Income Tax Act, 1962 (Act No. 58 of 1962)

Chapter II : The Taxes

Part I : Normal Tax

24J. Incurral and accrual of interest

Purchase

(1)	For the purposes of this section, unless the context otherwise indicates—

"accrual amount",

in relation to an accrual period, means an amount determined in accordance with the following formula:

A = B x C

in which formula—

(a)	"A" represents the amount to be determined;

(b)	"B" represents the yield to maturity; and

(c)	"C" represents the adjusted initial amount:

Provided that—

(i)

where the commencement or end of any year of assessment falls within an accrual period, the amount so determined shall be apportioned on a day to day basis over the term of such accrual period in order to determine the relevant portion of such amount relating to that part of such accrual period falling within the year of assessment so commencing or ending, as the case may be;

(ii)

where an instrument is transferred on a date other than at the end of an accrual period, the amount so determined shall be apportioned on a day to day basis over the term of such accrual period in order to determine the relevant portion of such amount relating to the relevant transferor or transferee, as the case may be, in relation to such instrument; and

(iii)

the amount so determined shall be appropriately adjusted by taking into account amounts received or payments made other than at the end of an accrual period;

"accrual period",

in relation to an instrument, means—

(a)	where in terms of such instrument regular payments at intervals of equal length and not exceeding 12 months per interval are to be made throughout the term of such instrument, the period between such regular payments; or

(b)	any period not exceeding 12 months elected by the holder or issuer, as the case may be,

which period shall be applied consistently throughout the term of such instrument;

"adjusted gain on transfer or redemption of an instrument"

means—

(a)	in relation to the holder of any income instrument, where—

(i)

an alternative method has not been applied, the amount by which the sum of the transfer price or redemption payment of such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the accrual period in which such income instrument is transferred or redeemed, exceeds the sum of the adjusted initial amount in relation to such income instrument and the accrual amount in relation to such accrual period and any payments made by such holder in terms of such income instrument during such accrual period; or

(ii)

an alternative method has been applied, the amount by which the sum of the transfer price or redemption payment of such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder, exceeds the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments made by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder; or

(b)	in relation to the issuer of any instrument, where—

(i)

an alternative method has not been applied, the amount by which the sum of the adjusted initial amount in relation to such instrument and the accrual amount in relation to the accrual period during which such instrument is transferred or redeemed and any payments received by such issuer in terms of such instrument during the accrual period, exceeds the sum of the transfer price or redemption payment in relation to such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during such accrual period; or

(ii)

an alternative method has not been applied, the amount by which the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments received by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer, exceeds the sum of the transfer price or redemption payment in relation to such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer;

[Definition substituted by section 14(1)(a) of the Income Tax Act, 1996 (Act No. 36 of 1996)]

"adjusted initial amount"

means—

(a)

in relation to the holder of an income instrument with regard to a particular accrual period, the sum of the initial amount and the accrual amounts in relation to all previous accrual periods and any other payments made by such holder during all such previous accrual periods less any payments received by such holder during all such previous accrual periods, in terms of such income instrument; or

(b)

in relation to the issuer of an instrument with regard to a particular accrual period, the sum of the initial amount and the accrual amounts in relation to all previous accrual periods and any other payments received by such issuer during all such previous accrual periods less any payments made by such issuer during all such previous accrual periods, in terms of such instrument:

Provided that where that instrument forms part of any transaction, operation or scheme—

(i)

any payments made by the issuer to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to the holder, must be deducted for purposes of this paragraph; and

(ii)

in the case where any party to that transaction, operation or scheme is a connected person in relation to that issuer, any payments made by that connected person to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to the holder, must be deducted for purposes of this paragraph;

[Definition substituted by section 24(1)(a) of the Revenue Laws Amendment Act, 1994 (Act No. 32 of 2004) - effective 1 January 2005]

