21 March 2022

Mr Lekone
Matt Walls (Pty) Ltd
PO Box 10205
Cape Town =12+8+6+8+8+8+7

Dear Mr Lekone

VARIOUS TAX QUERIES 2022 YEAR OF ASSESMENT

I appreciate the opportunity afforded to advise you regarding various tax matters in the 2022 year of
assessment. To ensure a complete understanding between us I refer to your email dated 14 March
2022 which contains the information and queries provided by you on which I will base my advice.

The following facts are based on the abovementioned email sent by you on 14 March 2022. Please
let me know should these facts be incorrect or incomplete.

Matt Walls is a paint producer in the Western Cape and has been trading for over 40 years,
However, in early November 2014 an unfortunate matter occurred where one of your solvents
suppliers accidently used the wrong chemical in mixing your product which resulted in Matt Walls
suffering an immense loss of profits, customers and reputational damage.

A legal claim between Solvents Forever and Matt Walls was settled and Solvents Forever paid an
amount of R 1 500 000 compensation for the loss of profits, customers, and reputational damage.
I have addressed each of your questions separately below.

1. Deductibility on orders not yet delivered on 28 February 2022.

Matt Walls placed a solvent order of R 80 000 telephonically before year-end.

You are unsure whether a deduction for the R 80 000 order can be deducted in the 2022 year of
assessment.

It was established in the Port Elizabeth Electric Tramway Co case that the general deduction formula
is made up of two sections namely the positive and negative test (Port Elizabeth Electric Tramway Co
Ltd v CIR, 8 SATC 13, 1936 CPD 241). In addressing whether the R 80 000 worth of solvent orders
placed is deductible we need to refer to the General Deduction Formula as defined in section 11(a)
(the positive test) read together with section 23(g) (the negative test) of the Act (Income Tax Act, No.
58 of 1962: Section 11(a)) (Income Tax Act, No. 58 of 1962: Section 23(g)).

Section 11(a) reads:

General deductions allowed in determination of taxable income. – For the purpose of determining
the taxable income derived by any person from carrying on any trade, there shall be allowed as
deductions from the income of such person so derived –

(a) expenditure and losses actually incurred in the production of the income, provided such
expenditure and losses is not of a capital nature;

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Section 23(g) reads:

Deductions not allowed in determination of taxable income. – No deductions shall in any case be
made in respect of the following matters, namely –

(g) any moneys, claimed as a deduction from income derived from trade, to the extent to which
such moneys were not laid out or expended for the purposes of trade.

Section 11(a) provides positively of what may be deducted while Section 23(g) provides negatively of
what may not be deducted (Income Tax Act, No. 58 of 1962: Section 11(a)) (Income Tax Act, No. 58
of 1962: Section 23(g)). For an amount to be claimed as a deduction it needs to satisfy both these
sections. It is also important to note that deductions may only be claimed during the year of
assessment in which it incurred as set out in the (Caltex Oil (SA) Ltd v SIR (1975 AD)) case.

As R 80 000 worth of solvent orders has telephonically been placed in the 2022 year of assessment,
but not yet delivered it needs to be determined whether Matt Wallis has incurred the expenditure in
the 2022 year of assessment.

In terms of section 102 of the Tax Administration Act the burden of proof is on the taxpayer to prove
that the R 80 000 is deductible (Tax Administration Act, No. 28 of 2011: Section 102).

A liability must arise for an expenditure to be incurred and an obligation needs to occur for the
expenditure to be claimed as a deduction. In the Caltex Oil Case (Caltex Oil (SA) Ltd v SIR (1975 AD))
the courts held that expenditure actually incurred means that the expenditure for which the liability
has been incurred during the year of assessment whether the liability has been discharged or not.
Matt Walls obligation only exists once delivery has been made and invoice has been raised.

Expenditure is actually incurred in a year of assessment only if there is an unconditional legal

obligation to incur the expenditure in the year (CIR v Edgars Stores Ltd (1986 (4) SA 312(T))). It’s
assumed that the agreement between Matt Walls and Simply Solvents is informal and that there is
no binding contract between the parties. The quantities of the order can be changed up to the day
before the delivery and as the delivery only takes place after year end the obligation to pay the
expense is only once the order has been delivered and invoice is issued.

