REPUBLIC OF SOUTH AFRICA
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case number: 404/99
In the matter between:
THE COMMISSIONER FOR THE
SOUTH AFRICAN REVENUE SERVICE
Appellant
and
THE EXECUTOR OF THE ESTATE
OF THE LATE WALDO EARL FRITH
Respondent
CORAM:
HEFER ADCJ, PLEWMAN JA, MPATI, BRAND
and CHETTY AJJA
HEARD:
17 NOVEMBER 2000
DELIVERED:
29 NOVEMBER 2000
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Estate duty - Section 4(q) deduction - Computation.
______________________________________________________________
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JUDGMENT

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PLEWMAN JA:
[1] I have read the judgment of Brand AJA.  Unfortunately I differ from him and
disagree with the conclusion to which he has come for the reasons I now give.  The
facts are set out in Brand AJA’s judgment.
[2] The issue in the appeal is how s 4(q) of the Estate Duty Act 45 of 1955 (the
Act) is to be construed.  The primary rule in construction of statutory provisions is (as
is well established) to ascertain the intention of the legislator and (as is equally well
established) one seeks to achieve this, in the first instance, by giving the words of the
enactment under consideration their ordinary grammatical meaning, unless to do so,
would lead to an absurdity so glaring that the legislature could not have contemplated
it.  Boland Bank Ltd v The Master and Another 1991 (3) SA 387 (A).  Literal
interpretation is thus a firmly established principle.

[3] S 4 of the Act lays down that the “net value of any estate” be determined by
making specified “deductions” from the total value of all property included in the
estate.  Ss 4(q) (one of the class of deductions so prescribed) reads:
“(q)
so much of the value of any property included in the estate which
has not been allowed as a deduction under the foregoing
provisions of this section, as accrues to the surviving spouse of
the deceased: Provided that -
(i)
the deduction allowable under the provisions of this
paragraph shall be reduced by so much of any amount as
the surviving spouse is required in terms of the will of the
deceased to dispose of to any other person or trust;
(ii)
no deduction shall be allowed under the provisions of this
paragraph in respect of any property which accrues to a
trust established by the deceased for the benefit of the
surviving spouse, if the trustee of such trust has a discretion
to allocate such property or any income therefrom to any
person other than the surviving spouse.”
To follow the arguments dealt with in the appeal attention must be focussed on the
word “accrues”.  (It is also found in ss 4(g) and (h).)

[4] A word of warning must be sounded.  The Act is a fiscal statute.  It has in the
forty five years of its existence been the subject of thirty seven Amending Acts. It
takes its present form as a result of amending Acts - being s 5(1)(b) of Act 81 of 1985
and the substitution of the present wording by s 6(1)(c) of Act 86 of 1987.  Fiscal
statutes pose their own problems.
[5] “Accrue” is a familiar word often encountered in our law - particularly, in the
law of succession and in taxation legislation where it is usually encountered in a
disjunctive sense in phrases such as “receipts or accruals”.  The Shorter Oxford
English Dictionary gives (in the sense appropriate to the context in which we find the
word) the meaning “to come as an accession or advantage”.
[6] In our jurisprudence the word is, in general, used in contexts which require that
it be given the meaning “entitled to” in contrast to a meaning such as “actually receive
or received”.  This too seems to be the sense in which the word is, for example, used

in America.  Black’s Law Dictionary (1979 Ed) gives numerous examples illustrating
this.  Some of the examples are - “alimony which is due but not yet paid”; “expenses
incurred but not yet paid”; “interest which has been earned but is not yet paid or
payable”.  The primary meaning of the word accrue would thus seem to me to involve
a nuance which contrasts it with a meaning such as “has been received” or “will be
actually received”.
[7] This however does not, of itself, resolve the conflict which has arisen in this
appeal.  One could well use the word accrue in a setting such as “the value of property
which will accrue to the surviving spouse in terms of the executor’s final liquidation
and distribution account”.  In this example the word would still connote “entitled to”
rather than “received” but it would establish clearly the stage in the process at which
the value in question must be determined.
[8] The reference in paragraph 11 of Brand AJA’s judgment to the executor’s

contention that the deduction “includes estate duty” while the Commissioner’s
contention is that it “excludes” estate duty tends to obscure the real question which
must be asked.  This, in my view, is what the value is which is to be taken into
account.  This necessarily, given the nature of the conflicting views, involves asking
at what point in the process dealt with in the Act is the relevant value to be determined.
[9] S (4)(q) does not contain phraseology such as is used in my example in
paragraph 7 hereof.  Had the legislature intended the meaning found in that example it
could quite easily have so said in express terms.  At the very least then the word
accrue would be uncertain or ambiguous.
[10] The practical effect of interpreting the section as appellant would have it is an
increase in the amount of duty payable.  With fiscal provisions where a doubt arises,
the construction against the larger imposition is to be adopted.  Borcherds, NO v
Rhodesia Chrome and Asbestos Co Ltd 1930 AD 112 at 119; Commissioner for

