An Analysis Of The Term Actually Incurred — страница 2

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considerable problems in the past. In concluding, some of the recent legislative changes will de discussed and considered. 2. ACTUALLY INCURRED IN THE CONTEXT OF SECTION 11(a). Section 11(a) of the South African Income Tax Act No. 58 of 1962(as amended), reads as follows: 11. General deductions allowed in determination of taxable income.- For the purpose of determining the taxable income derived by any person from the carrying on of any trade within the Republic, there shall be allowed as deductions from the income of such person so derived- (a) expenditure and losses actually incurred in the Republic in the production of the income, provided that such expenditure and losses are not of a capital nature. Section 11(a) is broadly referred to as the general deduction provision. It

is intended to cover the requirements for expenditure and losses to be deductible in the determination of taxable income. Whilst the section is comprehensive as it stands, there is a further critical requirement that the expenditure and losses have been incurred during the year of assessment. This is not expressly stated in the section, but it is considered to be implicit that expenditure is only deductible for tax purposes, in the year in which it is incurred. Significant important case law exists to support this contention. Thus, should expenditure, usually deductible under s11(a), not be claimed as a deduction in the year in which it is incurred, it may not be claimed in any other year, unless the Act provides otherwise. The recognition or deductibility of expenditure,

provided all the other requirements are met, is triggered by incurral. This report will focus on three main issues surrounding incurral: a. Was expenditure actually incurred? To establish this, one needs to understand and define exactly what constitutes actual incurral. b. When did incurral take place? This will lead to understanding exactly when the action or actions which triggered incurral, took place. The timing of incurral will determine the year of assessment in which the expenditure or loss may be deductible in the determination of taxable income. In the Caltex Oil case Botha J.A. made the point that income tax is assessed on an annual basis , this lends support to the contention that expenditure incurred in a particular year of assessment is only deductible in that same

year. The determination of the year in which the expenditure or loss is actually incurred, brings more problems to be resolved. c. There is the problem of expenditure in respect of which the obligation to pay is, or during the year, becomes, unconditional, but which cannot be quantified until after the termination of the year of assessment. This again leads to a plethora of problems to resolve. The second year problem being but only one. All the issues give rise to thorny problems. There are many more issues. The courts and the legislature have battled. Some of the problems encountered have been raised by the two most recent Commissions of Inquiry such that legislation has recently been introduced to resolve them in the future. This will also be discussed and considered. The

primary objective of this report is to try to help to better understand this fundamentally critical area of the tax law. Planning to avoid future problems is easier then dealing with a problem after it has arisen, because history cannot be changed except in exceptional circumstances To be able to plan so that the occurrence of incurral can be planned rather then simply to be in the lap of the Gods. This is infinitely better then defending past actions. It is both cheaper and the outcome much more certain. 3. WHY IS “ACTUALLY INCURRED” SUCH A CRITICAL PROVISION: 3.1 What does it mean to be actually incurred . In interpreting a fiscal statute, It is important to distinguish between the presumptions of statutory interpretation and the rules or canons of construction. The

presumptions have obligatory force, being legal rules derived from the common law. They are intrinsic to the principle of legality because they qualify parliament s legislative enactments and exist side by side with the provisions of all statutes. The rules or canons of construction, on the other hand, have no status as legal rules and are merely conceptual models applied(or not applied as the case may be) by judges grappling with the meaning of particular legislative provisions. The traditional approach to the interpretation of statutes, often referred to as the Cardinal rule, holds that the literal meaning of the wording of a provision must be ascertained by the use of ordinary grammatical rules. If the meaning of the words is clear, then this meaning represents the intention