South Africa Case Law

Clicks Retailers (Pty) Ltd v Commissioner for the South African Revenue Service (CCT 07/20)

Clicks Retailers (Pty) Ltd v Commissioner for the South African Revenue Service (CCT 07/20) [2021] ZACC 11; 2021 (4) SA 390 (CC); 2021 (10) BCLR 1102 (CC); 84 SATC 71; 2021 BIP 16 (CC) (21 May 2021)

Court

Constitutional Court

Case number

CCT 07/20

Judges

Mogoeng, Jafta, Khampepe, Madlanga, Mathopo, Mhlantla, Theron, Tshiqi, Victor

The Constitutional Court held that Clicks could not claim a section 24C allowance for loyalty programme income because the sale and ClubCard contracts were not sufficiently the same.

• Income Tax Act
• Future Expenditure Allowance
• Contractual Sameness
• Retail Loyalty Programmes
• Deductibility Of Expenditure
• Income-tax-act

Commissioner for the South African Revenue Service v Clicks Retailers (Pty) Ltd (58/2019)

Commissioner for the South African Revenue Service v Clicks Retailers (Pty) Ltd (58/2019) [2019] ZASCA 187; 2020 (2) SA 72 (SCA); 82 SATC 167 (3 December 2019)

Court

Supreme Court of Appeal

Case number

58/2019

Judges

Wallis, Swain, Mbha, Dlodlo, Hughes

The Supreme Court of Appeal held that Clicks Retailers (Pty) Ltd was not entitled to the allowance under s 24C of the Income Tax Act for expenditure expected to be incurred in honouring loyalty programme vouchers. The income-earning contract was the initial sale contract, while the obligation to award points and vouchers arose from the separate ClubCard contract. The expenditure incurred in redeeming vouchers did not arise from the same contract as the income received. The court rejected the argument that the contracts were sufficiently linked to satisfy the statutory requirement, reaffirming…

Source excerpt

• Income Tax Act
• Future Expenditure Allowance
• Contractual Obligations
• Loyalty Programmes
• Tax Deductions

Commissioner for the South African Revenue Service v Big G Restaurants (Pty) Ltd (157/2018)

Commissioner for the South African Revenue Service v Big G Restaurants (Pty) Ltd (157/2018) [2018] ZASCA 179; 2019 (3) SA 90 (SCA); 81 SATC 185 (3 December 2018)

Court

Supreme Court of Appeal

Case number

157/2018

Judges

Ponnan, Mbha, Mathopo, Schippers, Rogers

The Supreme Court of Appeal held that section 24C requires both the income and the obligation to originate from the same contract. The taxpayer did not receive income under the franchise agreement; rather, income was earned from contracts with patrons. The franchise agreement enabled the taxpayer to operate the business but did not itself create a right to income. Therefore, the taxpayer's claim for a section 24C allowance failed, as the statutory requirements were not met. The appeal was upheld and the order of the Tax Court was set aside.

Source excerpt

• Income Tax Act Section 24c
• Future Expenditure Allowance
• Contractual Obligations
• Tax Deductions

ABC (Pty) Ltd v Commissioner For The South African Revenue Service (13988)

ABC (Pty) Ltd v Commissioner For The South African Revenue Service (13988) [2018] ZATC 5; 81 SATC 214 (1 November 2018)

Court

Tax Court

Case number

13988

Judge

Nuku

The court found that the first purchase and sale contract triggers both the earning of income by the appellant and the obligation to incur future expenditure towards the customer, as points are awarded at the time of sale and the appellant becomes obliged to provide goods when the customer redeems the voucher. The loyalty card contract sets the terms, but the operative contract for section 24C purposes is the first purchase and sale contract. The court held that it is artificial and factually incorrect to treat the future expenditure as arising under a different contract. Therefore, the appel…

Source excerpt

• Income Tax Act Section 24c
• Future Expenditure Allowance
• Contractual Link For Deduction
• Loyalty Programme Taxation

B v Commissioner for the South African Revenue Services (IT14240)

B v Commissioner for the South African Revenue Services (IT14240) [2017] ZATC 3; 80 SATC 223 (3 November 2017)

Court

Tax Court

Case number

IT14240

Judge

J I Cloete

The Tax Court held that franchise income and refurbishment obligations arose under the same contract, allowing a section 24C deduction for future expenditure.

• Income Tax Act Section 24c
• Franchise Agreements
• Future Expenditure Allowance
• Contractual Obligations
• Tax Deductions
• Income-tax-act-section-24c

ABC (Pty) Ltd v Commissioner for the South African Revenue Service (ITI13772)

ABC (Pty) Ltd v Commissioner for the South African Revenue Service (ITI13772) [2016] ZATC 7; 79 SATC 62 (4 November 2016)

Court

Tax Court

Case number

ITI13772

Judge

Boqwana

Tax Court held section 24C did not apply because the income and future expenditure arose from different contracts, but remitted the understatement penalty.

• Income Tax Act Section 24c
• Future Expenditure Allowance
• Understatement Penalty
• Contractual Linkage
• Tax Administration Act Section 222
• Income-tax-act-section-24c