Edgars Stores Ltd v Commissioner for Inland Revenue (71a/88) [1988] ZASCA 71 (30 May 1988)

Edgars Stores Ltd v Commissioner for Inland Revenue (71a/88) [1988] ZASCA 71 (30 May 1988)

The Supreme Court of Appeal held that the lease agreements created a single obligation to pay rent, comprising both the basic rental and any excess turnover rental. This obligation arose month by month, and although the quantum of the turnover rental component could not be ascertained during the tax year, the liability to pay it was certain and established within that year. The Court rejected the respondent's argument that the liability was conditional and dependent on future events, finding instead that the obligation to pay the turnover rental was unconditional, with the amount to be determined after the end of the 12-month period. Accordingly, Edgars Stores Limited was entitled to...

Citation
[1988] ZASCA 71
Parties
Appellant: Edgars Stores Limited; Respondent: Commissioner for Inland Revenue
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
30 May 1988
Case Number
71a/88
Procedural Posture
Civil Appeal / Appeal From Provincial Division Judgment
Outcome
Appeal upheld. The order of the Court a quo is set aside and substituted with an order dismissing the appeal with costs.
Judges
Corbett, Hoexter, Vivier, Viljoen, Nicholas
Legal Topics
Income Tax Deductions, Lease Agreements, Rental Liability, Timing of Expenditure
Tax Law Commercial and Corporate Income Tax Deductions Lease Agreements Rental Liability Timing of Expenditure

Case Brief

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Parties

Edgars Stores Limited

Appellant

Commissioner for Inland Revenue

Respondent

Procedural Posture

Civil Appeal / Appeal From Provincial Division Judgment

Legal Issues

  1. 1 Whether Edgars Stores Limited was entitled to deduct estimated turnover rental from taxable income in the year the liability arose, despite the amount being unascertainable at year-end.
  2. 2 Whether the lease agreements created a single rental obligation or two separate obligations for basic and turnover rental.
  3. 3 Whether the liability for turnover rental was 'actually incurred' within the meaning of section 11(a) of the Income Tax Act, 58 of 1962.

Ratio Decidendi

The Supreme Court of Appeal held that the lease agreements created a single obligation to pay rent, comprising both the basic rental and any excess turnover rental. This obligation arose month by month, and although the quantum of the turnover rental component could not be ascertained during the tax year, the liability to pay it was certain and established within that year. The Court rejected the respondent's argument that the liability was conditional and dependent on future events, finding instead that the obligation to pay the turnover rental was unconditional, with the amount to be determined after the end of the 12-month period. Accordingly, Edgars Stores Limited was entitled to...

Court Disposition

Appeal upheld. The order of the Court a quo is set aside and substituted with an order dismissing the appeal with costs.

Orders

  • The appeal is upheld with costs, including the costs of two counsel.
  • The order of the Court a quo is set aside.