Commissioner for South African Revenue Service v BP South Africa (Pty) Ltd (92/05 , 92/05) [2006] ZASCA 61; [2006] 4 All SA 523 (SCA); 2006 (5) SA 559 (SCA) (25 May 2006)

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[2006] ZASCA 61
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Commissioner for South African Revenue Service v BP South Africa (Pty) Ltd (92/05 , 92/05) [2006] ZASCA 61; [2006] 4 All SA 523 (SCA); 2006 (5) SA 559 (SCA); 68 SATC 229 (25 May 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
CASE NO
: 92/05
In the matter between :
THE COMMISSIONER OF THE SOUTH AFRICAN REVENUE
SERVICE
Appellant
- and -
BP SOUTH AFRICA (PTY) LTD
Respondent
_________________________________________________________________________
Before: HOWIE P, STREICHER, NUGENT, CLOETE & HEHER JJA
Heard: 3 MAY 2006
Delivered:
25 MAY 2006
Summary: Income tax – s 11(a) of Income Tax Act 68 of 1962
– interest paid by company in respect of loan granted at time
dividend declared – loan obtained not to pay dividend but to
produce income – rental paid in advance in respect of long leases
–
expenditure of capital nature.
Neutral citation: This judgment may be referred to as The
Commissioner of South African Revenue Services v BP South Africa
(Pty)
Ltd [2006] SCA 60 (RSA)
_________________________________________________________________________
J U D G M E N T
_________________________________________________________________________
STREICHER JA
STREICHER JA:
[1] This is an appeal by the
Commissioner of the South African Revenue Service (‘the
Commissioner’) against a judgment in the
Cape Tax Court (‘the Tax
Court’) upholding an appeal by BP Southern Africa (Pty) Ltd
(‘BPSA’) against the Commissioner’s
income tax assessment for
the 1993 year of assessment. In terms of the assessment the
Commissioner disallowed the deduction from
income of interest in the
amount of R81 755 944 payable by BPSA in respect of a loan
by its only shareholder British Petroleum
Company plc (‘BP plc’)
and rental expenditure incurred by BPSA in respect of filling station
sites of R13 483 420 (less
R31 008 and R71 464).
The Tax Court held that these expenditures constituted expenditures
incurred in the production of
income and that they were to be treated
as expenses deductible from BPSA’s income for the 1993 year of
assessment.
Deduction of interest
[2] BPSA markets petroleum products
in South Africa. Some of the petrol that it markets is refined by
South African Petroleum Refineries,
a joint venture by BPSA and
Shell. BP plc, the holding company of BPSA, is a company incorporated
outside the Republic. It required
that dividends of profits available
for distribution be declared quarterly. As at 25 March 1990 BPSA held
distributable profits amounting
to R682 499 575 which it
would have liked to retain. BP plc on the other hand considered its
investment in South Africa
risky, wanted to take the money out and
insisted that a dividend be declared. Eventually, in terms of an
agreement reached with the
management of BPSA, a general meeting of
the members of BPSA, on 6 August 1990, resolved that the amount of
R682 499 575
be declared as a dividend and that a loan of
R348 374 594 granted by BP plc be accepted by BPSA. In
terms of the loan granted
by BPSA, interest at an agreed rate was
payable on the capital amount outstanding from time to time. At the
time BPSA had the necessary
cash resources to pay the dividend in
full but as a result of the loan, only the difference between the
amount of the dividend and
the loan (after deduction of the
non-resident shareholder’s tax, being an amount of R300 000 000)
was remitted to BP
plc on 20 August 1990.
[3] Mr McClelland, the financial
director of BPSA, who negotiated the loan with BP plc, was the only
witness who testified at the
hearing of the appeal in the Tax Court.
