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💡 GROSS INCOME: CASE LAW & PRINCIPLES - Coggle Diagram
💡 GROSS INCOME: CASE LAW & PRINCIPLES
Income vs Capital Nature
Realisation of Assets
🗺️ CIR v Stott :
Core Principle:
Taxpayer may realise an asset to his
best advantage
.
Subdividing land to maximize return does not automatically create a trade or revenue intent.
Dual or Mixed Intentions
👥 CIR v Nussbaum :
Core Principle:
A secondary intention of selling at a profit can
affect/taint
the primary capital intention if profit-making is regular.
Nature of Assets
🌳 CIR v Visser
Core Principle:
Income is what capital produces.
Capital is the tree (asset structure); income is the fruit (yield/product).
Definition of Gross Income & Accrual
Definition of "Amount"
🔍Lategan v CIR :
Core Principle:
'
Amount' must be granted a
wider meaning
.
Includes rights with a monetary value, not just physical cash.
Definition of "Accrued to"
📝 CIR v People's Stores
(Walvis Bay)
Core Principle:
'Accrued to' means the taxpayer has become
entitled
to the amount.
Credit sales must be included in gross income when the right to claim payment vests.
Valuation Onus
⚖️ CIR v Butcher Bros
Core Principle:
SARS bears the responsibility to determine and prove the specific monetary
amount/value
to be included.
Change of Intention & Legality
Transition Action Requirement
🛑 Elandsheuwel Farming v SBI
Core Principle:
Something more
is required to change the character of an asset from capital to revenue.
A mere mental decision to sell is insufficient without accompanying trading activity.
Illegal Activities
⛓️ CIR v Delagoa Bay Cigarette Co & MP Finance
Core Principle:
Money made from activities against the law must be included in gross income.
Legality is irrelevant; if it is an "amount received," it is taxable.
Schemes of Profit-Making
🏛️Natal Estates Ltd v SIR
Core Principle:
Embarking on active, extensive development means the taxpayer has crossed the
Rubicon
.
Turns a capital asset into a full-scale commercial business operation.
Obligations to Third Parties
🤝 CIR v Witwatersrand Association of Racing Clubs
Core Principle:
If a taxpayer only has a
moral obligation
(and not a strict legal obligation) to pay money over, it still accrues to them.