Page 262 - SAIT Compendium 2016 Volume1

s 44
INCOME TAX ACT 58 OF 1962 s 44
(b)
aggregate capital gain or aggregate capital loss of that resultant company for purposes of the Eighth Schedule: Provided that the amount of any capital loss so disregarded may be deducted from the amount of any capital gain determined in respect of the disposal during that year or any subsequent year of assessment of any other asset acquired by that resultant company from that amalgamated company in terms of that amalgamation transaction; or
that asset constitutes—
(i) trading stock in the hands of that resultant
company, so much of the amount received or accrued in respect of the disposal of that trading stock as does not exceed the market value of that trading stock as at the beginning of that period of 18 months and so much of the amount taken into account in respect of that trading stock in terms of section 11 (a) or 22 (1) or (2) as is equal to the amount so taken into account in terms of subsection (2) (b): Provided that this subparagraph does not apply to any asset that constitutes trading stock that is regularly and continuously disposed of by that resultant company; or
(aa) an expenditure actually incurred by that person in respect of those equity shares for the purposes of paragraph 20 of the Eighth Schedule, if those equity shares in the resultant company are acquired as capital assets; or
(bb) the amount to be taken into account by that person in respect of those equity shares for the purposes of section 11 (a) or 22 (1) or (2), if those equity shares in the resultant company are acquired as trading stock; and
(iv) done any valuation of the equity share in the amalgamated company which was done by that person within the period contemplated in paragraph 29 (4) of the Eighth Schedule, in respect of the equity share in the resultant company.
(c) An equity share in the resultant company that is acquired by the person contemplated in paragraph (a) is deemed not to be an amount transferred or applied by the amalgamated company for the bene t or on behalf of that person in respect of the share held by that person in that amalgamated company.
(d) Where the person contemplated in paragraph (a) becomes entitled to any consideration other than any equity share in the resultant company, the provisions of paragraph (b) must not apply in respect of the part of the equity share held by that person in the amalgamated company which bears the same ratio to that share as the amount of that other consideration bears to the amount of the full consideration in respect of that share.
(e) Where the person contemplated in paragraph (a) becomes entitled, by virtue of the equity share held by that person in the amalgamated company, to any consideration other than any equity share in the resultant company, so much of the amount of that other consideration as does not exceed the market value of all the assets of the amalgamated company immediately before the amalgamation, conversion or merger less—
(i) the liabilities; and
(ii) the sum of the contributed tax capital of all the classes
of shares,
of the amalgamated company immediately before the amalgamation, conversion or merger must, for the purposes of the de nitions of ‘dividend’, ‘foreign dividend’, ‘foreign return of capital’ and ‘return of capital’ in section 1, be deemed to be an amount transferred or applied by that amalgamated company for the bene t or on behalf of that person in respect of the share held by that person in the amalgamated company.
[Sub-s. (6) substituted by s. 52 (1) (d) of Act 45 of 2003 and by s. 40 (1) (b) of Act 31 of 2005, amended by s. 34 (1) (b) of Act 8 of 2007, by s. 69 (1) (e) of Act 24
of 2011 and by s. 76 (1) (e) and (f) of Act 22 of 2012 and substituted by s. 93 (1) (d) of Act 31 of 2013 – substitution deemed to have come into operation on 4 July 2013 and applies in respect of transactions entered into on or after that date.]
(7) . . .
[Sub-s. (7) amended by s. 52 (1) (e) of Act 45 of 2003
and deleted by s. 93 (1) (e) of Act 31 of 2013 – deletion deemed to have come into operation on 4 July 2013 and applies in respect of transactions entered into on or after that date.]
(8) Where an amalgamated company disposes of any equity shares in a resultant company that were acquired by that amalgamated company in terms of an amalgamation transaction that was subject to subsection (2) or (3), to a shareholder of that amalgamated company as part of that amalgamation transaction, that amalgamated company
[Sub-para. (i) amended by s. 63 (1) (a) of Act 7 of 2010.] (ii) an allowance asset in the hands of that resultant company, so much of any allowance in respect of that asset that is recovered or recouped by or included in the income of that resultant company as a result of that disposal as does not exceed the amount that would have been recovered had that asset been disposed of at the beginning of that period of 18 months for an amount equal to
market value of that asset as at that date,
must be deemed to be attributable to a separate trade carried on by that resultant company, the taxable income or assessed loss from which trade may not be set off against or added to any assessed loss or balance of assessed loss of that resultant company.
(6) (a) This subsection applies where any person that holds an equity share in an amalgamated company acquires an equity share in the resultant company by virtue of that shareholding and pursuant to an amalgamation transaction in respect of which subsection (2) or (3) applied—
(i) as either a capital asset or trading stock, in the case where that equity share in the amalgamated company is held as a capital asset; or
(ii) as trading stock in the case where that equity share in the amalgamated company is held as trading stock.
(b) The person contemplated in paragraph (a) is deemed, subject to paragraphs (d) and (e), to have—
(i) disposed of the equity share in that amalgamated company for an amount equal to the expenditure incurred by that person in respect of that equity share which is or was allowable in terms of paragraph 20 of the Eighth Schedule or taken into account in terms of section 11 (a) or 22 (1) or (2), as the case may be;
(ii) acquired the equity share in the resultant company on the date on which that person acquired the equity share in the amalgamated company for a cost equal to the expenditure incurred by that person as contemplated in subparagraph (i);
(iii) incurred the cost contemplated in subparagraph (ii) on the date on which that person incurred the expenditure in respect of the equity share in the amalgamated company, which cost must be treated as—
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SAIT CompendIum oF TAx LegISLATIon VoLume 1