In the Cape Tax Court: Case No 11466
14 November 2005
Posted by: TaxFind™
Before the Hon Mr Justice J G Foxcroft - President
Mr R J De Beer - Accountant member
Mr T M Pasiwe - Commercial member
[Heard at Cape Town on 16TH May 2005]
The present appeal was noted against assessments by the South African Revenue Service for two tax years.
The appellant was appointed to a company as its managing director.His contract of employment provided for payment to him of one million shares in the company, as consideration in respect of a restraint of trade.However, he never received the cash in respect of the shares.In respect of his salary, amounts were paid to appellant in reduction of the amount owing to him in respect of the cash due to him for the promised shares.According to the appellant, the amounts paid to him were erroneously recorded in the company's books as an expense to the directors' fees expense account.
The grounds of appeal were that the amount credited to the appellant's loan account was of a capital nature, being an amount received as consideration for the appellant undertaking the restraint of trade, and the amounts received by the appellant between October 1999 and July 2001 were of a capital nature, being payments of capital to the appellant in reduction of his loan account.
Held that the appeal was allowed.The company's books were shown to have been incorrect, and the case was referred back to the Commissioner for a revised assessment.
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