Clicks Retailers (Pty) Ltd v Commissioner for the South African Revenue Service (CCT 07/20) [2021] ZACC 11; 2021 (4) SA 390 (CC); 2021 (10) BCLR 1102 (CC); 84 SATC 71; 2021 BIP 16 (CC) (21 May 2021)

Clicks Retailers (Pty) Ltd v Commissioner for the South African Revenue Service (CCT 07/20) [2021] ZACC 11; 2021 (4) SA 390 (CC); 2021 (10) BCLR 1102 (CC); 84 SATC 71; 2021 BIP 16 (CC) (21 May 2021)

The Constitutional Court held that Clicks is not entitled to claim an allowance under section 24C of the Income Tax Act for its loyalty programme expenditure. The Court found that the contract of sale and the ClubCard contract, while functionally related and inextricably linked within the context of the loyalty programme, do not meet the requirement of contractual 'sameness' as required by section 24C(2). The income accrues under the contract of sale, and the obligation to finance future expenditure arises under the ClubCard contract. Each contract can exist independently: a sale contract does not depend on the ClubCard contract, and vice versa. The Court clarified that mere linkage or...

Citation
[2021] ZACC 11
Parties
Applicant: Clicks Retailers (Pty) Limited; Respondent: Commissioner for the South African Revenue Service
Court
Constitutional Court
Jurisdiction
South Africa
Judgment Date
21 May 2021
Case Number
CCT 07/20
Procedural Posture
Civil Appeal / Appeal From Supreme Court of Appeal, After Tax Court
Outcome
Appeal dismissed. Leave to appeal granted. Costs awarded against applicant.
Judges
Mogoeng, Jafta, Khampepe, Madlanga, Mathopo, Mhlantla, Theron, Tshiqi, Victor
Legal Topics
Income Tax Act, Future Expenditure Allowance, Contractual Sameness, Retail Loyalty Programmes, Deductibility of Expenditure
Tax Law Commercial and Corporate Income Tax Act Future Expenditure Allowance Contractual Sameness Retail Loyalty Programmes Deductibility of Expenditure

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Parties

Clicks Retailers (Pty) Limited

Applicant

Commissioner for the South African Revenue Service

Respondent

Procedural Posture

Civil Appeal / Appeal From Supreme Court of Appeal, After Tax Court

Legal Issues

  1. 1 Whether Clicks Retailers (Pty) Ltd is entitled to claim an allowance under section 24C of the Income Tax Act for future expenditure incurred in its loyalty programme.
  2. 2 Whether the income-producing contract and the obligation-imposing contract are the same or sufficiently inextricably linked to satisfy section 24C(2).
  3. 3 Whether the contracts underlying the loyalty programme meet the 'sameness' requirement established in Big G.

Ratio Decidendi

The Constitutional Court held that Clicks is not entitled to claim an allowance under section 24C of the Income Tax Act for its loyalty programme expenditure. The Court found that the contract of sale and the ClubCard contract, while functionally related and inextricably linked within the context of the loyalty programme, do not meet the requirement of contractual 'sameness' as required by section 24C(2). The income accrues under the contract of sale, and the obligation to finance future expenditure arises under the ClubCard contract. Each contract can exist independently: a sale contract does not depend on the ClubCard contract, and vice versa. The Court clarified that mere linkage or...

Court Disposition

Appeal dismissed. Leave to appeal granted. Costs awarded against applicant.

Orders

  • Leave to appeal is granted.
  • The appeal is dismissed.