Page 123 - SAIT Compendium 2016 Volume2

PN 4/1999
Income Tax acT: PracTIce noTes
PN 4/1999
Tax calculation on 28-02-1998
Loss before these transactions Exchange difference:
Forward exchange contract
(R160 000 gain, less R156 800
carried forward to 1999)
Loss from mining
Section 36 deduction
(No capital expenditure was incurred. Therefore no expenditure quali es for a deduction in terms of section 15 read with section 36)
Assessed loss
YEAR END 28-02-1999 Debt ($4 000 000 – 2%) Ruling exchange rates:
Transaction date (10-03-1998) Date of realisation (10-03-1998)
Exchange difference:
[(5,4600 – 5,4600) x $3 920 000]
Forward exchange contract
Portion of exchange difference which is carried over from the 1998 year of assessment:
Note:
(R600 000) R3 200
(R596 800) R nil
(R596 800)
5,4600 5,4600
R nil
R156 800 gain
The mineral processing plant had still not been taken into use for purposes of trade, but, because the acquisition cost of the plant was incurred as capital expenditure in this year the proviso in section 24I(7) becomes operative and the exchange difference is not postponed further.
Tax calculation on 28-02-1999
Income before these transactions
Exchange differences: Debt
Forward exchange contract (carried forward from 1998)
Assessed loss brought forward from previous year
(The exchange differences relating to the forward exchange contract are deemed to be closely related to the mining activities and the income from mining is therefore adjusted to determine the section 36 deduction)
Income from mining
Section 36 deduction
Acquisition cost of plant
($3 920 000 x 5,4600) Less: Utilised this year
Carried forward to 2000
R1 000 000
R nil R156 800 (R596 800)
R560 000 (R560 000)
R21 403 200
(R560 000)
R20 843 200
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