Avenant v Commissioner for the South African Revenue Service

Dr H C Avenant, a wine grape farmer and member of a wine-producing co‑operative, delivered his harvested grapes to the co‑operative before the end of the 2009 tax year. Upon delivery, the grapes were pressed into pulp and mixed with pulp from other members’ grapes for fermentation and eventual wine production. Ownership of the grapes and resultant pulp was retained by the farmers; the co‑operative merely processed, marketed and sold the wine on their behalf. Payment to farmers occurred later, once wine sales were realised. SARS assessed Avenant on the basis that the pressed grape pulp constituted ‘produce held and not disposed of’ at year‑end under the First Schedule to the Income Tax Act 58 of 1962, and included its value as closing stock in his taxable income. Avenant disputed that the pulp still constituted his produce, or that it was ‘held and not disposed of’ by him at year‑end.

The appeal was dismissed with costs. The finding that the grape pulp constituted closing stock (‘produce held and not disposed of’) was upheld.

The case clarifies the meaning of ‘produce held and not disposed of’ in the First Schedule to the Income Tax Act, confirming that agricultural produce includes work‑in‑progress and partially processed goods. It establishes that wine grapes pressed into pulp and undergoing fermentation remain the farmer’s produce for tax purposes, and that pooling and processing by a co‑operative does not constitute disposal. The decision provides important guidance for the taxation of farmers participating in co‑operatives and aligns farming‑stock principles with trading‑stock jurisprudence.