Summary
Summary TAX3761 summaries
- Course
- TAX3761 (TAX3761)
- Institution
- University Of South Africa (Unisa)
This is a summary of all the court cases dealt with in the TAX3761 module. It also includes examples for you to work through.
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By: lastkingmarno • 1 year ago
By: larissamyburgh • 3 year ago
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GROSS INCOME CASESCASE HAUPT FACTS OF CASE PRINCIPLE
Residency
1 Cohen Par 2.5.1 Facts of case A person is ordinarily resident in the country to which he
page 26 A taxpayer owned a flat in Johannesburg, moved intends to return from all his wanderings. The country
overseas for work for two years and leased his flat. he regards as his real home.
Issue
Is the taxpayer ordinarily resident in SA while
working overseas for two years?
Judges Decision
Physical absence is not decisive in determining if
one is ordinarily resident. The taxpayer’s actions for
the two years are not the sole test. “If, though a
man may be resident in more than one country at a
time, he can only be 'ordinarily resident' in one, it
would be natural to interpret 'ordinary resident' by
reference to the country of his most fixed or settled
residence. His ordinary residence would be the
country to which he would naturally and as a matter
of course return from all his wanderings, as
contrasted with other lands it might be called his
usual or principal residence and it would be
described more aptly than other countries as his
real home.”
1
,2 Kuttel Par 2.5.1 Facts of case A person is ordinarily resident where the person’s
page 27 A taxpayer emigrated to America and started his principle residence is – where the person is habitually
life there. He returned to SA regularly to pursue and normally resident.
business interest and take part in yachting
activities. During these periods he stayed in his
home in Cape Town, where he maintained and
renovated his house.
Issue
Is the taxpayer ordinarily resident in SA?
Judges Decision
Ordinarily resident is a narrower concept than
resident. The place of ordinary residence was the
place where the person was habitually and
normally resident, apart from temporary or
occasional absences of long or short duration. The
taxpayer’s real home was seen to be in America.
Source
1 Lever Brothers Par 2.6.14 Facts of case In order to determine the source of an amount one must
page 37 A foreign creditor lent money to a South African consider Lever Brother:
company and earned interest income. What is the originating cause?
Where is the cause situated?
Issue
Is the interest income from a South African source?
Judges decision
The money lent was utilised in SA. Therefore the
interest income is SA source.
Total amount in cash or otherwise
1 Lategan Par 2.4.3 Facts of case The word “amount” includes any form of property with
page 23 The taxpayer, a wine farmer, entered into an an ascertainable monetary value, including debt and
agreement in terms of which he disposed of wine rights.
he had made during the year of assessment. A
portion of the selling price was paid prior to the end
of his year of assessment and the balance was to
be paid in instalments after the end of the year of
assessment.
Issue:
Is “amount” per the gross income definition
confined to receipts of “money”?
2
, Judges decision
Amount includes every other form of property,
including debts and rights of action
2 Butcher Bros Par 2.2 Facts of case The onus is on SARS to determine the amount.
page 18 The taxpayer owned land, leased it to a company If there is no amount can be determined there will be no
for 50 years with a renewal option of 49 years. In gross income.
terms of the lease agreement the lessee was
obliged to effect improvements. The ownership of This court case lead to the par (h) gross income special
the improvements would pass to the lessor upon inclusion. The principle however still remains.
termination or renewal.
Issue
The benefit will pass in the future; can an amount
be determined now (upon completion of the
improvements) in order to tax the lessor?
Judges Decision
The benefit will only pass in 50 years; therefore the
lessor can’t be taxed now as there is no
ascertainable monetary value. I.e. they can’t
determine the value now for the benefit that
accrues in 50 yrs.
3 Brummeria Par 2.7.11 Facts of case If a taxpayer has a right to an interest-free loan, such
page 53 The taxpayer companies developed retirement a right has value.
villages and sold life rights in the dwelling units to
old age people (i.e. the old person can stay in the If a taxpayer receives an interest-free loan, and the
unit until death). In return for the life right, the lender receives a quid pro quo (i.e. the lender receives
pensioner had to make an interest free loan to the something in return for lending the money – in this case
developer. life rights), there will be an “amount” for the taxpayer
having the benefit of interest-free loans.
Issue
Does the fact of having monies available (i.e. the Interpretation Note 58 was issued for interest-free loans
interest-free loans) mean that there is an ‘amount’ with life rights as quid pro quo. See IN 58 for the formula
accruing to the developer? on how to calculate the ‘amount’. You do not have to
study IN 58, just study the formula and accompanying
Judges Decision examples 1-3 on page 488/9.
If a taxpayer had a right to an interest-free loan,
such a right had value. In other words, the benefit
of having monies available on loan, interest free,
has an ascertainable monetary value.
3
, Accrual
1 People’s Stores Par 2.2, Facts of case Accrued to = entitled to
2.4.3 A clothing retailer sold on credit. Included in gross income when entitled to not when you
Page 18, 23 receive the money.
Issue Accrual = face value not discounted value
Has the amount accrued to the taxpayer despite
money still being owed? Taxed on the earlier of receipt or accrual
If accrued, should it be included at face value or
present discounted value?
Judges Decision
Accrual means the taxpayer has become entitled to
the amount on the date of sale.
Always include an amount at face value.
2 Witwatersrand Par 2.4.1 Facts of case If an amount has accrued to a taxpayer and no legal
Association of page 22 A race event was held and resulted in proceeds obligation exists to pay it over (only moral obligation)
racing clubs that the taxpayer divided between two charities. to another individual, it has in fact accrued and is gross
The taxpayer argued that the proceeds did not income.
accrue to them, but to the charities.
Issue
Did the proceeds from the race accrue to the
taxpayer or the charities?
Judges Decision
The proceeds were received as a result of a
scheme of profit making and were distributed in
terms of a moral obligation. Therefore the
association was still the principle, not acting as the
agent of the charities. It was the racing club’s gross
income.
If the contract between the company and charities
stated that the proceeds would accrue to the
charity, then the company would have been acting
as an agent and it would not have accrued to them.
3 Mooi Accrued to = unconditionally entitled to the amount.
4
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