He conceded that BPSA would have been better off had the dividend not
been declared in that
the declaration of the dividend brought about a
liability to pay interest on the amount of the loan. The payment of
the dividend
also brought about a lowering of the local borrowing
ceiling of BPSA imposed by the South African Reserve Bank. For this
reason a
dividend would not have been declared had it not been for
the insistence of BP plc. The loan together with the partial
restoration
of the local borrowing ceiling brought about by such loan
was required to fund various capital expenditure programmes which
were
being contemplated by BPSA at the time. These included the
expansion of the refining capacity of South African Petroleum
Refineries;
maintaining other parts of the refinery; the building of
new service stations; re-branding them in due course; and replacing
delivery
vehicles. The major item was the expansion of the refinery.
It would have been seriously disadvantageous to BPSA not to have
expanded
the refining capacity of the refinery. However, at the end
of 1990 BPSA, notwithstanding payment of part of the dividend, still
had
R427m in cash, which was more than was required to pay the
balance of the dividend in full. It would therefore have been
possible
to run the business of BPSA until the end of 1990 but at
some stage during 1991 the company would have experienced serious
financial
difficulties.
[4] In the event essentially all
expenditure in respect of the refinery was financed by way of hire
purchase contracts and long term
leases and at least a substantial
part of the loan was used as working capital. According to McClelland
the money, while it was in
the bank, helped BPSA to overcome
shortfalls in working capital.
[5] The Commissioner disallowed the
deduction of the interest on the loan on the basis that it had not
been incurred in the production
of BPSA’s income as required by
s 11(a) of the Income Tax Act 58 of 1962 (‘the Act’). The
Tax Court overruled the Commissioner’s
assessment and held that the
purpose of BPSA, in so far as the loan was concerned, was to continue
its income producing activities;
and that the interest paid on the
loan was an expense incurred in order to produce income within the
meaning of s 11(a).
[6] Section 11(a) provides that there
shall be allowed as deductions from income, for the purpose of
determining the taxable income
derived by a person from the carrying
on of any trade, ‘expenditure and losses actually incurred in the
production of the income,
provided such expenditure and losses are
not of a capital nature’. In order to determine whether expenditure
has been incurred
in the production of income ‘important, sometimes
overriding, factors are the purpose of the expenditure and what the
expenditure
actually effects’. (Per Corbett JA in
Commissioner
for Inland Revenue v Nemojim (Pty) Ltd
1983 (4) SA 935
(A) at
947F-H). In
Commissioner for Inland Revenue v Giuseppe Brollo
Properties (Pty) Ltd
[1993] ZASCA 197
;
1994 (2) SA 147
(A) at 152I-153D Nicholas
AJA said:
‘
[T]he enquiry relates primarily to the purpose
for which the money was borrowed. That is often the “dominant” or
“vital” enquiry,
although the ultimate user of the borrowed money
may sometimes be a relevant factor. Where a taxpayer’s purpose in
borrowing money
upon which it pays interest is to obtain the means of
earning income, the interest paid on the money so borrowed is
prima
facie
an expenditure incurred in the production of income. See
Commissioner for Inland Revenue v Allied Building Society
1963
(4) SA 1
(A) at 13C-G . . .
If, on the other hand, the purpose of the
borrowing was for some other purpose than obtaining the means of
earning income (for example,
to pay a dividend), the interest is not
deductible.’
[7] In
Ticktin Timbers CC v
Commissioner for Inland Revenue
1999 (4) SA 939
(SCA) certain
trading reserves and income were credited to the loan account of
Ticktin Timbers’ only member, Dr Ticktin, who had
bought the shares
in a company which he had then converted into a close corporation,
Ticktin Timbers CC. Dr Ticktin contended that
‘he was entitled to
whatever dividends he wished to declare; and that all the credits
were passed in respect of dividends which
he had declared but
retained in the business as an interest-bearing loan in order to
finance its day-to-day operations’.
1
Interest was credited annually on the accumulated balance in the loan
account. This court had to decide whether the interest credited
to
the loan account qualified as expenditure actually incurred in the
production of income. The issue was, therefore, the purpose
for which
the loan was made.
