27. Determination of taxable income of co–operative societies and companies
(1) In the determination of the taxable income of any co–operative trading society, as defined in the Co–operative Societies Act, 1939 (Act No. 29 of 1939), derived by that society from its transactions, whether with persons who are members or with persons who are not members of the society, the amount of any bonus distributed in any year of assessment to its members by any such society which is a closed society as defined in section ninety–seven of that Act shall be allowed as a deduction from the income of that society in so far as such bonus does not exceed an amount equivalent to one–tenth of the aggregate value of the business of such society with its members during such year of assessment, but no such deduction shall be allowed in the case of any such co–operative trading society which is not such a closed society.
(2) In the determination of the taxable income of any agricultural co–operative, there shall be allowed as deductions from the income of such agricultural co–operative for the year of assessment in question –
(a) the amounts of any profits distributed by it during the specified period in relation to the year of assessment by way of bonuses (other than bonuses distributed out of the stabilization fund referred to in paragraph (h)) to persons entitled to participate in such distribution: Provided that the amounts allowed as deductions under this paragraph shall not in the aggregate exceed an amount which bears to the taxable income of such agricultural co–operative for the year of assessment (as calculated before allowing any deductions under this paragraph and before setting off any balance of assessed loss brought forward from a previous year of assessment) the same ratio as the aggregate value of the business conducted by such agricultural co–operative with its members during such year bears to the aggregate value of all business conducted by it during such year;
(b) subject to the provisions of subsections (3), (4) and (5), an allowance equal to two per cent of the cost (after the deduction of any amount referred to in subsection (4)) to such agricultural co–operative of –
(i) any building which was during the year of assessment wholly or mainly used by such co-operative as a storage building, if such building was erected by such co-operative or by any other co-operative agricultural society or company or farmers’ special co-operative company as defined in the Co-operative Societies Act, 1939, and the erection of such building was commenced on or after 25 March 1959; or
(ii) any improvements (other than repairs) to any building referred to in subparagraph (i) which was during the year of assessment used as contemplated in that subparagraph; or
(iii) any improvements (other than repairs) to any other building which was during the year of assessment used as a storage building by such co-operative, if such improvements were commenced on or after 1 April 1971:
Provided that no allowance shall be granted under this paragraph in respect of the cost of any building or improvements if an allowance in respect of such cost has been granted in respect of the year of assessment under the provisions of section 13(1): Provided further that no allowance shall be made under this paragraph in respect of such portion of the cost of any building or of any improvements as has been taken into account in the calculation of any storage building initial allowance or any allowance to such co–operative under section 11(g), whether in the current or any previous year of assessment: Provided further that in the case of any such building the erection of which commences on or after 1 January 1989 and any such improvements which commence on or after that date the allowance under this paragraph shall be increased to 5 per cent of the cost (after the deduction of any amount as provided in subsection (4)) to the taxpayer of such building or improvements;
(c) ……….
(d) ……….
(e) ……….
(f) ……….
(g) an allowance in respect of the year of assessment in respect of losses suffered by such agricultural co–operative in consequence of physical damage to or deterioration of pastoral, agricultural and other farm products held by such agricultural co–operative on behalf of any control board established under the provisions of the Marketing Act, 1968 (Act No. 59 of 1968): Provided that such allowance shall be included in the income of such agricultural co–operative in the following year of assessment; and
[Paragraph (g) substituted by section 51 of Act 25 of 2015 effective on 8 January 2016]
(h) in the case of the vereniging defined in section 1 of the Wine and Spirit Control Act, 1970 (Act No. 47 of 1970), an allowance equal to so much of any amount which the said vereniging has, within the specified period in relation to the year of assessment, transferred from its profits for such year to a price stabilization fund for distribution to its members or winegrowers within a period not exceeding five years reckoned from the end of such year of assessment, as does not exceed an amount equal to that portion of the profits derived by such vereniging for that year of assessment in the exercise of its functions relating to the control of, and the stabilization of prices in, the wine industry;
(3) The aggregate of the allowances under subsection (2) (b) and section 13(1) in respect of any building or improvements shall not exceed the cost (after the deduction of any amount referred to in subsection (4)) of such building or improvements, as the case may be, less the aggregate of any storage building initial allowance and any allowances made to the agricultural co–operative concerned in respect of such building or improvements, as the case may be, under section 11(g).
(4) If in any year of assessment there falls to be included in an agricultural co-operative’s income in terms of paragraph (a) of section 8(4) an amount, which has been recovered or recouped, in respect of any allowance made under subsection (2)(b) in respect of any building or improvements, such portion of the amount so recovered or recouped as is set off against the cost of a further building as hereinafter provided shall, notwithstanding the provisions of the said paragraph, at the option of that co-operative and provided it erects within twelve months or such further period as the Commissioner may allow from the date on which the event giving rise to the recovery or recoupment occurred, any other building to which the provisions of subsection (2)(b) apply, not be included in its income for that year of assessment, but shall be set off against so much of the cost to it of that further building erected by it as remains after the deduction of any portion of that cost in respect of which an allowance has been granted to that co-operative under section 11(g), whether in the current or any previous year of assessment.
(5) Where any agricultural co–operative (hereinafter referred to as the new co–operative) has before 1 April 1977 been constituted by an amalgamation under section 94 of the Co–operative Societies Act, 1939, of two or more other agricultural co–operatives and by reason of such amalgamation the ownership of any building used as a storage building by one of such other co–operatives (hereinafter referred to as the other co–operative) has passed from the other co–operative to the new co–operative –
(a) an allowance may in the appropriate circumstances be granted under subsection (2) (b) to the new co–operative in respect of such building or any improvements (other than repairs) thereto if such allowance would have been granted to the other co–operative if the amalgamation had not been effected;
(b) ……….
(c) where an allowance or deduction may be granted or allowed as contemplated in paragraph (a) or (b), the provisions of subsections (2) (b), (3) and (4) shall be applied as though the other co–operative and the new co–operative had at all relevant times been one co–operative.
(5A) Where any agricultural co–operative has on or after 1 April 1977 and before the date of commencement of the Co–operatives Act, 1981, been constituted by an amalgamation under section 94 of the Co–operative Societies Act, 1939, of two or more other agricultural co–operatives, the said co–operative and such other co–operatives shall, for the purposes of assessments under this Act, be deemed to be and to have been one and the same agricultural co–operative.
(5B) Where any co–operative has on or after the date of commencement of the Co–operatives Act, 1981, come into being in pursuance of a conversion or amalgamation in terms of Chapter VIII of that Act, such co–operative and any company, co–operative or co–operatives out of which it so came into being shall, for the purposes of assessments under this Act for the year of assessment during which such co–operative came into being and subsequent years of assessment but subject to such conditions as the Commissioner may impose, be deemed to be and to have been one and the same co–operative.
(6) ……….
(7) ……….
(8)
(a) The full amount of any bonus distributed by any agricultural co–operative shall, to the extent that such amount qualifies for deduction from the income of such co–operative under subsection (2) (a) or, if it is distributed out of the stabilization fund referred to in subsection (2) (h), be included in the gross income of the person who has become entitled thereto and shall be deemed to have accrued to such person on the date of the distribution of the bonus by such co–operative.
(b) For the purposes of this section the amount of any bonus distributed by way of capitalization shares or bonus debentures or securities shall be deemed to be the nominal value of such shares, debentures or securities, as the case may be.