In the matter between "A" Appellant and the Commissioner for the South African Revenue Service Judgment delivered on 24 April 2007
In the present appeal, the appellant contended that its payment of interest was an expenditure in the production of income and therefore deductible in terms of section 11(a) and section 23(g) of the Income Tax Act 56 of 1962.The respondent disagreed, averring that the interest paid by the appellant fell foul of the provisions of the aforesaid two sub-sections and could, therefore, not be deducted from the appellant's taxable income.
Held that the court had to decide whether the payment was of a capital or income producing nature. The appellant bore the onus of showing that the amount was not taxable.What is required of a taxpayer to discharge that onus is affirmative evidence that satisfies a court upon a preponderance of probability that the amount is deductible or alternatively not taxable.
Examining the facts, the court found that the appellant had succeeded in proving that the interest paid was not expenditure of a capital nature, and that the deduction should have been allowed.Finding that the respondent had acted unreasonably in opposing the matter when the issue was a simple and clear one, the court made a punitive costs order against it.
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