Commissioner of the South African Revenue Services v Volkswagen of South Africa (Pty) Limited (153/99) [2000] ZASCA 92; [2001] 2 All SA 111 (A) (24 November 2000)

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[2000] ZASCA 92
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Commissioner of the South African Revenue Services v Volkswagen of South Africa (Pty) Limited (153/99) [2000] ZASCA 92; [2001] 2 All SA 111 (A); 2001 (2) SA 42 (SCA); 63 SATC 109 (24 November 2000)

REPUBLIC
OF
SOUTH
AFRI
C
A
IN
THE SUPR
E
M
E
COURT OF APPEAL
Rep
o
r
t
ab
l
e
Case
No:
153/99
In
t
he
m
a
tter
b
e
twee
n
:
The
C
om
m
i
s
s
i
o
n
er
of SA
R
ev
e
n
u
e
Services
...............................................................
Appellant
a
nd
V
ol
k
s
w
a
gen
o
f
So
uth
Africa
(
P
r
o
priet
a
r
y
)
Limited
.....................................................
Respo
n
dent
Co
r
am:
H
e
fe
r
A
DCJ
,
N
i
enab
e
r
,
S
c
ot
t
JJ
A
,
M
e
luns
k
y
,
Mpa
t
i
A
JJA
Da
t
e
of
h
e
aring:
13
Nov
e
mb
e
r
2000
Da
t
e
of
d
e
l
i
very:
24
Nov
e
mb
e
r
2000
I
n
co
m
e
Tax
-
Capital
receipts
or
ac
c
r
uals
-
v
e
hic
l
es
u
s
e
d
b
y
t
h
e
m
a
nuf
a
c
t
u
r
e
r
in
conducting
its
bu
s
i
n
e
s
s
a
n
d
then
so
l
d
.
JU
D
G
M
E
NT
HEFER
ADCJ:
[
1
]
The
exc
l
u
s
ion
of
receipts
or
accruals
of
a
capital
na
t
u
re
from
a
taxpaye
r
’s
taxable income
which
now
a
ppe
a
rs
in
the
de
f
i
nition
of “g
r
o
ss
income”
in
s
1
of
the
Inco
m
e
T
ax
Act
58
of
1
9
62,
a
s
a
m
ended,
h
a
s
long
be
e
n
a feature of our income tax legislation.
B
u
t
the concept of capital
receipts
and accruals
has
never
been
defined
in
t
h
e
legislation
or
i
n the
j
u
dgments
of
the
courts. All
th
a
t
we
have
is
a
n
umber
of
judicial
guidelines
for
the
determination of t
h
e na
t
u
re
of a par
t
icu
l
ar
receipt or accrual
on the facts
of
each
case.
In
performing
this
exercise
we
mu
s
t
bear
in
mind
what
Innes
C
J
said
in
Over
s
eas
T
r
ust
Corporation
Ltd
v
Commission
e
r
for
Inla
n
d
Rev
e
nue
1926
AD
444
at
4
5
3
viz
that
“
[w
]
h
ere
an
a
s
set
is
realised
at
a
pr
o
f
i
t
as
a
m
e
r
e
c
h
a
n
g
e
o
f
i
n
v
est
m
e
n
t
t
h
ere
i
s
no
d
i
f
f
e
r
ence
i
n
c
h
a
r
ac
te
r
b
e
t
ween
t
he
a
m
o
u
nt
of
enh
a
n
cement
a
n
d
t
h
e
b
a
lance
o
f
the
p
r
oce
e
d
s.
B
u
t
w
h
e
re
t
h
e
pro
f
it
is,
in
t
h
e
w
o
r
d
s
of
a
n
e
m
ine
n
t
Sc
o
t
ch
J
ud
g
e
see
Californ
i
a
n
C
op
p
er
S
yn
d
i
c
a
te
v
Inla
n
d
R
e
v
en
u
e
(41
S
c
.
L
.
R.
p
694)
‘
a
g
a
i
n
m
a
d
e
by
an
op
e
ration
o
f
b
u
s
i
n
ess
in
c
a
r
ry
i
ng
o
u
t
a
s
che
m
e
for
pro
f
it
m
aki
n
g
,
’
t
h
en
i
t
is
r
e
v
e
n
u
e
d
e
ri
v
e
d
f
r
o
m
ca
p
i
tal
p
r
o
d
u
ct
i
v
ely
e
m
p
l
o
yed,
and
m
u
st
be
i
n
co
m
e.”
