Taxpayer v Commissioner for the South African Revenue Services (13798; 13931; 14294) [2019] ZATC 5 (17 September 2019)

Taxpayer v Commissioner for the South African Revenue Services (13798; 13931; 14294) [2019] ZATC 5 (17 September 2019)

The court held that the taxpayer was not entitled to claim capital losses arising from the employee share incentive scheme trust for the 2007 to 2013 tax years. The right to instruct the trustees to grant share options did not constitute an 'asset' for capital gains tax purposes under the Eighth Schedule to the Income Tax Act, as it was a personal right and not a right in or to property. The losses incurred by the trust and made good by the taxpayer were not capital losses of the taxpayer and did not qualify for deduction. The taxpayer failed to prove the existence, acquisition, base cost, and disposal of any such asset. Accordingly, the appeals were dismissed and the additional...

Citation
[2019] ZATC 5
Parties
Appellant: Taxpayer; Respondent: Commissioner for the South African Revenue Services
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
17 September 2019
Case Number
13798; 13931; 14294
Procedural Posture
Tax Appeal / Final Judgment
Outcome
Appeals dismissed except for remission of the understatement penalty for the 2013 year.
Judges
L R Adams, M F Van Wyk, T V L Makhakhe
Legal Topics
Capital Gains Tax, Employee Share Incentive Scheme, Trusts in Taxation, Definition of Asset, Capital Loss Deduction
Tax Law Commercial and Corporate Capital Gains Tax Employee Share Incentive Scheme Trusts in Taxation Definition of Asset Capital Loss Deduction

Case Brief

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Parties

Taxpayer

Appellant

Commissioner for the South African Revenue Services

Respondent

Procedural Posture

Tax Appeal / Final Judgment

Legal Issues

  1. 1 Whether the taxpayer is entitled to claim capital losses arising from an employee share incentive scheme trust for the 2007 to 2013 tax years.
  2. 2 Whether the right to instruct trustees to grant share options constitutes an 'asset' for capital gains tax purposes under the Eighth Schedule to the Income Tax Act.
  3. 3 Whether the losses incurred by the trust and made good by the taxpayer qualify as capital losses deductible by the taxpayer.

Ratio Decidendi

The court held that the taxpayer was not entitled to claim capital losses arising from the employee share incentive scheme trust for the 2007 to 2013 tax years. The right to instruct the trustees to grant share options did not constitute an 'asset' for capital gains tax purposes under the Eighth Schedule to the Income Tax Act, as it was a personal right and not a right in or to property. The losses incurred by the trust and made good by the taxpayer were not capital losses of the taxpayer and did not qualify for deduction. The taxpayer failed to prove the existence, acquisition, base cost, and disposal of any such asset. Accordingly, the appeals were dismissed and the additional...

Court Disposition

Appeals dismissed except for remission of the understatement penalty for the 2013 year.

Orders

  • The understatement penalty imposed by the respondent in respect of the 2013 year of assessment in the amount of R2 275 206 is waived and/or remitted.
  • Save to the extent reflected above, the appeals by the appellant against the additional assessments for the tax years 2007 to 2013 are dismissed.