In the matter between A LTD - Appellant and the commissioner for the South African Revenue Service - Respondent
The appellant had held a 98% interest in a subsidiary company, via its 60% controlling interest in another company (C).The 98% shareholding was intended to be an investment.Later in the relevant tax year, the appellant acquired a 15.6% interest in the same subsidiary, but later sold that interest to C for less than half the amount paid.In the relevant tax return, the appellant claimed as a loss, a deduction equal to the difference between the amount of the purchase of the shares and the sale.In support of the deduction, the appellant stated that the loss was of a speculative nature and therefore deductible.The respondent disallowed the deduction on the basis that it was of a capital nature.
Held that the appellant had failed to discharge the onus of showing that it acquired the shareholding in the subsidiary company either as a scheme of profit-making or as trading stock.Instead, the evidence showed that the shares were acquired and held as a capital investment.The appeal was dismissed.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.