A
full
discussion
of
the
guidelines
that
have
emerged
f
r
om
the
cases
will
n
o
t
se
r
v
e
any
useful
pu
r
p
ose.
W
e are
conce
r
ned
in
the
present
case
with what
i
s
alleged
by
t
h
e
taxpayer
to
be
the
sale
of
capital
a
ss
e
ts
and
it
is suf
f
icient
to
re
f
er
to
the
following
e
x
position
in
Co
r
b
ett
JA’s
j
u
dgment
in
Elandsh
e
uwel
Farming
(E
dms)
Bpk
v
Sekretaris
van
Binnelandse
Inkoms
t
e
1978(1) SA
101
(A) at
118
A-E:
“
Wh
e
re
a t
a
x
p
ayer
sells
pro
p
e
r
t
y,
t
h
e
qu
est
i
on
a
s
to
w
h
e
t
her
t
h
e
p
r
ofits
d
e
r
iv
e
d
f
r
o
m
t
h
e
sale
are
t
a
x
a
b
l
e
in
h
i
s
h
ands
b
y
rea
s
o
n
of
t
h
e
p
roc
e
e
d
s
c
onsti
t
u
ting
gro
s
s
i
n
c
o
m
e
or a
r
e
n
o
t
s
u
b
ject
t
o
t
ax
because
the
p
r
o
ceeds
c
o
n
sti
t
u
te
receipts
o
r
accr
u
als
o
f
a
c
apital
n
atu
r
e
,
t
u
r
n
s
o
n
t
h
e
f
u
r
t
h
er
e
n
q
u
iry
a
s
to
w
h
eth
e
r
t
h
e
sale
a
m
o
u
n
t
ed
to
t
h
e
reali
s
at
i
o
n
of
a
c
a
p
i
t
al
asset
or
w
h
e
ther
i
t
was
t
h
e
sale
o
f
a
n
a
s
set
in
t
h
e
cou
r
se
of
c
a
r
ryi
n
g
o
n
a
bu
s
i
n
e
s
s
o
r
i
n
pu
r
s
u
a
nce
of
a
profit
-
maki
n
g
s
c
h
e
m
e
...
I
n
t
h
e
deter
m
ination
o
f
t
h
e
q
u
es
t
ion
into
which
o
f
t
h
ese
t
w
o
classes
a
p
a
r
t
i
c
u
lar
t
r
ans
a
ction
fal
l
s
,
t
h
e
i
n
tenti
o
n
of
the
ta
x
payer,
b
o
t
h
at
t
h
e
time
o
f
ac
q
u
i
ring
the
asset
a
n
d
at
th
e
t
i
m
e
of
its
s
a
le,
is
o
f
g
r
ea
t
,
a
n
d
s
o
m
et
i
m
es
d
e
c
isi
v
e,
i
m
po
rta
n
ce.
Oth
e
r
sig
n
i
f
ic
a
nt
fac
t
o
r
s
i
n
c
l
ude,
i
nter
a
lia
,
the
ac
t
ual
a
cti
v
i
ties
o
f
t
h
e
tax
p
ayer
in
relat
i
o
n
t
o
t
h
e
asset
in
q
u
estio
n
,
the
m
anner
of
i
t
s
realisat
i
on
,
t
h
e
t
a
xp
a
y
er’s
o
th
e
r
b
u
s
i
n
ess
operat
i
on
s
(if
a
n
y)
...”
[
2
]
The
respondent
is
a
well-known
manufacturer
of
motor
vehicles.
By
far
the
largest
part
of
its
producti
o
n
is
d
e
stined
for
sale
to
the
publi
c
.
But it
also
manufactures
vehicles
for
t
h
e
co
mpany’s
own
us
e
.
H
a
ving
been
used
for
some
time
the
s
e vehicles
were
sold
and
the
question
is
whether
the
p
r
oceeds
constit
u
ted
r
eve
n
u
e
for
inc
o
me
tax
purposes.
An
Income
Tax
Special
C
o
urt
found
t
h
at
they
d
i
d
not because
the
receipts
were
of
a
capital nature.
A
n
d
so
did
the
Easte
r
n
Cape
P
r
o
v
inc
i
al
Division of
the
High
Court
in an
appeal
to
it
by
the
Comm
i
ssioner.
