Author: admin_kmos

Section 23B (ITA) – Prohibition of double deductions

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23B.     Prohibition of double deductions

(1)     Where, but for the provisions of this subsection, an amount –

(a)     qualifies or has qualified for a deduction or an allowance; or

(b)     is otherwise taken into account in determining the taxable income of any person,

under more than one provision of this Act, that amount or any portion thereof, shall not be allowed or taken into account more than once in the determination of the taxable income of any person.

(2)     The provisions of subsection (1) shall not apply to expenditure in respect of which a deduction or an allowance has been determined, if any section under which such deduction or allowance is allowed, expressly requires such expenditure to be deductible under any other section as a prerequisite for a deduction under such section.

(3)     No deduction shall be allowed under section 11(a) in respect of any expenditure or loss of a type for which a deduction or allowance may be granted under any other provision of this Act, notwithstanding that –

(a)     such other provision may impose any limitation on the amount of such deduction or allowance; or

(b)     that deduction or allowance in terms of that other provision may be granted in a different year of assessment.

(4)       ……….

[Subsection (4) added by section 42 of Act 7 of 2010 effective on 1 January 2011, repealed by section 163 of Act 24 of 2011 effective on 1 January 2011), re-added by section 48 of Act 24 of 2011 and deleted by section 34 of Act 43 of 2014 effective on 1 January 2014]

(5)     No deduction shall be allowed under section 11(a) in respect of any expenditure incurred by a person in respect of any premium paid under a policy of insurance, where the policy relates to death, disablement or illness of an employee or director, or former employee or director, of the person that is the policyholder (other than a policy that relates to death, disablement or illness arising solely out of and in the course of employment of the employee or director).

[Subsection (5) added by section 48 of Act 24 of 2011 and substituted by section 43 of Act 22 of 2012 and section 36 of Act 17 of 2017 effective on 18 December 2017]

Subsections 2, 3 and 4 of section 23A of ITA

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(2)     Notwithstanding the provisions of sections 11(e) and (o), 12B, 12BA, 12C, 12DA, and 37B (2)(a) the sum of the deduction which may be allowed to any taxpayer in any year of assessment under those provisions in respect of any affected assets let by the taxpayer shall not exceed the taxable income (as determined before making the said deductions) derived by the taxpayer during such year from rental income.

[Subsection (2) substituted by section 22(1)(c) of Act 101 of 1990, by section 24 of Act 129 of 1991, by section 17(1)(b) of Act 3 of 2008, by section 25(b) of Act 23 of 2020 and by section 24(1)(c) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(3)     For the purposes of subsection (2), where the taxpayer is entitled to any deduction which relates to rental income and other income derived by the taxpayer, an appropriate portion of such deduction shall be taken into account in the determination of the taxable income derived by the taxpayer from rental income.

[Subsection (3) substituted section 24(1)(d) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

(4)     Any deduction which is disallowed under the provisions of subsection (2) shall be carried forward to the succeeding year of assessment and shall, subject to the provisions of this section as applicable in relation to that year, be deemed to be a deduction to which the taxpayer is entitled in that year.

“Rental income” definition of section 23A of ITA

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“rental income” means income derived by way of rent from the letting of any affected asset in respect of which an allowance has been granted to the lessor under section 11(e), 12B, 12BA, 12C, 12DA or 37B (2)(a), whether in the current or any previous year of assessment, and includes any amount—

(a)     which is included in the income of that person in terms of section 8(4) in respect of an amount deducted in any year of assessment in respect of any affected asset; and

(b)     derived from the disposal of any affected asset.

