Category: Section 13 (ITA) – Deductions in respect of buildings used in a process of manufacture

Section 13

 

  1. Heading substituted by section 30 of Act 60 of 2001.

 

  1. Paragraph (1)(a) deleted by section 45 of Act 31 of 2013 effective on 12 December 2013.

 

  1. Paragraph (1)(b) substituted by section 40 of Act 24 of 2011 effective on 1 April 2012.

 

  1. Paragraph (1)(c) deleted by section 45 of Act 31 of 2013 effective on 12 December 2013.

 

  1. Paragraph (1)(d) substituted by section 40 of Act 24 of 2011 effective on 1 April 2012.

 

  1. Paragraph (1)(dA) inserted by section 13 of Act 19 of 2001 and substituted by section 40 of Act 24 of 2011 effective on 1 April 2012.

 

  1. Paragraph (b) of proviso to subsection (1) substituted by section 22 of Act 53 of 1999.

 

  1. Paragraph (c) of proviso to subsection (1) amended by section 22 of Act 53 of 1999 and deleted by section 45 of Act 31 of 2013 effective on 12 December 2013.

 

  1. Paragraph (d) of proviso to subsection (1) added by section 30 of Act 7 of 2010 effective on 2 November 2010.

 

  1. Subsection (1) amended by section 12 of Act 90 of 1962 and section 17 of Act 55 of 1966, substituted by section 13 of Act 88 of 1971 and amended by section 10 of Act 96 of 1985, section 12 of Act 90 of 1988 and section 11 of Act 46 of 1996.

 

  1. Subsection (1A) inserted by section 20 of Act 59 of 2000.

 

  1. Subsection (2) amended by section 12 of Act 90 of 1962 and substituted by section 13 of Act 88 of 1971, section 10 of Act 96 of 1985 and section 20 of Act 59 of 2000.

 

  1. Subsection (3) amended by section 12 of Act 90 of 1962 and substituted by section 17 of Act 55 of 1966, section 13 of Act 88 of 1971 and section 3 of Act 4 of 2008 effective on3 July 2008.

 

  1. Subsection (4) deleted by section 12 of Act 113 of 1993.

 

  1. Subsection (4)bis inserted by section 14 of Act 88 of 1965 and deleted by section 12 of Act 113 of 1993.

 

  1. Subsection (5) amended by section 12 of Act 90 of 1962 and section 11 of Act 72 of 1963, substituted by section 14 of Act 88 of 1965, section 17 of Act 55 of 1966 and section 13 of Act 89 of 1969, amended by section 12 of Act 90 of 1972, section 13 of Act 65 of 1973, section 16 of Act 85 of 1974, section 31 of Act 69 of 1975, section 7 of Act 101 of 1978, section 10 of Act 104 of 1980 and section 14 of Act 96 of 1981 and deleted by section 12 of Act 113 of 1993.

 

  1. Subsection (6) amended by section 12 of Act 90 of 1962 and section 5 of Act 6 of 1963, substituted by section 12 of Act 90 of 1964, section 14 of Act 88 of 1965, section 17 of Act 55 of 1966 and section 13 of Act 89 of 1969, amended by section 12 of Act 90 of 1972, section 13 of Act 65 of 1973, section 16 of Act 85 of 1974, section 13 of Act 69 of 1975, section 7 of Act 101 of 1978, section 10 of Act 104 of 1980, section 14 of Act 96 of 1981 and section 10 of Act 96 of 1985 and deleted by section 12 of Act 113 of 1993.

 

  1. Subsection (6A) inserted by section 17 of Act 55 of 1966, and substituted by section 13 of Act 89 of 1969, amended by section 13 of Act 88 of 1971, section 13 of Act 65 of 1973, section 16 of Act 85 of 1974, section 13 of Act 69 of 1975, section 7 of Act 101 of 1978, section 10 of Act 104 of 1980 and section 14 of Act 96 of 1981 and deleted by section 12 of Act 113 of 1993.

 

  1. Subsection (7) added by section 14 of Act 88 of 1965, deleted by section 17 of Act 55 of 1966, inserted by section 10 of Act 96 of 1985, amended by section 12 of Act 85 of 1987 and deleted by section 12 of Act 113 of 1993.

 

  1. Subsection (7A) inserted by section 10 of Act 96 of 1985 and deleted by section 12 of Act 113 of 1993.

 

  1. Subsection (8) added by section 17 of Act 55 of 1966.

 

  1. Subsection (9) added by section 17 of Act 55 of 1966 and substituted by section 13 of Act 88 of 1971.

Section 13 (ITA) – Deductions in respect of buildings used in the process of manufacture

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13.     Deductions in respect of buildings used in a process of manufacture

(1)     Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to section 11(e), there shall be allowed to be deducted from the income of the taxpayer an allowance equal to two per cent of the cost (after the deduction of any amount referred to in subsection (3) or (7) or the corresponding provisions of any previous Income Tax Act) to the taxpayer of –

(a)     ……….