W
i
th
the
n
ecessary
leave
t
h
e
Com
m
issioner has now appealed
to this
court.
[
3
]
The
disp
u
t
e
arose
from
the
claim
in
the
r
espondent
’
s
inco
m
e
tax returns
for
the
1986
to
1992
years
of
assessment th
a
t
the profits
derived
f
r
om the
s
a
les
consti
t
u
ted
receip
t
s
or accruals
of a capit
a
l
nature.
The
Receiver
of
Revenue did
not
agree.
He
assessed the
r
e
spond
e
nt
to tax
on
the
b
a
sis
that the profits were
t
a
xable
and dismis
s
ed an
objection
to
the
assessments.
Then followed the appeals already referred to.
[
4
]
The
vehicles
in
que
s
tion
fall broadly
into
four
categorie
s
:
lea
s
e
vehicles,
test vehicles,
promotion vehicl
e
s and
transport vehicles. Since
the Commi
s
sioner
has
conceded
the
correct
n
ess
of
the
Special
Cou
r
t
’
s
findin
g
s
in
respect
of
the
test
and
transpo
r
t
vehicles
the
enq
u
iry
will
be
confined
to
the remaining
two
categories. They are descri
b
ed
a
s
follo
w
s
i
n
th
e
Sp
e
c
i
a
l
Cou
r
t’s
j
u
dgment:
Lea
s
e
v
e
h
i
c
l
e
s
.
“
In
an
e
f
f
ort
to
provi
d
e
a
b
e
n
e
fit
to
i
ts
e
m
p
loyees
a
n
d
t
o
a
t
t
r
act
s
u
itable
perso
n
s
t
o
its
e
m
p
l
oy
m
e
n
t,
t
h
e
[c
o
m
pa
n
y]
op
e
rates
a
v
e
h
i
cle
lease
sc
h
e
m
e
w
h
e
reu
n
d
e
r
e
m
p
loyees
of
c
e
r
ta
i
n
g
r
a
des
a
r
e
p
r
ovi
d
e
d
w
i
th
t
h
e
b
en
e
f
i
t
of
le
a
si
n
g
a
c
o
m
p
any
car
at
a
n
ex
t
re
m
e
l
y
fa
v
ourable
r
e
n
t
al
a
nd
whi
c
h
the
[co
m
pany]
...
m
aintains
and
serv
i
ces
at
its
exp
e
nse
.
..
The
e
m
ploy
e
es
are
re
q
u
ired
t
o
r
e
t
urn
t
he
vehicles
a
f
t
e
r
t
hey
h
a
v
e
tr
a
v
el
l
ed
1
5
000
k
i
l
ome
t
r
es
o
r wh
e
n
t
h
e
l
ea
s
e
h
as
r
u
n
f
o
r
a
pe
r
i
o
d
o
f
1
1
m
o
n
t
h
s,
wh
ic
h
ever
e
v
e
nt
oc
c
u
r
s
f
irst.
This
w
a
s
i
m
p
o
sed
as a
m
i
ni
m
u
m
p
er
i
od
of
t
h
e
l
ease
in
te
r
m
s
of
an
a
g
r
ee
m
e
n
t
with
the
m
aj
or
tra
d
e
u
n
i
on
and
i
s
also
re
g
a
r
d
e
d
in
ec
o
no
m
ic
te
r
m
s
a
s
b
ei
n
g
t
h
e
o
p
ti
m
u
m
d
u
rati
o
n
o
f
a
m
ot
o
r
car
l
ea
s
e.
On
ter
m
i
n
at
i
o
n
o
f
t
h
e
lease,
t
h
e
e
m
pl
o
yee
is
gi
v
e
n
t
h
e
opti
o
n
o
f
p
u
r
c
h
a
s
i
n
g
the
leas
e
d
v
ehicle
al
t
h
ough,
in
p
r
ac
t
ice,
o
nly
s
o
m
e
2
0
%
of
t
he
e
m
p
l
o
yees
av
a
il
t
he
m
se
l
v
es
o
f
t
h
e
o
p
p
o
r
t
u
n
i
t
y
to
d
o
s
o.
T
h
o
se
n
o
t
p
ur
c
h
a
sed
b
y
t
h
e
e
m
p
l
o
yees
are
t
h
en
s
o
l
d
o
u
t
o
f
hand
by
the
[co
m
p
a
n
y]
to
its
fra
n
c
hised
d
e
ale
r
s.”
