If only all judgments were formulated with the elegant reasoning and perspicacity of the judgment delivered by Rogers J in the Western Cape Division of the High Court in Kluh Investments (Pty) Ltd v Commissioner for the South African Revenue Service (case number A48/2014, as yet unreported) on 9 September 2014. The appeal was against the dismissal of an appeal brought in the tax court against an additional assessment levied by the South African Revenue Service (SARS) in respect of the 2004 – year of assessment. SARS added an amount of R110 million to the appellant’s taxable income on the basis that the gross income giving rise to such taxable income had accrued to the appellant during its 2004 year of assessment on disposal of a plantation as contemplated in Paragraph 14 of the First Schedule to the Income Tax Act 58 of 1962 (Act).
Category: Court Cases
Sars wins war on tax dodgers
Author: Babington Maravanyika (IOL) Johannesburg - More than 260 cases of tax evasion were successfully prosecuted by the National Prosecuting Authority during the last financial year. Sars spokeswoman Marika Muller said about 330 tax-related criminal cases were finalised during the 2013/14 financial year, of which 267 were successfully prosecuted.
Section 14 of the Prescription Act, No 56 of 1972 – A life line
It’s no joke, prescription is probably one of the most dreaded expressions in the legal profession, even more so when an attorney has to inform his client that his claim has prescribed. It’s probably the closest we can get to understanding how a medical doctor must feel when walking out into the hospital’s waiting room and having to tell hopeful family members that there was nothing more he could do for his patient.
Liquidation: The effect on leases
Although a tenant’s insolvency does not automatically terminate the lease or confer a right upon a landlord to cancel the lease, a landlord is not left without any remedies where a tenant is in breach of the lease before the tenant is wound-up. A recent judgment of the Supreme Court of Appeal (SCA) in Ellerine Brothers (Pty) Limited (Ellerine) v McCarthy Limited, clarified the legal position.
Search and seizure: the extent of SARS's powers
In order to give effect to the information gathering powers of the South African Revenue Service (SARS), SARS may apply to a magistrate or a judge to issue a search and seizure warrant so as to, unannounced, enter premises where relevant material is being kept, conduct a search of a person’s premises and seize relevant material. Section 59 of the Tax Administration Act, No 28 of 2011 (TAA) provides that in obtaining the search and seizure warrant, SARS must make an ex parte application to a judge, which application must be supported by information supplied under oath or solemn declaration, establishing the facts upon which the application is based.
Expenditure relating to deferred accruals
Background The taxpayer operated a mine. Firstly, it would extract mineral ore from the earth, and secondly, by smelting and other processes, it would extract a concentrate (containing the minerals) from the ore. The taxpayer sold the concentrate to a subsidiary company. In terms of the agreement with the subsidiary, and in respect of the sale of concentrate in any particular month, the purchase price would only be finally determined five months later. Section 24M of the Income Tax Act, No 58 of 1962 (Act) allows a taxpayer to include in its gross income an amount accruing to it in a particular tax year only in the tax year that the amount is finally determined.
The Cape Tax Court interprets the statutory criteria for approval by SARS as a tax-exempt PBO
Author: BDO South Africa The decision of the Cape Town Tax Court in ITC 1872 (2014) 76 SATC 225 brings long-awaited clarity to the interpretation of the statutory criteria that a public benefit organisation (PBO) needs to satisfy in order to qualify for tax exemption in terms of s 10(1)(cN) of the Income Tax Act 58 of 1962, read with the provisions of the Ninth Schedule to the Act.
The case of GB Mining v Commissioner: SARS
Author: Erich Bell (SAIT Technical) This case stems from disallowed and partially disallowed objections raised against revised assessments for the 2003-2006 tax years of the appellant, GB Mining, where the matter went on appeal through the Pretoria Tax Court which dismissed the appeal except for certain management fees which do not form part of the appeal to the SCA. This case clearly highlights the importance of supporting information submitted with a return and the burden of proof on the taxpayer when disputing an assessment.
The Supreme Court of Appeal admonishes the South African Revenue Service
Author: Beric Croome Under the provisions of the Tax Administration Act, the Commissioner: South African Revenue Service (‘SARS’) is entitled to request that a taxpayer submits relevant material that SARS requires in terms of section 46 of the Tax Administration Act No. 28 of 2011 (‘TAA’). Section 1 of the TAA in turn defines ‘relevant material’ as meaning:
Legal professional privilege
On 17 March 2014 judgment was handed down in the Western Cape High Court in the case of A Company and two others v Commissioner for the South African Revenue Service (case no 16360/2013 – as yet unreported). The facts were briefly as follows: The applicants were three companies in a group of companies. In the course of conducting an audit of the applicants’ tax affairs, the South African Revenue Service (SARS) directed a request for relevant material at the applicants in terms of section 46 of the Tax Administration Act, No 28 of 2011(the TAA).