In the Golden Dumps case the court established whether the word “actually” in the phrase “actually
incurred” is inessential, the court held that every word in the act is valid and needs to be defined
(CIR v Golden Dumps (Pty) Ltd (1993 AD) 55 SATC 198). The court further held that according to the
Oxford English Dictionary the adverb ‘actually’ means ‘in act or fact; really.’ The order was placed
before year-end, but the R 80 000 would only be ‘actually incurred’ once the obligation existed to do
so. As the order can be changed or even canceled the day before delivery, the expense will only
have actually been incurred the day before delivery as that is the day the obligation arises and also
when the exact amount for the order can be confirmed.

Where expenditure is contingent on a future event the expenditure is not actually incurred
(Nasionale Pers Bpk v KBI (1986 (3) SA 549 (A) 48 SATC 55). The amount due for the solvent order
can only be established on the day before delivery as Matt Walls may change and even cancel the
order up to such day. The payment of the R 80 000 can be seen as conditional as the amount may
change due to a possible change in the order or cancelation thereof thus the expense is only
incurred once the condition has been met.

If payment is conditional on the performance of the seller no ‘absolute and unqualified’ liability
exists until such time (ITC 1444 (1987) 51 SATC 35). Payment can only be made once the order has

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been delivered and the invoice has been issued by Simply Solvents. Therefor the liability only exists
once the goods has been delivered.

It is presented that in conclusion no liability or obligation existed before or on 28 February 2022 to

pay the R 80 000 for the solvent order. Therefor the expense has not incurred in the 2022 year of
assessment and a deduction cannot be claimed for the said year.

My conclusion is based on the facts provided by you and tax law as it existed on 14 March 2022.

2. R 1 500 000 compensation received from Solvents Forever

One of Solvent Forever’s’ employees used the wrong chemical in mixing the solvent used by Matt
Walls. This caused major damage in Matt Walls paint-mixing machines as well as a loss of profits and
customers. The parties settled the legal claim, and an amount of R 1500 000 was paid by Solvents
Forever.

The R 1500 000 compensation received from Solvents Forever is based on the following calculation:

 R 950 000 – Paint Production losses

 R 150 000 – Repair of paint mixing machines
 R 350 000 – Replacement of paint mixing machines
 R 50 000 – Goodwill – I assume the remaining R 50 000 is for goodwill as you mentioned
a claim is instituted for the loss of income, goodwill, irreparable damage to the
machines.

When an amount for compensation has been received the first starting point in determining the full
tax treatment will be to assess whether the amount received should be included in Gross Income or
not. As you have listed the components of the compensation received and the amounts allocated
thereto it will be beneficial to discuss each component individually in determining the complete tax
treatment of the amount received.

Paint Production losses – R 950 000

For an amount to be included in Gross Income it needs to meet the definition of section 1 of the
Income Tax Act, No 58 of 1962 of the Act.

The definition reads:

“gross income”, in relation to any year or period of assessment, means—

(i) in the case of any resident, the total amount, in cash or otherwise, received by or accrued to or in
favour of such resident; or

(ii) in the case of any person other than a resident, the total amount, in cash or otherwise, received
by or accrued to or in favour of such person from a source within the Republic, during such year or
period of assessment, excluding receipts or accruals of a capital nature, but including, without in any
way limiting the scope of this definition, such amounts (whether of a capital nature or not) so
received or accrued as are described hereunder, namely—

With reference to the definition of gross income in section 1 of the Income Tax Act, No 58 of 1962 of
the Act the compensation amount received must be included in Matt Walls gross income in the
applicable year of assessment unless the amount is of a capital of nature.

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The onus is on the taxpayer to prove that the compensation received is of a capital nature and not
gross income in terms of section 102 of the Tax Administration Act no 28 of 2011.

I will use case law for the clarification and explanation of capital of nature as the term is not defined
in the Act.

