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13 S. Afr. Mercantile L.J. 445 (2001)
The Tax Consequences of a Fradulent Claim to Deduct Overseas Travelling Expenses

handle is hein.journals/safrmerlj13 and id is 455 raw text is: The Tax Consequences of a Fraudulent Claim to Deduct Overseas Travelling Expenses RC WILLIAMS University of Natal, Pietermaritzburg That some taxpayers claim a tax deduction for expenses incurred in travelling on business when in reality they were having a holiday may shock the puritan soul. Even non-puritans will be startled at the chutzpah of the particular taxpayer featuring in ITC 1658 (1999) 61 SATC 231), a one-man company, whose sole director and shareholder had, in three successive years during December and January, taken what the judgement variously calls his 'female companion', 'girlfriend' and 'lover' and, on one occasion his son, on trips lasting from a month to six weeks, to Europe, the Far East, Mauritius and various Pacific-rim countries. He then claimed all the expenses as a tax-deduction on the basis that the trips were solely for business purposes, namely to find export markets for the candles manufactured by the company. (At the time, travelling expenditure was not deductible under the Income Tax Act 58 of 1962 unless it was incurred 'wholly or exclusively for the purposes of trade'; currently, such expenditure is prohibited from deduction in terms of s 23(g) 'to the extent to which' it was not expended for the purposes of trade.) Leach J, giving judgement in the Special Court, drily noted that all the travelling had occurred during the traditional holiday season, that the itinerary included holiday resorts (which the head note tells us included six days in a hotel at the coastal resort of Pattaya in Thailand), that the extended duration of the trips allowed 'spare time for vacational purposes', that no resultant business of any significance had ever eventuated from these trips except from Germany, and that the director in question (who was chairman of a softball association) had travelled to New Zealand at a time when a softball championship was being held there. The taxpayer's explanation for the last-mentioned trip, namely that he was trying to market softball plates made out of old conveyer belts was said by Leach J (at 237) to be 'somewhat facile, to say the least'. The taxpayer's chutzpah was matched by that of his accountant, who appeared on his behalf in the Special Court and argued that the Commissioner, having accepted his client's claim for a tax deduction in respect of similar expenditure on similar trips in past years (on the faith, presumably, of similarly false statements in the taxpayer's return for those years), was now estopped from denying a deduction for this one. The accountant also seems to have made an off-the-cuff assertion that s 82 of the Income Tax Act, which places the burden on the taxpayer to prove that an assessment is wrong, is unconstitutional.

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