2
It was held that a scheme had been devised with the obvious aim of
ensuring that Dr Ticktin would be able to pay the interest on
the
purchase price in respect of the shares he had bought and possibly
the purchase price itself. Hefer JA said:
3
‘
I agree with the Court
a quo
that the
loan was not needed for the appellant’s income-producing activities
and that the intention was to increase Dr Ticktin’s
income, not
that of the appellant.’
[8] Counsel for the appellant contend
that ‘the principle which emerges from
Ticktin
is that,
where the loan giving rise to the relevant liability for interest is
incurred pursuant to a scheme devised to benefit the
shareholder
company and which results, not in additional income for the taxpayer,
but in an additional liability, then it cannot
be said that the
interest is incurred in the production of the taxpayer’s income,
for the purposes of s 11(a)’. They contend
that the evidence
and documents clearly established that the scheme upon which BPSA
embarked, whereby it paid a dividend and at the
same time borrowed an
equivalent amount from BP plc, was not conceived in the interest of
BPSA but was to serve the purposes of BP
plc and in fact created
additional expenditure for BPSA in the form of interest on the loan
and not additional income.
[9] The fallacy in the argument is
that a comparison is made between the position of BPSA having
declared the dividend and borrowed
the money and the position in
which BPSA would have been, had the dividend not been declared. In
the circumstances of this case the
position of BPSA having declared a
dividend and borrowed the money should be compared with the position
that BPSA would have been
in had the dividend been declared and had
there not been a loan. In terms of the articles of association of
BPSA dividends are declared
by the company in general meeting. The
policy of BPSA, insisted upon by BP plc, was that distributable
profits be distributed quarterly.
When the dividend in issue was
declared there were distributable profits available for distribution
and there was cash on hand to
pay the dividend. However, the
management of BPSA realised that cash would in a few months’ time
be required to fund capital expenditure
programmes.
4
It was because of this expected future requirement that McClelland
negotiated the loan with BP plc. He testified:
‘
[T]here was a very sound and sensible policy on
the part of the shareholders, which I couldn’t gainsay as the local
Finance Director,
that if there was money which could be taken out of
South Africa, let’s take it out sooner rather than later and then
bring it
back when needed so the shareholder’s interest would have
been best served by taking all the money and then bringing it back
when
needed. I didn’t like that because I had no guarantee that
when I needed the money I couldn’t sign deals to expand or the
company
couldn’t sign deals to expand the refineries without
knowing that the finance was going to be there.’
[10] In these circumstances it would
be illogical to regard the fact that the loan was linked to the
declaration of a dividend as
an arrangement or scheme conceived in
the interest of BP plc. It was in fact an arrangement conceived and
concluded in the interest
of BPSA which, insofar as the dividend
component is concerned, benefited BP plc and, insofar as the loan
component is concerned,
benefited BPSA. The loan whether looked at in
isolation or in combination with the declaration of a dividend was,
therefore, seen
from BPSA’s vantage point, a transaction concluded
in the interest of BPSA.
[11] The fact that the loan agreement
was concluded in the interest of BPSA does, however, not answer the
critical question whether
the money was borrowed in order to pay the
dividend or whether it was borrowed in order to produce income. In
Ticktin
Hefer JA said in an alternative approach, upon which
the Commissioner also relied:
5
‘
A company or corporation is not obliged to pay
a dividend or make a distribution respectively irrespective of the
financial circumstance
in which it finds itself. If after doing so,
it will have the resources to enable it to continue its
income-earning activities without
having to borrow simultaneously an
equivalent amount no problem arises. When it will not, but
nonetheless pays a dividend or makes
a distribution and
simultaneously raises a loan in exactly the same amount, it becomes a
question whether or not the purpose of the
loan was to enable a
dividend to be paid or the distribution to be made or to provide the
entity with liquid funds required to enable
it to pursue its income
earning activities.’
