South Africa: To Deem Or Not To Deem: Tax Court Judgment On Section 13quin Of The Income Tax Act

Last Updated: 8 November 2019
Article by Louis Botha


The Taxpayer bought commercial property in August 2001 from which it currently earns rental income and between 2007 and 2012, it made improvements to the property. The Taxpayer did not claim the commercial building allowance in terms of s13quin of the Act between the 2007 and 2012 years of assessment, but in the 2014 year of assessment, it claimed the s13quin allowance for all of these years of assessment. SARS disallowed the allowance claimed for the 2007 to 2012 years of assessment by issuing an additional assessment, against which the Taxpayer is appealing. It was not in dispute that, in principle, the Taxpayer was entitled to claim the s13quin allowance.

Relevant legal provision and issue in dispute

Section 13quin(3) of the Act states the following:

"Where any building or improvement in respect of which any deduction is claimed in terms of this section was during any previous financial year brought into use for the first time by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such year or any subsequent year in which such asset was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer."

Assuming a taxpayer meets all the requirements of s13quin of the Act, the provision allows a taxpayer to claim an allowance of 5% of the cost to the taxpayer of any new and unused building owned by the taxpayer or on any new and unused improvement to a building owned by the taxpayer, in a particular year of assessment.

In the current matter, the Tax Court had to decide whether, based on s13quin(3) of the Act, the Taxpayer could claim the allowance for the 2007 to 2012 years of assessment, in the 2014 year of assessment.

Arguments raised by the parties

The Taxpayer's key arguments were the following:

  • The Tax payer "did not claim the commercial building allowance provided for by section 13quin...between the periods 2007 and 2012 and was therefore entitled to claim same together with the 2013 [year of] assessment in the 2014 year of assessment".

  • The Taxpayer did not claim the allowance in those years as it was not properly advised by its former accountant;

  • SARS will not be prejudiced if it were to allow the Taxpayer to claim the allowance as argued for as it will recoup the allowances when the Taxpayer sells the property;

  • The purpose of introducing s13quin was to put a taxpayer in the same position as other taxpayers who benefit from allowances granted for movable assets;

  • Section 13quin(3) is ambiguous and therefore needs to be interpreted in favour of the Taxpayer; and

  • On a proper interpretation of s13quin(3), a taxpayer is entitled to claim allowances for the previous years of assessment relating to the building or improvements as provided for in s13quin.

SARS' key arguments were the following:

  • The Taxpayer failed to provide any evidence that s13quin(3) is ambiguous and therefore the Tax payer could not' invoke the contra fiscum rule;

  • When considering the provisions of s13quin, it is impermissible for the Taxpayer to claim a lump sum of the improvements for the 2008 to 2012 years of assessment and the building allowance for the 2013 year of assessment, in the 2014 year of assessment;

  • It is clear from s13quin(3) that if the allowance could not be claimed because if the receipts and accruals of the taxpayer are not included in its income, the allowance is nonetheless deemed to have been claimed and allowed; and

  • The deeming provision merely provides a taxpayer who qualifies to apply the allowances as and when it has to recoup it in terms of s8(4) of the Act, but does not grant an automatic right to a taxpayer to deduct the previous years' allowances in a subsequent year of assessment.


The Tax Court held that it is trite that s13quin of the Act was introduced to provide for capital allowances in respect of immovable property depending on the use of the property. It explained that the section provides for an allowance in respect of commercial buildings that are owned by a taxpayer and used solely for a taxpayer's trade.

The Tax Court held that it could not agree with the Taxpayer's contentions and that the provisions of s13quin(3) are clear and need not be interpreted further than the words in the provision itself. According to the Tax Court, " is clear that if the receipts and accruals were not included in the income of the Taxpayer during the previous year of assessment, any deduction which would have been allowed in terms of s13quin during that year shall be deemed to have been allowed in that year."

The Tax Court then referred to the Supreme Court of Appeal's judgment in Novartis v Maphil (20229/2014) [2015] ZASCA 111 where it deals with the principles of interpretation and held that the Taxpayer had failed to demonstrate that s13quin(3) is ambiguous. With reference to the definition of "year of assessment" in s1(1) and case law, it held that in light of the Taxpayer's failure to claim the building allowances in the 2007 to 2012 years of assessment, s13quin(3) deems the allowance as having been claimed and allowed as a deduction for the past years of assessment. Furthermore, the Tax Court stated that it "...does not make any business sense for the appellant [Taxpayer] to claim a lump sum after having incurred the expenses over a period of 5 years." In its view, s13quin(3) was inserted to "...prevent taxpayers from delaying in applying for these deductions and to avoid unnecessary cash flow problems."

The Tax Court therefore disallowed the Taxpayer's appeal regarding s13quin. It also disallowed the Taxpayer's appeal against the imposition of interest.


The judgment serves as a warning to taxpayers in the commercial property industry to ensure that they claim the s13quin allowance correctly. However, it is slightly disappointing that the Tax Court did not analyse the deeming provision in a bit more detail before coming to its conclusion. It would also have been helpful if it discussed the principles of the contra fiscum rule in a bit more detail. Presumably it did not do so, as it found the provision was clear and easy to interpret.

It is also noteworthy that SARS Interpretation Note 107 (IN 107) only dedicates a few paragraphs to s13quin(3). We discussed IN 107 in our Tax & Exchange Control Alert of 14 June 2019.


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions