Commissioner for Inland Revenue v Golden Dumps (Pty) Ltd

• Jurisdiction: South Africa
• Citation: 1993 (4) SA 110 (A)

Commissioner for Inland Revenue v Golden Dumps (Pty) Ltd
1993 (4) SA 110 (A)

1993 (4) SA p110

Citation	1993 (4) SA 110 (A)
Court	Appellate Division
Judge	Corbett CJ, Van Heerden JA, Smalberger JA, Kumleben JA, Nicholas AJA
Heard	May 11, 1993
Judgment	June 2, 1993

Flynote : Sleutelwoorde B

Statute — Interpretation of — Meaning to be given to every word — Such rule well established — Contrary to such rule to regard words occurring C in a section as having been inserted per incuriam — Although surplusage and tautology not wholly unknown in statute, 'a statute is never supposed to use words without a meaning' — Word 'actually' in s 11(a) of Income Tax Act 58 of 1962 not used through inadvertence or error.

Revenue — Income tax — Deductions — Expenditure incurred in the production of income — 'Expenditure actually incurred' in s 11(a) of D Income Tax Act 58 of 1962 in context of determining when expenditure was incurred — Claim against taxpayer by former employee — Taxpayer disputing claim — Such liability of taxpayer a contingent liability which will only be determined when claim admitted or finally upheld by decision E of a court or arbitrator — If outcome of dispute undetermined at end of tax year in which deduction claimed, cannot be said that liability actually incurred in that tax year and not deductible in that tax year — Former employee's claim made against taxpayer in 1981 but liability of taxpayer on disputed claim only finally determined in 1985 — Special F Court correctly holding that taxpayer entitled to deduction for such liability in tax year ending 30 June 1985.

Headnote : Kopnota

The rule of statutory construction that a meaning must be given to every word (used in a statute) is a firmly established one. It is contrary to that well-approved canon of construction to regard words occurring in a section as having been inserted per incuriam. Although surplusage, or even G tautology, is not wholly unknown in the language of the Legislature, nevertheless 'a statute is never supposed to use words without a meaning'. (Craies Statute Law 7th ed at 103-4.)

The Court accordingly held that it could not be suggested that the Legislature had used the word 'actually' in s 11(a) of the Income Tax Act 58 of 1962 through inadvertence or error and that the implication, arising out of dicta in certain cases, that the word was mere surplusage and could be ignored was contrary to the above-stated firmly established rule of statutory construction. H

The respondent had been obliged, in terms of a judgment of the Appellate Division (delivered on 27 March 1985 and reported as Nash v Golden Dumps (Pty) Ltd1985 (3) SA 1 (A)) to deliver certain shares to the said Nash, a former employee, against payment of a stipulated sum. The respondent, in its return of income for the tax year ended 30 June 1985, claimed as a deduction the cost it had incurred in purchasing the said shares for delivery to Nash less the amount paid by Nash in terms of the Court order. I The appellant disallowed the deduction but a Special Income Tax Court allowed the respondent's appeal and referred the matter back to the appellant for reassessment. In a further appeal, it appeared that the shares in question had been offered to Nash at a stated price in a letter, dated 19 September 1980, in which employment had been offered by the respondent to Nash; that Nash had accepted the offer and had fulfilled the requirements which would have entitled him to the allotment of the shares; that the respondent had summarily dismissed Nash in December 1980; that in J January 1981 Nash had demanded delivery of the shares

1993 (4) SA p111

A against payment of the price stipulated in the letter of 19 September 1980; that the respondent had replied to the claim denying liability; that Nash had instituted proceedings in a Local Division claiming delivery of the shares; and that absolution from the instance had been granted on the claim but that such order had been reversed on appeal in March 1985. In the present appeal the appellant contended that the rights and obligations of the parties had existed at the time of the institution of action by Nash in February 1981 and that the obligation of the respondent to deliver B the shares had been 'actually incurred', within the meaning of s 11(a) of the Income Tax Act 58 of 1962, during the 1981 year of assessment. It was further contended that the judgment of the Appellate Division did not constitute a novation and did not amount to the fulfilment of a condition which resulted in the liability of the respondent arising, but it served only to confirm the rights and obligations which already existed in 1981. Accordingly, it was contended that the expenditure had not been incurred during the 1985 year of assessment but during that of 1981. C

Held, that, in the case of a liability which was contingent in the legal sense, the expenditure was incurred during the year of assessment only if the condition on which it depended was fulfilled during that year; and there was no difference in principle between a case where liability was contingent in the legal sense and one where it was contingent in the popular sense.

