Page 449 - SAIT Compendium 2016 Volume2

IN 47 (3) Income Tax acT: InTeRPReTaTIon noTes IN 47 (3)
ANNEXURE A – SCHEDULE OF WRITE-OFF PERIODS ACCEPTABLE TO SARS
Preamble
In this Note unless the context indicates otherwise—
• ‘allowance’ means the wear-and-tear or depreciation allowance granted under section 11(e);
• ‘qualifying assets’ mean machinery, plant, implements, utensils and articles qualifying for the allowance; • ‘section’ means a section of the Act;
• ‘Value-Added Tax Act’ means the Value-Added Tax Act 89 of 1991;
• ‘Tax Administration Act’ means the Tax Administration Act 28 of 2011; and
• any word or expression bears the meaning ascribed to it in the Act.
1. Purpose
This Note provides guidance on the application and interpretation of section 11(e) in relation to the determination of— • the ‘value’ of a qualifying asset on which the allowance is based; and
• acceptable write-off periods of such assets.
This Note is a binding general ruling made under section 89 of the Tax Administration Act on section 11(e) in so far as it relates to the determination—
• of the value of an asset for purposes of section 11(e); and
• the amount that will qualify as an allowance.
This ruling applies to any qualifying asset brought into use during any year of assessment commencing on or after 1 March 2009.
2. Background
This Note provides guidance on the circumstances under which the wear-and-tear or depreciation allowance provided for in section 11(e) may be claimed as a deduction. It also contains Annexure A which provides the different write-off periods for qualifying assets.
3. The law
Section 11 (e)
11. General deductions allowed in determination of taxable income.—For the purpose of determining the taxable income derived by any person from carrying on any trade, there shall be allowed as deductions from the income of such person so derived—
(e) save as provided in paragraph 12(2) of the First Schedule, such sum as the Commissioner may think just and
reasonable as representing the amount by which the value of any machinery, plant, implements, utensils and articles (other than machinery, plant, implements, utensils and articles in respect of which a deduction may be granted under section 12B, 12C, 12DA, 12E(1) or 37B) owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the de nition of ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act, 1991 (Act No. 89 of 1991), and used by the taxpayer for the purpose of his or her trade has been diminished by reason of wear and tear or depreciation during the year of assessment: Provided that—
(i) .........
(iA) no allowance may be made in respect of any machinery, plant, implement, utensil or article the ownership
of which is retained by the taxpayer as a seller in terms of an agreement contemplated in paragraph (a) of
an ‘instalment credit agreement’ as de ned in section 1 of the Value-Added Tax Act, 1991;
(ii) in no case shall any allowance be made for the depreciation of buildings or other structures or works of a
permanent nature;
(iiA) where any machinery, implement, utensil or article qualifying for an allowance under this paragraph is
mounted on or af xed to any concrete or other foundation or supporting structure and the Commissioner is
satis ed—
(aa) that the foundation or supporting structure is designed for such machinery, implement, utensil or article
and constructed in such manner that it is or should be regarded as being integrated with the machinery,
implement, utensil or article;
(bb) that the useful life of the foundation or supporting structure is or will be limited to the useful life of
the machinery, implement, utensil or article mounted thereon or af xed thereto, the said foundation or supporting structure shall for the purposes of this paragraph not be deemed to be a structure or work of a permanent nature but shall for the purposes of this Act be deemed to be a part of the machinery, implement, utensil or article mounted thereon or af xed thereto;
(iii) no allowance shall be made under this paragraph in respect of any ship to which the provisions of section 14(1)(a) or (b) apply or in respect of any aircraft to which the provisions of section 14bis(1)(a), (b) or (c) apply;
(iiiA) no allowance shall be made under this paragraph in respect of any machinery, implement, utensil or article of which the cost has been allowed as a deduction from the taxpayer’s income under the provisions of section 24D;
(iv) ...................
(v) the value of any machinery, implements, utensils or articles used by the taxpayer for the purposes of his trade
shall be increased by the amount of any expenditure (other than expenditure referred to in paragraph (a)) which is proved to the satisfaction of the Commissioner to have been incurred by the taxpayer in moving such machinery, implements, utensils or articles from one location to another;
(vi) . . . . . .
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