Page 81 - SAIT Compendium 2016 Volume2

PN 25/1994 Income Tax acT: PracTIce noTes PN 35/1994
PRACTICE NOTE 25 OF 1994 – EXCESSIVE REMUNERATION AND OTHER CHARGES
General Notice 978 published in Government Gazette 15951 of 9 September 1994
Note withdrawn* with effect from 1 February 2010. SARS comment: Normal requirements of section 11 (a) read with
section 23 (g) are applicable.
PRACTICE NOTE 28 OF 1994 – SECONDARY TAX ON COMPANIES: SECTION 64C OF THE INCOME TAX ACT: CERTAIN AMOUNTS DISTRIBUTED DEEMED TO BE DIVIDENDS: EMPLOYER CONTRIBUTIONS TO EMPLOYEES’ PENSION, PROVIDENT AND MEDICAL FUNDS
General Notice 981 published in Government Gazette 15951 of 9 September 1994
Note withdrawn with effect from 1 February 2010. SARS comment: Incorporated in the Comprehensive Guide to CGT, paragraph 4.4.2.
PRACTICE NOTE 29 OF 1994 – SALARIES PAID TO MEMBERS OF INCORPORATED ACCOUNTING PRACTICE
General Notice 982 published in Government Gazette 15951 of 9 September 1994
Withdrawn* with effect from 1 February 2010. SARS comment: normal requirements of section 11 (a) read with section 23 (g) are applicable.
PRACTICE NOTE 31 OF 1994 – INTEREST PAID ON MONEYS BORROWED
issued by
OFFICE OF THE COMMISSIONER FOR INLAND REVENUE General Notice 1129 published in Government Gazette 16018 of 14 October 1994
1. To qualify as a deduction in terms of section 11 (a) of the Income Tax Act (the Act), expenditure must be incurred
in the carrying on of any ‘trade’ as de ned in section 1 of the Act. In determining whether a person is carrying on a trade, the Commissioner must have regard to, inter alia, the intention of the person. Should a person, therefore, borrow money at a certain rate of interest with the speci c purpose of making a pro t by lending it out at a higher rate of interest, it may well be that the person has entered into a ‘venture’ and is thus carrying on a trade (50 SATC 40). In other words, interest paid on funds borrowed for purposes of lending them out at a higher rate of interest will, in terms of section 11 (a) of the Act, constitute an admissible deduction from the interest so received by virtue of the fact that this activity constitutes a pro tmaking venture.
2. While it is evident that a person (not being a moneylender) earning interest on capital or surplus funds invested does not carry on a trade and that any expenditure incurred in the production of such interest cannot be allowed as a deduction, it is nevertheless the practice of Inland Revenue to allow expenditure incurred in the production of the interest to the extent that it does not exceed such income. This practice will also be applied in cases where funds are borrowed at a certain rate of interest and invested at a lower rate. Although, strictly in terms of the law, there is no justi cation for the deduction, this practice has developed over the years and will be followed by Inland Revenue.
PRACTICE NOTE 32 OF 1994 – VALUATION OF STOCK: NURSERYMEN
General Notice 1130 published in Government Gazette 16018 of 14 October 1994 Note replaced by Interpretation Note 79 of 22 September 2014.
PRACTICE NOTE 33 OF 1994 – SECTION 99 OF THE INCOME TAX ACT: ATTORNEYS
General Notice 1191 published in Government Gazette 16052 of 4 November 1994
Withdrawn* with effect from 1 February 2010. SARS comment: Of a procedural nature and not an interpretative aspect.
PRACTICE NOTE 34 OF 1994 – SALE OF IMMOVABLE PROPERTY BY THE EXECUTOR OF A DECEASED ESTATE
General Notice 1237 published in Government Gazette 16065 of 11 November 1994
Withdrawn* with effect from 1 February 2010. SARS comment: Incorporated in the Transfer Duty Handbook..
PRACTICE NOTE 35 OF 1994 – ESTATE DUTY: BEQUEST OF TRUST INCOME TO SURVIVING SPOUSE: TRUSTEE’S DISCRETION: DEDUCTION UNDER SECTION 4 (q) OF THE ESTATE DUTY ACT, 1955
DEPARTMENT OF FINANCE: INLAND REVENUE
issued by
OFFICE OF THE COMMISSIONER FOR INLAND REVENUE General Notice 1315 published in Government Gazette 16111 of 2 December 1994 Practice Note 35 of 17 November 1994
* See http://www.sars.gov.za/home.asp?pid=5627.
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