Inland Revenue v McNeil 1959 (1) SA 481 (A) at 489 B-D.
[11] But I do not view the matter as being in doubt.  The practical implications
referred to in paragraph 14 of Brand AJA’s judgment (which he refers to as “a certain
awkwardness”) to me indicates a result which the legislature could not have intended.
I am aware that situations may occur where a measure of “back calculation” is called
for.  An example may arise from the provisions of s 7(3)(a) of the Value-added Tax
Act No 89 of 1991 where the price is or is deemed to include VAT.  But where in the
present statute is there any suggestion that one must engage in arithmetic or algebraic
gymnastics when applying it?
[12] The determination of the dutiable amount in the Act is to follow a process
whereby one is able to establish the charge which is to be raised in the executor’s
liquidation and distribution account.  I find nothing in the Act to suggest that the very
charge one is seeking to determine is to be used to determine itself.  There is

furthermore nothing in s (4)(q) to suggest that it is concerned with what the surviving
spouse will ultimately receive from the executor.  What it is concerned with is the
determination of a charge which must be made against the estate and therefore
included as a charge in the account, which account will establish the sum (if it is a
monetary amount) which the surviving spouse will receive.  The focus is on what the
surviving spouse is entitled to from the will, not her ultimate cash receipt.  That this is
so is in my view supported by the wording of the section which concerns itself with
“the value of any property included in the estate” (and not with the surviving spouse).
[13] The inherent circularity of the procedure Brand AJA’s judgment suggests would
seem to me to be totally unnecessary if the relatively simple scheme of the Act is
followed.  The scheme of the Act is that estate duty is to be charged on a dutiable
amount “calculated in accordance with the provisions of the Act” (s 2(2)).  What
constitutes an estate for this purpose is expressly set out (s 3).  The “net value” of the

estate is determined by making the specified deductions (which do not, in terms,
include deductions of notional amounts) (s 4).  Thereafter an additional abatement of
R1 million is made (s 4A).  The appellant’s contention thus would seem to rest on the
introduction into the process of computation of a deduction which is not provided for
in the Act.
[14] In Brand AJA’s judgment a paragraph is quoted from Meyerowitz,
Administration of Estates, Estate Duty and Capital Transfer Tax 6th Ed.  It seems
to me that regard should also be had to another and (simply for convenience) I will
then set out both.  They read as follows:

“27.1    The duty is imposed on the dutiable amount.  The dutiable
amount is determined by a series of steps.  The start is the gross value
of the estate, that is the total values of all the property which by definition
must be included in the estate.  From this gross value there must be
deducted all the amounts and values allowed by the Act, the balance
being termed the net value.  From this net value there is deductible an
abatement, currently R1 million, the balance being the dutiable amount on

which the duty is calculated.”
“30.5    In previous editions I exemplified the practice whereby, in the
case of allowable deductions in respect of the residue or the usufruct of
the residue accruing to a surviving spouse or charity, the ‘net amount’ is
determined by taking into account the estate duty as liability which
reduces the allowable deduction and in consequence increases the ‘net
amount’.  This practice involves a duty on duty situation.  Where the rate
of duty is 25% the calculation of duty on duty results in an amount equal
to 33,33% of the ‘net amount’ before taking the duty into account.
It is my view that there is no warrant in the Estate Duty Act for this
practice.  Section 4 of the Act sets out the allowable deductions in
determining the ‘net amount’ and it is this ‘net amount’ on which duty is
imposed.  It is fallacious to determine the net amount on which duty is
payable and then bring in the duty so calculated as liability (not provided
for) in order to redetermine the ‘net amount’.”
The fact that the author at an earlier time held (for whatever reason) a different view
seems to me irrelevant.
[15] Brand AJA finds support for the appellant’s construction in the cases of Estate
Smith v Estate Follet 1942 AD 364 and Greenberg and Others v Estate Greenberg

