Case No 12515

• Jurisdiction: South Africa
• Judge: Traverso J
• Judgment Date: 05 September 2005
• Docket Number: 11515
• Hearing Date: 19 August 2005
• Citation: 2005 JDR 1159 (CSpCrt)

Traverso J:

[1]

The appellant is an employee of A.

[2]

He was previously employed by B, as group secretary and group accountant. He retired in February 1995. The appellant was at the time of his retirement a member of B Pension Fund ("the Fund"). The Fund was administered by Old Mutual.

[3]

After the appellant's retirement he received a monthly pension from the Fund.

[4]

During 1999 Old Mutual decided to demutualise and as a result of the demutualisation Old Mutual allocated 3826900 shares to the Fund. The shares were converted to cash by the Fund and added as a windfall profit to the general reserve account.

[5]

During March 1999 the trustees decided to offer the value of the share allocations to pensioners through the following options:

(a)

To remain members of the Fund and receive 50% of the share allocation in cash or as an additional pension;

(b)

To have their pensions transferred to individual contracts in terms whereof their membership of the Fund would cease and they would become eligible to receive 100% of the value of the demutualisation shares made available to them in a lump sum.

[6]

On 7 March 2000 the appellant chose the second option and therefore received 100% of the value of the shares allocated to him whereupon his membership of the Fund ceased.

[7]

In his 2001 tax return the appellant included the receipt of the amount of R155 302,00, which he indicated as a receipt of a capital nature.

[8]

The respondent however assessed the appellant on the basis that the amount received was income.

[9]

The respondent initially contended that the amount is included in paragraph (a) of the definition of "gross income", alternatively that the amount falls within paragraph (e) of the definition of gross income.

2005 JDR 1159 p2

Traverso J

[10]

The appellant objected to the assessment. The objection was dismissed as a result whereof the appellant noted an appeal to the Tax Board. The Tax Board dismissed the appeal.

[11]

This Court is therefore seized with the appeal de novo. For purposes of this appeal the respondent relies solely on the definition of gross income contained in paragraph (e).

[12]

Paragraph (e) of the definition of gross income provides:

"'gross income', in relation to any year or period of assessment, means -

(i)

in the case of any resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such resident; or

(ii)

in the case of any person other than a resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such person from a source within or deemed to be within the Republic,

during such year or period of assessment...