Income Tax Act, 1962 (Act No. 58 of 1962)Chapter II : The TaxesPart I : Normal Tax27. Determination of taxable income of co-operative societies and companies |
| (1) | In the determination of the taxable income of any co-operative trading society, as defined in the Co-operative Societies Act, 1939 (Act No. 29 of 1939), derived by that society from its transactions, whether with persons who are members or with persons who are not members of the society, the amount of any bonus distributed in any year of assessment to its members by any such society which is a closed society as defined in section ninety-seven of that Act shall be allowed as a deduction from the income of that society in so far as such bonus does not exceed an amount equivalent to one-tenth of the aggregate value of the business of such society with its members during such year of assessment, but no such deduction shall be allowed in the case of any such co-operative trading society which is not such a closed society. |
| (2) | In the determination of the taxable income of any agricultural co-operative, there shall be allowed as deductions from the income of such agricultural co-operative for the year of assessment in question— |
| (a) | the amounts of any profits distributed by it during the specified period in relation to the year of assessment by way of bonuses (other than bonuses distributed out of the stabilization fund referred to in paragraph (h)) to persons entitled to participate in such distribution: Provided that the amounts allowed as deductions under this paragraph shall not in the aggregate exceed an amount which bears to the taxable income of such agricultural co-operative for the year of assessment (as calculated before allowing any deductions under this paragraph and before setting off any balance of assessed loss brought forward from a previous year of assessment) the same ratio as the aggregate value of the business conducted by such agricultural co-operative with its members during such year bears to the aggregate value of all business conducted by it during such year; |
[Section 27(2)(a) substituted by section 29 of the Taxation Laws Amendment Act, 2002 (Act No. 74 of 2002)]
| (b) | subject to the provisions of subsections (3), (4) and (5), an allowance equal to two per cent of the cost (after the deduction of any amount referred to in subsection (4)) to such agricultural co-operative of— |
| (i) | any building which was during the year of assessment wholly or mainly used by such co-operative as a storage building, if such building was erected by such co-operative or by any other co-operative agricultural society or company or farmers' special co-operative company as defined in the Co-operative Societies Act, 1939, and the erection of such building was commenced on or after 25 March 1959; or |
| (ii) | any improvements (other than repairs) to any building referred to in subparagraph (i) which was during the year of assessment used as contemplated in that subparagraph; or |
| (iii) | any improvements (other than repairs) to any other building which was during the year of assessment used as a storage building by such co-operative, if such improvements were commenced on or after 1 April 1971: |
Provided that no allowance shall be granted under this paragraph in respect of the cost of any building or improvements if an allowance in respect of such cost has been granted in respect of the year of assessment under the provisions of section 13(1):
Provided further that no allowance shall be made under this paragraph in respect of such portion of the cost of any building or of any improvements as has been taken into account in the calculation of any storage building initial allowance or any allowance to such co-operative under section 11(g), whether in the current or any previous year of assessment:
[Second proviso to section 27(2)(b) substituted by section 15(1)(a) of the Income Tax Act, 1985 (Act No. 96 of 1985)]
Provided further that in the case of any such building the erection of which commences on or after 1 January 1989 and any such improvements which commence on or after that date the allowance under this paragraph shall be increased to 5 per cent of the cost (after the deduction of any amount as provided in subsection (4)) to the taxpayer of such building or improvements;
[Third proviso to section 27(2)(b) inserted by section 22 of the Income Tax Act, 1988 (Act No. 90 of 1988)]
| (c) | [Section 27(1)(c) deleted by section 28 of the Income Tax Act, 1991 (Act No. 129 of 1991)] |
| (d) | [Section 27(1)(d)deleted by section 28 of the Income Tax Act, 1991 (Act No. 129 of 1991)] |
| (e) | [Section 27(1)(e) deleted by section 28 of the Income Tax Act, 1991 (Act No. 129 of 1991)] |
| (f) | [Section 27(1)(f) deleted by section 28 of the Tax Act, 1991 (Act No. 129 of 1991)]; |
