This Note provides guidance on the application of the proviso to the definition in section 41(1).
Under certain circumstances the corporate rules provide relief from income tax when assets are disposed of between companies forming part of the same “group of companies as defined in section 41(1). Generally these relief measures defer the income tax on income and capital gains until the asset is disposed of to a third party or until a de-grouping occurs.
The Act contains two definitions of a “group of companies, namely, a wider definition in section 1(1) and a narrower definition in section 41(1). The narrower definition generally applies for the purposes of the corporate rules but is also used elsewhere in the Act.
The definition in section 41(1) starts with the definition in section 1(1) and then proceeds to exclude certain companies and shares by way of a proviso.
This Note is concerned with the application and effect of that proviso.