It can be quite a strenuous task to determine whether compensation payments are of a capital or
revenue of nature. Therefor the following rules have been established by the courts:

 If an amount received for compensation is for the loss of the taxpayer’s capital asset that is
his income-earning machine, it is capital of nature (Taeuber and Corssen (Pty) Ltd v CIR
(1975 AD) ).
 If the amount received is for the loss of profits it is of a revenue nature.

Another well-established test that can be applied to determine the nature of the compensation
receipt is to determine whether this compensation will fill the hole in the taxpayer’s profits or is it to
fill the hole in his assets (Burmah Steam Ship Co Ltd v IRC (1931 SC 156)). If the compensation receipt
is to fill the hole in his profits it will be revenue of nature. If it is to fill the hole in his assets it will
then be of capital nature. The R 950 000 relates to the loss of sales, customers, and raw materials.
The raw materials are used in the production of income, the loss of customers and sales is a loss on
income therefor the compensation is to fill the hole of Matt Walls profits.

The principle established in the W J Fourie Beleggings case is that if the compensation was for the
loss of the taxpayer’s income-earning structure, it is capital of nature. If it was for a loss of income, it
will be revenue in nature (W J Fourie Beleggings CC v CSARS (71 SATC 125) 2009 (SCA)). It is clear
that the R 950 000 compensation received from Solvents Forever is not for the income earning
structure but rather a loss of income.

In the Stellenbosch Farmers Winery the court held that the nature of a receipt is not determined by
how it is subsequently treated for accounting purposes (Stellenbosch Farmers Winery Ltd v CSARS
(74 SATC 235)). One should be very cautious in applying this test. However, it is very clear that Matt
Walls embarked on a profit-making scheme and that the R 950 000 is to fill the hole in Matt Walls
profits.

In concluding the R 950 000 received for the loss of raw materials, sales and lost customers is
revenue in nature and will be included in Matt Walls Gross Income as defined in (Income Tax Act,
No. 58 of 1962: Section 1).

Repair of certain paint mixing machines

R 150 000 of the compensation amount received is for repairing paint mixing machine that suffered
damage due to the wrong powder used.

In terms of section 11(a) the cost of repairing an asset does not qualify as a deduction because it is of
a capital nature (Income Tax Act, No. 58 of 1962: Section 11(a)).

As the Income Tax Act does not define repairs, we should use court cases to establish the meaning.

In the (CIR v African Products Manufacturing Co Ltd, 1944 TPD) case the following guideline has been
established relevant to this scenario:

 A repair is restoration by renewal or replacement of a subsidiary part of the whole.

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  The materials used does not need to be the same as the original material. However, the
voluntary use of higher quality materials may raise suspicion that the asset has been
improved
 A repair is different of to an improvement or renewal. Renewal is a reconstruction of the
entirety or substantially the entirety, whereas improvement is the creation of a better asset.
 In order for an asset to be repaired there must be damage or deterioration to a part of the
original asset and the intention of the taxpayer must be to restore the asset to its original
condition.

It is important to distinguish repairs from renewals and improvements. As Improvements would not
qualify for this special deduction. A repair is a restoration by renewal or replacement of subsidiary
parts of the whole. In contrast, a renewal is a reconstruction.

There should be clear evidence of damage or deterioration to the asset in order for an asset to be
repaired (Flemming v KBI (57 SATC 73, 1995(1) SA 574 (A)). This should not be a difficult task to
prove as the use of the wrong powder chemical caused damaged to the paint mixing machines
which resulted in the machines that needs to be repaired.

It is important that the intention of the taxpayer is to repair the machine. As it’s difficult to assess
the taxpayer’s intention section 102 of the Tax Administration Act states that the onus is on the
taxpayer to prove whether the amount for the repairs is deductible (Tax Administration Act, No. 28
of 2011: Section 102).

In the Burmah Steamship Co case the court examined whether the compensation paid, was
intended to fill a “hole” in the recipient’s profits or paid to fill a “hole” in the recipient’s capital
assets (Burmah Steam Ship Co Ltd v IRC (1931 SC 156)). Although the asset is seen as an income-
producing asset and only 500 paint mixing machines were affected. There is still 1500 paint mixing
machines that can be used in the production of income. Therefor the the income-earning structure is
still intact. Thus the compensation is to fill the hole of the taxpayers’ assets and not profits and is
therefore classified as capital of nature.

