TAXC221 - Court Cases summary

Relevant to Words or phrase Name of the court case Summary of case

considered
“ordinary residence” would be the country to which a
Ordinarily resident Cohen vs CIR person would naturally and as a matter of course return
from his wanderings.

CIR vs Kuttel
“ordinary residence” = place where you normally reside,
Resident
apart from temporary/occasional absences.
Not just money/cash is applicable. Anything (property)
CIR v Lategan earned that has a money-value must be included in
“amount”.
The onus of establishing an amount rests upon the
CIR v Butcher Bros (Pty) Ltd
Commissioner.
Amount
Interest-free loans granted to a TP in consideration for the
acquisition of life-interest in units does constitute a benefit
CSARS v Brummeria of which a value can be determined to be included as part
Definition of gross income. (A benefit with an ascertainable value is
of gross included in gross income)
income CIR v People’s Stores (Walvis Accrues to when TP becomes entitled to it.
Bay) (Pty) Ltd
Mooi v SIR Accrues to only when TP is unconditionally entitled to it.
accrued to
The disposal of income after it has accrued to a TP does
CIR v Witwatersrand Association
not influence the taxability of that accrual in the hands of
of Racing Clubs:
the TP.
Geldenhuys v CIR On his (or her) own behalf and for his (or her) own benefit
Obtaining physical control over “money” – not mean a
CIR v Genn & Co (Pty) Ltd
received by receipt for GI purposes – must be for his own benefit

MP Finance Group CC v CSARS:

An amount will be “received by” a Tax payer if his intention
was to benefit from it for his own purpose.
of a capital nature – Original intention may change to a scheme of profit
CIR v Richmond Estates (Pty) Ltd
intention making.
TAXC221 - Court Cases summary
· The sale of asset does not mean intention
changed.
of a capital nature – Elandsheuwel Farming (Edms)
· Consider whether there was a scheme of profit-
intention Bpk vs SBI (1978 A)
making.
· May realise asset to the greatest advantage of TP.
· Intention at purchase could be decisive unless
other factors intervene.
of a capital nature –
CIR v Stott · The decision to dispose of asset does not mean
Definition mixed or dual intention
there was a change in intention.
of gross · May realise asset to the greatest advantage of TP.
income
Factors such as planning, scope, nature, duration and
of a capital nature –
Natal Estates Ltd v SIR marketing will determine intention change. Must establish
change in intention
whether a business was operated. Cross the “Rubicon”
of a capital nature – the CIR v Visser Capital is tree and the fruit of the tree is income in nature
nature of the “asset” which must be separated from each other.

The intention of company is determined by the actions and

of a capital nature – the
CIR v Richmond Estates (Pty) Ltd decisions by directors.
intention of company

An annuity has two characteristics:

Special • it is an annual or periodical payment (repetitive); and
Annuity KBI and another v Hogan:
inclusions • the beneficiary has the right to receive more than one
such payment
TAXC221 - Court Cases summary
Relevant to Words or phrase Name of the court case
considered
General Sub-Nigel Ltd v CIR
Burgess v CIR
carrying on a trade
Port Elizabeth Electric Tramway
Co Ltd v CIR
in the production of income
Deductions –
Provider v COT:
section 11(a)
Joffe & Co (Pty) Ltd v CIR
Caltex Oil (SA) Ltd v
Edgars Stores Ltd v CIR
Actually incurred
Nasionale Pers Bpk v KBI
CIR v Golden Dumps (Pty) Ltd
Summary of case
Not necessary to show that expenditure will have effect upon
production of the income for that year.
As long as the expenditure is incurred to earn the future income.
This definition gives a wide and well established interpretation. It
is not to be seen as exhaustive. Consider the following:
· Is there continuity of the activities?
· Is the long-term objective of the trade to generate profit?
· Expenditure incurred must originate from operating a
business operation with the goal to earn an income.
· The expenditure incurred must in other word have a
close connection with the business’s income-earning
operations. (necessary concominant)
· Expenditure incurred to induce employees to enter and
remain in the service of a taxpayer may qualify for a
deduction since the purpose is to produce current or
future income.
The expenditure or the act leading to the expenditure as has to
be a “necessary concomitant” of the business operation to be in
the production of income.
Amounts paid and amounts for which there is a responsibility to
pay but is not yet payable (liability)
Unconditional legal obligation before it can be seen as actually
incurred.
If not explicit and absolute liability to pay, expense not actually
incurred.
If the outcome of a dispute over expenditure / claim remains
undetermined at end of tax year, the obligation is not actually
incurred.
TAXC221 - Court Cases summary
New State Areas Ltd v CIR
not of a capital nature
Rand Mines (Mining & Services) Ltd
v CIR
Floating or circulating capital vs fixed capital: cost of performing
income-earning operations vs cost of establishing or improving
or adding to the income earning plant.
If the expenditure is more closely related to the TP’s income-
generating structure than to his income-earning operations, it is
capital in nature.