"adjusted loss on transfer or redemption of an instrument"

means—

(a)	in relation to the holder of any income instrument, where—

(i)

an alternative method has not been applied, the amount by which the sum of the adjusted initial amount in relation to such income instrument and the accrual amount in relation to the accrual period during which such income instrument is transferred or redeemed and any payments made by such holder in terms of such income instrument during such accrual period, exceeds the sum of the transfer price or redemption payment in relation to such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during such accrual period; or

(ii)

an alternative method has been applied, the amount by which the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments made by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder, exceeds the sum of the transfer price or redemption payment in relation to such holder and any payments received by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder; or

(b)	in relation to the issuer of any instrument, where—

(i)

an alternative method has not been applied, the amount by which the sum of the transfer price or redemption payment of such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the accrual period during which such instrument is transferred or redeemed, exceeds the sum of the adjusted initial amount in relation to such instrument and the accrual amount in relation to such accrual period and any payments received by such issuer in terms of such instrument during such accrual period; or

(ii)

an alternative method has not been applied, the amount by which the sum of the transfer price or redemption payment of such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer, exceeds the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments received by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer

[Definition substituted by section 14(1)(b) of the Income Tax Act, 1996 (Act No. 36 of 1996)]

"alternative method"

means a method of calculating interest in relation to any class of instruments which—

(a)	is in accordance with IFRS;

(b)	is consistently applied in respect of all such instruments for all financial reporting purposes; and

(c)	method achieves a result in so far as the timing of the accrual and incurral of interest is concerned which produces substantially the same result achieved by the application of the provisions of subsections (2)(a) and (3)(a);

[Definition substituted by section 43 of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]

"date of redemption",

in relation to an instrument, means—

(a)

where—

(i)	the terms of that instrument specify a date on which all liability to pay all amounts in terms of that instrument will be discharged; and

(ii)	the date so specified is not, in terms of the instrument, subject to change, whether as a result of any right, fixed or contingent, of the holder of that instrument or otherwise,

that date; or

(b)

where—

(i)	the terms of that instrument do not specify a date as contemplated in paragraph (a)(i); or

(ii)	that date, if so specified, is subject to change as contemplated in paragraph (a)(ii),

the date on which, on a balance of probabilities, all liability to pay all amounts in terms of that instrument is likely to be discharged;

[Definition substituted by section 54(1)(a) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 April 2012)]

"deferred interest"

includes—

(a)

any interest where such interest (or any portion thereof), calculated in respect of any accrual period falling within the term of any instrument by applying a constant interest rate throughout the term of such instrument, is not payable or receivable in terms of such instrument within one year from the date of the commencement of such accrual period; and

(b)	any interest payable or receivable in terms of any instrument where such interest is not calculated by applying a constant interest rate throughout the term of such instrument;

"demand instrument"

[Definition deleted by section 54(1)(b) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]

"fixed rate instrument"

means an instrument in terms of which the amount or amounts payable or receivable is or are or consists of or consist of—

(a)	a specified amount or specified amounts;

(b)	an amount or amounts the method of calculation of which does not involve the application of a variable rate; or

(c)	any combination of amounts referred to in paragraph (a) or (b);

"holder",

in relation to an income instrument—

(a)	means any person who has become entitled to any interest or amount receivable in terms of such income instrument; or

(b)	at any particular time, means any person who, if any interest payable in terms of such income instrument was due and payable at that time, would be entitled to receive payment of such interest;

[Definition substituted by section 24(1)(b) of the Revenue Laws Amendment Act, 2004 (Act No. 32 of 2004) - effective 1 January 2005]

"income instrument"

means—

(a)	in the case of any person other than a company any instrument—

(i)	the term of which will, or is reasonably likely to, exceed one year; and

(ii)	which is issued or acquired at a discount or premium or bears deferred interest; and

(b)	in the case of any company, any instrument

[Definition substituted by section 14(1)(c) of the Income Tax Act, 1996 (Act No. 36 of 1996)]

"initial amount"

means the issue price or transfer price, as the case may be, in relation to an instrument;

"instrument"

means—

(a)	[Paragraph (a) deleted by section 54(1)(d) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2013]

