Deductions - Actually Incurred Flashcards
Facts:
The TP claimed a provision for bonuses as a deduction. The amount was only payable at a future date. The provision was raised for the employees working for a full year and becoming entitled to their bonus.
Nasionale Pers Bpk
Issue:
Was the provision expense actually incurred during the year of assessment?
Principle:
If a payment is contingent upon the happening of an uncertain future event, the expense and corresponding liability can only be actually incurred once the conditions are met.
Facts:
The TP leased premises to conduct its business. There was a basic monthly rental and an annual rental based on turnover. The taxpayer estimated the annual amount and claimed it as a deduction.
Edgars Stores
Issue:
Are the estimates of the annual turnover liability actually incurred?
Principle:
An expense can only be deducted once there is an unconditional legal obligation to pay the expense.
Facts:
The TP and a former employee were involved in a 4 year dispute over the delivery of share promised by the TP. The TP claimed the cost of the shares as a deduction.
Golden Dumps
Issue:
When the expenditure actually incurred?
Principle:
Where an obligation to pay an amount is in dispute, the expense can only be actually incurred when the dispute is settled with regards to the obligation and the amount thereof.
Facts:
The company, Labat, issued shares as consideration for the acquisition of a trademark.
Labat
Issue:
Whether the issuing of the shares as consideration for the acquisition of the trademark amounted to “expenditure actually incurred” by the issuing company.
The term “expenditure” is not defined in the Income Tax and it was decided to use the ordinary meaning - spending funds, disbursement or consumption.
Principle:
Section 40CA
An expense is deemed to be incurred by a company where it issues shares as consideration for acquiring an asset to be the market of the shares issued immediately after acquisition.
