| 20/5/2012 |
HOME
FSS
Downloads
|
| Board of Special Commissioners - Cases |
| Case No. 19/71 |
Decided: 5 June, 1972 |
   |
|
Method of determining when an expense may be considered to be a deductible allowance - articles 5 and 10, now 4 and 14, Income Tax Act
|
Appellant contested Revenue's refusal to allow a deduction in respect of an "entertainment allowance" which had been incorporated in his salary. The allowance was granted to him in his capacity as director who was "expected to entertain visitors as and when the necessity arises".
In order to establish whether an allowance was deductible one has in the first instance to establish that it was chargeable income in terms of article 5 of the Income Tax Act. If it is chargeable, one has to view it in the light of article 10 to determine whether it is an allowable deduction.
Article 5 provides that "gains and profits from any employment" are chargeable to tax. It has always been held that these words include any form of remuneration received under whatever form or guise. In this context all allowances are considered to be gains from employment.
The next step is to establish whether the relative expense actually incurred by the employee was, indeed, made "wholly and exclusively in the production of income" as required by the provisions of article 10. The Board has, therefore, to be satisfied that the employee was obliged in terms of the contract of employment to incur the expenses claimed. In the negative the expense would be considered to be either voluntary or of a private or domestic nature and, therefore, not deductible.
In this particular case it was established that no contract of employment had been entered into in writing, no specific job description was available and the arrangements had been agreed upon by appellant and his immediate superior but not authorised by the Board of Directors. Moreover the words "expected to entertain" implied discretion rather than a firm obligation.
|
|
|
|
|