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Case Law: General Deductions, image, image, image, image, image, image,…
Case Law: General Deductions
Trade
Carrying a trade
Case 1: Burgess
Principle: Broad definition of trade must be given
Case 2:
Joffe & Co
Principle: If it is not an inevitable part of trade = Not in production of income & not deducted
Case 3:
De Beers Holding
Principle: Possible to carry on a non profit making trade
Positive Test
1.Expenditures & Losses
Case1: Joffe & Co
Principle: If it is not an inevitable consequence of the production of income, it can't be deducted
Case 2: Port Elizabeth Electric Tramway Co Ltd
Principle: Expense must be closely connected to production of income
In the production of income
Case 1: Port Elizabeth Electric Tramway
Principle: Expense must be closely connected to production of income
Case 2: Joffe & Co (Pty) Ltd
Principle: Expense can't be decuted if it's not an inevitable consequence of business operations
Case 3: BP Southern Africa
Principle: Payments connected to income-generating activities are deducted
Case 4: Provider
Principle: When service package amounts are paid = deductible
Audit fees for dual purpose = apportion
Case 5: Mobile Telephone Network Holdings
Principle: Audit fees are incurred in the production of income
Not of a capital nature
Case 1: New State Areas Ltd
Principle: Fixed capital = Capital = Not deductible (cost of improving income earning plant)
Floating capital = Revenue = Deductible
Case 2: Rand Mines
Principle: Expenses incurred to create capital structure = capital
Expense incurred to work the capital structure = income
Case 3: BP Southern Africa
Principles: Payments connected to income-generating activities are deducted
During the year of assessment
Case 1: Sub-Nigel (Pty) Ltd
Principle: Deduct expense in the year it was INCURRED
Case 2: Golden
Dumps (Pty) Ltd
Principle: Amount can only be deducted in the year of assessment when the dispute is settled
Actually Incurred
Case 1: Nationale Pers Bpk
Principle: Payment can only be deducted once any contingent conditions have been met
Case 2 : Edgars Stores Ltd
Principle: Only deduct an expense when there's a legal obligaiton (unconditional)
Case 3: Golden Dumps
Principle: Amount can only be deducted when dispute is actually settled