P
romo
t
ional
ve
h
i
cles.
“
[P
ro
m
o
t
i
on
al
v
e
h
i
c
les
a
r
e]
us
e
d
f
o
r
pr
o
m
o
tio
n
al
p
u
r
p
o
s
es
t
o
e
n
h
a
n
ce
t
h
e
pu
b
l
i
c
i
m
a
ge
o
f
t
he
[c
o
m
p
any]
and
its
prod
u
ct
s
.
Ve
h
i
cles
t
y
pica
l
ly
i
n
c
l
ud
e
d
in t
h
i
s
catego
r
y
are
pre
s
s
v
e
h
i
cles,
ve
h
ic
l
es
u
s
e
d
f
o
r
m
o
t
o
r
s
p
o
r
t,
v
e
h
i
cles
p
r
ov
i
d
ed
to
sc
h
o
o
ls
for
d
r
i
v
er
e
d
u
c
atio
n
,
v
e
h
ic
l
es
p
r
o
v
id
e
d
t
o
N
o
csa
a
nd
I
t
h
uba
as
well
a
s
v
e
h
ic
l
es
u
s
e
d
in
s
pecial
m
a
rk
et
d
e
m
o
n
stra
t
i
o
n
s
.
I
n
respe
c
t
of
t
h
ese
ve
h
ic
l
es
the
[
c
o
m
p
a
n
y
]
h
ad
a
set
o
f
r
u
les
a
s
to
when
t
h
ey
were
t
o
b
e
s
o
ld
b
u
t
,
g
e
n
e
r
a
l
ly,
wh
e
n
t
h
ey
h
a
d
tr
a
v
e
l
l
ed
s
o
m
e
10
0
0
0
t
o
1
5
000
k
i
l
o
m
e
t
r
es
they
w
ere
p
a
ssed
on
t
o
t
h
e
u
s
e
d
v
e
h
i
cle
de
p
a
rt
m
ent
f
o
r
d
i
s
p
o
s
a
l
i
n
t
h
e
sa
m
e
way
as
t
h
e
l
eas
e
d
v
ehi
c
les.”
[
5
]
It
is
necessary
to
deal
at
the
o
u
t
se
t
with
an
argu
m
ent
on
b
e
half
of the Commissioner to the effect
t
h
at
t
h
e
le
a
s
e
a
n
d
promotional
sch
em
es
should not be tr
e
ated
as separate enterpris
e
s b
u
t
as
part of the respondent’s
entire bus
i
ness
opera
t
ion.
The
s
ch
e
mes,
it
is
submitt
e
d,
a
r
e
designed
to
render
the entire
opera
t
i
on
more
profitable
by
a
ttracting
a
better
c
alibre of
employee and advertising the company’s
products;
and it matters not
whether either scheme,
viewed
independently,
is
or is not
pro
f
it
orient
a
t
ed
.
T
h
e
submission
must
be
r
ej
e
cted.
W
e
are
deali
n
g
with
the
disp
o
s
a
l
of specific
a
s
sets
and
the
income
generated
in
th
a
t
way.
The
income
is
taxable or non-taxable
depending
on
the
nature
of
the
receipts
and
we
mu
s
t
determine whether
their
disposal
consti
t
u
ted
tra
n
s
actions
in
the
c
o
u
r
se
of
a
p
r
ofit-
making
sch
e
me
or
wh
e
t
her
it
amounted
to
t
h
e
r
ealiz
a
t
ion
of
capit
a
l
a
s
s
e
ts.
The
object
of
the
acquisiti
o
n
and
disposal
of
the
ass
e
ts
is
pl
a
i
nly
r
eleva
n
t
both
in
regard
to
the
respondent’s
e
n
tire
business
and in
rega
r
d
to
the
sche
m
es
in
terms
of
which
it
occu
r
re
d
.
Indeed, bearing in
m
i
nd
that
p
r
ofit-
making
is
obviously
the ulti
m
ate
aim
of
any
busin
e
ss
v
enture,
it
would
be impossi
b
le
to
sep
ar
ate
c
a
pit
a
l
a
ss
e
ts
f
r
om
trading
stock if
only
the
ove
r
all
purpose
o
f
the
e
n
t
i
r
e
ent
e
rpri
s
e
were
to count.
[
6
]
It
is
beyond
dispute
t
h
at
the
purpose
of
the
le
a
se
scheme
is
n
o
t
to derive
a
profit.