Heher JA, in
Commissioner, South
African Revenue Service v Scribante Construction (Pty) Ltd
2002
(4) SA 835
(SCA) at 841H, in respect of the same issue but different
facts, regarded surplus cash as the decisive factor.
[12] In the present case the evidence
of McClelland was that if the dividend had been paid in full, BPSA
would have been able to continue
with its normal business activities
including its capital expenditures until the end of 1990 but would by
the end of 1991 have had
to find R440m. BPSA did not therefore have
simultaneously to borrow an amount to replace the amount of the
dividend or any part thereof.
That, according to the above quoted
passage from
Ticktin
, should be the end of the enquiry. But it
seems to me to be nevertheless conceivable that a company may be
borrowing money to fund
a dividend notwithstanding the fact that it
has resources available to enable it to continue its income-earning
activities.
I shall therefore proceed on the basis that it
nevertheless has to be determined whether the purpose of the loan was
to enable the
dividend to be paid or whether the purpose was to
provide BPSA with the liquid funds required to enable it to pursue
its income-earning
activities.
[13] After having concluded that, on
the facts of
Ticktin
, the two transactions were interdependent
and that neither was intended to exist without the other, Hefer JA
said:
6
‘It is this linkage which, to my mind, is fatal for appellant’s
case for it shows that the true reason why appellant had to borrow
back at interest from Dr Ticktin money which it had had in it own
coffers and was under no obligation to part with was because it
wanted to make a distribution to Dr Ticktin.’
[14] Here it cannot be said that
without the loan there would have been no dividend. BP plc insisted
on the dividend being declared
and there was cash available to pay
that dividend. There was, therefore, no need to borrow money to pay
that dividend. It was clear
that cash would in the future be needed
to carry on with the business of BPSA unless the business was to be
run down but that cash
could have been raised at a later date by
increasing the issued share capital of BPSA or by a loan at that
stage. In the circumstances
there is no reason not to accept the
evidence of McClelland that the money was borrowed to ensure that it
would be available when
the need arose and not to pay the dividend.
[15] It follows that the Tax Court
correctly held that the purpose of BPSA insofar as the loan is
concerned was to continue its income
producing activities and that
the interest paid on the loan was an expense incurred in order to
produce income within the meaning
of s 11(a). Insofar as the
interest of R81 755 944 includes interest on interest the
Commissioner agreed that, should
it be held that the loan was an
expense incurred in order to produce income within the meaning of
s 11(a), the interest on interest
was likewise incurred for that
purpose. The appeal in respect of the interest on the loan should
therefore be dismissed.
Prepaid rental
[16] BPSA, like other oil companies
in South Africa, is not allowed to operate service stations. It sells
its products to independent
dealers who in turn sell to the public.
BPSA, therefore, has an indirect interest in the sale of its petrol
to the public and an
interest in securing sites from which its petrol
can be sold. This is done by either acquiring such sites and leasing
them to dealers
or by leasing sites from the owners thereof in terms
of long term head leases and subletting them to dealers. The
sub-tenants may
be the owners themselves. We are concerned with the
head leases which, in most cases, were for periods of some 20 years.
Each of
the head leases provides for the payment of rental by way of
a lump sum in advance. These lump sum payments put the owner in a
position
to build a service station where no service station was in
existence on the site, or to improve an existing service station in
accordance
with the requirements of BPSA. The head leases also
provide for the registration of servitudes over the leased properties
as security
for the repayment of prepaid rental in the event of the
termination of the lease by BPSA. In terms of the servitudes the
lessor and
any other occupiers of the properties are precluded from
selling any petrol or petroleum products from the properties other
than
those supplied by BPSA from time to time. McClelland testified
that BPSA was not in the business of hiring or letting property for
the purpose of making a profit. He agreed with the proposition that
BPSA’s ‘purpose was to create a set-up which would enable
retailers to purchase petrol from BP which they would in turn retail
to the public’.
