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General Deductions - Coggle Diagram
General Deductions
Section 11(a) Positive Test
Expenditure and losses
Actually incurred
Nasionale Pers
Bpk :silhouettes:
Principle :explode:: If a payment is contingent upon the happening of an uncertain future event, the expense and corresponding liability can only be actually incurred once the conditions are met.
Edgars Stores :silhouettes:
Principle :explode:: An expense can only be deducted once there is an unconditional legal obligation to pay the expense
Golden Dumps
(Pty) Ltd :silhouettes:
Princidple :explode:: an amount is in dispute, the expense can only be actually incurred when the dispute is settled w
During the year of assessment
Sub-Nigel Ltd : :silhouettes:
Principle : :explode: An expense must be deducted in the year of assessment that it is incurred, even if it will only produce income in future years. An expense must be claimed in the year it is incurred. It cannot be claimed in later years
In the production of income
Port Elizabeth
Tramway
:silhouettes:
Principle :explode:: 1. What is the purpose of the expense?
How closely connected is that expense to the production of income?
Joffe and Co :silhouettes:
Principle :explode:: not an inevitable concomitant of the business
operations it is not deductible.
BP Southern
Africa
:silhouettes:
Principle :explode:: Recurring payments for maintaining income earning operations are deductible.
Provider :silhouettes:
Principle :explode:: Amounts paid in terms of a service package (employment contract) are deductible.
Mobile Telephone Networks Holdings (Pty) Ltd :silhouettes:
Principle:explode: Fees is necessarily attached to the performance
of the taxpayer’s income earning operations
Principle :explode:: fees are incurred for a dual
purpose), apportionment has to take place.
Principle :explode:: facts of each case; a reasonable apportionment approach will thus be followed.
Not of a capital nature : :
New State
Areas Ltd
:silhouettes:
Principle :explode:: Cost of establishing/ improving/adding income earning plant (fixed capital) is capital in nature and therefore not deductible
Principle :explode:: Cost of performing income-earning operations (floating capital) which is revenue in nature and therefore deductible
Rand Mines :silhouettes:
Principle :explode:: Cost incurred to create a capital structure = capital
Cost incurred to work the capital structure = revenue
BP South
Africa
:silhouettes:
Principle :explode: legal categorisation of a payment does not determine whether it is capital or revenue, rather the purpose of the expenditure
Was an enduring benefit created?
Trade Test
Carrying on a trade
Income from trade
Burgess :silhouettes:
Principle : : :explode: A wide interpretation should be given to trade
Section 23(g) – negative test
Warner Lambert SA (Pty) Ltd :silhouettes:
Principle :explode: : f there is a link between the company’s ability to trade and the expenditure, it will be incurred for the purposes of trade
Principle :explode:: Social responsibility was seen as crucial for trading success.
Section 23H – prepaid expenditure
Telkom :silhouettes:
Principle :explode: : he period to which the expenditure ‘relates’, must be the period during which the benefit is enjoyed.