(b)	[Paragraph (b) deleted by section 54(10(d) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012) - effective 1 January 2013]

(c)	any interest-bearing arrangement or debt;

(d)	any acquisition or disposal of any right to receive interest or the obligation to pay any interest, as the case may be, in terms of any other interest-bearing arrangement; or

(e)	any repurchase agreement or resale agreement,

which was—

(i)	issued or deemed to have been issued after 15 March 1995;

(ii)	issued on or before 15 March 1995 and transferred on or after the 19 July 1995; or

(iii)

in so far as it relates to the holder thereof, issued on or before 15 March 1996 (excluding any arrangements contemplated in subparagraphs (i) and (ii)),

but excluding any lease agreement (other than a sale and leaseback arrangement as contemplated in section 23G)or any policy issued by an insurer as defined in section 29A;

[Definition substituted by section 41(1)(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - deemed to have come into operation on 1 January 1996]

"interest"

includes the—

(a)	gross amount of any interest or similar finance charges, discount or premium payable or receivable in terms of or in respect of a financial arrangement;

[Paragraph (a) substituted by section 45 of the Taxation Laws Amendment Act, 2015 (Act No. 15 of 2016]

(b)	amount (or portion thereof) payable by a borrower to a lender in terms of any lending arrangement as represents compensation for any amount to which the lender would, but for such lending arrangement, have been entitled; and

[Paragraph (b) substituted by section 27(1)(a) of the Revenue Laws Amendment Act, 1999 (Act No. 53 of 1999)]

(c)	absolute value of the difference between all amounts receivable and payable by a person in terms of a sale and leaseback arrangement as contemplated in section 23G throughout the full term of such arrangement, to which such person is a party,

irrespective of whether such amount is—

(i)	calculated with reference to a fixed rate of interest or a variable rate of interest; or

(ii)	payable or receivable as a lump sum or in unequal instalments during the term of the financial arrangement;

"interest rate agreement"

means an interest rate agreement as defined in section 24K;

"issue",

in relation to an instrument, means the creation of the liability to pay or the right to receive an amount or amounts in terms of such instrument;

"issue price",

in relation to an instrument, means the market value of the consideration given or received, as the case may be, for the issue of the instrument as determined on the date on which that instrument is issued;

[Definition substituted by section 24(1)(c) of the Revenue Laws Amendment Act, 2004 (Act No. 32 of 2004) - effective 1 January 2005]

"issuer",

in relation to any instrument—

(a)	means any person who has incurred any interest or has any obligation to repay any amount in terms of such instrument; or;

(b)	at any particular time, means any person who, if any interest payable in terms of such instrument was due and payable at that time, would be liable to pay such interest;

[Definition substituted by section 24(1)(d) of the Revenue Laws Amendment Act, 2004 (Act No. 32 of 2004) - effective 1 January 2005]

"lending arrangement"

means any arrangement or agreement in terms of which—

(a)	a person (in this section referred to as the lender) lends any instrument to another person (in this section referred to as the borrower); and

(b)	the borrower in return undertakes to return any instrument of the same kind and of the same or equivalent quantity and quality to the lender;

"redemption",

in relation to an instrument, means the discharging of all liability to pay all amounts in terms of such instrument;

"redemption payment",

in relation to an instrument, means any payment made or received which has the effect of redeeming such instrument;

"repurchase agreement"

means the obtaining of money (which money shall for the purposes of this section be deemed to have been so obtained by way of a loan) through the disposal of an asset by any person to any other person subject to an agreement in terms of which such person undertakes to acquire from such other person at a future date the asset so disposed of or any other asset issued by the issuer of, and which has been so issued subject to the same conditions regarding term, interest rate and price as, the asset so disposed of;

"resale agreement"

means the provision of money (which money shall for the purposes of this section be deemed to have been so provided in the form of a loan) through the acquisition of an asset by any person from any other person subject to an agreement in terms of which such person undertakes to dispose of to such other person at a future date the asset so acquired or any other asset issued by the issuer of, and which has been so issued subject to the same conditions regarding term, interest rate and price as, the asset so acquired;