[17] The Commissioner contends that
these lump sum rental payments, R13 483 420 (less R31 008
and R71 464) in
total, were of a capital nature and therefore
not deductible from income in terms of s 11(a). The Tax Court
held that the expenditures
were deductible. It reasoned that if BPSA
had operated its own service stations on the leased properties the
rental payable would
have been deductible as the premises would have
been occupied by BPSA for the purposes of its trade. Due to the
prohibition against
BPSA owning service stations it had no choice
other than to sublet the premises to independent operators. It
considered the rentals
paid by BPSA to have been expenditures which
were ‘an essential part of the business of (BPSA); it was the only
way in which it
could sell its products and the expenditure incurred
thereby was deductible’.
[18] Counsel for BPSA contend that
the reasoning of the Tax Court is correct. Their submission is that
there is no material difference
between a lease in terms of which
rental is paid by way of a lump sum ‘up front’ and a lease in
terms of which periodic rental
payments are made.
[19] In
Turnbull v Commissioner
for Inland Revenue
1953 (2) SA 573
(A) at 579A-B Centlivres CJ
said that rent is an expenditure incurred in the production of income
and that it is of a non-capital
nature and therefore deductible for
the purpose of determining taxable income. In general that is so but
it would not always be the
case. In this regard Wilcox J said in
Federal Commissioner of Taxation v Creer
65 ALR 485
(FC) at
493 (25-35):
‘Ordinarily, of course, rental payments, made to obtain the right
to occupy premises used for the purpose of earning assessable
income,
are deductible. But ordinarily such payments are recurrent; and
ordinarily they bear a relationship to the income expected
to be
earned by virtue of that occupation during the relevant accounting
period. Where those features are absent, it is better to
set aside
nomenclature and to examine the substance of the transaction and –
where relevant – the purpose for which it was undertaken.’
[20] In
Regent Oil Co Ltd v Strick
[1965] 3 All ER 174
(HL) the House of Lords was dealing with four
contracts in terms of which garage owners were tied by way of a lease
and a sublease
to sell an oil company’s petrol. The consideration
for the lease was an agreed lump sum payment plus a nominal rent of
one pound
per annum. In two of the four cases the lump sums were
expressly stated to be premiums while in the other two they were not.
It was
held that the lump sum payments were of a capital nature. It
is true that some of the law lords drew a distinction between rent
and
a premium. Their view was that rent is paid for the use of
property and is a revenue expenditure
7
whereas a premium is a capital expenditure as it is a payment for the
acquisition of an asset, being the right to use the property
for the
purpose of carrying on a trade.
8
However, whether a payment is made for the use of property or whether
it is made for the right to use property the payment is a rental
payment. In this regard I agree with the following statement by Lord
Reid in
Regent:
9
‘
It was argued that a rent and a premium paid
under a lease are paid for different things – that the premium is
paid for the right
but that the rent is for the use of the subjects
during the year. I must confess that I have been unable to understand
that argument.
Payment of a premium gives just as much right to use
the subjects as payment of a rent and an obligation to pay rent gives
just as
much right to the whole term of years as payment of a
premium.’
[21] It is not the legal
categorization of a payment which determines whether it is of a
revenue or a capital nature.
10
The mere fact that a payment constitutes a payment of rental does,
therefore, not qualify it as a revenue expenditure. As in the
case of
every other expenditure ‘the true nature of each transaction must
be enquired into in order to determine whether the expenditure
attached to it is capital or revenue expenditure’. (Per Watermeyer
CJ in
New State Areas Ltd v Commissioner for Inland Revenue
1946 AD 610
at 627.) Again the purpose of the expenditure is an
important factor in determining the true nature of a transaction. If
the expenditure
is incurred for the purpose of acquiring a capital
asset for the business it is capital expenditure.
