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SARS Releases New Gross Income Definition

by Robert Lee, Tax-News.com, London

15 August 2003


The South African Revenue Service (SARS) has published a draft interpretation note relating to the definition of gross income as contained in the Income Tax Act which concerns the taking of unclaimed deposits by deposit-taking institutions.

The move by SARS comes in the wake of the Supreme Court of Appeal judgement in the Omnia Fertilisers case where the court had to establish whether a 'recoupment' had taken place within the meaning of the act. In this instance, the question was whether the tax treatment of the writing back of certain unclaimed creditor balances should be taxed as a recoupment. In short, whether a reduction in liability should be taxed.

In the case of Omnia, some of the firm's creditors failed to claim payment for the cost of raw materials and transport which was then subsequently allocated to the company's income. SARS considered the amounts that had been written back part of Omnia's gross income, and though the Income Tax Special Court initially ruled in favour of the tax department, the Appeal Court overturned this decision.


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