In the WJ Fourie Beleggings CC case the principle was established that if the compensation was for
the loss of a part of the taxpayer’s income-earning structure, it would be capital in nature (W J
Fourie Beleggings CC v CSARS (71 SATC 125) 2009 (SCA)). The compensation paid for the repairs of
the paint mixing machine is therefor seen as capital of nature.

In conclusion the R 150 000 received for repairs is Capital of nature.

Goodwill

It is assumed that R 50 000 of the compensation amount is paid in respect of Goodwill.

Goodwill is capital of nature and is not included in the definition of gross income. When a
lawsuit is filed to recover damages for the destruction of the business one needs to ask oneself is
the amount received for profits or for damages to the goodwill of the business.

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 Paint production has been exceptionally reduced which meant that standing orders by regular
customers were not met as a result not only did it affect the income, but the Goodwill has also
suffered. Therefor the recovery of the R 50 000 is to fill the hole of the taxpayers’ profits
(Burmah Steam Ship Co Ltd v IRC (1931 SC 156)). Thus, the R 50 000 received in respect of the
goodwill will be revenue in nature and the receipts must subsequently be included in Matt Walls
Gross Income.

3. Tax treatment for the compensation payment of R 1 500 000 paid by Solvent Forever

In order to qualify for a Section 11(c) deduction the cost must be actually incurred; in respect of any
claim; dispute or action at law; incurred in the course of the, or by reason of, ordinary operations in
carrying on trade; and not of a capital nature (Income Tax Act, No. 58 of 1962: Section 11(c)). As this
section does not deal with damages or compensation, we need to consider Section 11(a) of the Act.

In order for the R 1 500 000 compensation paid to Matt Walls to be deductible the requirements of
Section 11(a) read together with Section 23(g) must be met. (Income Tax Act, No. 58 of 1962: Section
11(a)) (Income Tax Act, No. 58 of 1962: Section 23(g)).

Section 11(a) reads:

General deductions allowed in determination of taxable income. – For the purpose of determining
the taxable income derived by any person from carrying on any trade, there shall be allowed as
deductions from the income of such person so derived –

(b) expenditure and losses actually incurred in the production of the income, provided such
expenditure and losses is not of a capital nature;

Section 23(g) reads:

Deductions not allowed in determination of taxable income. – No deductions shall in any case be
made in respect of the following matters, namely –

(h) any moneys, claimed as a deduction from income derived from trade, to the extent to which
such moneys were not laid out or expended for the purposes of trade.

Section 11(a) provides positively of what may be deducted while Section 23(g) provides negatively of
what may not be deducted. For an amount to be claimed as a deduction it needs to satisfy both
these sections. It is also important to note that deductions may only be claimed during the year of
assessment in which it incurred as set out in the (Caltex Oil (SA) Ltd v SIR (1975 AD)) case.

The requirements that will likely be challenged is if the compensation paid is in the production of
income, in the purposes of Solvents Forever’s trade and whether it is of a capital nature.

In terms of section 102 of the Tax Administration Act the onus is on the taxpayer to prove that the R
1 500 000 is deductible (Tax Administration Act, No. 28 of 2011: Section 102).

In the PE Electric Tramway Company Case the court held that expenses do not produce income, but
actions do. The expenditure to be deducted should be closely linked to the performance of the act
identified. If the act performed is for the purpose of earning an income, then the cost associated
with performing that act is deductible (Port Elizabeth Electric Tramway Co Ltd v CIR, 8 SATC 13, 1936
CPD 241). Solvents Forever is a solvent supplier by nature of their business. They incurred the loss

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while they produced income by supplying solvents to Matt Walls. Solvents Forever paid the R 1500
000 compensation to prevent a loss of income.

