Sentra-Oes Kooperatief Bpk v Kommissaris van Binnelandse Inkomste (312/93) [1995] ZASCA 9; 1995 (3) SA 197 (AD); (9 March 1995)

Sentra-Oes Kooperatief Bpk v Kommissaris van Binnelandse Inkomste (312/93) [1995] ZASCA 9; 1995 (3) SA 197 (AD); (9 March 1995)

The court held that the loss of R5 million was not deductible under section 28(2)(c) of the Income Tax Act, as that section only allows deductions for expenditure, not losses. The general deduction formula in section 11(a) applies only if the loss is not of a capital nature. The appellant's business was short-term insurance, not banking or money-lending, and its investment activities were incidental to its insurance business. The funds lost were fixed capital, not circulating capital, and the loss was therefore of a capital nature. Consequently, the loss was not deductible for tax purposes. The application for condonation was refused, and the appeal was struck off the roll with costs.

Citation
[1995] ZASCA 9
Parties
Appellant: Sentra-Oes Kooperatief Bpk; Respondent: Kommissaris van Binnelandse Inkomste
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
9 March 1995
Case Number
312/93
Procedural Posture
Civil Appeal / Appeal From Cape Income Tax Special Court
Outcome
Appeal struck off the roll. Application for condonation refused. Costs awarded against appellant, including costs of two counsel.
Judges
Corbett, Hoexter, Smalberger, Kumleben, Nicholas
Legal Topics
Income Tax Act 58 of 1962, Deductibility of Losses, Capital Vs Revenue Loss, Short Term Insurance, Investment Losses
Tax Law Commercial and Corporate Income Tax Act 58 of 1962 Deductibility of Losses Capital Vs Revenue Loss Short Term Insurance Investment Losses

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Parties

Sentra-Oes Kooperatief Bpk

Appellant

Kommissaris van Binnelandse Inkomste

Respondent

Procedural Posture

Civil Appeal / Appeal From Cape Income Tax Special Court

Legal Issues

  1. 1 Whether the loss of R5 million incurred by the appellant is deductible under section 11(a) or section 28(2)(c) of the Income Tax Act 58 of 1962.
  2. 2 Whether the loss was of a capital nature or revenue nature for tax purposes.
  3. 3 Whether the appellant's investment activities qualify as money-lending or banking business for purposes of deductibility.

Ratio Decidendi

The court held that the loss of R5 million was not deductible under section 28(2)(c) of the Income Tax Act, as that section only allows deductions for expenditure, not losses. The general deduction formula in section 11(a) applies only if the loss is not of a capital nature. The appellant's business was short-term insurance, not banking or money-lending, and its investment activities were incidental to its insurance business. The funds lost were fixed capital, not circulating capital, and the loss was therefore of a capital nature. Consequently, the loss was not deductible for tax purposes. The application for condonation was refused, and the appeal was struck off the roll with costs.

Court Disposition

Appeal struck off the roll. Application for condonation refused. Costs awarded against appellant, including costs of two counsel.

Orders

  • The application for condonation is refused with costs, including the costs of two counsel.
  • The appeal is struck off the roll.