About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

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
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.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing nearly 3,000 academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.

Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline with pricing starting as low as $29.95

Contact us for annual subscription options:

Already a HeinOnline Subscriber?

profiles profiles most