"short selling"

means the sale of any instrument by a person who is not the owner of such instrument, and in respect of which such person has the obligation to deliver such instrument at a future date;

"term",

in relation to an instrument, means the period commencing on the date of issue or transfer of that instrument and ending on the date of redemption of that instrument;

[Definition substituted by section 54(1)(g) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 20124) - effective 1 April 2012]

"transfer",

in relation to an instrument, includes—

(a)	the transfer, sale, assignment or disposal in any other manner of such instrument by the holder or issuer thereof, as the case may be; or

(b)	the acquisition of such instrument by the holder or issuer thereof, as the case may be, by way of a transfer, sale, assignment or disposal in any other manner,

but does not include the redemption of such instrument;

"transfer price",

in relation to the transfer of an instrument, means the market value of the consideration payable or receivable, as the case may be, for the transfer of such instrument as determined on the date on which that instrument is transferred;

[Definition substituted by section 24(1)(e) of the Revenue Laws Amendment Act, 2004 (Act No. 32 of 2004) - effective 1 January 2005]

"variable rate"

means a rate determined with reference to an interest or indexation rate or other similar factor, being a rate or factor that varies or may vary during the term of the instrument;

"variable rate instrument"

means an instrument which is not a fixed rate instrument; and

"yield to maturity"

means the rate of compound interest per accrual period at which the present value of all amounts payable or receivable in terms of any instrument in relation to a holder or an issuer, as the case may be, of such instrument during the term of such instrument equals the initial amount in relation to such holder or issuer of such instrument: Provided that where—

(a)	such instrument is a variable rate instrument, such rate of compound interest shall be calculated with reference to the variable rate applicable on the date such rate of compound interest is to be calculated to determine all amounts payable or receivable after such date;

(b)	in the case of a variable rate instrument the variable rate in relation to such instrument changes, the rate of compound interest shall be redetermined in relation to such variable rate instrument with reference to—

(i)	the appropriate adjusted initial amount in relation to such variable rate instrument determined before such change in the rate; and

(ii)	such changed variable rate applicable on the date such rate of compound interest is to be redetermined to determine all amounts payable or receivable after such date;

(c)

any variation in the terms or conditions of such instrument takes place or any variation in any amount payable or receivable in terms of such instrument takes place which will result in a change in such rate of compound interest in relation to such instrument, the rate of compound interest shall be redetermined in relation to such instrument with reference to the appropriate adjusted initial amount in relation to such instrument determined before such variation;

[Paragraph (c) of the proviso substituted by section 69(1)(b) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 April 2013]

(d)	there is a variation or alteration—

(i)

of the rights or interests of a holder in relation to an income instrument in respect of any amounts receivable in terms of such income instrument, the rate of compound interest in relation to such income instrument shall be redetermined in respect of such holder with reference to the appropriate adjusted initial amount in relation to such income instrument determined before such variation or alteration: or

(ii)

in the obligations of an issuer in relation to an instrument in respect of any amounts payable in terms of such instrument, the rate of compound interest in relation to such instrument shall be redetermined in respect of such issuer with reference to the appropriate adjusted initial amount in relation to such instrument determined before such variation or alteration; or

[Paragraph (d) of the proviso substituted by section 69(1)(c) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 April 2013]

(e)	in the case of an instrument of which the date of redemption is subject to change during a year of assessment, the rate of compound interest shall be redetermined in relation to such instrument with reference to—

(i)	the appropriate adjusted initial amount in relation to such instrument; and

(ii)	the changed date of redemption:

[Paragraph (e) of the proviso substituted by section 69(1)(d) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 April 2013]

Provided further that where that instrument forms part of any transaction, operation or scheme—

(a)	any payments made by the issuer to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to the holder; and

(b)

must be taken into account as a reduction of amounts payable by that issuer for purposes of determining that rate of compound interest: Provided further that where the calculated rate of compound interest per accrual period results in a negative rate of interest, the rate of compound interest per accrual period must be treated to be zero.