1955 (3) SA 361 (A).  The first mentioned case held that a fiduciary burdened with a
fidei commissum residui cannot dispose of any property to his wife by a donation
uncompleted by delivery at the time of his death.  The case involved somewhat
complicated provisions of two wills and a deed of donation.  The question in issue
was the power of a fiduciary heir to deal with property bequeathed to him - being
property subject (in itself) to a fidei commissum.  There is a statement (at 383) that
under our system of administration of the estates of deceased persons an heir is in
effect a residuary legatee (and that)
“when we speak of his inheritance we mean either the property
which he is entitled to claim from the executors of the estate of the
deceased or his legal right to claim such property derived from the
will.  The heir in this sense is entitled, after confirmation of the
executor’s account to certain rights of action against the executors
to claim what is due to him whether it be payment of money or
delivery of moveables or transfer of unmovable property”.
In the context this is true.  But how it can be suggested that it, or the analogy

suggested as to the position of the heir, assists in the construction of the statute in
question in this case is not clear.  In the Greenberg case one finds the statement (p
364) that:
“The position under our modern system of administering deceased
estates is that when a testator bequeaths property to a legatee the latter
does not acquire the dominium in the property immediately on the death
of the testator but what he does acquire is a vested right to claim from the
testator’s executors at some future date delivery of the legacy, i.e. after
confirmation of the liquidation and distribution account in the estate of
the testator.”
I am equally unable to discern from this why what “accrues” to a surviving spouse
would for the purposes of s 4(q) be considered to be some after-duty figure.  The
section, in my view, is concerned with property derived from the will and neither
authority can assist when construing s 4(q).
[16] The submission of counsel that the tax authorities have consistently over time
construed and applied s 4(q) in the manner contended for by appellant is accepted in

the judgment of Brand AJA as providing an aid to the construction of the section.
While this principle has been recognised in our courts (see R v Detody 1926 AD 198)
it is only invoked in cases where there is ambiguity in an enactment.  I find none here.
In any event, however, I would hesitate to invoke the principle.  Thirty seven amending
acts in forty five years is suggestive of ad hoc fiscal re-arrangement and not a
consistent legislative approach.
[17] The order I make is:
The appeal is dismissed with costs.
C PLEWMAN JA
CONCUR:
HEFER ADCJ)
MPATI AJA)

BRAND AJA
[1] This is an appeal from the Transvaal Income Tax Special Court.   It concerns
the calculation of estate duty payable in terms of  the Estate Duty Act 45 of 1955 (“the
Act”).   The issue relates to the determination of the amount  of a deduction under
s 4(q) of the Act.
[2] According to s 2  - read with the provisions of the first schedule - estate duty
is charged at the rate of 25% of the dutiable amount of the estate.   The calculation
of the dutiable amount involves a series of steps.   The starting point is to establish the
gross value of the estate,  i.e. the aggregate of the values of all the property of the
deceased.    Section 3 lays down what constitutes the property of the deceased
whereas s 5 stipulates how such property is to be valued.    The next step is to
determine the net value of the estate by subtracting the amounts allowed as
deductions under s 4.   The final step is to deduct from the net value, the abatement
of R1 million provided for in s 4A .   The balance then constitutes the dutiable
amount upon which estate duty is calculated.   (see Meyerowitz: Administration of
Estates, Estate Duty and Capital Transfer Tax, 6th Ed, para 27.1)
[3] Section 4 provides a list of various deductions.   These include all the liabilities
of the deceased  and  the costs pertaining to the administration of his estate.  The
provision in issue in this case is s 4(q) which section, insofar as it is relevant hereto,
reads as follows:
“4.
Net value of the estate.
The net value of the estate shall be determined by making the following deductions
from the total value of all property included therein in accordance with section 3, that
is to say:
(q)
so much of the value of any property included in the estate which has
not been allowed as a deduction under the foregoing provisions of this
section , as accrues to the surviving spouse of the deceased:
Provided that ...

[4] Section 4(h) is also of some relevance.   It provides for the deduction of
the “value of any property included in the estate ... which accrued or accrues” to
certain institutions, including charitable institutions.
[5] The background facts are not in dispute.   The deceased,  Mr Waldo Earl
Frith, died on 25 February 1997.   He was survived by his spouse, three children
and seven grandchildren.   In terms of his will he bequeathed R750 000,00 to each
of his children, R100 000 to each of his grandchildren, R25 000 to a charity and
R14 000 to his erstwhile employees.   The specific bequests in the will thus
amounted to R2 989 000,00.  In terms of clause 3 of the will the deceased
bequeathed the “entire residue” of his estate to his wife.
[6] From the outset, it was common cause between appellant (“the
commissioner”) and respondent (“the executor”) that the bequest to the surviving
spouse of the deceased qualifies as a deduction in terms of s 4(q).   The dispute
relates to the quantification of this deduction.
[7] The total value of the property in the estate was determined at
R13 560 363,33.  The total claims against the estate and costs of administration
amounted to R280 411,90.
[8] If the liabilities and legacies are deducted from the gross value of the estate,
the balance is R10 290 951,00.   The executor’s contention is that this is the
amount to be deducted under the section and that the dutiable amount is therefore
to be calculated as follows:
Total assets
R13 560 363,00
Less liabilities
280 412,00