11
[22] In the present case the purpose
of the lump sum payments ‘up front’ was to secure sites from
which BPSA’s petrol could
be sold. The registration of the
servitudes referred to above ensured that the sites would be used for
this purpose, even after termination
of the leases by BPSA, for as
long as prepaid rental remained in the hands of the lessor. The
expenditures were, therefore, intended
to secure sites from which
BPSA’s petrol could be sold even in situations where there was no
lease. By paying the lump sums BPSA
secured these sites for a period
of some 20 years ie it acquired assets which were intended to endure
for 20 years and which were
going to produce income for 20 years
without any further expenditure required in respect of the
acquisition of the assets.
[23] A test that has been adopted to
assist in the determination whether expenditure is of a capital or
revenue nature is to ask whether
the expenditure is more akin to the
income producing operations of the taxpayer or whether it is more
akin to the income-earning
structure of the taxpayer, or to ask ‘is
it expenditure required to carry on a business or is it required to
establish a business?’.
12
Money spent in creating an income –producing concern is capital
expenditure; it is invested to yield future profit.
13
In this case the purpose of BPSA was to establish a base for its
income-producing operations for the next 20 years. In the
circumstances
the lump sum expenditures are more closely related to
the income-earning structure of BPSA than its income-producing
operations.
They were incurred not to carry on the business of BPSA
but to establish it. Through the payment of a lump sum BPSA acquired
an asset
which, in the words of Lord Wilberforce in
Regent
14
,
‘was a source or foundation for the earning of profits, through
orders for petrol . . .: it can fairly be described as a piece of
fixed capital which is to be used in order to dispose of circulating
capital’.
[24] To allow these lump sum payments
as a debit against income would distort the profit for the particular
year in that the profit
for that year would be unduly diminished and
it is only after 20 years that a fair result would be reached. This
is a consideration
that weighed with Lord Reid in
Regent
. He
said
15
‘recurrence as against a payment once and for all has (ever since
Vallambrosa Rubber Co Ltd v Farmer (Surveyor of Taxes)
(1910)
5 Tax Cas. 529) been accepted as one of the criteria in a question of
capital or income’ and added that he ‘would have
great difficulty
in regarding a payment to cover twenty years as anything other than a
capital outlay’.
16
Lord Wilberforce said:
17
‘
No rule can be laid down as to a minimum period
of endurance for a capital asset or a maximum permissible period for
an item of stock
or circulating capital, though obviously the more
closely the period of endurance is related to an accounting period
the easier it
is to argue for a revenue character, but no doubt there
is a penumbra the width of which may vary according to the nature of
the
trade.’
[25] In the light of the nature of
the payments, being lump sums, the nature of the advantage obtained,
being security that BPSA’s
products would be sold from the leased
premises, and the substantial periods involved, I am of the view that
the expenditures were
of a capital nature. My reasons are essentially
the same as the reasons advanced by Lord Wilberforce in
Regent
18
for concluding that the lump sum payments dealt with in
Regent
were capital and not revenue payments. In one of the other speeches
in
Regent
Lord Morris of Borth-y-Gest expressed agreement with
the conclusion of Lord Denning MR in the Court of Appeal, which
conclusion is
particularly apposite to this case and reads:
19
‘
The company make a payment once and for all. In
return they get an advantage which is of enduring benefit to the
company. It brings
in revenue to the company week after week, and
month after month, from the petrol they supply to the retailer. I
have no doubt this
advantage is a capital asset and the payment for
it is capital expenditure.’
[26] The parties were agreed that
should it be held that the lump sum payments constituted expenditure
of a capital nature, s 11(f)
would be applicable.
