29 June 2009

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CSARS v Wooltru Property Holdings (Pty) Ltd (unreported, CPD case no A395/07).

Expenditure can only be recouped by the taxpayer who claimed it as a deduction.

The Municipality of Cape Town and A entered into a lease agreement in respect of a site know as the Major's Garden. A successfully claimed, as a deduction for income tax purposes, a lease premium paid as well as the cost of certain improvements to the property. Subsequently, as part of its liquidation, A disposed of the leasehold rights to B as a liquidation dividend in specie to the value of R82 505 092. B then disposed of the leasehold rights to a third party for over R99 million. SARS was of the opinion that the deductions previously claimed by the original lessee, A, were recouped in the hands of B. The issue in dispute was complicated by the fact that SARS agreed with the Wooltru group of companies to submit a consolidated tax return for all the group's companies.

The court held that deductions can only be recouped by the person who was granted the deduction. The income and deductions remained that of each company in the group despite the fact that the group rendered consolidated returns. SARS merely agreed to the group submitting a consolidated return to ease its administrative burden.


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