Judgment No. 23/18 Civil Appeal No. SC 145/15 date of acceptance of his application. The gross costs of the ‘voluntary retrenchment’ exercise was US$1 995 402. A further 27 staff members submitted applications in January and February 2010, but this appeal does not relate to them. It is confined to the exercise in respect of the 74. [5] In the return for the tax year ending 31 December 2009, the appellant submitted applications in respect of each of the 74 employees to the respondent for a tax directive. It claimed a deduction for staff retrenchment costs in terms of s 15 (2) (a) of the Act as an expenditure incurred for the purpose of trade and for conducting its business and earning income in that year of assessment. The respondent disallowed the deduction but included it in the amended assessment for the 2010 tax year. [6] The appellant contended that the deduction ought to have been allowed in the year 2009 which is the year in which the expenditure was incurred. Mr de Bourbon submitted that the exercise was a voluntary retirement scheme to which the provisions of s 12C and 12D of the Labour Act did not apply. By accepting the applications of the 74 on or before 31 December 2009, the appellant had incurred an unconditional legal obligation to make payment to the 74. Therefore, the obligation to pay the 74 arose in December 2009 and should be deducted in the assessment year 2009. [7] On behalf of the respondent (“Zimra”), Mr Magwaliba countered that the exercise constituted a retrenchment in terms of the Labour Act. He accepted the legal position that in terms of s 15(2)(a) of the Act, the costs of the exercise were deductible in the year of expenditure, viz, the year in which the expenditure is incurred3 even if paid in a subsequent 3 Caltex Oil (SA) Ltd v Secretary for Inland Revenue 1975 (1) SA 665 (A) at 674. 3