Abstract
M.Comm. (South African & International Taxation)
The capital allowance mentioned in section 11(e) of Income Tax Act 58 of 1962 (“the
Act”) refers to machinery, plant, implements, utensils and articles, the value of which
may have diminished by reason of wear and tear or depreciation. The machinery,
plant, and articles in question, often accede to other assets of a permanent nature
such as immovable buildings. This is a problem in South Africa because the wear
and tear allowance is lost when machinery, plant or articles lose their identities upon
being absorbed into assets of a permanent nature such as a building. Buildings and
other structures of a permanent nature do not qualify for the wear and tear allowance
in terms of section 11(e) of the Act. This article investigates the uncertainties with
regard to interpreting what constitutes “buildings, or other structures or works of a
permanent nature” for the purposes of the prohibition of wear and tear allowances
contained in section 11(e)(ii) of the Act.