Where a taxpayer is dissatisfied with a South African Revenue Services (SARS) decision regarding its objection to an assessment, the taxpayer can appeal the decision to the Tax Court. The Rules of the Tax Court, promulgated under Section 103 of the Tax Administration Act (28/2011), prescribe the procedure to be followed when proceedings are instituted in the Tax Court.
In Lion Match Company (PTY) LTD v Commissioner for the South African Revenue Services,(1) the taxpayer noted an appeal against the disallowance of an objection raised in response to an additional assessment issued by SARS. The additional assessment had arisen after the taxpayer disposed of its entire shareholding in the Kimberly Clark Group in the 2008 assessment year. In determining the taxable capital gain, the base cost of the shares had been taken as the market value of the shares as at October 1 2001. It was this value that SARS had later adjusted, which increased the taxpayer's taxable capital gain.
The focus of this case was not the merits of the dispute between the parties, but rather the correctness of the procedure that the taxpayer had followed in its appeal to the Tax Court.
After the taxpayer noted its appeal, SARS delivered its statement of grounds of assessment to the taxpayer in accordance with Rule 31 of the Tax Court Rules. This rule prohibits SARS from including in its statement any ground that constitutes a novation of the whole of the factual or legal basis of the disputed assessment. Instead of submitting its response in accordance with Rule 32, the taxpayer brought an application to the Tax Court in which it:
- asserted that SARS had included in its statement a ground that constitutes a novation; and
- asked the Tax Court to set aside the statement.
The Tax Court dismissed the application, but granted the taxpayer leave to appeal to the Supreme Court of Appeal.
Before the Supreme Court of Appeal, SARS argued that the Tax Court's decision was not appealable.
The Supreme Court of Appeal took a relatively simple approach. Being a creature of statute, the Tax Court obtains all of its powers and functions from the Tax Administration Act. Section 117 of the act provides that the Tax Court has jurisdiction to hear appeals lodged under Section 107, which in turn states that taxpayers may appeal against an assessment or decision. Section 104(2) refers to three types of decision – namely:
- a decision not to extend the period for lodging an objection;
- a decision not to extend the period for lodging an appeal; and
- any other decision that may be objected to or appealed under a tax act.
Further, Section 129 sets out the ambit of decisions that the Tax Court may make in response to an appeal lodged under Section 107.
In turn, Section 133 of the Tax Administration Act provides for appeals against Tax Court decisions under Section 129.
The Supreme Court of Appeal held that determining whether the Tax Court's decision was appealable was contingent on whether the decision was one contemplated in Section 104(2) of the act.
The Supreme Court of Appeal found that the decision did not fall within Section 104(2) of the act and that, as such, the Tax Court's decision was not subject to appeal.
For further information on this topic please contact Heinrich Louw or Louise Kotze at Cliffe Dekker Hofmeyr by telephone (+27 115 621 000) or email ([email protected] or [email protected]). The Cliffe Dekker Hofmeyr website can be accessed at www.cliffedekkerhofmeyr.com.
Endnotes
(1) (2018) ZASCA 36 (March 27 2018).
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