Commissioner for Inland Revenue v Malcomess Properties (Isando) (Pty) Ltd. (41/89) [1990] ZASCA 163; 1991 (2) SA 27 (AD); [1991] 4 All SA 145 (AD) (30 November 1990)

Commissioner for Inland Revenue v Malcomess Properties (Isando) (Pty) Ltd. (41/89) [1990] ZASCA 163; 1991 (2) SA 27 (AD); [1991] 4 All SA 145 (AD) (30 November 1990)

The court held that the profit realised from the sale of the Isando property by Malcomess (Isando) (Pty) Ltd was a capital realisation and not subject to income tax. The property was acquired and held as a capital asset, and its character was not altered by the subsequent sale, nor by the involvement of Malbak as the controlling shareholder. The sale was not part of a profit-making scheme but a mere realisation of a capital asset in the course of voluntary liquidation. The intention of Malbak in devising and executing the scheme was irrelevant to the intention of Malcomess (Isando), as the companies operated at arm's length and Malbak did not exercise de facto control over the taxpayer at...

Citation
[1990] ZASCA 163
Parties
Appellant: Commissioner for Inland Revenue; Respondent: Malcomess Properties (Isando) (Pty) Ltd
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
30 November 1990
Case Number
41/89
Procedural Posture
Civil Appeal / Appeal From the Transvaal Income Tax Special Court
Outcome
Appeal dismissed with costs, including the costs of two counsel.
Judges
Botha, Nestadt, Kumleben, Nicholas, Preiss
Legal Topics
Capital Vs Revenue Distinction, Realisation of Assets, Company Control, Scheme of Arrangement
Tax Law Commercial and Corporate Capital Vs Revenue Distinction Realisation of Assets Company Control Scheme of Arrangement

Case Brief

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Parties

Commissioner for Inland Revenue

Appellant

Malcomess Properties (Isando) (Pty) Ltd

Respondent

Procedural Posture

Civil Appeal / Appeal From the Transvaal Income Tax Special Court

Legal Issues

  1. 1 Whether the profit from the sale of the Isando property by Malcomess (Isando) (Pty) Ltd was of a capital or revenue nature for income tax purposes.
  2. 2 Whether the intention of the controlling shareholder (Malbak) at the time of sale could be attributed to the taxpayer for tax liability.
  3. 3 Whether the sale formed part of a profit-making scheme or was a mere realisation of a capital asset.

Ratio Decidendi

The court held that the profit realised from the sale of the Isando property by Malcomess (Isando) (Pty) Ltd was a capital realisation and not subject to income tax. The property was acquired and held as a capital asset, and its character was not altered by the subsequent sale, nor by the involvement of Malbak as the controlling shareholder. The sale was not part of a profit-making scheme but a mere realisation of a capital asset in the course of voluntary liquidation. The intention of Malbak in devising and executing the scheme was irrelevant to the intention of Malcomess (Isando), as the companies operated at arm's length and Malbak did not exercise de facto control over the taxpayer at...

Court Disposition

Appeal dismissed with costs, including the costs of two counsel.

Orders

  • The appeal is dismissed with costs, including the costs of two counsel.