[Definition of “rental income” substituted by section 22(1)(b) of Act 101 of 1990, by section 32(1)(c) of Act 60 of 2001, by section 17(1)(a) of Act 3 of 2008, by section 35(b) of Act 17 of 2009 and by section 24(1)(b) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

“Operating lease” definition of section 23A of ITA

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“operating lease” means a lease of movable property concluded by a lessor in the ordinary course of a business (not being a banking, financial services or insurance business) of letting such property, if –

(a)     such property may be hired by members of the general public directly from that lessor in terms of such a lease, for a period of less than one month;

(b)     the cost of maintaining such property and of carrying out repairs thereto required in consequence of normal wear and tear, is borne by the lessor; and

(c)     subject to any claim that the lessor may have against the lessee by reason of the lessee’s failure to take proper care of the property, the risk of destruction or loss of or other disadvantage to such property is not assumed by the lessee;

“Affected asset” definition of section 23A of ITA

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(1)     For the purposes of this section –

“affected asset” means any machinery, plant, implement, utensil, article, aircraft or ship which has been let and in respect of which the lessor is or was entitled to an allowance under section 11(e), 12B, 12BA, 12C, 12DA or 37B(2)(a), whether in the current or a previous year of assessment, but excluding any such asset let by the lessor under an operating lease or any such asset which was during the year of assessment mainly used by the taxpayer in the course of any trade carried on by the taxpayer, other than the letting of any such asset;

[Definition of “affected asset” amended by section 22(1)(a) of Act 101 of 1990, by section 34 of Act 30 of 1998, by section 32(1)(a) of Act 60 of 2001 and by section 33 of Act 35 of 2007 and substituted by section 25(a) of Act 23 of 2020 and by section 24(1)(a) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]

Subsections 2, 3, 4 and 5 of section 24G of ITA

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(2)     Subject to the provisions of subsection (5), there shall be deducted in the determination of the taxable income derived by the taxpayer during any year of assessment –

 

(a)     the sum of any annual allowances determined under subsection (3) in relation to expenditure incurred during the current or any previous year of assessment in respect of any permanent work, road pavement, major rehabilitation of the road pavement or erection or construction of ancillary services in relation to a toll road;

 

(b)     any expenditure incurred during the year of assessment in respect of the repair or maintenance of a toll road or any ancillary service in relation to such toll road, other than expenditure incurred on major rehabilitation of the road pavement;

 

(c)     any interest (other than interest which is deductible under section 11(a) incurred by the taxpayer during the year of assessment in respect of any loan utilized for the purpose of financing any expenditure contemplated in paragraph (a) or (b); and

 

(d)     any amount which has been disallowed in the preceding year of assessment under the provisions of subsection (5):

 

Provided that the aggregate of the allowances which may be granted under paragraph (a) shall not exceed the total expenditure incurred by the taxpayer on such permanent work, road pavement, major rehabilitation of road pavement or erection or construction of ancillary services.

 

(3)     For the purposes of subsection (2), an annual allowance shall be calculated in respect of expenditure incurred by the taxpayer on permanent works, road pavements, major rehabilitation of road pavements or the erection, construction, installation or provision of ancillary services during any year of assessment, such allowance to be equal to the expenditure so incurred during the year divided by the lesser of the number of years reckoned from the commencement of that year until the end of the tolling period (for which purpose a portion of a year shall be regarded as a year) and –

 

(a)     in the case of expenditure incurred on permanent works or the erection or construction of ancillary services, 25 years; and

 

(b)     in the case of such expenditure incurred on road pavements or major rehabilitation of road pavements, 8 years.

 

(4)     No deduction or allowance shall be granted under this Act in respect of expenditure contemplated in subsection (2) otherwise than as provided in that subsection.

 

(5)     The allowances which may be granted under subsection (2) (a), (b) and (d) in any year of assessment in respect of any single toll road shall not in the aggregate exceed the taxable income (as determined before the deduction of the said allowances) derived by the taxpayer during such year from –

 

(a)     the exploitation of such toll road or any ancillary service in relation to such toll road; and

 

(b)     any interest derived in the ordinary course of such exploitation and the financing of any expenditure contemplated in subsection (3) which relates to such toll road.

“Tolling period” definition of section 24G of ITA

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“tolling period”, in relation to a toll road, means the initial period during which the South African National Roads Agency Limited has granted to the taxpayer or any other person the right to operate such toll road, including any period in respect of which such right was so granted in terms of an interim agreement concluded by the South African National Roads Agency Limited, but excluding any extension of such first-mentioned period in respect of which a right of renewal may be exercised;