(b)     any building the erection of which was commenced by the taxpayer on or after the fifteenth day of March, 1961, if such building was wholly or mainly used by the taxpayer during the year of assessment for the purpose of carrying on therein in the course of his trade (other than mining or farming) any process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein any process as aforesaid in the course of any trade (other than mining or farming); or;

[Paragraph (b) substituted by section 40 of Act 24 of 2011 and section 30 of Act 25 of 2015 effective on 8 January 2016]

(c)     ………..

(d)     any building the erection of which was commenced on or after the fifteenth day of March, 1961, if such building has been acquired by the taxpayer by purchase from any other person who was entitled to an allowance in respect thereof under paragraph (b) or this paragraph or the corresponding provisions of any previous Income Tax Act, and such building was wholly or mainly used during the year of assessment by the taxpayer for the purpose of carrying on therein in the course of his trade (other than mining or farming) a process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein in the course of any trade (other than mining or farming) any process as aforesaid; or

[Paragraph (d) substituted by section 40 of Act 24 of 2011 and section 30 of Act 25 of 2015 effective on 8 January 2016]

(dA)  any building that has never been used, if such building has been acquired by the taxpayer by purchase from any other person and such building was wholly or mainly used during the year of assessment by the taxpayer for the purpose of carrying on therein in the course of his trade (other than mining or farming) a process of manufacture, research and development or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein in the course of any trade (other than mining or farming) any process as aforesaid; or

[Paragraph (dA) inserted by section 13 of Act 19 of 2001 and substituted by section 40 of Act 24 of 2011 and section 30 of Act 25 of 2015 effective on 8 January 2016]

(e)     any improvements (other than repairs) to any building referred to in paragraph (a), (b), (c) or (d) which is during the year of assessment used as contemplated in that paragraph, if such improvements were commenced not later than the thirty–first day of March, 1971; or

(f)     any improvements (other than repairs) to any building, if such improvements were commenced on or after the first day of April, 1971, and such building was wholly or mainly used by the taxpayer during the year of assessment for the purpose of carrying on therein in the course of his trade (other than mining or farming) any process of manufacture or any other process which is of a similar nature, or such building was let by the taxpayer and was wholly or mainly used by a tenant or subtenant for the purpose of carrying on therein any process as aforesaid in the course of any trade (other than mining or farming):

[Paragraph (f) substituted by section 37 of Act 15 of 2016 effective on 19 January 2017]

Provided that –

(a)     no allowance shall be made under this subsection in respect of such portion of the cost of any building the erection of which was commenced on or after 1 July 1961, or any improvements effected thereto as has been taken into account in the calculation of any allowance to the taxpayer under section 11(g) whether in the current or any previous year of assessment;

(b)     in the case of any such building the erection of which has or is commenced on or after 1 January 1989 and any such improvements which have or are commenced on or after that date, other than any building or improvements in respect of which the increased allowance contemplated in paragraph (c) of this proviso applies, the allowance under this subsection shall be increased to 5 per cent of the cost (after the deduction of any amount as provided in subsection (3)) to the taxpayer of such building or improvements; and

(c)     ……….

(d)     in the case of an improvement completed by a taxpayer as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall for the purposes of this section be deemed to be the cost to the taxpayer of any building or improvement contemplated in this subsection.

(1A)  Where any building in respect of which any deduction of an allowance is claimed in terms of this section was during any previous financial year or years used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year or years, any deduction which could have been allowed during such previous year or years in terms of this section shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(2)     The aggregate of the allowances allowed under subsection (1) or the corresponding provisions of any previous Income Tax Act, or deemed to have been allowed in terms of subsection (1A), in respect of any building or improvements shall not exceed the cost (after the deduction of any amount referred to in subsection (3) or the corresponding provisions of any previous Income Tax Act) of such building or improvements, as the case may be, less the aggregate of any allowances made to the taxpayer in respect of such building or improvements, as the case may be, under subsection (7) or section 11(g) or the corresponding provisions of any previous Income Tax Act.

(3)     If in any year of assessment there falls to be included in a taxpayer’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 (1) or the corresponding provisions of any previous Income Tax Act 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 the taxpayer and provided the taxpayer purchases or 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 (1) apply, not be included in the taxpayer’s income for that year of assessment, but shall be set off against so much of the cost to the taxpayer of that further building purchased or erected by the taxpayer as remains after the deduction of any portion of such cost in respect of which an allowance has been granted to the taxpayer under section 11(g), whether in the current or any previous year of assessment.

(4)     ……….

(5)    ……….

(6)     ……….

(7)     ……….

(8)     The provisions of this section shall mutatis mutandis apply with reference to any permanent shipbuilding structure the erection of which was commenced by the taxpayer on or after the first day of January, 1966, and the cost of improvements (other than repairs) effected thereto if such structure was wholly or mainly used during the year of assessment for the purposes of the shipbuilding trade, and for the purposes of this subsection any reference in the said provisions to a building shall be construed as a reference to a shipbuilding structure and any reference therein to improvements to a building shall be construed as a reference to improvements to a shipbuilding structure.

“Improvements” definition of section 13 of ITA

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(9)     For the purposes of this section –

 

“improvements”, in relation to any improvements commenced on or after the first day of April, 1971, means any extension, addition or improvements (other than repairs) to a building which is or are effected for the purpose of increasing or improving the industrial capacity of the building;