In the context of a tax dispute the court held that the phrases ‘in terms of’ and ‘under’ a contract can have an ordinary or wide meaning of ‘by virtue of’ or ‘in consequence of’, or a narrow meaning requiring a direct and immediate connection between the contract and the money earned under the contract. It depends on the context.

The context was whether the money earned from selling meals to patrons of a restaurant was income ‘in terms of’ the franchise agreement entered into by the restaurant-owning taxpayer.

The court found that the narrow meaning applied requiring a direct and immediate connection between the agreement and the income for the purposes of section 24C(2) of the Income Tax Act 1962. The court refused to adopt the wide meaning of a loose and indirect relationship between the two. Obligations under the contract meant obligations created by the same contract not by the indirectly connected contracts between the restaurant and its patrons.

The case is CSARS v Big G Restaurants (Pty) Ltd.