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S.Africa: Recent cases relevant to tax issues – summarised

Public Protector v South African Reserve Bank (CCT107/18) [2019] ZACC 29; 2019 (9) BCLR 1113 (CC) (22 July 2019)

The issues were whether:

(a) the test of gross negligence or bad faith was relied on;

(b) the legal requirements for awarding personal costs against a representative litigant were met;

(c) correct legal principles for awarding costs on an attorney and client scale were relied on and complied with; and

(d) there is any basis for interfering with the costs order.

The court discussed the test for personal costs orders against representative litigants. Furthermore, important phrases such as the test for gross negligence and bad faith was also discussed.

We can use this when we try to make out an argument for punitive cost order against government officials.

Herbert N.O. and Others v Senqu Municipality and Others (CCT 308/18) [2019] ZACC 31 (22 August 2019)

The court had to confirm the High Court’s declaration of invalidity of Section 1 of the Land Affairs General Amendment Act and Section 25A of the Upgrading of Land Tenure Act.

In its judgment the court had to interpret the provisions and determine what they mean. Once this was done, it had to measure the provisions against the relevant clauses of the Constitution.

Although this case is not applicable to PAJA or Tax Law, we refer to it whenever we would like to challenge the validity and constitutionality of legislation, especially certain provisions of the TAA.  

President of the Republic of South Africa v Democratic Alliance and Others (CCT159/18) [2019] ZACC 35 (18 September 2019)

This case is interesting because it deals with 2 questions:

  1. Can the decision of the President of the Republic of South Africa to appoint and dismiss a Minister and his Deputy be reviewed and set aside? 
  2. Is the President under a rule 53 of the Uniform Rules of Courtobligation to disclose the reasons for relieving Cabinet Ministers and their Deputies of their duties or should the arguably raw political character of that decision perhaps exempt her from doing so?

Although this case is not really applicable to our line of work, it might be interesting to read.

Gordhan v Malema and Another (EQJHB 5/2019) [2019] ZAEQC 5 (31 October 2019)

This case dealt with utterances made by Malema against Gordhan and the Court had to decide whether it contravenes Section 10 of the Equality Act. Interestingly, the court found that the attack/utterances was personal in nature only. 

This is not applicable to our line of work, but might be interesting to read if you want to stay updated with the political developments in SA.

BMW South Africa (Pty) Ltd v The Commissioner for the South African Revenue Service (1156/2018) [2019] ZASCA 107 (6 September 2019)

The question at the centre of this appeal is whether payments totalling R6 795 540 made by BMWSA to tax consulting firms KPMG, Price Waterhouse Coopers and Raffray Tax Consultants CC (the firms) in relation to services rendered to expatriate employees in respect of their domestic tax obligations, constitute a taxable benefit and consequently forms part of gross income in respect of which the employees are liable to taxation.

Simply put, the question is whether the payments to the firms fall within the ambit of the definition of ‘gross income’ in s 1(i) of the Income Tax Act 58 of 1962 (the Act), read with paragraphs 2(e) or (h) of the Seventh Schedule thereto. 

Commissioner for the South African Revenue Service v Atlas Copco South Africa (Pty) Ltd (834/2018) [2019] ZASCA 124 (27 September 2019)

The Income Tax Act 58 of 1962 (the Act) requires opening and closing trading stock to be taken into account when determining taxable income derived from carrying on any trade in any year of assessment. Section 22(1) of the Act is concerned with the value of trading stock held and not disposed of at the end of the relevant year of assessment, which is determined with reference to the diminution thereof.

Sections 22(1)(a) and (b) of the Act prescribe the basis upon which taxpayers are to value trading stock at the beginning and end of each year of assessment.

This appeal by the Commissioner for the South African Revenue Service (SARS), against a judgment of the Tax Court, Johannesburg (Opperman J, sitting with assessors), turns on the interpretation and application of those provisions.

The dispute relates to whether the value of the taxpayer’s trading stock had diminished, entitling SARS to make a just and reasonable allowance under s 22(1)(a) of the Act.

ARTICLES

Of the recent articles published, I think the following might be very interesting. I still want to read through them and I will report to you once done.

  • Fritz, C and Van Zyl, SP ‘The issue of prescription in tax – CSARS v CharTrade’ (2019) 82.3 THRHR 511.
  • Moosa, F ‘Does the Tax Administration Act apply extraterritorially? A constitutional perspective’ (2019) 34.2 ITJ.
  • Van der Walt, JJ ‘Prejudice’ (2019) 33.4 TPCP
  • Palmer, G ‘Imposing penalties – more on understatements’ (2019) 33.5 TPCP.
  • Silke, J ‘Readily apparent errors – review of undisputed administrative decisions’ (2019) 33.5 TPCP