General deduction s11(a)
Case law
Requirements in general and It is not necessary that expenditure produce income
if income must be earned in in the year that it was incurred for the expenditure to
the same year be deductible and expenditure cannot be carried
forward or carried back to the previous year of
assessment
(Sub-Nigel Ltd v CIR)
Carrying on a trade The definition of trade should be given a wide
interpretation
(Burgess v CIR)
Must determine whether the expenditure was used
for the purposes of trade and in fact produce
income directly or indirectly
(C:SARS v Scribante Construction (Pty) Ltd)
In the production of income To determine if expenditure is in the production of
income – determine the following:
1. What action gave rise to the expenditure
and what is the purpose for the taxpayer?
2. Is this action closely connected with (or a
necessary concomitant of trade) the
income-earning business activities?
(Port Elizabeth Electric Tramway Co Ltd v CIR)
Payments will only be allowed as a deduction if there
is a:
1. Close relationship between trading operations
or income-earning business activities and that
caused the liability; and
2. Liability did not arise as a result of gross
negligence
(JoRe & Co (Pty) Ltd)
The Port Elizabeth Electric Tramway and Jo6e & Co
requirements are the same with an additional layer
with Jo6e & Co being negligence
Expenditure actually incurred To incur expenditure, there must be an unconditional
legal obligation during the year of the assessment
(Edgars Stores Ltd v CIR)
Case law
Requirements in general and It is not necessary that expenditure produce income
if income must be earned in in the year that it was incurred for the expenditure to
the same year be deductible and expenditure cannot be carried
forward or carried back to the previous year of
assessment
(Sub-Nigel Ltd v CIR)
Carrying on a trade The definition of trade should be given a wide
interpretation
(Burgess v CIR)
Must determine whether the expenditure was used
for the purposes of trade and in fact produce
income directly or indirectly
(C:SARS v Scribante Construction (Pty) Ltd)
In the production of income To determine if expenditure is in the production of
income – determine the following:
1. What action gave rise to the expenditure
and what is the purpose for the taxpayer?
2. Is this action closely connected with (or a
necessary concomitant of trade) the
income-earning business activities?
(Port Elizabeth Electric Tramway Co Ltd v CIR)
Payments will only be allowed as a deduction if there
is a:
1. Close relationship between trading operations
or income-earning business activities and that
caused the liability; and
2. Liability did not arise as a result of gross
negligence
(JoRe & Co (Pty) Ltd)
The Port Elizabeth Electric Tramway and Jo6e & Co
requirements are the same with an additional layer
with Jo6e & Co being negligence
Expenditure actually incurred To incur expenditure, there must be an unconditional
legal obligation during the year of the assessment
(Edgars Stores Ltd v CIR)
