Income Tax Case No: 9894

• Jurisdiction: South Africa
• Judge: Southwood R
• Judgment Date: 06 December 1995
• Docket Number: 9894
• Hearing Date: 03 November 1995
• Court: Transvaal Income Tax Special Court

Southwood R :

Die geskilpunt in hierdie appèl is of die appellant gedurende die 1990, 1991 en 1992 belastingjare boerdery beoefen het soos beoog deur artikel 26 van die Inkomstebelastingwet 58 van 1962 ("die Wet").

Die appellant het in sy belastingopgawes vir die 1990, 1991 en 1992 belastingjare die volgende boerderyverliese aangetoon:

Belastingjaar	Boerderyverlies
1990	R42 345,75
1991	R45 725,65'
1992	R39 163,62

Die kommissaris het hierdie boerderyverliese nie toegelaat nie omdat hy van mening was dat die appellant nie 'n boerdery bedryf het soos beoog deur artikel 26(1) van die Wet nie en die kommissaris het aanslae dienooreenkomstig uitgereik. Die appellant het onsuksesvol teen die aanslae beswaar gemaak en daarna appèl aangeteken. Die gronde van sy appèl is dat hy wel

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gedurende die drie belastingjare boerdery beoefen het soos beoog deur die Wet.

Artikel 26(1) van die Wet lui soos volg:

"26. Vasstelling van belasbare inkomste uit boerdery verkry - (1) Die belasbare inkomste van iemand wat veeboerdery, landbou of ander boerdery beoefen, word, vir sover dit uit so 'n boerdery verkry word, met inagneming van die bepalings van die Eerste Bylae, ooreenkomstig die bepalings van hierdie Wet vasgestel."

Die woord "boerdery" word nie in die Wet omskryf nie. Die woord is ook nie deur die howe omskryf nie. Die algemene benadering is dat die vraag 'n feitlike vraag is wat aan die hand van al die omstandighede van die besondere geval beoordeel moet word (Commissioner for Inland Revenue v D & N Promotions (Pty) Ltd 1995 2 SA 296 (A) te 306A-C; ITC 1319, 42 SATC 263 te 264) . Die howe het egter riglyne neergelê wat toegepas kan word om hierdie feitevraag te beslis. In sommige vroeëre beslissings is die bedoeling van die persoon om 'n wins uit sy boerderybedrywighede te maak as deurslaggewend beskou (ITC 209, 6 SATC 55 te 57; ITC 938, 24 SATC 374 te 375; ITC 1258, 39 SATC 58 te 61 ) . Maar in onlangse beslissings is dit nie as voldoende beskou nie. In ITC 1319, het SMALBERGER R hierdie vroeëre beslissings oorweeg en die volgende gesê (te 264):

"In so far as the test propounded by Silke purports to be an entirely subjective one, I do not agree with it. It seems to me that before a person can be said to carry on farming operations there must be a genuine intention to farm, coupled with a reasonable prospect that an ultimate profit will be derived, thereby incorporating an objective element into the test. To hold otherwise would make it wellnigh impossible for the Commissioner to determine whether or not to allow farming losses as a deduction from

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other income, for he must needs adopt an objective approach when doing so."

In ITC 1424, 49 SATC 99 het SMITH R na die uitspraak van SMALBERGER R in ITC 1319 verwys en die volgende gesê (te 106-107) :

"In my view the proper test to be applied is that put forward in Silke in South African Income Tax 9 ed. As long as there is a genuine intention to develop land as a farming proposition in the hope that an ultimate profit will be derived then the taxpayer can be said to be a farmer who is carrying on farming operations or incurring expenditure for the purposes of his trade. This hope must of course be based on reasonable grounds. If the area used for farming operations or the means used or available to the taxpayer are such that there could never possibly be any chance of an ultimate profit then it could not be said that the hope of an ultimate profit is a reasonable one. If the objective element suggested by SMALBERGER J in ITC 1319, (supra), were to be accepted many so-called commercial farmers in this country would cease to qualify for treatment as farmers under the Income Tax Act (Chapter 181 ) as they appear to be travelling hopefully but are never destined to arrive."

Die appellant se advokaat het betcog dat die toets "'n egte verwagting om 'n wins te maak" is en dat die hoop nie op denkbeeldige' verwagtinge gegrond moet wees nie maar op redelike moontlikhede. Hy het ook verwys na ITC 1258, 39 SATC 58 waar die president van die hof die volgende gesê het (te 61):

"The enquiry is simply whether the appellant has proved that he carried on a trade. It is common cause that if he did carry on a trade, the correct designation thereof is 'farming' . I emphasise, however, that the conduct of one or two activities which might properly be described as farming

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operations does not necessarily constitute the trade of 'farming' . See IT Case No. 1135, 31 SATC 228 at 231 . What must be locked to is the intention with which such activity is conducted. If the appellant's activities were the result of a genuine intention to use and develop the property as a farming proposition in the hope of producing an income therefrom, then he has carried on a trade (see IT Case No.208, 6 SATC 55 at 57), and it matters not that the income so derived was meagre. See IT Case No.1177, 34 SATC 147 at 149. The determination of the issue is purely factual and no useful guidance is to be obtained by having regard to previously decided cases which turn on different facts."

Die kommissaris se verteenwoordiger wat op ITC 1424 gesteun het het ook verwys na "J" v Commissioner of Taxes 55 SATC 62 waar SMITH R die toets in ITC 1424 aangehaal het en toe die volgende gesê het (te 67-68):

"It seems to me that a similar test must be applied in trying to determine the question of the continued existence of the secondary object - to make a profit. Applying such a test in this case, the court must decide whether there existed a genuine intention to make a profit based on reasonable grounds that an ultimate profit would be derived."

Die kommissaris se verteenwoordiger het aan die...