Page 83 - P6 Slide Taxation - Lecture Day 7 - Various Topics
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Source of rental income
• No statutory source rule deals with the source of rental income. The originating
cause of rental income is usually the asset that is used to earn rental income. In
COT v British United Shoe Machinery (SA) (Pty) Ltd (1964 FC) the asset concerned
was machinery and the leases were so long in duration that it was held that the
emphasis was on the property let and not on the business of the lessor.
• The source of the rent derived from the use of the property was located where it
was used, that is, in Rhodesia. It follows from this decision that it is too wide a
proposition to state that the source of rent is always the asset and that the place
where the asset is used by the lessee necessarily determines the situation of the
source of the rent.
• Regard must be had to the nature of the property let, the nature of the lessor’s
business and the duration of the lease. When the emphasis is on the property let
and not on the business of the lessor, the source is located where the property is
used. However, where the emphasis is on the business and not the asset (for
example with car rentals), it is not important where the asset is used. The source
of the rental will then be where the business is situated, as discussed next.
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