WJ Fourie Beleggings v Commissioner for the South African Revenue Service (168/08) [2009] ZASCA 37; 2009 (5) SA 238 (SCA) ; [2009] 3 All SA 230 (SCA); 71 SATC 125 (31 March 2009)

WJ Fourie Beleggings v Commissioner for the South African Revenue Service (168/08) [2009] ZASCA 37; 2009 (5) SA 238 (SCA) ; [2009] 3 All SA 230 (SCA); 71 SATC 125 (31 March 2009)

The court held that the contract between the appellant and Naschem was not an asset forming part of the appellant's income-producing structure but rather a product of its ordinary business activities as a hotelier. The payment received upon cancellation of the contract was compensation for loss of future profits, not for the loss of a capital asset. The appellant continued its business both before and after the contract, and the contract did not generate business opportunities but merely memorialised business already concluded. Therefore, the payment was of a revenue nature and must be included in the appellant's gross income for tax purposes. The appeal was dismissed, and the decisions...

Citation
[2009] ZASCA 37
Parties
Appellant: W J Fourie Beleggings; Respondent: Commissioner for the South African Revenue Service
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
31 March 2009
Case Number
168/08
Procedural Posture
Civil Appeal / Appeal From the High Court, Bloemfontein
Outcome
Appeal dismissed with costs.
Judges
Streicher, Farlam, Nugent, Leach, Bosielo
Legal Topics
Income Tax, Capital Vs Revenue, Contract Termination, Damages for Breach, Gross Income Definition
Tax Law Commercial and Corporate Income Tax Capital Vs Revenue Contract Termination Damages for Breach Gross Income Definition

Case Brief

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Parties

W J Fourie Beleggings

Appellant

Commissioner for the South African Revenue Service

Respondent

Procedural Posture

Civil Appeal / Appeal From the High Court, Bloemfontein

Legal Issues

  1. 1 Whether the payment received by the appellant for cancellation of a hotel accommodation contract is of a capital or revenue nature for income tax purposes.
  2. 2 Whether the cancelled contract formed part of the appellant's income-producing structure, thereby rendering the compensation a capital receipt.
  3. 3 Whether the payment should be included in the appellant's gross taxable income.

Ratio Decidendi

The court held that the contract between the appellant and Naschem was not an asset forming part of the appellant's income-producing structure but rather a product of its ordinary business activities as a hotelier. The payment received upon cancellation of the contract was compensation for loss of future profits, not for the loss of a capital asset. The appellant continued its business both before and after the contract, and the contract did not generate business opportunities but merely memorialised business already concluded. Therefore, the payment was of a revenue nature and must be included in the appellant's gross income for tax purposes. The appeal was dismissed, and the decisions...

Court Disposition

Appeal dismissed with costs.

Orders

  • The appeal is dismissed with costs.