South Africa Case Law

Commissioner for the South African Revenue Service v Atlas Copco South Africa (Pty) Ltd (834/2018)

Commissioner for the South African Revenue Service v Atlas Copco South Africa (Pty) Ltd (834/2018) [2019] ZASCA 124; [2019] 4 All SA 635 (SCA); 2020 (4) SA 61 (SCA); 82 SATC 116 (27 September 2019)

Court

Supreme Court of Appeal

Case number

834/2018

Judges

Navsa, Ponnan, Zondi, Mocumie, Weiner

The Supreme Court of Appeal held that the taxpayer's method of valuing closing stock by applying fixed percentage write-downs based on aging, as per group policy and accounting standards, did not comply with section 22(1)(a) of the Income Tax Act. The Act requires a factual, retrospective assessment of whether trading stock has actually diminished in value due to specified causes, not a forward-looking or arbitrary policy. The taxpayer failed to provide reliable evidence of actual diminution in value for any of the six categories of stock. The use of NRV, while acceptable for accounting purpo…

Source excerpt

• Valuation Of Trading Stock
• Income Tax Act Section 22
• Net Realizable Value
• Accounting Standards Vs Tax Law
• Diminution Of Value
• Tax Deductions

XYZ (Pty) Ltd v Commissioner For The South African Revenue Service (13626)

XYZ (Pty) Ltd v Commissioner For The South African Revenue Service (13626) [2018] ZATC 12 (17 May 2018)

Court

Tax Court

Case number

13626

Judge

Ingrid Opperman

The Tax Court held that XYZ’s stock write-downs based on NRV under IAS2 were just and reasonable under section 22(1)(a) of the Income Tax Act.

• Income Tax Act
• Trading Stock Valuation
• Net Realizable Value
• International Accounting Standards
• Inventory Obsolescence
• Tax-law