R13 279 951,00
Less deduction of
legacy to charity in terms
of s 4(h)
25 000,00
Less deduction of bequest to
surviving spouse in terms of
s 4(q)
10 290 951,00
R2 964 000,00
Less abatement in terms of
s 4A of the Act
1 000 000,00
R1 964 000,00
[9] Since s 2 of the Act, read with the first schedule thereto, provides for estate
duty to be calculated at 25% of the dutiable amount, the executor’s contention
is that the amount of estate duty payable is R491 000,00.
[10] The contention by the commissioner, on the other hand, is that the amount
to be deducted under s 4(q) is not R10 290 951,00 but R9 636 284,00 (i e R654

666 less); that the dutiable amount is therefore R2 618 666,00 and the estate duty
payable equal to 25% thereof, that is R654 666,00.
[11] The difference between the dutiable amounts contended for by the parties
respectively is therefore equal to the estate duty payable on the commissioner’s
calculation.   This directs the focus to the very essence of the dispute between the
parties.   According to the executor, the amount to be deducted under s 4(q)
includes estate duty.   The commissioner, on the other hand, contends that estate
duty is to be excluded from the deduction under s 4(q).
[12] The commissioner issued an estate duty assessment  based  on  his view.
In his letter of objection the executor failed to persuade the commissioner to
change his mind.    Consequently, the executor lodged an appeal to the Special
Court.
[13] At the hearing before the Special Court, the executor called no witnesses.

His case was based on the facts which were common cause.   On behalf of the
commissioner one witness was called, namely Mrs Marx.   She is employed in the
head office of  the commissioner in the section  involved with the assessment of
estate duty.
[14] What emerges from Mrs Marx’s evidence is that the acceptance of the
commissioner’s view that the s 4(q) deduction excludes estate duty requires the
estate duty to be calculated before the amount of the deduction can be
determined.   That obviously creates a certain awkwardness.   According to the
scheme of the Act, deductions are determined for purposes of assessing estate
duty and not the other way round.   Moreover, logic suggests that if the estate
duty is to be determined for purposes of calculating the deduction under s 4(q)
which in turn is a prerequisite for determining the estate duty itself, the result may
very well be something of a  merry-go-round.   From Mrs Marx’s evidence it

appears, however, that in practice the problem is resolved by means of an
algebraic formula.
[15] It also appears from Mrs Marx’s evidence that she is not the inventor or
author of the formula.   For example, an exposition and explanation of the formula
is to be found in the first edition of Meyerowitz, Estate Duty and Donation Tax,
111 et seq which was published in 1955 (see also NJ Wiechers and I Vorster,
Administration of Estates,  9 - 28).
[16] In the court a quo the correctness of the formula applied by Mrs Marx was
not disputed.   Likewise, it was common cause between counsel in this Court that
if the commissioner’s approach is to be accepted as correct in principle, the
formula applied by Mrs Marx provides the proper solution to the apparent merry-
go-round.  Since neither the formula itself nor its application to the facts of this
matter are in dispute, it is unnecessary to deal with it in any detail.   Suffice it to

state  the essential principles underlying  the formula.   The starting point of the
formula is based on the supposition that the whole of the residue, after deduction
of the liabilities and legacies, is deductible under s 4(q).   On the basis of this
supposition a “notional dutiable amount” and “notional estate duty” is then
calculated.  The amount  of this notional estate duty is then subtracted from the
residue.   As a consequence the  s 4(q) deduction is decreased with the further
consequence that the dutiable amount and the estate duty calculated thereon are
increased.   The next step in the formula is to deduct the estate duty so increased
from the residue.   This  results in a further increase in the estate duty.   The same
process is repeated until the stage is reached where the difference between the
amount of estate duty arrived at before and after the deduction of the increased
duty is so negligible that it can be ignored.   On the facts of the present matter, for
example, the amount of estate duty arrived at in the penultimate calculation was

