The approach by our courts of the apportionment of expenditure in terms of section 11(a) read with section 23(g) of the Income Tax Act no. 58 of 1962.

Abstract

The primary aim of a dissertation is to try to discover information that could

assist in solving a particular problem at hand. The object of this dissertation is

to determine the approach by our courts to apportionment of expenditure in

terms of section 11(a) read with section 23(g) of the Income Tax Act No 58 of

1962. A single expenditure incurred for more than one purpose poses a

problem when deduction of such an expenditure, is sought by a taxpayer.

The problem that ttie courts have always encountered when dealing with the

deductibility of expenditure incurred for a dual purpose, is that there is no

provision in the Income Tax Act that directs what to do when faced with such a

problem. The courts have always chosen apportionment of expenditure as a

solution to the deductibility of expenditure incurred for more than one purpose,

one such purpose being for tax purposes and the other being for non tax

purposes.

Apportionment of expenditure is used as a device to allocate part of the

expenditure, which was incurred to produce income, as taxable expenditure, and

another part of that expenditure which was incurred to produce non-taxable

income, as non-deductible expenditure.

This dissertation seeks to find out whether courts do take into consideration the

provisions of the Income Tax Act applicable to the deduction of expenditure

when called upon to make a decision on a particular case. The South African

Revenue Services use apportionment of expenditure where it deems appropriate

and the courts have never opposed it.

The Legislature, which is responsible for the enactment of the act, seems to be

happy to lie low, and allow the courts to dominate in handling the disputes that

arise as a result of expenditure incurred with a dual purpose. It has been

suggested that whilst the Income Tax Act does not provide any direction in

situations where the deductibility of dual purposes expenditure is in dispute,

apportionment is implied in the terms of section 11(a) read with section 23(g) of

the Income Tax Act no 58 of 1962.

The main aim of this research is to establish whether the path taken by the

courts is the correct one in terms of section 11(a) and section 23(g) of the

Income Tax Act no 58 of 1962. It is hoped that this work will be of assistance to

both The South African Revenue Services and the taxpayers at large in terms of

understanding that the courts are within the bounds of the Act.