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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

23J. Limitation of allowances granted in respect of assets previously held by connected persons

 

 

The Income Tax Act, 1962, is hereby amended by the repeal of section 23J [Deleted by the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]

 

1) Where a depreciable asset acquired by a taxpayer was held within a period of two years preceding the acquisition by a person who was a connected person in relation to that taxpayer at any time during that period, the cost or value of the depreciable asset for the purposes of this section and any deduction or allowance claimed by the taxpayer in respect of that asset shall not exceed an amount determined in accordance with subsection (2).

 

2) The amount to be determined for purposes of subsection (1) is the sum of—
a) the cost of the depreciable asset for purposes of any deductions allowable in respect of that asset to the most recent person contemplated in subsection (1) that previously held that asset (hereinafter referred to as the 'connected person'), less the sum of—
i) all deductions which have been allowed to the connected person in respect of the asset; and
ii) all deductions that are deemed to have been allowed to the connected person in respect of the asset in terms of section 11(e)(ix), 12B(4B), 12C(4A), 12D(3A), 12DA(4), 12F(3A), 13(1A), 13bis(3A), 13ter(6A), 13quin(3) or 37B(4);
b) any amount contemplated in paragraph (n) of the definition of 'gross income' in section 1 that is required to be included in the income of the connected person that arises as a result of the disposal of the asset by the connected person; and
c) the applicable percentage in paragraph 10 of the Eighth Schedule, of the capital gain of the connected person that arises as a result of the disposal of the asset by the connected person.