R654 666,04.   When this amount was subtracted from the s 4(q) deduction and
consequently added to the dutiable amount  the estate duty calculated on the thus
increased dutiable amount was  R654 666,51, i e  less than one Rand.   That is
where, according to the formula, the process of repeated calculations was
terminated.
[17] In cross examination, Mrs Marx conceded that the algebraic formula
applied by her is not specifically provided for in the Act.   Nevertheless, she
stated, it has been applied consistently by the commissioner since before the
commencement  of  the present Act when giving effect to similar provisions in the
Death Duties Act 29 of 1922.   In this regard it was pointed out by Mrs Marx that,
although s 4(q) of the Act was only introduced by Act 81 of 1985, the same
problem occurred and still occurs in determining the amount of a deduction under
s 4(h) when the residue of an estate is bequeathed to a charity.   Unlike s 4(q), s

4(h) was incorporated in the Act from its inception and in fact echoes the
provision of s 4(a) (viii) of the 1922 Act.
[18] Mrs Marx’s evidence in this regard is borne out by a reference to the  the
author Meyerowitz’s commentary  on the 1922 Act in The Law and Practice of
Administration of Estates, 2 Ed (1954) 324.
[19] Subsequent to the enactment of the present Act in 1955, Meyerowitz
persisted in his exposition and approval of the commissioner’s practice to exclude
estate duty from the deduction under s 4(h)  where the residue of the estate had
been bequeathed to charity.   After the incorporation of s 4(q) in 1985,
Meyerowitz also subscribed to the commissioner’s method of determining
deductions under this section where the residue of the estate had been bequeathed
to the surviving spouse.  (See e.g. Meyerowitz, Estate Duty and Donation Tax,
1 Ed (1955) 115 et seq; 2 Ed (1962) 133 et seq; 6 Ed (loose leaf) prior to 1998,

para 30.32 et seq.)
[20] In 1998 Meyerowitz changed his mind, as appears from the following
statement in the current edition of his book, para 30.5:
“In previous editions I exemplified the practice whereby, in the case of allowable
deductions in respect of the residue ... accruing to a surviving spouse or charity, the
‘net amount’ is determined by taking into account the estate duty as a liability which
reduces the allowable deduction and in consequence increases the net amount.   This
practice involves a duty on duty situation.   Where the rate of duty is 25% the
calculation of duty on duty results in an amount equal to 33,33% of the ‘net amount’
before taking the duty into account.
In my view  there is no warrant in the Estate Duty Act for this practice.   Section 4 of
the Act sets out the allowable deductions in determining the ‘net amount’ and it is this
‘net amount’ on which duty is imposed.   It is fallacious to determine the net amount
on which duty is payable and then bring in the duty so calculated as a liability (not
provided for in section 4) in order to re-determine the net amount.”
[21] On behalf of the executor the only direct authority relied upon in the court
a quo as well as in this Court is the aforegoing statement by Meyerowitz.   In
holding for the executor, the court a quo did not, however, rely on this statement.
[22] The starting point of the court’s reasoning  was a concession by Mrs Marx

that if the surviving spouse was the sole beneficiary under the will, the whole
bequest would have been deductable under s 4(q) with the result that no estate
duty would be payable.   On the basis of this concession the Special court
proceeded  to formulate its reasoning as follows:
“1.
Had the will provided that the total estate devolves upon the surviving spouse
no estate duty would have been payable (Section 4(q) )
2.
Estate duty is payable solely because of the legacies (Mrs Marx agreed with
this.)
3.
The amount of the legacies, the cause of the liability to pay estate duty
amounts to the sum of R2 989 000 (common cause)
4.
From this amount two deductions must be made:
4.1
R25 000 in terms of section 4(h) ...
4.2
R1 million in terms of section 4(A)
5.
The balance which constitutes  the amount upon which estate duty is payable
is thus the sum of R1 964 000,00.
6.
The duty payable on the sum of R1 964 000,00 (25%) is R491 000
For purposes of this case the foregoing is the only manner in which the provisions of
the Act can and should be applied.   Any calculation, other than that set out above, is
unjustified and wrong.”
[23] Though the reasoning of the court a quo is attractive in its simplicity and
logical progression,  I find it lacking in one fundamental respect.   By  calculating

estate duty not on the dutiable amount properly calculated, but simply on bequests
which are undoubtedly not deductable in terms of s 4, it effectively  ignores the
provisions of s 4(q).   Since the outcome of the whole case depends on an
interpretation of s 4(q), this section cannot be ignored.
[24] In this Court it was common cause that the ultimate question to be  decided
is whether that  portion of the residue which will go to the fiscus  in the form of
estate duty can be said to be included in “the value of the property” which
“accrues to the surviving spouse of the deceased” as contemplated in s 4(q).
[25] The first step in the argument on behalf of the commissioner was to give a
meaning to the term “accrue”.   Although this term is not defined in the Act and
has not as yet been judicially interpreted for purposes of the Act, counsel for the
commissioner referred to authorities in which this term had been interpreted,
within the context of the definition of “gross income” in section 1 of the Income

