Page 260 - SAIT Compendium 2016 Volume1

s 44 INCOME TAX ACT 58 OF 1962 s 44
(ii) if, immediately before that transaction, any shares in that amalgamated company are held as capital assets; and
[Sub-para. (ii) substituted by s. 93 (1) (a) of Act 31 of 2013 – substitution deemed to have come into operation on 1 January 2013 and applies in respect of transactions entered into on or after that date.]
and date of incurral by that amalgamated company of any expenditure in respect of that asset allowable in terms of paragraph 20 of the Eighth Schedule; and
(bb) any valuation of that asset effected by that amalgamated company as contemplated in paragraph 29 (4) of the Eighth Schedule:
Provided that this paragraph does not apply to any asset disposed of in terms of an amalgamation transaction contemplated in paragraph (b) of the de nition of ‘amalgamation transaction’ if, on the date of that disposal, the market value of that asset is less than the base cost of that asset;
[Para. (a) amended (by the addition of a proviso) by
s. 76 (1) (b) of Act 22 of 2012 – date of commencement: 1 January 2013. This amended paragraph applies in respect of transactions entered into on or after that date.
(b) an asset held by it as trading stock in terms of an amalgamation transaction to a resultant company which acquires it as trading stock—
(i) that amalgamated company must be deemed to have disposed of that asset for an amount equal to the amount taken into account by that amalgamated company in respect of that asset in terms of section 11 (a) or 22 (1) or (2); and
(ii) that amalgamated company and that resultant company must, for purposes of determining any taxable income derived by that resultant company from a trade carried on by it, be deemed to be one and the same person with respect to the date of acquisition of that asset by that amalgamated company and the amount and date of incurral by that amalgamated company of any cost or expenditure incurred in respect of that asset as contemplated in section 11 (a) or 22 (1) or (2):
Provided that this paragraph does not apply to any asset disposed of in terms of an amalgamation transaction contemplated in paragraph (b) of the de nition of ‘amalgamation transaction’ if, on the date of that disposal, the market value of that asset is less than the amount taken into account in respect of that asset in terms of section 11 (a) or 22 (1) or (2).
[Para. (b) amended (by the addition of a proviso) by s. 76 (1) (c) of Act 22 of 2012 – date of commencement: 1 January 2013; this amended paragraph applies in respect of transactions entered into on or after that date.
(3) Where an amalgamated company disposes of—
(a) an asset that constitutes an allowance asset in that amalgamated company’s hands to a resultant company as part of an amalgamation transaction and that resultant
company acquires that asset as an allowance asset—
(i) no allowance allowed to that amalgamated company in respect of that asset must be recovered or recouped by that amalgamated company or included in that amalgamated company’s income
for the year of that transfer; and
(ii) that amalgamated company and that resultant
company must be deemed to be one and the same person for purposes of determining the amount of any allowance or deduction—
(aa) to which that resultant company may be
entitled in respect of that asset; or
(bb) that is to be recovered or recouped by or included in the income of that resultant
company in respect of that asset;
[Sub-para. (ii) amended by s. 34 (1) (a) of Act 8 of 2007.] (b) a contract to a resultant company as part of a disposal of a business as a going concern in terms of an amalgamation transaction and an allowance
(c)
(iii) as a result of which the existence of that amalgamated company will be terminated; or
(i) in terms of which an amalgamated company which is a foreign company disposes of all of its assets (other than assets it elects to use to settle any debts incurred by it in the ordinary course of its trade) to a resultant company which is a foreign company, by means of an amalgamation, conversion or merger;
(ii) if—
(aa) immediately before that transaction—
(A) that amalgamated company and that resultant company form part of the same group of companies (as de ned in section 1);
(B) that resultant company is a controlled foreign company in relation to any resident that is part of the group of companies contemplated in subitem (A); and
(C) any shares in that amalgamated company that are directly or indirectly held by that resultant company are held as capital assets; and
(bb)immediately after that transaction, more than 50 per cent of the equity shares in that resultant company are directly or indirectly held by a resident (whether alone or together with any other person that is a resident and that forms part of the same group of companies as that resident); and
(iii) as a result of which the existence of that amalgamated company will be terminated.
[De nition of ‘amalgamation transaction’ amended by s. 52 (1) (a) and (b) of Act 45 of 2003 and substituted by s. 69 (1) (a) of Act 24 of 2011 (date of commencement: 1 January 2012) and by s. 76 (1) (a) of Act 22 of 2012 – date of commencement: 1 January 2013. This substitution applies in respect of transactions entered into on or after that date.]
‘equity share’ . . .
[De nition of ‘equity share’ deleted by s. 49 (1) (a) of Act
17 of 2009.]
‘qualifying interest’ . . .
[De nition of ‘qualifying interest’ substituted by s. 27 (1) (a) of Act 3 of 2008, amended by s. 49 (1) (b) of Act 17 of 2009 and deleted by s. 69 (1) (b) of Act 24 of 2011 – date of commencement: 1 January 2012. This deletion applies in respect of transactions entered into on or after that date.]
(2) Where an amalgamated company disposes of—
(a)
a capital asset in terms of an amalgamation transaction to a resultant company which acquires it as a capital asset— (i) the amalgamated company must be deemed to have disposed of that asset for an amount equal to the base cost of that asset on the date of that
disposal; and
(ii) that resultant company and that amalgamated
company must, for purposes of determining any capital gain or capital loss in respect of a disposal of that asset by that resultant company, be deemed to be one and the same person with respect to— (aa) the date of acquisition of that asset by that
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amalgamated company and the amount
SAIT CompendIum oF TAx LegISLATIon VoLume 1