Held, further, that a liability was contingent (in the sense of 'a condition or situation, the ultimate outcome of which, gain or loss, D (would) be confirmed only on the occurrence, or non-occurrence, of one or more uncertain future events') in a case where there was a claim which was disputed, at any rate genuinely disputed and not vexatiously or frivolously for the purpose of delay.

Held, further, that in such a case the ultimate outcome would be confirmed only if the claim was admitted or if it was finally upheld by the decision of a court or arbitrator: where, at the end of the tax year in which a E deduction was claimed, the outcome of the dispute was undetermined, it could not be said that a liability had been actually incurred; the taxpayer could not properly claim the deduction in that tax year, and the receiver of revenue could not, in the light of the onus provisions of s 82 of the Act, properly allow it.

Held, further, that on the crucial date for the 1981 year of assessment the outcome of the disputed claim by Nash was still undetermined and F liability was then no more than impending or threatened.

Held, further, that the ultimate outcome of the disputed claim would be known only upon the delivery of the Appellate Division's judgment in 1985, which lay four years in the future.

Held, accordingly, that the decision of the Special Court that the expenditure had only been 'actually incurred' during the 1985 tax year was clearly right. Appeal dismissed. G

Case Information

Appeal from a decision in the Transvaal Income Tax Special Court (Goldstein J). The facts appear from the judgment of Nicholas AJA.

P J J Marais for the appellant referred to the following authorities: Nash v Golden Dumps (Pty) Ltd1985 (3) SA 1 (A) at 15F, 16E-H, 20B-F and 24G. As to the scheme of the Income Tax Act 58 of 1962 and the operation and meaning of s 11(a) of the Act, see Sub-Nigel Ltd v Commissioner for H Inland Revenue1948 (4) SA 580 (A) at 589; Caltex Oil (SA) Ltd v Secretary for Inland Revenue1975 (1) SA 665 (A) at 674B-D, 674E; Nasionale Pers Bpk v Kommissaris van Binnelandse Inkomste1986 (3) SA 549 (A) at 564A-C; Edgars Stores Ltd v Commissioner for Inland Revenue1988 (3) SA 876 (A) at 889B-G. As to whether the effect of a judgment of the Court constitutes a novation of the contractual rights and obligations of the parties, see I Trust Bank of Africa Ltd v Dhooma 1970 (3) SA 304 (N) at 310A-C; Swadif (Pty) Ltd v Dyke NO1978 (1) SA 928 (A) at 942D-E and 944F; E A Gani (Pty) Ltd v Francis1984 (1) SA 462 (T) at 466H-467A; Le Roux v Yskor Landgoed (Edms) Bpk en Andere1984 (4) SA 252 (T) at 256F-I; Zygos Corporation v J Salen Rederierna AB1984 (4) SA 444 (C).

1993 (4) SA p112

A E B Broomberg SC (with him B S Spilg) for the respondent referred to the following authorities: As to the nature of the deduction claimed by the respondent, see Stone v Secretary for Inland Revenue1974 (3) SA 584 (A) at 592H; Pyott Ltd v Commissioner for Inland Revenue1945 AD 128 at 136. As to the question of whether the conclusion of a binding and unconditional contract gives rise to rights and obligations in respect of B which the parties became 'entitled' to the amounts represented by those rights and that those amounts would be included in the respondent's 'gross income', see Ese Financial Services (Pty) Ltd v Cramer1973 (2) SA 805 (C) at 808-9; ITC 1444 (1987) 51 SATC 35 at 39-40. As to whether the effect of a judgment of the Court constitutes a novation of the rights and C obligations of the parties, see Trust Bank of Africa Ltd v Dhooma1970 (3) SA 304 (N) at 310A-C. As to the question of whether the respondent had only incurred the expenditure in question during the 1985 tax year, see ITC 840 (1957) 21 SATC 424; ITC 969 (1961) 24 SATC 777 at 786-7; ITC 183 (1930) 5 SATC 262; ITC 423 (1938) 10 SATC 335; ITC 505 (1941) 12 SATC 160; ITC 684 (1949) 16 SATC 368; ITC 1154 (1970) 33 SATC 159; ITC 1029 (1963) D 26 SATC 54; Secretary for Inland Revenue v Raubenheimer1969 (4) SA 314 (A); ITC 1310 (1979) 42 SATC 177; Port Elizabeth Electric Tramway Co Ltd v Commissioner for Inland Revenue 1936 CPD 241; ITC 658 (1948) 15 SATC 498; ITC 590 (1945) 14 SATC 133 at 138; Sub-Nigel Ltd v Commissioner for Inland Revenue1948 (4) SA 580 (A); ITC 815 (1955) 20 SATC 487 at 494. As to the meaning of the words 'actually incurred' in s 11(a) of the Income Tax Act E 58 of 1962 with reference to the case of a disputed liability, see ITC...