Chipkin (Natal) (Pty) Limited v Commissioner for the South African Revenue Service

The appellant was a partner en commandite holding a 30% interest in a partnership formed to acquire and operate an aircraft. The partnership qualified for aircraft allowances under section 14 bis of the Income Tax Act, which were allocated to partners proportionally under section 24H(5). The appellant claimed its pro rata share of the allowance over several years. In the 1992 year of assessment, the appellant disposed of 99.9% of its partnership interest to the managing partner, and in return its loan used to fund the capital contribution was discharged. SARS assessed this transaction as a recoupment of the previously claimed allowances under section 8(4)(a). The appellant’s objection and appeal to the Tax Court were unsuccessful, leading to this appeal.

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

The case clarifies the tax treatment of partnerships in South African law, confirming that partnerships are not taxable entities and that deductions, allowances, and recoupments accrue to partners individually. It establishes that disposal of a partnership interest can trigger recoupment of capital allowances, even if the partnership retains the asset.