Section 26A of the Income Tax Act 58 of 1962 provides that ‘[t]here shall be included in the taxable income of a person for a year of assessment the taxable capital gain of that person for that year of assessment, as determined in terms of the Eighth Schedule’.

This matter concerns how a capital gain accrued as a result of the disposal of an asset in a particular year of assessment falls to be treated for capital gains tax purposes when the contract in terms of which the asset was sold is cancelled during a subsequent tax period, with the effect that the taxpayer does not realise the full proceeds of the disposal that had been taken into account in assessing its taxable income in the year that the asset was disposed of. 

It was ultimately common cause between the parties that on the facts of the current case the relevant provisions of the Eighth Schedule deem the date of the disposal to have been the date upon which the contract was concluded and that the proceeds are deemed to have accrued to the taxpayer and fall to be accounted for income tax purposes in the year in which the disposal occurs, even if the proceeds actually fall to be received after that year.