Ernst Bester Trust v Commissioner of South African Revenue Services (282/07) [2008] ZASCA 55; 2008 (5) SA 279 (SCA); 70 SATC 151 (26 May 2008)

Ernst Bester Trust v Commissioner of South African Revenue Services (282/07) [2008] ZASCA 55; 2008 (5) SA 279 (SCA); 70 SATC 151 (26 May 2008)

The court held that the proceeds from the sale of sand were revenue in the hands of the taxpayer, not capital. The arrangement between the taxpayer and Brickrush resembled a mineral lease with royalty payments, and the taxpayer productively employed its capital asset for ongoing profit-making. The distinguishing features raised by the taxpayer were immaterial to the essential trading nature of the transaction. Regarding the opening stock deduction, the court found that section 22 did not apply because the sand was acquired and disposed of within the same assessment year, and there was no evidence that any part of the sand deposit constituted trading stock held by the taxpayer. The...

Citation
[2008] ZASCA 55
Parties
Appellant: Ernst Bester Trust; Respondent: Commissioner South African Revenue Service
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
26 May 2008
Case Number
282/07
Procedural Posture
Civil Appeal / Appeal From Income Tax Special Court
Outcome
Appeal dismissed with costs, including those consequent upon the employment of two counsel.
Judges
Harms, Navsa, Heher, Cachalia, Snyders
Legal Topics
Income Tax Act 58 of 1962, Trading Stock Deduction, Capital Vs Revenue, Mineral Lease, Taxable Income
Tax Law Commercial and Corporate Income Tax Act 58 of 1962 Trading Stock Deduction Capital Vs Revenue Mineral Lease Taxable Income

Case Brief

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Parties

Ernst Bester Trust

Appellant

Commissioner South African Revenue Service

Respondent

Procedural Posture

Civil Appeal / Appeal From Income Tax Special Court

Legal Issues

  1. 1 Whether proceeds from the sale of sand extracted from the taxpayer's farm constitute capital or revenue for income tax purposes.
  2. 2 Whether the taxpayer is entitled to an opening stock deduction under section 22 of the Income Tax Act for trading stock held at the beginning of each assessment year.

Ratio Decidendi

The court held that the proceeds from the sale of sand were revenue in the hands of the taxpayer, not capital. The arrangement between the taxpayer and Brickrush resembled a mineral lease with royalty payments, and the taxpayer productively employed its capital asset for ongoing profit-making. The distinguishing features raised by the taxpayer were immaterial to the essential trading nature of the transaction. Regarding the opening stock deduction, the court found that section 22 did not apply because the sand was acquired and disposed of within the same assessment year, and there was no evidence that any part of the sand deposit constituted trading stock held by the taxpayer. The...

Court Disposition

Appeal dismissed with costs, including those consequent upon the employment of two counsel.

Orders

  • The appeal is dismissed with costs including those consequent upon the employment of two counsel.