Tax Act, 1962 (Act 58 of 1962), to mean “to become entitled to” (see eg
Commissioner for Inland Revenue v People’s Stores 1990 (2) SA 353 (A) 362 G
- H).   The further submission on behalf of the commissioner was that the same
meaning should be ascribed to the term “accrue”  in s 4(q) of the Act.
[26] The next step in the argument on behalf of the commissioner focuses the
attention on what an heir, to whom the residue of the estate had been bequeathed,
can be said to become entitled to in terms of our law of succession.    This
question, counsel for the Commissioner submitted, was answered by this Court
in Estate Smith v Estate Follett 1942 AD 364.
[27] In the Estate Smith - case, the testatrix, Mrs Follett, bequeathed the residue
of her estate to her son, who donated the rights which accrued to him under the
will of his mother to his wife.  The deed of donation was executed after the death
of  Mrs Follett, but prior to the finalisation of the liquidation and distribution

account in her estate.  One of the questions pertinently considered by Watermeyer
JA (at 382 of the report) related to the nature of the right that was donated, i e the
right that  accrued to the residuary heir.
[28] The learned Judge commenced his answer to this question by explaining the
difference between Roman Law and South African Law in this regard.  In Roman
Law, he stated, the heir was a universal successor to the whole estate of the
deceased person.  His position was more analogous to that of the modern
executor, save that, unlike the executor,  the heir was the dominus  of the estate.
Watermeyer JA then proceeded to express himself as follows (at 383 of the
report)
“The notion of an inheritance as the whole estate of a deceased person, ... no longer
exists in our law.  Under our system of administration of the estates of deceased
persons an heir is in effect a residuary legatee ....   In the present case, at the time
when the deed of donation was executed, the liquidation and distribution account in the
estate of Mrs Follett had not yet been confirmed and Smith’s right to claim payment
or delivery or transfer of his inheritance, though vested, was not yet enforceable by

action.   Clearly what had then accrued to Smith was not the ownership of specific
assets but the right to claim from the executors of Mrs Follett’s estate at some future
time after confirmation of the liquidation and distribution account satisfaction of his
claim under that account.”
[29] Counsel for the commissioner also relied on the judgment of Centlivres CJ
in Greenberg and Others v Estate Greenberg 1955 (3) SA 361 (A) 364,  where
it was decided that the principles enunciated in Estate Smith v Estate Follett
(supra) with reference to residuary heirs (and confirmed  in Commissioner for
Inland Revenue v Estate Crewe and Another 1943 AD 656 at 669 and 692), also
apply to legatees.
[30] In De Leef Family Trust and Others v Commissioner for Inland Revenue
1993 (3) SA 345 (A) the judgments in Estate Smith (supra) and Estate Greenberg
(supra) were again confirmed.   At 358 E - G of the report Joubert ACJ, however,
added the following rider:

“[A]lthough these judgments speak of ‘confirmation’ of estate accounts by the Master
no provision is made for confirmation, as such, in the Administration of Estates Act, 66
of 1965 ... It is suggested that ‘confirmation’ in this context should be taken as a
reference to the fact that the accounts had lain for inspection, without objection, for the
statutory period”
[See also s 35, and particularly s 35 (12), of Act 66 of 1965]
[31] In the light of these authorities, counsel for the commissioner submitted,
the question is whether it can be said that that portion of the residue that must go
to the fiscus in the form of estate duty, can be said to accrue to the surviving
spouse in the sense that she can claim payment of this amount from the executor
in terms of the liquidation and distribution account.   This question, counsel
submitted,  must be answered in the negative.   Under ss 12 and 19 of the Act,
estate duty is to be paid by the executor out of the assets of the estate.   The
amount payable as estate duty can therefore never be allocated to the surviving
spouse in terms of the liquidation and distribution account and she is not entitled

to claim this amount from the executor.
[32] The counter-submission on behalf of the executor  was that, on a proper
interpretation of s 4(q), the residue which “accrues to the surviving spouse” in
terms of the will includes the estate duty to be paid by the executor.  In support
of this submission various arguments were raised.   I propose to deal with these
arguments separately.
[33] His first argument was based on the premise that all the assets in the estate
must accrue to someone.  Since the surviving spouse is the residuary  heir, so the
argument went,  she is entitled  to everything that does not accrue to someone
else.   I think the answer to this argument is that the very premise on which it is
based is in conflict with the  line of authority that I have referred to.  In the light
of these authorities it is simply not true to say that all the assets in a deceased
estate must accrue to someone.    As pointed out by Centlivres CJ in Greenberg