[Words following paragraph (b) of the further proviso substituted by section 10(1) of the Taxation Laws Amendment Act, 2005 (Act No. 9 of 2005) - effective 8 June 2005]

(2)	Where any person is the issuer in relation to an instrument during any year of assessment, such person shall for the purposes of this Act be deemed to have incurred an amount of interest during such year of assessment, which is equal to—

(a)	the sum of all accrual amounts in relation to all accrual periods falling, whether in whole or in part, within such year of assessment in respect of such instrument; or

(b)	an amount determined in accordance with an alternative method in relation to such year of assessment in respect of such instrument;

which must be deducted from the income of that person derived from carrying on any trade, if that amount is incurred in the production of the income;

[Section 24J(2) substituted by section 24(1)(h) of the Revenue Laws Amendment Act, 2004 (Act No. 32 of 2004) - effective 1 January 2005]

(3)

Where any person is the holder in relation to an income instrument during any year of assessment, there shall for the purposes of this Act be deemed to have accrued to that person and must be included in the gross income of that person during that year of assessment, (whether or not that amount constitutes a receipt or accrual of a capital nature), an amount of interest which is equal to—

(a)	the sum of all accrual amounts in relation to all accrual periods falling, whether in part or in whole, within such year of assessment in respect of such income instrument; or

(b)	an amount determined in accordance with an alternative method in relation to such year of assessment in respect of such income instrument.

[Section 24J(3) substituted by section 24(1)(i) of the Revenue Laws Amendment At, 2004 (Act No. 32 of 2004) - effective 1 January 2005]

(3A)

Where any person is the holder of any income instrument which is an instrument as contemplated in paragraph(iii) of the definition of "instrument" the amount by which the sum of all accrual amounts in relation to all periods falling within the period from the date of acquisition (whether by way of issue or transfer, as the case may be) of such income instrument by such person until 13 March 1996, exceeds the sum of all interest received by or accrued to such person during such period had the provisions of this section not been applicable during such period in respect of such income instrument, shall for the purposes of this Act be deemed to have accrued to such person in the year of assessment during which income instrument is transferred by such holder or redeemed (whichever is the earlier): Provided that the provisions of this subsection shall not apply in so far as any interest in relation to such income instrument was assessed to tax in the hands of such person under an assessment raised with a date of assessment before the date of promulgation of this Act.

[Section 24J(3A) inserted by section 14(1)(e) of the Income Tax Act, 1996 (Act No. 36 of 1996)]

(4) Any—

(a)	adjusted gain on transfer or redemption of an instrument calculated in relation to the transfer or redemption, as the case may be, of such instrument by a person during any year of assessment shall for the purposes of this Act be deemed to have accrued to such person in such year of assessment; and

(b)

adjusted loss on transfer or redemption of an instrument calculated in relation to the transfer or redemption, as the case may be, of such instrument by a person during any year of assessment, shall for the purposes of this Act be deemed to have been incurred by such person in such year of assessment.

(4A) Where in the case of any—

(a)	holder of any income instrument any adjusted loss on transfer or redemption of such income instrument which has been deemed to have been incurred by such holder in terms of subsection (4)(b) during any year of assessment, includes an amount in relation to such income instrument representing an—

(i)	accrual amount; or

(ii)	amount determined in accordance with an alternative method,

which amount has been included in the income of the holder during such year of assessment or any previous year of assessment, such amount shall be allowed as a deduction from the income of such holder during such year of assessment; or

(b)	issuer of an instrument any adjusted gain or transfer or redemption which has been deemed to have been accrued to such issuer in terms of subsection (4)(a) during any year of assessment, includes an amount in relation to such instrument representing an—

(i)	accrual amount; or

(ii)	amount determined in accordance with an alternative method,

which amount has been allowed as a deduction from the income of such issuer during such year of assessment or any previous year of assessment, to the extent that such amount is not taken into account in terms of section 19, such amount shall be included in the income of such issuer during such year of assessment.

