Commissioner for the South African Revenue Service v SA Silicone Products (Pty) Ltd (358/02) [2004] ZASCA 3; [2004] 2 All SA 1 (SCA); 66 SATC 131 (5 March 2004)

Commissioner for the South African Revenue Service v SA Silicone Products (Pty) Ltd (358/02) [2004] ZASCA 3; [2004] 2 All SA 1 (SCA); 66 SATC 131 (5 March 2004)

The Supreme Court of Appeal held that the trade mark licence acquired by the respondent did not constitute 'property similar in nature' to a trade mark under s 11(gA)(iii) of the Income Tax Act. The licence was not intellectual property but merely a temporary right of use, lacking the proprietary interest, monopoly, and legal protection characteristic of the identified intellectual property rights. The customer connection was not an asset in the hands of DBS capable of assignment, and the payment for goodwill related to customer connection independent of the trade marks. The respondent's reliance on s 11(gA) was misplaced, and the deduction was correctly disallowed.

Citation
[2004] ZASCA 3
Parties
Appellant: Commissioner for the South African Revenue Service; Respondent: SA Silicone Products (Pty) Ltd
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
5 March 2004
Case Number
358/02
Procedural Posture
Civil Appeal / Appeal From Income Tax Special Court
Outcome
Appeal upheld; the judgment of the Special Court is set aside and the assessment is restored.
Judges
Howie, Marais, Zulman, Cloete, Heher
Legal Topics
Income Tax Deductions, Intellectual Property Licensing, Trade Mark Rights, Goodwill Valuation
Tax Law Commercial and Corporate Income Tax Deductions Intellectual Property Licensing Trade Mark Rights Goodwill Valuation

Case Brief

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Parties

Commissioner for the South African Revenue Service

Appellant

SA Silicone Products (Pty) Ltd

Respondent

Procedural Posture

Civil Appeal / Appeal From Income Tax Special Court

Legal Issues

  1. 1 Whether the trade mark licence acquired by the respondent constitutes 'property similar in nature' to a trade mark under s 11(gA)(iii) of the Income Tax Act.
  2. 2 Whether the conclusion of the licence agreement amounts to the 'acquisition' of such property for the purposes of the Act.
  3. 3 Whether the customer connection and goodwill were assets capable of assignment and deduction under s 11(gA).

Ratio Decidendi

The Supreme Court of Appeal held that the trade mark licence acquired by the respondent did not constitute 'property similar in nature' to a trade mark under s 11(gA)(iii) of the Income Tax Act. The licence was not intellectual property but merely a temporary right of use, lacking the proprietary interest, monopoly, and legal protection characteristic of the identified intellectual property rights. The customer connection was not an asset in the hands of DBS capable of assignment, and the payment for goodwill related to customer connection independent of the trade marks. The respondent's reliance on s 11(gA) was misplaced, and the deduction was correctly disallowed.

Court Disposition

Appeal upheld; the judgment of the Special Court is set aside and the assessment is restored.

Orders

  • The appeal is upheld with costs of two counsel.
  • The judgment of the Special Court is set aside.