Abstract
A comparative analysis of capital allowances for foundations and structures of permanent nature for plant and machinery for small business corporations ABSTRACT Purpose: Section 12E of the Income Tax Act No. 58 of 1962 (the Income Tax Act), which provides for deductions of small business corporations (SBCs), does not have a provision that deems foundations or supporting structures to be part of the asset under section 12E(1). This therefore creates uncertainty as to whether SBCs can claim a deduction in respect of foundations or supporting structures on which the asset is mounted. The purpose of the study was therefore to provide a comparative analysis of the various capital allowance sections that deal with plant or machinery and to highlight the anomaly in section 12E and the implications thereof. Design/Methodology/Approach: An interpretative paradigm and a qualitative mode of enquiry were used. The doctrinal research method was selected for this study. Findings: Various sections of the Income Tax Act, such as sections 11(e), 12B, 12BA and 12C, provide for a deduction in respect of the foundations or supporting structures by deeming foundations or supporting structures to be part of the machinery or plant, provided certain requirements are met. However, section 12E(1), which deals with manufacturing plant or machinery of SBCs, does not have the same provision; by implication, SBCs cannot claim a deduction on foundations or supporting structures that are attached to the plant or machinery. Consequently, section 12E is inconsistent with other capital allowance provisions, leading to ambiguity and inequity for SBCs. Originality/Contribution: The study recommends that section 12E be amended to include a provision that deems foundations or supporting structures to be part of plant or machinery.