The expense incurred must be an “inevitable/concomitant” of the type of business

(Joffe & Co (Pty) Ltd v CIR (1946 AD)). The expense occurred due to negligence by the taxpayer as
one of Solvents Forever’s employees had mistaken another powder chemical for the supplements
usually used when mixing a container of solvents for Matt Walls. Negligence cannot be seen as an
inevitable concomitant of the trade of Solvents Forever. Section 23(g) of the Act prohibits the
deduction of non-trade expenses (Income Tax Act, No. 58 of 1962: Section 23(g)).

The principle established in the Cot v Rendle case is that the risk of the expense being incurred is an
inevitable or necessary concomitant of the taxpayer’s business operation (COT v Rendle 1965 1 SA
59). The deductibility of the incidental expenditure depends on whether the chance of the
expenditure incurred is closely connected to the taxpayer’s business operations. Solvents Forever
should also show that the risk of the unlucky event being the mistaken powder used for the solvent
mix which gives rise to the R 1 500 000 expenditure is inseparable of the carrying on of the business.
Employment carries potential liability for compensation as an employee mistakenly used another
powder chemical for the supplements other than the usual powder usually used when mixing a
container of solvents for Matt Walls. But as the employee assumingly did not willingly use the wrong
powder it cannot be seen that the expenditure and losses in incurred in the production of income.

Expenditure bona fide incurred for the purpose of the taxpayer’s income producing operations, will
form part of the cost of performing such operation whether it’s directly or indirectly (CIR v Pick n Pay
Wholesalers (Pty) Ltd,1987 (3) SA 453(A), 49 SATC 132).

It is submitted in conclusion that Solvents Forever will not be able to claim a Section11(a) deduction
as the expense of R 1 500 000 was not incurred in the production of income.

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4. Matt Walls Tax consequences of the waiver of 60% of the loan by Sturdy Constructions

Actual Calculation/   Taxable

Legislation Consequences
Sold in 2021 Year of Assesment     2021
       
Cost   R1,100,000.00  
Less S12C aAlowances      
2020 Year Of Assesment (R 1 100 000 x -R440,000.00  
40% )
2021 Year Of Assesment (R 1 100 000 x -R220,000.00 -R220,000.00
20% )
Tax Value (R 1 100 000 - R R440,000.00  
440 000 - R 220
000)
       
Recoupment      
Proceeds limited to cost price   R650,000.00  
Less Tax Value (as calculated above)   -R440,000.00  
Recoupment Section 8(4)(a) (R 650 000 - R 440 R210,000.00 R210,000.00
000)
       
Taxable Income before Capital Gain or     -R10,000.00
Loss
       
Capital Gain or Loss      
Proceeds Calculation   R650,000.00  
Less Recoupment   -R210,000.00  
Adjusted proceeds   R440,000.00  
       
Base Cost Calculation      
Purchase price   R1,100,000.00  
Less past allowances (R 440 000 + R 220 -R660,000.00  
000)
    R440,000.00  
       
Proceeds   R440,000.00  
Less Base Cost   -R440,000.00  
Capital Gain or Loss   R0.00  
       
Include 80% of Capital Gain or Loss in (0 x 80%)   R0.00
Taxable Income - As determined in
Section 26A of the Act
       
Total Taxable Income/Loss     -R10,000.00

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Hypothetical calculation      

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Debt benefit (R 1100 000 x R660,000.00  
60%)
       
Tax Value @2021   R440,000.00  
Reduce base cost   -R440,000.00  
Hypothetical Base Cost   R0.00  
       
Remaining debt benefit (R 660 000 - R 440 R220,000.00  
000)
Less Recoupment in terms of Section 8(4)   R210,000.00  
(a)
Additional Recoupment in 2021 Year of   R10,000.00  
Assesment
       
Capital Gain      
Proceeds   R650,000.00  
Less Recoupment   R220,000.00  
Adjusted Proceeds   R430,000.00  
       
Base Cost reduced to nil   R0.00  
       
Gapital Gain (Proceeds Less Base Cost) (R 430 000 - R 0) R430,000.00  
       
Additional Capital Gain   R430,000.00  
       
Include 80% of Capital Gain or Loss in (R 430 000 x80%)   R344,000.00
Taxable Income - As determined in
Section 26A of the Act
       