[Section 24J(4A) substituted by section 54(1)(h) of the Taxation Laws Amendment Act, 2012 (Act No. 22 of 2012)]

(5) Where any amount actually—

(a)

paid by any person in terms of an instrument is to be taken into account in the determination of any accrual amount in relation to that instrument or any other amount determined in accordance with an alternative method in relation to that instrument which accrual amount or other amount is to be dealt with in terms of the provisions of subsection (2), no account shall for the purposes of section 11 be taken of any such amount so actually paid, save by way of the operation of such subsection; or

(b)

received by any person in terms of an income instrument is to be taken into account in the determination of any accrual amount in relation to that income instrument or any other amount determined in accordance with an alternative method in relation to that income instrument which accrual amount or other amount is to be dealt with in terms of the provisions of subsection (3), no account shall for the purposes of the definition of "gross income" in section 1 be taken of any such amount so actually received, save by way of the operation of such subsection.

[Section 24J(5) substituted by section 20 of the Revenue Laws Amendment Act, 2006 (Act No. 20 of 2006)]

(5A)

Any amount which has been deemed to have been incurred by or accrued to a person, as the case may be, in respect of an instrument in terms of the provisions of this section, shall for the purposes of this Act not be deducted from or included in, as the case may be, the income of such person more than once by reason of the application of this section.

[Section 24J(5A) inserted by section 14(1)(g) of the Income Tax Act, 1996 (Act No. 36 of 1996]

(6)

Where the term of an instrument issued on or before 15 March 1995 is extended or the terms or conditions of such instrument are materially varied after the said date, such instrument shall be deemed to have been issued after the said date and the provisions of this section shall apply to both the issuer and the holder in relation to such instrument as from the date of such extension or material variation.

(7) Where there is more than one—

(a)

holder in relation to an income instrument and any accrual amount in relation to an accrual period with regard to any one of the holders in relation to such income instrument is to be determined, such accrual amount shall be so determined without taking into account any consideration or any amount or amounts paid or payable or received or receivable by any other holder in terms of such income instrument; and

(b)

issuer in relation to an instrument and any accrual amount in relation to an accrual period with regard to any one of the issuers in relation to such instrument is to be determined, such accrual amount shall be so determined without taking into account any consideration or any amount or amounts paid or payable or received or receivable by any other issuer in terms of such instrument.

(8)	Where in relation to an instrument any person is entitled to any interest in terms of such instrument and also liable to pay any interest in terms of such instrument, such person shall for the purposes of this section—

(a)	where the interest which he is entitled to receive in terms of such instrument exceeds the interest which he is liable to pay in terms of such instrument, be deemed not to be an issuer in relation to such instrument; and

(b)	where the interest which he is liable to pay in terms of such instrument exceeds the interest which he is entitled to receive in terms of such instrument, be deemed not to be a holder in relation to such instrument.

(9)

(a)

Any company whose business comprises the dealing in instruments (including the short selling of instruments), interest rate agreements or option contracts may elect that the provisions of subsections (2) to (8), inclusive, section 24K and section 24L shall not apply to all such instruments, interest rate agreements or option contracts in respect of which it so deals in.

(b)	Any election referred to in paragraph (a) shall—

(i)	be made in writing;

(ii)	be accompanied by a statement setting forth full details of the methodology to be applied by the company to determine the market value as contemplated in paragraph (c) in relation to all instruments, interest rate agreements or option contracts contemplated in paragraph (a);

(iii)

not take effect unless the Commissioner has, subject to such conditions as he may deem necessary, approved—

A)	the methodology to be applied by such company to determine the market value as contemplated in paragraph (c) in respect of such instruments, interest rate agreements or option contracts; and

B)	the manner in which such market value in relation to such instruments, interest rate agreements or option contracts is to be taken into account in the determination of the taxable income of such company during any year of assessment; and

(iv)	subject to the provisions of paragraphs (e) and (f), be binding upon such company in respect of all such instruments, interest rate agreements and option contracts during the year of assessment in which it took effect and every succeeding year of assessment.

