Original Research

A critical analysis of the meaning of the term ‘income’ in Sections 7(2) to 7(8) of the Income Tax Act No. 58 of 1962

Danielle van Wyk, Mareli Dippenaar
South African Journal of Economic and Management Sciences | Vol 20, No 1 | a1560 | DOI: https://doi.org/10.4102/sajems.v20i1.1560 | © 2017 Danielle van Wyk, Mareli Dippenaar | This work is licensed under CC Attribution 4.0
Submitted: 10 March 2016 | Published: 26 April 2017

About the author(s)

Danielle van Wyk, School of Accountancy, University of Stellenbosch, South Africa
Mareli Dippenaar, School of Accountancy, University of Stellenbosch, South Africa


Share this article

Bookmark and Share

Abstract

Background: Section 7 of the Income Tax Act 58 of 1962 (the Act) was introduced as an anti-avoidance measure to prevent tax avoidance by means of a donation, settlement or other disposition in various types of schemes. In terms of this section, in certain circumstances, ‘income’ is deemed to be income received by or accrued to a taxpayer. Despite the fact that the term ‘income’ has been used in Section 7 from the time that it was first introduced into the Act and the fact that it is defined in section 1 of the Act, there still remains uncertainty regarding the intention of the legislature and the actual meaning of the term in terms of Section 7.

Aim: The objective of the study is to understand whether the term ‘income’, as used in Sections 7(2) to 7(8) of the Act, is used in its defined sense or if it should be ascribed a different meaning.

Setting: This article examines existing literature in a South African income tax environment.

Method: A non-empirical study of existing literature was conducted by performing a historical analysis within a South African context. A doctrinal research approach was followed.

Results: Possible interpretations determined include ‘income’ as defined in section 1 of the Act, namely ‘gross income’ (also defined) less exempt income, ‘gross income’, profits and gains or ‘taxable income’ (i.e. ‘income’ less allowable expenditure, deductions and losses) and ‘gross income’ less related deductible expenses and losses.

Conclusion: It was found that the meaning of ‘income’, for purposes of Sections 7(2) to 7(8), remains an uncertainty, and it is recommended that the wording of Section 7 be amended to reflect the intended meaning thereof.


Keywords

income tax; section 7; income; intention; meaning; interpretation

Metrics

Total abstract views: 1418
Total article views: 2150


Crossref Citations

No related citations found.