Date: 26 June 1989

Sections 6bis, 6ter and 6quat of the Income Tax Act, 1962, provide for the granting of a rebate against normal tax in respect of certain other taxes paid by the taxpayer on amounts included in his taxable income. Each of those sections provides, however, that the rebate is to be limited to the amount of normal tax which is attributable to the inclusion of the relevant amounts. Many of the double taxation agreements concluded between the Republic and other states similarly provide for the granting of relief in respect of foreign taxes paid, subject also to the relief being limited to the amount of normal tax attributable to the inclusion of the income subject to the foreign tax.

The amount of normal tax attributable to the inclusion of a particular amount in income may be calculated either according to the 'top slice' method, in which the amount to be determined represents the difference between the normal tax calculated on the total taxable income and the normal tax calculated on the taxable income before the inclusion of the relevant amount, or according to the pro rata method, in which the amount of attributable tax is determined by apportioning the total normal tax payable in the ratio which the relevant amount of income bears to the total taxable income. Inland Revenue has, in certain instances, used the 'top slice' method of calculation in the past.

In the case of Commissioner for Inland Revenue v Estate late Bulman, 1987 (1) SA 659, the Appellate Division, in considering a similar calculation required to be made for purposes of the proviso to the First Schedule to the Estate Duty Act, 1955, held that the pro rata method was to be used. It is considered that the reasoning adopted by the Court in that case is applicable also the various income tax calculations mentioned above, and those calculations will accordingly in future be made on the pro rata basis.