(c)

The market value in relation to all instruments, interest rate agreements and option contracts contemplated in paragraph (a) of a company which made an election as contemplated in such paragraph shall be determined in accordance with commercially accepted practice which is applied by such company consistently in respect of all such instruments, interest rate agreements and option contracts for financial reporting purposes to its shareholders.

(d)

Any instrument, interest rate agreement or option contract contemplated in paragraph (a) which as a result of an election made in terms of such paragraph is to be dealt with on a market value basis as contemplated in the aforegoing provisions of this subsection shall (subject to the provisions of paragraphs (e) and ( f )) be so dealt with until the date of redemption or transfer of such instrument, interest rate agreement or option contract.

(e)

Where the Commissioner is satisfied that the approval granted by him in terms of paragraph (b) (iii) was obtained by fraud or in consequence of any misrepresentation or failure to disclose any material fact by the company which made the election in terms of paragraph (a), he shall, if he is satisfied that in the light of the full facts the approval should not have been granted, withdraw such approval as from the date such approval was granted by him.

(f)	Where any company during any year of assessment no longer complies with the provisions of this subsection—

(i)	the approval granted by the Commissioner in terms of paragraph (b) (iii) shall be deemed to have been withdrawn by the Commissioner as from such year of assessment; and

(ii)

an appropriate adjustment shall be made to the taxable income of such company during such year of assessment in relation to all instruments, interest rate agreements or option contracts contemplated in paragraph (a) of the company held and not disposed of or not redeemed by it, as the case may be, as at the end of such year of assessment, having regard to all interest or amounts which would have been deemed to have been incurred by or accrued to such company had the provisions of this subsection not been applicable during all years of assessment before such year of assessment and all amounts which have been included in or deducted from the income of such company during such years of assessment: Provided that the provisions of this paragraph shall not have the effect that an amount be included in or deducted from the income of such company more than once.

(g)	This subsection shall not apply—

(i)	in respect of a company that is a covered person as defined in section 24JB, during any year of assessment ending on or after 1 January 2014; and

[Section 24J(9)(g)(i) substituted by section 41(1)(b) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]

(ii)	in respect of any other company, during any year of assessment commencing on or after 1 April 2014.

(9A)

(a)	Any company that made an election contemplated in subsection (9) and in respect of which the Commissioner granted an approval as contemplated in that subsection is deemed to have—

(i)	disposed of all instruments, interest rate agreements or option contracts contemplated in subsection (9); and

(ii)	reacquired the instruments, interest rate agreements or option contracts,

held and not disposed of at the end of the year of assessment for an amount equal to the market value, as contemplated in subsection (9)(c), on the last day of that year of assessment.

(b)	Paragraph (a) applies—

(i)	in the case of a company that is a covered person as defined in section 24JB, in respect of the year of assessment of that covered person immediately preceding the year of assessment ending on or after 1 January 2014; and

[Section 24J(9A)(b)(i) substituted by section 41(1)(c) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014) - effective 1 January 2014]

(ii)	in the case of any other company, in respect of the year of assessment of the company immediately preceding the year of assessment commencing on or after 1 April 2014.

[Section 24J(9A)(b)(ii) substituted by section 69(1)(f) of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013) - effective 1 April 2014]

(10)	Any reference in this section to any payment made or an amount paid or payable, consideration given or received or any payment received or an amount received or receivable, as the case may be, shall be construed as including a payment or an amount or consideration otherwise than in cash.

(11)	[Section 24J(11) deleted by section 271, read with paragraph 40 of Schedule 1, of the Tax Administration Act, 2011 (Act No. 28 of 2011)]

(12)	This section must not apply to an instrument if—

(a)	the holder of that instrument has, throughout any period during a year of assessment during which that holder holds that instrument, a right to require the redemption of that instrument at any time during that period; and

(b)	that instrument does not provide for the payment of any deferred interest.

Income Tax Act, 1962 (Act No. 58 of 1962)

Chapter II : The Taxes

Part I : Normal Tax

24J. Incurral and accrual of interest

"holder",

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