       
Net effect      
Actual Recoupment 2021 Year Of   R210,000.00  
Assesment
Additional Recoupment 2021 Year Of   R10,000.00  
Assesment
Additional Capital Gain 2022 Year Of   R430,000.00  
Assesment
    R650,000.00  
       
Matt Walls will be taxed on all as the      
debt Benefit = R 660 000

The debt benefit can never exceed the cost of the asset, because the loan or debt was used to
fund the cost of the asset

The Oxford dictionary defines a write-off as follow:

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write somethingoff
1. (business) to cancel a debt; to recognize that something is a failure, has no value, etc.to
write off a debt/an investment.

A write-off is a synonym of the word cancelled and a cancelled debt is included in the definition of
‘concession or compromise’ as defined in Section 19 in paragraph (a)(i) of the Income Tax Act, No 58
of 1962 of the act and it is also defined in paragraph 12A of the Eighth schedule.

The exclusions as set out in section 19(8)(b)(i) of the Income Tax Act, No 58 of 1962 and paragraph
12A(6)(b)(i) of the Eighth Schedule does not apply as Sturdy Constructions only wrote of part of the
loan as Matt Walls won’t be able to pay it back due to their struggling Cash Flow. The cancellation of
the debt was not motivated by sheer liberality and was not gratuitous ( (Welch's Estate v C: SARS
2005 (4) SA 173)). Therefore, the cancelled debt was not a donation as defined in section 55(1) of
the Income Tax Act, No 58 of 1962 of the act.

 The cancelled debt is not considered as disposal at inadequate consideration by the commissioner
and therefor the waiver is not a deemed donation in terms of section 58 the Income Tax Act, No 58
of 1962 of the act. And the exclusions will subsequently not apply as set out in section 19(8)(b)(ii)
and paragraph 12A(6)(b)(ii) of the Eighth Schedule.   

As the cancellation of debt is included in the definition of ‘concession or compromise’ as defined in

Section 19 in paragraph (a)(i) of the Income Tax Act, No 58 of 1962 of the act and in paragraph 12A
of the Eighth Schedule, the debt benefit will be the amount cancelled (R 1 100 000 x 60% = R 660
000).

5. Tax Consequences for Sturdy Constructions in waiving 60% of the loan

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The loan to Matt Walls is an asset and the waiver/cancellation of a debt is therefor, a disposal of
assets for Capital Gains Tax Purposes as defined in paragraph 11(1)(b) of the Eight Schedule of the
Income Tax Act, No 58 of 1962 of the act. As Sturdy Constructions gives up 60% of the debt owed to
them the proceeds of the capital gains tax calculation are R nil and the base cost is equal to the
amount cancelled (R 1 100 000 x 60% = R 660 000). Therefor a capital loss of R 660 000 (R nil – R 660
000) arises in the hands of Sturdy Constructions.

Paragraph 38 of the Eighth schedule cannot be applied as the cancellation of 60% of the loan would
not yield proceeds equal to R 660 000 as the asset are not disposed of for an amount received or
accrued equal to the market value of the asset.

In addressing whether Sturdy Constructions and Matt Walls is connected persons we need to refer
to the definition of connected persons as defined in Section 1 of the Act (Income Tax Act, No. 58 of
1962: Section 1).

Section 1 reads:

“connected persons” means –

(d) in relation to a company –

(i) any other company that would be part of the same group of companies as that
company if the expression “at least 70% of the equity shares in” in paragraphs (a)
and (b) of the definition of “group of companies”.

(iv) any person, other than a company as defined in section 1 of the Companies Act that
alone or together with any connected person in relation to that person, holds,
directly or indirectly, at least 20 per cent of-

(aa) the equity shares in the company; or

(bb) the voting rights in the company

Mr Molefe holds 70% of the equity shares in Sturdy Constructions and holds 100% equity shares in
Matt Walls. Thus Sturdy Constructions and Matt Walls is Connected Persons as defined.

Therefor paragraph 39 of the Eighth Schedule will be applied.