| (g) | an allowance in respect of the year of assessment in respect of losses suffered by such agricultural co-operative in consequence of physical damage to or deterioration of pastoral, agricultural and other farm products held by such agricultural co-operative on behalf of any control board established under the provisions of the Marketing Act, 1968 (Act No. 59 of 1968): Provided that such allowance shall be included in the income of such agricultural co-operative in the following year of assessment; and |
[Section 27(1)(g) substituted by section 51 of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
| (h) | in the case of the vereniging defined in section 1 of the Wine and Spirit Control Act, 1970 (Act No. 47 of 1970), an allowance equal to so much of any amount which the said vereniging has, within the specified period in relation to the year of assessment, transferred from its profits for such year to a price stabilization fund for distribution to its members or winegrowers within a period not exceeding five years reckoned from the end of such year of assessment, as does not exceed an amount equal to that portion of the profits derived by such vereniging for that year of assessment in the exercise of its functions relating to the control of, and the stabilization of prices in, the wine industry; |
[Section 27(1)(h) substituted by section 28 of the Income Tax Act, 1991 (Act No. 129 of 1991)]
| (i) | [Section 27(1)(i) substituted by section 28 of the Income Tax Act, 1991 (Act No. 129 of 1991) |
| (2A) | [Section 27(2A) deleted by section 28(3) of the of the Income Tax Act, 1991 (Act No. 129 of 1991)] |
| (3) | The aggregate of the allowances under subsection (2)(b) and section 13(1) in respect of any building or improvements shall not exceed the cost (after the deduction of any amount referred to in subsection (4)) of such building or improvements, as the case may be, less the aggregate of any storage building initial allowance and any allowances made to the agricultural co-operative concerned in respect of such building or improvements, as the case may be, under section 11(g). |
[Section 27(3) substituted by section 15(1)(d) of the Income Tax Act, 1985 (Act No. 96 of 1985)]
| (4) | If in any year of assessment there falls to be included in an agricultural co-operative's income in terms of paragraph (a) of section 8(4) an amount, which has been recovered or recouped, in respect of any allowance made under subsection (2)(b) in respect of any building or improvements, such portion of the amount so recovered or recouped as is set off against the cost of a further building as hereinafter provided shall, notwithstanding the provisions of the said paragraph, at the option of that co-operative and provided it erects within twelve months or such further period as the Commissioner may allow from the date on which the event giving rise to the recovery or recoupment occurred, any other building to which the provisions of subsection (2)(b) apply, not be included in its income for that year of assessment, but shall be set off against so much of the cost to it of that further building erected by it as remains after the deduction of any portion of that cost in respect of which an allowance has been granted to that co-operative under section 11(g), whether in the current or any previous year of assessment. |
[Section 27(4) substituted by section 7(1) of the Taxation Laws Second Amendment Act, 2008 (Act No. 4 of 2008)]
| (5) | Where any agricultural co-operative (hereinafter referred to as the new co-operative) has before 1 April 1977 been constituted by an amalgamation under section 94 of the Co-operative Societies Act, 1939, of two or more other agricultural co-operatives and by reason of such amalgamation the ownership of any building used as a storage building by one of such other co-operatives (hereinafter referred to as the other co-operative) has passed from the other co-operative to the new co-operative— |
| (a) | an allowance may in the appropriate circumstances be granted under subsection (2)(b) to the new co-operative in respect of such building or any improvements (other than repairs) thereto if such allowance would have been granted to the other co-operative if the amalgamation had not been effected; |
[Section 27(5)(a) substituted by section 23(b) of the Income Tax Act, 1993 (Act No. 113 of 1993)]
| (b) | [Section 27(5)(b) deleted by section 28(f) of the Income Tax Act, 1991 (Act No.129 of 1991)]; |
| (c) | where an allowance or deduction may be granted or allowed as contemplated in paragraph (a) or (b), the provisions of subsections (2)(b), (3) and (4) shall be applied as though the other co-operative and the new co-operative had at all relevant times been one co-operative. |
[Section 27(5) substituted by section 28(g) of the Income Tax Act, 1991 (Act No. 129 of 1991]
| (5A) | Where any agricultural co-operative has on or after 1 April 1977 and before the date of commencement of the Co-operatives Act, 1981, been constituted by an amalgamation under section 94 of the Co-operative Societies Act, 1939, of two or more other agricultural co-operatives, the said co-operative and such other co-operatives shall, for the purposes of assessments under this Act, be deemed to be and to have been one and the same [Section 27(5A) substituted by section 21(1)(e) of the Income Tax Act, 1981 (Act No. 96 of 1981)] |
