Abstract:
The question whether or not income which is received by a taxpayer in the
course of carrying on illegal activities should be regarded as being received
by or accrued to such taxpayer for purposes of assessing such person’s
gross income has been an object of debate, both in South Africa and
abroad. A recent case on this topic, ITC 1789 (67 SATC 205), which will be
discussed hereunder, once again highlighted the uncertain treatment of
illegal income for purposes of income tax. The case concerned the inclusion
of proceeds from a pyramid scheme, deposits as well as commissions, as
gross income in the hands of the scheme perpetrators. Although this
discussion will focus on the said case, the history of cases that have dealt
with the concept of “beneficial receipt” will be set out to provide a clear
understanding of how the law has been applied and will set the background
for determining whether or not the case under discussion has been correctly
decided.