Paragraph 39 of the Eighth Schedule ring-fences capital losses on disposals between connected
persons. Sturdy Constructions can only set-off the specific capital loss against future capital gains
arising from disposals from Matt Walls.

However, Paragraph 56 of the Eighth Schedule override paragraph 39. As the disposal of the asset is
owed by a connected person paragraph 56 of the Eighth Schedule is applicable. Paragraph 56 of the
Eighth Schedule provides that a loss that arise from a disposal of a loan to a connected person can
be claimed in all and the following scenarios:

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  The debt waived reduces the base cost of the asset of the debtor in terms of paragraph 12A
of the Eighth Schedule.
 The waived debt reduced any aggregate capital loss of the debtor in terms of paragraph 12A
of the Eighth Schedule.
 The waived debt must be included in the gross income of any person who acquires the
claim.
 The waived debt reduces the assessed loss of the debtor or is included in his gross income.

As none of the above circumstances is applicable to your scenario the deduction of the capital loss of
R 660 000 will be disallowed in terms of paragraph 56 of the Eighth Schedule as Sturdy Constructions
waived Matt Walls’s debt who is a connected person as defined in Section 1 of the Income Tax Act,
No 58 of 1962 of the Act. Consequently, the capital loss will be permanently disregarded (Income
Tax Act, No. 58 of 1962: Eighth Schedule para 56).

My conclusions are based on the facts provided by you and the tax law as it existed on 14 March
2022.

I trust the above assists you with regards to finalising Matt Walls 2022 provisional tax return. Please
do not hesitate to contact me should you have any questions and or would like to discuss these
issues further. It was a pleasure working with you and look I forward to assisting you in the future
should you require any tax advice.

Please note that I use my judgment in resolving questions where the tax law is unclear or where
conflicts may exist between the taxing authorities. Unless you instruct me otherwise, I resolve such
questions in your favour whenever possible. However, the opinion I express does not bind the South
African Revenue Service. Therefore, I cannot guarantee the outcome in the event the SARS
challenges my opinion. You remain responsible for any tax or related liabilities resulting from an
adverse SARS or judicial decision.

Yours sincerely
Chazelle Conradie
Tax Consultant

Bibliography

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Burmah Steam Ship Co Ltd v IRC (1931 SC 156).

Caltex Oil (SA) Ltd v SIR (1975 AD).

CIR v African Products Manufacturing Co Ltd, 1944 TPD.

CIR v Edgars Stores Ltd (1986 (4) SA 312(T)).

CIR v Golden Dumps (Pty) Ltd (1993 AD) 55 SATC 198.

CIR v Pick n Pay Wholesalers (Pty) Ltd,1987 (3) SA 453(A), 49 SATC 132.

COT v Rendle 1965 1 SA 59.

Flemming v KBI (57 SATC 73, 1995(1) SA 574 (A).

Income Tax Act, No. 58 of 1962: Eighth Schedule para 11(1)(b).

Income Tax Act, No. 58 of 1962: Eighth Schedule para 38.

Income Tax Act, No. 58 of 1962: Eighth Schedule para 39.

Income Tax Act, No. 58 of 1962: Eighth Schedule para 56.

Income Tax Act, No. 58 of 1962: Section 1.

Income Tax Act, No. 58 of 1962: Section 11(a).

Income Tax Act, No. 58 of 1962: Section 11(c).

Income Tax Act, No. 58 of 1962: Section 23(g).

ITC 1444 (1987) 51 SATC 35.

Joffe & Co (Pty) Ltd v CIR (1946 AD).

Nasionale Pers Bpk v KBI (1986 (3) SA 549 (A) 48 SATC 55.

Port Elizabeth Electric Tramway Co Ltd v CIR, 8 SATC 13, 1936 CPD 241.

Stellenbosch Farmers Winery Ltd v CSARS (74 SATC 235).

Taeuber and Corssen (Pty) Ltd v CIR (1975 AD) , 37 SATC 129.

Tax Administration Act, No. 28 of 2011: Section 102.

W J Fourie Beleggings CC v CSARS (71 SATC 125) 2009 (SCA).

Welch's Estate v C: SARS 2005 (4) SA 173.

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