T
h
e
undisputed
evid
e
n
ce
is
that
it is
intended
entirely as
a
benefit
to
the
r
es
p
ondent
’
s
employees which
in
effect
forms
part
of
the
latter’s remuneration packages. The Commissioner’s counsel frankly
conceded
as
much.
He
conceded
moreover
t
h
at
the
l
e
a
s
e
scheme
as
such does
not
and
c
annot
yield
a
p
r
ofit
from
the
way
in
which
it
ope
r
ates.
The Preside
n
t
of the Sp
e
cial Cou
r
t
s
a
id in this reg
a
rd:
“
I
t
is
o
b
v
i
o
u
s
from
t
h
is
t
h
at
t
h
e
leasing
sch
e
m
e
was
n
ever
r
e
g
a
r
d
e
d
b
y
t
h
e
[
c
o
m
p
any]
as
a
pr
o
fit-
m
a
k
i
n
g
o
p
e
rati
o
n
p
l
an
n
e
d
along
s
ound
c
om
m
e
r
c
i
al
l
i
n
es.
I
nd
e
e
d
m
o
n
t
h
l
y
m
a
n
a
g
e
m
e
n
t
acc
o
u
n
ti
n
g
repo
r
ts
r
e
flect
o
ngoing
l
o
sses
cau
s
ed
b
y t
h
e
sc
h
e
m
e,
a
n
d
it is
c
l
ear
t
h
at
t
h
e
[
c
o
m
p
any]
v
iewed
t
h
e
sche
m
e
no
t
as
on
e
h
a
v
i
ng
a
p
r
o
fit
m
o
t
i
v
e,
b
u
t,
inde
e
d
,
t
h
e
di
r
ect
o
p
po
si
t
e.
A
s
a result
t
h
e
[c
o
m
p
any
’
s]
m
a
n
a
g
e
m
e
n
t
at
t
e
m
p
t
ed
to
d
o
away
wi
t
h
o
r
c
u
rtail
t
h
e
sch
e
m
e
b
ut
t
h
eir
prop
o
sals
i
n
t
h
at
r
e
g
a
rd
met wi
t
h
sub
s
t
a
n
tial
re
s
i
s
t
a
n
c
e
from
t
h
e
l
a
b
o
u
r
u
n
ions.
T
h
e
[
c
o
m
p
a
n
y
]
t
h
ere
f
ore
pe
r
sist
e
d
wi
t
h
t
he
s
c
h
e
m
e
on
l
y
as
an
e
x
e
r
c
is
e
in
l
abour
rel
a
t
i
on
s.”
[
7
]
The
way
in
which
the
r
espondent
deals
with
t
h
e
lease
vehicles
points
t
h
e
s
ame
way.
The
fol
l
owing
emerges
from
the
e
v
i
d
ence:
(a)
T
h
e
company
manufactures
vehicles
for
sale
to
the
p
u
blic
s
t
r
i
ct
l
y
o
n order.
Vehicl
e
s
for its
own
use
in
a
ll
f
o
ur
categories
me
n
tioned
e
a
rlier
are
produced
according
to
avai
l
a
b
l
e
con
s
truction
capacity
only. The
latter
are
identified
and
earmarked
at
an
ear
l
y
stage
of
the
construction
proce
s
s.
Thereafter,
as
a
rule, th
e
y
are
trea
t
e
d
separately
in
the
c
o
mpany’s
reco
r
d
ing
and
accounting
syste
m
.
I
t
would
not
be
wrong
to
say
that
the
company
at
all
times
m
anufactu
r
es
and
(until
d
e
live
r
y)
keeps two sets of vehicles,
o
n
e
of w
h
ich is for sale and the
other for its own use.
(b) Although
there
is
supposed
to
be
a
fixed
time
when
o
r
a
mileage
at which
l
e
ssees
are
required
to
return
their
hired
vehicles
the
operation
of
the
sc
h
eme
is
not
monito
r
ed.
The result
is
that
the
time
and
mileage are
regularly
exceeded
and
that
a
large
percentage
of
the
lease
ve
h
i
cles
are
returned
and
sold
-
obviou
s
ly
to the company’s det
r
iment
- after
u
p to
two
y
e
ars
of
u
s
e
.