| (5B) | Where any co-operative has on or after the date of commencement of the Cooperatives Act, 1981, come into being in pursuance of a conversion or amalgamation in terms of Chapter VIII of that Act, such co-operative and any company, co-operative or co-operatives out of which it so came into being shall, for the purposes of assessments under this Act for the year of assessment during which such co-operative came into being and subsequent years of assessment but subject to such conditions as the Commissioner may impose, be deemed to be and to have been one and the same co-operative. |
[Section 27(5B) inserted by section 21(1)(f) of the Income Tax Act, 1981 (Act No. 96 of 1981)]
| (6) | [Section 27(6) deleted by section 28(h) of the Income Tax Act, 1991 (Act No. 129 of 1991]; |
| (7) | [Section 27(7) deleted by section 28(h) of the Income Tax Act, 1991 (Act No. 129 of 1991]; |
(8)
| (a) | The full amount of any bonus distributed by any agricultural co-operative shall, to the extent that such amount qualifies for deduction from the income of such cooperative under subsection (2) (a) or, if it is distributed out of the stabilization fund referred to in subsection (2) (h), be included in the press income of the person who has become entitled thereto and shall be deemed to have accrued to such person on the date of the distribution of the bonus by such co-operative; |
| (b) | For the purposes of this section the amount of any bonus distributed by way of capitalization shares or bonus debentures or securities shall be deemed to be the nominal value of such shares, debentures or securities, as the case may be. |
[Section 27(8) inserted by section 17(1) of the Income Tax Act, 1977 (Act No. 113 of 1977)
(9) In this section—
"agricultural co-operative"
means any co-operative agricultural society or company or any farmers' special co-operative company, as defined in the Co-operative Societies Act, 1939;
"bonus"
means any amount distributed by any co-operative society or company referred to in this section out of its profits or surplus for any year of assessment or, in the case of the vereniging referred to in paragraph (h) of subsection (2), out of the stabilization fund referred to in that paragraph, whether such amount is distributed in cash or by way of a credit or an award of capitalization shares or bonus debentures or securities, if such amount—
| (a) | is divided among the persons entitled thereto in such manner that the amount accruing to each such person is determined in accordance with the value of the business transactions between such society or company and such person; and |
| (b) | is distributed during the specified period in relation to such year of assessment or is distributed out of the stabilization fund referred to in subsection (2) (h); |
"improvements"
in relation to any storage building, means any extension, addition or improvements (other than repairs) to a storage building which is or are effected for the purpose of increasing the capacity of the building for storing or packing pastoral, agricultural or other farm products or for carrying on therein any primary process in respect of any such products;
"primary process"
in relation to any product produced in the course of pastoral, agricultural or other farming operations, means the first process to which such product is subjected by an agricultural co-operative in order to render such product marketable or to convert such product into a marketable commodity, and includes any further process carried on by such co-operative which is so connected with the said first process that such first process and such further process or processes may be regarded as one process and to be necessary to convert such product into a marketable commodity;
[Definition substituted by section 23(c) of the Income Tax Act, 1993 (Act No. 113 of 1993)]
"storage building"
in relation to any agricultural co-operative, means—
| (a) | a building which is at any relevant time or during any relevant period wholly or mainly used by such co-operative for storing or packing pastoral, agricultural or other products produced by such co-operative's members or for carrying on therein any primary process in respect of such products; or |
| (b) | a structure of a permanent nature which is at any relevant time or during any relevant period wholly or mainly used by such co-operative in connection with the fattening of livestock on behalf of the members of such co-operative: |
Provided that for the purposes of this definition the members of a central co-operative agricultural company or central farmers' special co-operative company or federal co-operative agricultural company or federal farmers' special co-operative company, as defined in the Co-operative Societies Act, 1939, shall be deemed to include the members of any agricultural co-operative which itself is a member of such company.
[Definition substituted by section 19(1)(g) of the Income Tax Act, 1980 (Act No. 104 of 1980)]