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
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. / Thesis (M.Com.)-University of KwaZulu-Natal, 2004.
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