Abraham Krok Trust v Commissioner for South African Revenue Service (58/2010) [2010] ZASCA 153; [2011] 2 All SA 591 (SCA); 73 SATC 105 (29 November 2010)

Abraham Krok Trust v Commissioner for South African Revenue Service (58/2010) [2010] ZASCA 153; [2011] 2 All SA 591 (SCA); 73 SATC 105 (29 November 2010)

The court found that the language of the trust deed, specifically clause 12.1 read with clause 11.1, clearly authorised the trustees to apply capital for the benefit of the children in their absolute discretion. The disposals in question benefited the children and were thus authorised by the trust deed. Since the disposals were made under and in pursuance of the trust, they fell within the exemption provided by section 56(1)(l) of the Income Tax Act and were not subject to donations tax. The premise upon which the Commissioner assessed the trusts was unsound, and no other grounds for opposing the appeal were advanced. The appeal was upheld and the assessment set aside.

Citation
[2010] ZASCA 153
Parties
Appellant: The Abraham Krok Trust; Respondent: The Commissioner for South African Revenue Service
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
29 November 2010
Case Number
58/2010
Procedural Posture
Civil Appeal / Appeal From Tax Court
Outcome
Appeal upheld; cross appeal dismissed; assessment set aside.
Judges
NAVSA, NUGENT, MAYA, CACHALIA, BERTELSMANN
Legal Topics
Donations Tax, Trust Deed Construction, Exemption From Tax, Burden of Proof
Tax Law Civil Procedure Donations Tax Trust Deed Construction Exemption From Tax Burden of Proof

Case Brief

Summary, issues, holding and outcome

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Parties

The Abraham Krok Trust

Appellant

The Commissioner for South African Revenue Service

Respondent

Procedural Posture

Civil Appeal / Appeal From Tax Court

Legal Issues

  1. 1 Whether the disposals made by the trustees constituted donations as defined in section 54 of the Income Tax Act.
  2. 2 Whether the disposals were authorised by the trust deed and thus exempt from donations tax under section 56(1)(l).
  3. 3 Whether the validity or invalidity of the disposals affects their taxability under section 54.

Ratio Decidendi

The court found that the language of the trust deed, specifically clause 12.1 read with clause 11.1, clearly authorised the trustees to apply capital for the benefit of the children in their absolute discretion. The disposals in question benefited the children and were thus authorised by the trust deed. Since the disposals were made under and in pursuance of the trust, they fell within the exemption provided by section 56(1)(l) of the Income Tax Act and were not subject to donations tax. The premise upon which the Commissioner assessed the trusts was unsound, and no other grounds for opposing the appeal were advanced. The appeal was upheld and the assessment set aside.

Court Disposition

Appeal upheld; cross appeal dismissed; assessment set aside.

Orders

  • The appeal is upheld.
  • The cross appeal is dismissed.