Berea Park Avenue Properties (Pty) Ltd v Commissioner for Inland Revenue (624/90) [1994] ZASCA 167; 1995 (2) SA 411 (AD); [1995] 1 All SA 422 (A) (23 November 1994)

Berea Park Avenue Properties (Pty) Ltd v Commissioner for Inland Revenue (624/90) [1994] ZASCA 167; 1995 (2) SA 411 (AD); [1995] 1 All SA 422 (A) (23 November 1994)

The Supreme Court of Appeal found that the appellant's intention was to hold Vasella as a long-term investment and that the sale was compelled by the liquidity crisis of Pace Construction (Pty) Ltd, not by a profit-making scheme. The evidence showed genuine reluctance to sell, and the conversion to sectional title was a precautionary measure advised by legal counsel, not an indication of trading. The court rejected the respondent's argument that the appellant had become a land-jobber, noting that speculative ventures were kept separate from investments. The profit from the sale of Vasella was therefore of a capital nature and should not have been included in the appellant's taxable income.

Citation
[1994] ZASCA 167
Parties
Appellant: Berea Park Avenue Properties (Pty) Ltd; Respondent: Commissioner for Inland Revenue
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
23 November 1994
Case Number
624/90
Procedural Posture
Civil Appeal / Appeal From Full Court of the Transvaal Provincial Division
Outcome
Appeal upheld with costs, except for costs of an unnecessary condonation application, which are to be paid by the appellant.
Judges
Joubert, Van Heerden, Nestadt, Kumleben, Nicholas
Legal Topics
Capital Vs Revenue Receipts, Change of Intention, Sectional Title Scheme, Profit Making Scheme, Assessment of Taxable Income
Tax Law Commercial and Corporate Capital Vs Revenue Receipts Change of Intention Sectional Title Scheme Profit Making Scheme Assessment of Taxable Income

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Parties

Berea Park Avenue Properties (Pty) Ltd

Appellant

Commissioner for Inland Revenue

Respondent

Procedural Posture

Civil Appeal / Appeal From Full Court of the Transvaal Provincial Division

Legal Issues

  1. 1 Whether the profit of R836,717.00 from the sale of Vasella was of a capital nature and thus not taxable.
  2. 2 Whether there was a change of intention by the appellant converting the property from a capital asset to trading stock.
  3. 3 Whether the conversion of Vasella to a sectional title scheme indicated a profit-making scheme.

Ratio Decidendi

The Supreme Court of Appeal found that the appellant's intention was to hold Vasella as a long-term investment and that the sale was compelled by the liquidity crisis of Pace Construction (Pty) Ltd, not by a profit-making scheme. The evidence showed genuine reluctance to sell, and the conversion to sectional title was a precautionary measure advised by legal counsel, not an indication of trading. The court rejected the respondent's argument that the appellant had become a land-jobber, noting that speculative ventures were kept separate from investments. The profit from the sale of Vasella was therefore of a capital nature and should not have been included in the appellant's taxable income.

Court Disposition

Appeal upheld with costs, except for costs of an unnecessary condonation application, which are to be paid by the appellant.

Orders

  • The appeal is upheld with costs, except for the costs of the unnecessary application to condone the late filing of the record, which are to be paid by the appellant.
  • The order of the Special Court and the assessment for the year ended 28 February 1982 are set aside.