[MEDIA SUMMARY] Milnerton Estates Ltd v Commissioner for the South African Revenue Service

Milnerton Estates Ltd was a property developer that sold stands in a township. The sales were concluded in one tax year, but the transfer of the stands and payment of the purchase price occurred in the following tax year. All suspensive conditions attaching to the sale agreements had been fulfilled in the year in which the sales were concluded. Possession had either been given to the purchasers or they were entitled to possession in that same year. The dispute arose when CSARS included the amounts from these sales in the taxpayer's taxable income for the year in which the sales were concluded, rather than the year in which transfer and payment occurred.

• Whether amounts in respect of sales of stands should be included in taxable income in the year the sales were concluded or in the year when transfer and payment occurred
• Whether section 24(1) of the Income Tax Act 58 of 1962 applied to deem the purchase price to have been received in the year the sale agreements were concluded
• Whether the Supreme Court of Appeal was bound by its previous decision in Secretary for Inland Revenue v Silverglen Investments (Pty) Limited 1969 (1) SA 365 (A)

The appeal by the taxpayer was dismissed. The amounts in respect of sales of stands were properly included in the taxpayer's taxable income for the year in which the sales were concluded, not the following year when transfer and payment occurred.

Where a property developer concludes sale agreements for stands in one tax year, and all suspensive conditions attaching to the sale agreements have been fulfilled in that year, and possession has been given to purchasers or they are entitled to possession, section 24(1) of the Income Tax Act 58 of 1962 deems the whole of the purchase price to have been received in the year in which the sale agreements were concluded, even if transfer and payment only occur in a subsequent tax year.

The court noted that no argument was advanced by the appellant to justify departing from the previous decision in Secretary for Inland Revenue v Silverglen Investments (Pty) Limited 1969 (1) SA 365 (A). This suggests that had such arguments been presented, the court may have been willing to consider whether the precedent should be reconsidered, though this is merely implicit in the judgment summary.

This case reaffirms the application of section 24(1) of the Income Tax Act 58 of 1962 in property development transactions. It confirms that where suspensive conditions have been fulfilled and possession has been given or the purchaser is entitled to possession, the purchase price is deemed to have been received in the year of sale, regardless of when actual transfer and payment occur. The case demonstrates the SCA's adherence to the principle of stare decisis by following its previous decision in Silverglen Investments, providing certainty and consistency in the application of tax law to property developers.