(c)
The
c
o
mpany
does
not
concern
i
t
self
with
the
c
ondition
in
which
hired vehicles
are
kept
and
when
it
comes
to
selling
returned
ones
it
t
a
kes
no
r
eal
i
n
te
r
est
to
ensure
that
the
best prices
are
realized.
The
process
is
described
as
f
o
llows
in t
h
e
S
p
ecial
Co
u
rt’s
judgment:
“
In
d
eter
m
i
ni
ng
t
h
e
p
r
i
ce
t
h
e
[c
o
m
pany]
u
ses
t
h
e
A
u
t
o
deal
e
rs
Di
g
est,
a
p
u
b
lica
t
i
o
n
us
ed
in
the
m
o
to
r
t
r
a
de
to
p
r
ov
i
d
e
t
h
e
av
e
rage
val
u
e
of
sales
o
f
p
articul
a
r
m
o
dels
o
f
u
sed
m
o
tor
v
e
h
i
cle
s
,
a
d
j
u
s
t
m
e
n
t
s
b
e
i
ng
m
a
d
e
i
n
ter
alia,
for
k
ilo
m
e
t
r
es
t
r
a
v
e
lle
d
,
con
d
it
i
o
n
of
t
h
e
v
e
h
i
c
le
and
o
pti
o
n
al
e
x
t
ras
wi
t
h
w
h
ich
it
i
s
fit
t
e
d
.
The
l
i
s
t
of
ca
r
s
available
for
s
ale
a
n
d
t
h
e
f
i
x
ed
p
r
ices
th
e
r
eof
a
r
e
s
i
m
p
ly
m
a
d
e
a
v
ai
l
a
b
le
to
t
h
e
[
c
o
m
p
any
’
s
]
f
ra
n
c
h
i
s
ed
dealers
w
i
t
h
o
u
t
a
n
y
ba
r
g
ain
i
ng
as
t
o
price
...
I
n
the
event
of
no
o
r
der
b
e
ing
r
e
ce
i
ved
at
t
h
e
l
ist
price
o
f
t
h
e
v
e
h
i
cle,
t
h
e
p
rice
o
f
t
h
e
car
is
r
educed
in
t
h
e
n
ext list
a
n
d
t
h
e
p
r
o
cess
re
p
eat
e
d
u
n
t
i
l
s
u
c
h
ti
m
e
as
t
he
v
e
h
ic
l
e
is
s
old
.
.
.
t
h
e
[
c
o
m
p
a
n
y’s]
a
t
t
i
tu
d
e
in
d
i
s
p
o
sing
o
f t
h
e
s
e
v
e
h
i
cles
at t
h
e
end
of
t
h
e
lease
i
s
to
invol
v
e
itself
i
n
the
least
ti
m
e,
effo
r
t
and
c
o
st”.
[
8
]
Couns
e
l
for
the
Co
m
missioner
r
elies
h
eavily
on
the
f
a
ct
that
the
use
of
the
vehicles
for
relatively
short
periods
lacks an
e
l
ement
of permane
n
cy.
As
authority he
c
ites
R
a
bie
JA’s
observation
i
n
Sekre
t
a
r
i
s
van Binnelandse
Inkomste
v
A
veling
19
7
8
(
1)
SA
862
(A) at
880E
-
F
to
the
eff
ec
t
that
there
is
an
element
of
permanency
in
fixed
capit
a
l.
But
the
r
e
ma
r
k
must be
understood
in
t
h
e
cont
ex
t
in
whi
c
h
it
was
ma
de.
It
re
f
ers
to
the
d
i
stin
c
tion
between
f
i
xed
and
floating
capital
drawn
in
Commissioner
for
Inland Revenue
v
George
Forest
T
i
mber
Co
Ltd
1924
AD
516
at
524
where
it
w
a
s
said
th
a
t
“
...
f
l
oati
n
g
capital
is
con
s
u
m
ed
or
dis
a
p
p
e
a
rs
in
the
very
process
of
pr
o
duct
i
on,
w
hile
fi
x
e
d
c
a
p
i
tal
d
o
e
s
no
t
.”
But,
as
Innes
CJ
proceeded
to
say,
“
[t]he
d
is
t
i
n
cti
o
n
is
r
e
l
ative,
for
even
f
i
xed
c
a
p
i
tal,
s
uch
as
m
ac
h
i
n
e
r
y
,
gr
a
d
ually
wears
away
a
nd
needs
to
b
e
r
e
n
ew
e
d.”