v Estate Greenberg (supra) at 364 H the mere fact that a specific asset or a
specific sum of money is bequeathed to a legatee in terms of a will does not mean
that the legatee becomes entitled to that sum of money or that the asset accrues
to the legatee.   If the asset has to be sold in order to meet the liabilities of the
estate, or if part of the sum of money is utilised for that purpose, all that will
accrue to the legatee is the balance of the sum of money or the proceeds of the
asset.   Since in our law an heir is a residuary  legatee, the same principle must
apply to him (or her).   The mere fact that all the remaining assets are bequeathed
to him in terms of the will does not mean that all the remaining assets accrue to
him. What accrues to the residuary heir is the right to claim from the executor of
the estate, after finalisation of the liquidation and distribution account, those
specific assets or that some of money allocated to him in terms of the account,
after provision has been made for payment of the liabilities of the estate, including

estate duty.
[34] Counsel for the executor conceded, at least by implication, that the
argument under consideration is in conflict with the line of authorities that I have
referred to.   His answer was that these judicial pronouncements regarding the
rights of heirs and legatees must be confined to the context of those cases.   I do
not agree.   These judgments are widely accepted as laying down principles of
general application [see e g Corbett, Hahlo, Hofmeyr and Khan, The Law of
Succession in South Africa, p 10 et seq and Meyerowitz, op cit, par 18.12.]
[35] The second argument advanced by the executor’s counsel is based  on
what counsel suggested as an analogy from the application of the Income Tax Act
1962 (Act 58 of 1962).   In terms of the Fourth Schedule to the Income Tax Act,
counsel pointed out, the employer is obliged to deduct income tax from the
employee’s salary.   Nevertheless, counsel submitted, it has never been suggested

that the tax so deducted must be excluded  from that which “accrues” to him (or
her) as part of his “gross income” within the meaning of the definition of that term
in s 1 of that Act.   By the same token, counsel submitted that there is no basis for
excluding the amount earmarked for estate duty from the residue which accrues
to the surviving spouse within the meaning of s 4(q).
[36] The analogy is not an appropriate one.  In the present context the scheme
of the Income Tax Act is materially different from the scheme of the Act under
consideration.    The essential difference  is that according to the scheme of the
Income Tax Act, the employee is liable to pay income tax on the income which
accrues to him, i e on his whole salary including the amount which is subsequently
to be paid by him as tax.   In terms of the Fourth Schedule, the employer is
obliged to deduct such income tax and to pay it over on behalf of the employee.
That does not make  the employer liable for the income tax of the employee, it

remains the liability of the employee.   According to the Estate Duty Act, the
liability to pay estate duty is imposed on the executor, not on the heir.   The
executor does not pay estate duty on behalf of the heir. He (or she) does so in
compliance with his (or her) own obligation and the heir never becomes entitled
to claim the amount utilised by the executor for that purpose.
[37] The third argument on behalf of the executor was that the formula applied
by the commissioner for calculating estate duty in order to determine the s 4(q)
deduction (which formula involves inter alia the calculation of a “notional
dutiable amount” and “national estate duty”) is not prescribed by the Act and that
this elaborate process could not have been intended  by the legislature to form
part of the  relatively simple  scheme of the Act.
[38] Although it is true that the formula applied by the commissioner is not
specifically prescribed by the Act, the Act must not be read in vacuo.   It must be

read against the background of relevant  legal principles which are to be found,
inter alia, in the common law of succession and the provisions of the
Administration of Estates Act 66 of 1965.
[39] If it is established in accordance with these relevant legal principles that the
amount which accrues to the surviving spouse within the meaning of s 4(q) does
not include estate duty, the mere fact that no formula is specifically prescribed for
determining the estate duty to be subtracted , can not derogate from the true
meaning of the section.   The fact that the underlying mathematical justification for
the formula may be difficult to understand for laymen in the field of mathematics
is likewise  of no consequence.   The statement that a relatively simple scheme
implies only simple formulae in its  application, is a non sequitur.   It would have
been different if it transpired  that there was no mathematical formula available to
calculate the estate duty at the stage  when the s 4(q) deduction has to be

