Ernst Bester Trust v Commissioner, South African Revenue Service

The Ernst Bester Trust owned a farm, Klein Môrewag, which it leased for agricultural purposes. The farm contained commercially exploitable sand deposits. The Trust entered into an arrangement with Brickrush CC, granting Brickrush the right to extract sand from the farm in return for monthly payments calculated per cubic metre of sand removed. Brickrush obtained a mining licence, extracted sand at its discretion, kept records of quantities removed, and paid the Trust accordingly. During the 2000–2002 tax years, the Trust derived substantial income from these sand sales. SARS assessed the receipts as revenue. The Trust objected, contending that the proceeds were capital in nature, alternatively that it was entitled to an opening trading stock deduction under section 22 of the Income Tax Act 58 of 1962.

The appeal was dismissed with costs, including the costs of two counsel.

The case reinforces South African income tax jurisprudence on the distinction between capital and revenue, particularly in relation to natural resource extraction. It confirms that payments analogous to mineral royalties are revenue, even where the underlying asset is diminished. The judgment also clarifies the limited scope and timing function of section 22 of the Income Tax Act and rejects reliance on informal SARS practices not grounded in statute.