the Supreme Court of Appeal held that royalty payments are tax deductible in terms of s 11(a) of the Income Tax Act. It accordingly upheld an appeal by BP Southern Africa (Pty) Ltd against a judgment of the Income Tax Special Court. During 1997 BP Southern Africa (Pty) Ltd concluded a written trade mark licence agreement with its parent company BP plc in terms whereof it was granted authorisation to use and display the licensed marks and licensed marketing indicia of the latter against payment of royalties. For the tax years 1997, 1998 and 1999 the royalty fee payments were respectively R 40.190.000, R 45.150.000 and R 42.519.000. BP Southern Africa (Pty) Ltd subsequently claimed those payments as deductions in terms of section 11(a) of the Income Tax Act 58 of 1962 in the determination of its taxable income. The South African Revenue Services disallowed those deductions. BP Southern Africa (Pty) Ltd’s objection to the disallowance was overruled by the Revenue Services and its subsequent appeal to the Income Tax Special Court was dismissed. The Supreme Court of Appeal reasoned that the annual royalty payment procured for BP Southern Africa (Pty) Ltd the use – not ownership – of the intellectual property of its parent company. The recurrent nature of the payment which neither created nor preserved any asset in the hands of BP Southern Africa (Pty) Ltd was to all intents and purposes indistinguishable from recurrent rent paid for the use of another’s property. The Supreme Court of Appeal concluded that the expenditure in issue was so closely linked to the appellant’s income-earning operations during the tax years in question as to constitute revenue expenditure in respect of each of those tax years. The Supreme Court of Appeal accordingly declared those amounts to be deductible under section 11(a) of the Act and directed that South African Revenue Services alter the assessments for each of those tax years accordingly ...