Tax Case No: IT 11282
18 March 2005
Posted by: TaxFind™
In the Tax Court Held at Johannesburg Case IT 11282
In the matter of "A” Appellant and
The Commissioner for the South African Revenue Service - Respondent
The appellant had raised an objection against the determination of his tax liability for the years 1990-1991.Although the appellant had initially included certain share dealing profits as part of his gross income in his tax returns, he later submitted amended tax returns for the same tax years excluding the said profits on the ground that the amounts did not constitute part of his gross income as they were not beneficially received.
Held that the evidence established that the share dealing profits were obtained as part of a fraudulent operation in which the appellant was involved.The court emphasised that income received is subject to tax notwithstanding the fact that it is tainted with illegality or is received from illegal activities.
The real question to be determined was whether the receipt of secret profits by an agent falls within the "gross income" of the agent. The question entailed an examination of the law relating to agency.The court referred to the authorities which point out that a man who stands in a position of trust towards another cannot, in matters affected by that position, advance his own interests (eg by making a profit) at the other's expense.Thus, in the present case, neither the shares originally bought nor the profits realised belonged to the appellant and were never received by the appellant in his own right or for his benefit, but by the principal for whom he had been acting.
The appeal was upheld, and the profits referred to above were excluded from the appellant's gross income.
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