This
is true of the vehicles
with
which we a
r
e concerned
too. Admit
t
edly
they
are
s
o
l
d
,
n
o
t
because
they
have
reac
h
ed
a
state
o
f
di
s
r
epair
where
t
h
eir
replacement has become
i
m
perat
i
ve,
b
u
t (apart from the
agreement
with
the
trade
u
n
ions)
b
ecause
it
is
conside
re
d
in
e
conomic
te
rm
s
that
the
time
for
replacement
has
arrived. But
this
holds
g
o
od
for
any
piece
of
equipment
u
s
ed
for
the
production
of
income:
no
factory
owner
w
i
ll
use
his
machinery
until
it
becomes
worth
l
ess;
he
will
rep
l
ace
it
when
it
is
most economical
to
do
so.
I do not
share t
h
e Commi
s
sion
e
r’s
view th
a
t
the p
o
sition
changes where
the
equipment
is
the
very
com
m
odity
in
which
t
h
e
taxpay
e
r
t
r
ades.
Like
the
manufacturer
of
compu
t
ers
who
needs
compute
r
s
to
conduct
h
i
s
busin
e
ss so
t
h
e
m
anufactu
r
er
of
motor
vehi
cl
es
nee
d
s
motor
v
e
hicl
e
s
to conduct his bus
i
nes
s
.
In both cases t
h
e equipment
used for the production of income has to be replaced
from
time
to
time.
In
t
h
e
ab
s
e
nce
of
a
change
of
inte
n
tion
a
co
m
p
uter
in
the
f
i
rst
ca
s
e
and
a
motor
vehicle
in
the
second cannot
be
converted
from
capit
a
l
ass
e
ts
i
n
to
tr
ad
ing
sto
c
k
wh
e
n
ev
e
r
it
has
to be r
e
plac
e
d
and is sold.
[
9
]
Couns
e
l
f
o
r
the
Com
m
issio
n
er
also
reli
e
s
on
the
regula
r
ity
and extent
of
the
sa
l
e
s
.
That
the
sa
l
e
of
returned
vehicles
t
a
kes
place
on
a
regular
basis cannot be g
a
ins
a
id but,
for the
r
e
a
s
ons
lis
t
ed in
t
h
e
previous pa
r
ag
r
aphs,
it
is
an entir
e
l
y
neutral
f
a
c
t
or.
And
so
is
the
extent
of
the
s
a
l
e
s.
The
evidence
i
s in
any
eve
n
t
clear
and
uncontradicted
t
h
at,
compared
with
the respond
e
nt’s
tot
a
l
turnov
er
,
the sale of used
v
e
hicles
is
insignifican
t
.
[
1
0
]
For
these
reasons
I
agree
with
t
h
e
finding
of
the
two
lower
courts
that the income from the sale of lea
s
e
vehicles constituted capital receipts or accruals.
[
1
1
]
In
arrivi
n
g
at
this
conc
l
u
s
i
o
n
I
have
assumed
that
the
co
s
t
s
and expenses
contained
in
the
“capital
profits”
returns, have
not
otherwise
been
deducted
as
expenditure
or
losses
in
terms
of
s
11
of
t
h
e
Act. This
m
a
tter
was
rais
e
d
with the
respondents’
c
o
u
n
sel
during
a
r
gu
m
ent
and
h
e
,
q
u
ite
correctly,
pointed
out
t
h
at
t
h
e
afore
s
aid
costs
and
expenditure
were
not queried
by
the
Commi
s
sioner
and
were
not in
issue
at
t
h
e
hear
i
n
g
before
the
Special
C
ourt.
[12]
Counsel
for
the
Commissioner
ele
c
te
d
n
o
t
t
o
a
dd
r
es
s
u
s
o
n
the
co
r
rectn
e
ss
of the
finding
r
e
lating
to the
p
r
omotion
a
l
vehicl
e
s.
I
t
was
a
wise
dec
i
sion
for
one
needs
but
a
glance
at
the
d
e
sc
r
i
ption
of
the
use
of
these vehicles
in
par
[4]
above to realize
t
h
at
t
h
e
income derived from their disp
o
sal
also
const
i
tuted
ca
p
ital
receipts or accruals.
T
h
e
appeal
i
s dismis
s
e
d
wi
t
h
cost
s
.
J
J
F
H
E
FER
C
o
ncu
r
:
Nienaber
JA
Scott
JA
M
elunsky
JA
M
pat
i
JA