Burgess v Commissioner for Inland Revenue (685/91) [1993] ZASCA 88; 1993 (4) SA 161 (AD); [1993] 2 All SA 496 (A) (2 June 1993)

Burgess v Commissioner for Inland Revenue (685/91) [1993] ZASCA 88; 1993 (4) SA 161 (AD); [1993] 2 All SA 496 (A) (2 June 1993)

The Supreme Court of Appeal held that the appellant's participation in the investment scheme constituted a 'venture' and therefore fell within the definition of 'trade' under section 11(a) of the Income Tax Act. The interest liability incurred was an actual expense in the production of income and was not of a capital nature. The appellant's motive, whether for profit or tax advantage, was irrelevant as the transaction itself was commercial and not artificial. The deduction for interest should have been allowed, and the assessment was remitted for re-assessment to permit the deduction.

Citation
[1993] ZASCA 88
Parties
Appellant: P A Burgess; Respondent: Commissioner for Inland Revenue
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
2 June 1993
Case Number
685/91
Procedural Posture
Civil Appeal / Appeal From the Transvaal Income Tax Special Court
Outcome
Appeal allowed with costs, including costs of two counsel. The order of the Special Court is set aside and the assessment is remitted for re-assessment to allow the deduction.
Judges
Corbett, E M Grosskopf, Vivier, Kumleben, Nienaber
Legal Topics
Income Tax Deduction, Interest Expense, Definition of Trade, Venture Speculation, Capital Nature Expenditure
Tax Law Commercial and Corporate Income Tax Deduction Interest Expense Definition of Trade Venture Speculation Capital Nature Expenditure

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 3 Authorities cited 13 Party arguments 2 Amounts and remedies 4
Sign in to unlock

Parties

P A Burgess

Appellant

Commissioner for Inland Revenue

Respondent

Procedural Posture

Civil Appeal / Appeal From the Transvaal Income Tax Special Court

Legal Issues

  1. 1 Whether the appellant's liability for interest accrued under the investment scheme was a permissible deduction under section 11(a) of the Income Tax Act.
  2. 2 Whether the appellant's participation in the scheme constituted the carrying on of a 'trade' within the meaning of the Act.
  3. 3 Whether the interest expenditure was of a capital nature and therefore excluded from deduction.

Ratio Decidendi

The Supreme Court of Appeal held that the appellant's participation in the investment scheme constituted a 'venture' and therefore fell within the definition of 'trade' under section 11(a) of the Income Tax Act. The interest liability incurred was an actual expense in the production of income and was not of a capital nature. The appellant's motive, whether for profit or tax advantage, was irrelevant as the transaction itself was commercial and not artificial. The deduction for interest should have been allowed, and the assessment was remitted for re-assessment to permit the deduction.

Court Disposition

Appeal allowed with costs, including costs of two counsel. The order of the Special Court is set aside and the assessment is remitted for re-assessment to allow the deduction.

Orders

  • The appeal is allowed with costs, including the costs of two counsel.
  • The order of the Special Court is set aside.