determined.   In such event the conclusion would have been justified that the
legislature could not have intended a calculation which was a mathematical
impossibility.   However, that problem does not arise in this case.   On the
contrary, the formula applied by the commissioner has been applied for over
eighty years and it was pertinently conceded  on behalf of the executor that the
correctness of the formula applied by the commissioner is not in dispute.
Moreover, in the light of this concession, it was, in my view  not open for the
executor’s counsel to criticise concepts such as “a notional dutiable amount” and
“notional estate duty” which are integral parts of a formula, the correctness of
which is not disputed.
[40] This bring me to the final argument on behalf of the executor which is based
on the view expressed in  Meyerowitz op cit 30.5 quoted in paragraph [20] above.
According to this view the commissioner’s approach cannot be accepted

because it involves a “duty on duty situation” with the result that the rate of duty
is increased from 25% to 33, 33% of the “net amount”.
[41] I doubt whether it is correct to speak of a “duty on duty situation” where
the exclusion of estate duty from the amount deducted under s 4(q) gives rise to
an increase in the duty eventually assessed.   I also have difficulty with the
statement that the rate of duty is increased from 25% to 33, 33% of the net
amount.   The rate remains 25% of the “net amount”.   The question is how this
“net amount” is to be calculated.
[42] However, be that as it may, if the commissioner’s approach is supported
by a proper interpretation of s 4(q) the mere fact that the result of this approach
may be described as a “duty on duty situation” is of no consequence.
[43] In all the circumstances I hold the view that the commissioner’s approach
is indeed supported by a proper interpretation of the provisions of s 4(q).   It is

clear, in my view, that the word “accrues to” in the section must be understood
to mean “entitled to”.   According to the established principles of our law of
succession a residuary heir is only entitled to claim, that part of the residue which
is allocated to the heir in the liquidation and distribution account.   Thus
understood, it is clear that the amount to be paid as estate duty cannot be said to
accrue to the heir.
[44] Upon my understanding of s 4(q) its provisions cannot be said to be
ambiguous.   However, even if I were to find these provisions ambiguous I would
still come  to the same conclusion  regarding the interpretation of the section for
the reasons that follow:
[45] As I have indicated, it appears that the concept of a deduction being
constituted by that which “accrues to” an heir or legatee was incorporated not
only in s 4 (h) of the present Act since 1955, but also in s 4(a) (viii) of the Death

Duties Act 29 of 1922, which is the precursor to s 4(h).   From the evidence of
Mrs Marx it appears that the commissioner’s practice in relation  to s 4(h) and its
precursor in those instances where a charity was nominated as the residuary heir,
had been consistently applied  since 1922, to exclude the estate duty from the
residue for purposes of  the deduction under those sections.  Not only does this
evidence of Mrs Marx stand uncontroverted, it is borne out by textbook writers
on the subject. (See paragraphs 18 and 19 above)
[46] In The Commissioners for Special Purposes of the Income Tax v Pemsel
[1891] AC 532 [HL] 591 it was recognised by the House of Lords - per Lord
Macnaghten  - that when tax legislation follows a continuous practice in the
department  responsible for it’s administration, repeating the very words on which
the practice was founded, it is fair to infer that the legislature in enacting the statute
intended those words to be constructed in the manner understood by the

department.   This approach has been accepted as  applicable in South Africa by
Greenberg J in Randfontein Estates Gold Mining v Minister of Finance 1928
WLD 77 at 83 and 84. (See also R v Lloyd 1920 AD 474 at 475 and “Practice as
an Element in the Interpretation of Taxation Legislation”,   Taxpayer (1958) p
4 - 6).   I am in respectful  agreement with this approach.   Of course, the practice
of the department cannot run counter to the language used by the legislature and
regard to continuous previous practice will only be permissible when the
provisions to be interpreted are ambiguous.   With these qualifications I find it a
fair inference that the legislature intended the practice adopted by the department
responsible for the administration of the legislative provisions over many years to
be continued when the legislature re-enacts the provision which forms the basis
of the longstanding  practice.
[47] Therefore, on the assumption that the wording of s 4(q) is ambiguous, I

think it is legitimate to infer that, when this section was introduced  in 1985, the
legislature intended it to be applied in accordance with a practice founded on
almost identical provisions in previous legislation and followed by the
commissioner for more than sixty years at that time.
[48] For these reasons I would uphold the appeal and make the following order:
(a)
the appeal is allowed with costs, including the costs occasioned  by
the employment of two counsel.
(b)
The order of the court a quo is set aside and altered to read:
“The appeal is dismissed with costs”
_________________
BRAND AJA
CONCURRED:
CHETTY   AJA