A v Commissioner For The South African Revenue Services (46206) [2023] ZATC 1; 86 SATC 225 (21 February 2023)

A v Commissioner For The South African Revenue Services (46206) [2023] ZATC 1; 86 SATC 225 (21 February 2023)

The court held that the taxpayer was entitled to set off the foreign assessed loss against the foreign recoupment income arising from the deemed disposal of the aircraft. Section 9(4)(d) of the Income Tax Act positively identifies the recoupment as foreign-sourced income, and the requirements of section 9(2)(k) were not met to treat it as South African-sourced. The court found that paragraph (n)(ii) of the definition of 'gross income' was obsolete, limited in scope, and did not apply to the taxpayer's circumstances. Even if it did, section 9(4)(d), as the later and more comprehensive provision, prevails. The Commissioner's approach would lead to anomalous and unbusinesslike results,...

Citation
[2023] ZATC 1
Parties
Appellant: A; Respondent: Commissioner For The South African Revenue Services
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
21 February 2023
Case Number
46206
Procedural Posture
Tax Appeal / Final Judgment
Outcome
Appeal upheld; additional assessment for the 2018 year set aside.
Judges
Adams, M Dikotla, G Gould
Legal Topics
Income Tax Act, Foreign Assessed Loss, Source of Income, Recoupment, Statutory Interpretation
Tax Law Income Tax Act Foreign Assessed Loss Source of Income Recoupment Statutory Interpretation

Case Brief

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Parties

A

Appellant

Commissioner For The South African Revenue Services

Respondent

Procedural Posture

Tax Appeal / Final Judgment

Legal Issues

  1. 1 Whether the taxpayer may set off a foreign assessed loss against foreign recoupment income under section 20(1) of the Income Tax Act.
  2. 2 Whether proviso (b) to section 20(1) prohibits the deduction of foreign assessed losses from foreign-sourced income.
  3. 3 Whether section 9(4)(d) of the Income Tax Act prevails over paragraph (n)(ii) of the definition of 'gross income' in section 1.

Ratio Decidendi

The court held that the taxpayer was entitled to set off the foreign assessed loss against the foreign recoupment income arising from the deemed disposal of the aircraft. Section 9(4)(d) of the Income Tax Act positively identifies the recoupment as foreign-sourced income, and the requirements of section 9(2)(k) were not met to treat it as South African-sourced. The court found that paragraph (n)(ii) of the definition of 'gross income' was obsolete, limited in scope, and did not apply to the taxpayer's circumstances. Even if it did, section 9(4)(d), as the later and more comprehensive provision, prevails. The Commissioner's approach would lead to anomalous and unbusinesslike results,...

Court Disposition

Appeal upheld; additional assessment for the 2018 year set aside.

Orders

  • The appellant's appeal against the additional assessment for the 2018 year of assessment is upheld.
  • The additional assessment is set aside.