20
It follows that the appeal should be dismissed in respect of the
deduction of interest on the loan by BPSA plc but that it should
succeed in respect of the prepaid rental to the extent that BPSA is
not entitled to a deduction in terms of s 11(a) but is entitled
to a deduction in terms of s 11(f). Counsel for the Commissioner
suggested that should this be our conclusion it would be fair
to
apportion the costs of the appeal 80:20 in favour of BPSA. Counsel
for BPSA on the other hand submitted that BPSA should be awarded
all
its costs. In the light of the fact that the appeal is successful to
the extent mentioned above it would be fair to award the
Commissioner
20% of the costs of the appeal as requested by his counsel.
[27] The following order is made:
The appeal in respect of the
interest in an amount of R81 755 944 on the loan by
British Petroleum Company plc to the
respondent is dismissed.
The appeal in respect of rental
payments in an amount of R13 483 420 (less R31 008
and R71 464) is upheld.
Paragraph 2 of the order by the Cape
Tax Court is replaced with the following order: ‘The respondent is
directed to apply the
provisions of s 11(f) of the Income Tax
Act 58 of 1962 in respect of the rental expenditure of R13 483 420
(less
R31 008 and R71 464).’
The appellant is to pay 80% of the
respondent’s costs and the respondent is to pay 20% of the
appellant’s costs.
_________________
P E STREICHER
JUDGE OF APPEAL
HOWIE
P)
NUGENT
JA)
CLOETE
JA)
HEHER
JA)
1
943C-D.
2
943A-B.
3
944E-F.
4
Many years later Mr Featherstone in his capacity
as Public Officer: BP Southern Africa (Pty) Ltd wrote to the
Commissioner that
having declared a dividend it was necessary for
BPSA ‘to retain cash resources by way of a loan by the Parent in
order to carry
on its trading operations’. However, counsel for
the Commissioner correctly conceded that it made no difference
whether it was
foreseen that funds would in a few months’ time
after the declaration and payment of the dividend be required to
fund capital
expenditure programmes or working capital.
5
At 944H-J.
6
A
t 945C.
7
At 197A-B and 201G.
8
At
197C-F and 201G; see also Brownlie and Jooste
‘The Lease Premium Concept in South African Tax Law’
Acta
Juridica
241.
9
At 180I to 181A.
10
See
Hallstroms Proprietary
Limited v The Federal Commissioner of Taxation
[1946] HCA 34
;
(1946) 72 CLR 634
at 648.
11
New State Areas Ltd supra
at 627.
12
New State Areas Ltd v Commissioner for Inland
Revenue
1946 AD 610
at 620-621;
Secretary for Inland Revenue
v Cadac Engineering Works (Pty) Ltd
1965 (2) SA 511
(A) at 522B;
Hallstroms Proprietary Limited v The Federal Commissioner of
Taxation
(1946) CLR 634
at 646-647; and
Regent Oil Co Ltd v
Strick (Inspector of Taxes)
[1965] 3 All ER 174 189-190.
13
Commissioner for Inland Revenue v George
Forest Timber Co Ltd
1924 AD 516
at 526.
14
At 202G.
15
See also
Commissioner for Inland Revenue v
George Forest Timber Co Ltd supra
.
16
At 181B-F; see also 200A (per Lord Pierce).
17
At 204H-I.
18
A
t 205A
.
19
Regent
at 188B-C.
20
Section 11(f) provides as follows:
‘11 For the purpose of determining the taxable income derived by
any person from carrying on any trade, there shall be allowed
as
deductions from the income of such person so derived –
...
(f) an allowance in respect of any premium or consideration in the
nature of a premium paid by a taxpayer for –
(i) the right of use or occupation of land or buildings used or
occupied for the production of income or from which income is
derived; or
...
(aa) the allowance under subparagraph (i),
(ii), (ii)
bis
or (iii) shall not exceed for any one year such
portion of the amount of the premium or consideration so paid as is
equal to the
said amount divided by the number of years for which
the taxpayer is entitled to use or occupation, or one twenty-fifth
of the
said amount, whichever is the greater.’