1. Expenditure and Loss
1.1. Joffe & Co (Pty) Ltd v CIR
1.1.1. Losses are possibly expenditure of an involuntary nature
1.1.2. Expenditure is a voluntary payment of money.
1.2. Port Elizabeth Electric tramway Co Ltd v CIR
1.2.1. Losses refer to losses of floating capital
2. Actually Incurred
2.1. Nasionale Pers Bpk v KBI
2.1.1. If a payment is contingent upon the happening of an uncertain future event, the expense and corresponding liability can only be actually incurred once the conditions are met.
2.2. CIR v Edgars Stores Ltd
2.2.1. An expense can only be deducted once there is an unconditional legal obligation to pay the expense.
2.3. Golden Dumps
2.3.1. Where an obligation to pay an amount is in dispute, the expense can only be actually incurred when the dispute is settled with regards to the obligation and the amount thereof.
3. During the year of assessment
3.1. Sub-Nigel Ltd
3.1.1. An expense must be deducted in the year of assessment that it is incurred, even if it will only produce income in future years.
3.2. Golden Dumps (Pty) Ltd
3.2.1. Can only be deducted in year of assessment the expense was actually incurred.
4. Not Capital in anture
4.1. New State Areas Ltd
4.1.1. Cost of establishing/ improving/adding income earning plant (fixed capital) is capital in nature and therefore not deductible
4.1.1.1. vs.
4.1.1.1.1. Cost of performing income-earning operations (floating capital) which is revenue in nature and therefore deductible
4.2. Rand Mines
4.2.1. Expenditure incurred to obtain an income earning right or structure will be capital in nature
4.2.1.1. Cost incurred to create a capital structure = capital Cost incurred to work the capital structure = revenue
5. In the production of income
5.1. Port Elizabeth Electric Tramway Co Ltd
5.1.1. 1. What is the purpose of the expense?
5.1.2. 2. How closely connected is that expense to the production of income?
5.2. Joffe and Co
5.2.1. If something is not an inevitable concomitant of the business operations it is not deductible.
5.3. Provider
5.3.1. Expenditure incurred to induce the employees to enter and remain in the service of the taxpayer may qualify as a deduction since the purpose is to produce current or future income. since the purpose is to produce current or future income.
5.3.2. Amounts paid in terms of a service package (employment contract) are deductible
5.4. Mobile Telephone Network Holdings
5.4.1. Where a there is a split between producing income versus exempt income (thus where audit fees are incurred for a dual purpose), apportionment has to take place.