In ITC 1712 63 SATC 499, heard in the Gauteng Special tax Court and reported in the most recent issue of SA Tax Cases Reports, the court was required to decide on the normality or otherwise of a transaction. This is of course an important consideration in the application of section 103(1), the general anti-avoidance section of the Income Tax Act.
The taxpayer in this case leased four tank containers from a bank for a five year period, and in turn entered into an agreement with another person who was to lease them to third parties overseas. The bone of contention was the rate at which rental payments to the bank fell due. The first annual amount payable was R230 258, followed by instalments of R197 364, R98 682, R98 682 and finally R32 894 respectively in the next four years. The effect of this structure was that 43% of the total rental was paid in the first year.
