City Power (SOC) Limited v Commissioner for the South African Revenue Service

City Power (SOC) Limited is a state-owned company and municipal entity wholly owned by the City of Johannesburg, responsible for electricity distribution. SARS issued income tax assessments for the 2010–2012 years of assessment, disallowing doubtful debt allowances and treating City Power’s income as taxable. City Power objected, contending that its receipts and accruals were exempt from normal tax under section 10(1)(a) and (b) of the Income Tax Act 58 of 1962 because it functioned as part of local government or performed municipal functions on behalf of the City. The objection failed, and the Tax Court held that City Power did not qualify for the exemption. City Power appealed to the Supreme Court of Appeal.

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

The case clarifies the tax status of municipal entities and state-owned companies, confirming that performing public or municipal functions does not in itself entitle an entity to income tax exemption. It affirms a strict, constitutional interpretation of section 10 of the Income Tax Act and provides important guidance on the distinction between spheres of government and autonomous public entities for tax purposes.