The Commissioner for the South African Revenue Service v Clicks Retailers (Pty) Ltd

Clicks Retailers (Pty) Ltd operates a nationwide retail business and introduced a customer loyalty programme known as the Clicks ClubCard. Customers who apply for and use a ClubCard earn points based on qualifying purchases, which may be converted into vouchers redeemable as part payment for future purchases. During the 2009 tax year, Clicks claimed a deduction under s 24C of the Income Tax Act 58 of 1962 in respect of anticipated future expenditure related to honouring such vouchers. SARS disallowed the deduction, contending that the income earned and the future expenditure did not arise from the same contract. The Tax Court upheld Clicks’ appeal, finding that the initial sale contract both generated income and imposed an obligation to incur future expenditure. SARS appealed to the Supreme Court of Appeal.

The appeal by SARS was upheld with costs. The order of the Tax Court was set aside and replaced with an order dismissing Clicks’ appeal.

The case confirms and reinforces a strict interpretation of s 24C of the Income Tax Act, requiring that income and future expenditure arise from the same contract. It limits the availability of s 24C allowances in complex commercial arrangements such as loyalty programmes and clarifies that linked or composite contractual schemes do not satisfy the statutory requirements.