Page 272 - SAIT Compendium 2016 Volume1

s 47 INCOME TAX ACT 58 OF 1962 s 47
[Sub-s. (2) amended by s. 79 (1) (b) of Act 22 of 2012 (by the addition of a proviso) – date of commencement: 1 January 2013; the amended subsection applies in respect of transactions entered into on or after that date.]
(3) Where a liquidating company disposes of—
(a) an asset that constitutes an allowance asset in that liquidating company’s hands to its holding company in terms of a liquidation distribution and that holding company acquires that asset as an allowance asset— (i) no allowance allowed to that liquidating company in respect of that asset must be recovered or recouped by that liquidating company or included in that liquidating company’s income
for the year of that transfer; and
(ii)that liquidating company and that holding
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 holding 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 holding
company in respect of that asset; or
[Sub-para. (ii) amended by s. 37 (1) (b) of Act 8 of 2007.] (b) a contract to its holding company as part of a disposal of a business as a going concern in terms of a liquidation distribution and an allowance in terms of section 24 or 24C was allowable to that liquidating company in respect of that contract for the year preceding that in which that contract is transferred or would have been allowable to that liquidating company for the year of that transfer had that contract
not been so transferred—
(i)no allowance allowed to that liquidating
company under those sections must be included in that liquidating company’s income for the year of that transfer; and
(ii)that liquidating company and that holding company must be deemed to be one and the same person for purposes of determining the amount of any allowance—
(aa)to which that holding company may be entitled under those sections; or
(bb) that is to be included in the income of that holding company under those sections. [Para. (b) substituted by s. 66 (1) of Taxation Laws
Amendment Act, 2015 – date of commencement: date of promulgation of Taxation Laws Amendment Act, 2015*.]
(3A) The provisions of subsections (2) and (3) apply to a disposal of an asset by a liquidating company to its holding company in terms of a liquidation distribution only to the extent that—
(a) equity shares held by that holding company in that
liquidating company are disposed of as a result of the liquidation, winding up or deregistration of that liquidating company; and
[Para. (a) substituted by s. 37 (1) (c) of Act 8 of 2007.] (b) that holding company has not assumed any debt of that liquidating company which was incurred by that liquidating company within a period of 18 months
before that disposal, unless that debt—
(i) constitutes the re nancing of any debt incurred
in more than 18 months before that disposal; or (ii) is attributable to and arose in the normal course of a business undertaking disposed of, as a going concern, to that holding company as part
of that liquidation distribution.
[Sub-s. (3A) inserted by s. 43 (1) (b) of Act 31 of 2005.] (4) Where the holding company acquires any asset from the liquidating company in terms of a liquidation distribution and that holding company disposes of that asset within a period of 18 months after so acquiring that
asset and—
(a) that asset constitutes a capital asset in the hands of
that holding company—
(i) so much of any capital gain determined in respect
of the disposal of that asset as does not exceed the amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date, may not be taken into account in determining any net capital gain or assessed capital loss of that holding company but is subject to paragraph 10 of the Eighth Schedule for purposes of determining an amount of taxable capital gain derived from that gain, which taxable capital gain may not be set off against any assessed loss or balance of assessed loss of that holding company; or
(ii) so much of any capital loss determined in respect of the disposal of that asset as does not exceed the amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date must be disregarded in determining the aggregate capital gain or aggregate capital loss of that holding
(i) no allowance allowed to that liquidating company in respect of that obligation must be included in that liquidating company’s income for the year of that transfer; and
(ii) that liquidating company and that holding company must be deemed to be one and the same person for purposes of determining the amount of any allowance—
(aa) to which that holding company may be entitled in respect of that obligation; or
(bb) that is to be included in the income of that holding company in respect of that obligation.
Prelex
Wording of para. (b) in force until its substitution wef date of promulgation of Taxation Laws Amendment Act, 2015
(b) a contract to its holding company as part of a
disposal of a business as a going concern in terms of a liquidation distribution and that contract imposes an obligation on that liquidating company in respect of which an allowance in terms of section 24C was allowable to that liquidating company for the year preceding that in which that contract is transferred or would have been allowable to that liquidating company for the year of that transfer had that contract not been so transferred—
* Section 66 has no sub-s. (2). It is submitted that this may be due to an oversight by the legislature because the date of commencement of similar substituted provisions (see s. 42 (3) (b), s. 44 (3) (b) and s. 45 (3) (b), as substituted by ss. 62 (1) (d), 63 (1) (a) and 64 (1) (a), respectively, of Taxation Laws Amendment Act, 2015) is 1 January 2016. Those substituted paragraphs apply iro years of assessment ending on or after that date.
264 SAIT CompendIum oF TAx LegISLATIon VoLume 1