Our Insights

A CURIOUS TAX COURT JUDGMENT - SCA SETS IT STRAIGHT

A CURIOUS TAX COURT JUDGMENT: SCA SETS IT STRAIGHT

The SCA[1] recently upheld an appeal by SARS against a judgment of the tax court that Unicus Tax previously labelled: a curious tax court judgment. It turns out, taxpayers can’t rely on rule 42 of the tax court rules to circumvent provisions of the TAA…

The facts of the case are briefly as follows:

  • The taxpayer objected to an assessment raised by SARS.
  • Importantly, however, the taxpayer did not place all the adjustments made by SARS in the said assessment under objection.
  • More than three years later and whilst the appeal process was underway in relation to those adjustments that were placed under objection, the taxpayer realised that there were some adjustments SARS had made in the said assessment that ought to have been placed under objection but were not.
  • Likely knowing that adding these hitherto undisputed adjustments to the dispute at the appeal phase would be impermissible, the taxpayer instead brought an application to amend the objection (the first of its kind to our knowledge) with the aim of placing these adjustments under dispute also.

The gist of the taxpayer’s argument in the tax court was that because the tax court rules are silent on whether an amendment of this nature is permissible, rule 42 of the tax court rules can be applied read with rule 28 of the Rules of the High Court.

In short, rule 42 of the tax court rules provide that if the tax court rules do not provide for a procedure in the tax court, the Rules of the High Court can be applied. Relying on this rule and Uniform rule 28, the latter of which governs amendments, the taxpayer sought an amendment to its objection. After considering the law regulating Uniform rule 28, the tax court granted the relief sought by the taxpayer. The judgment was curious at the time for at least the following reasons:

  • The time period within which objections must be made cannot be extended by more than three years from the date of assessment. The assessments not previously placed under objection were more than three years old.
  • After three years have lapsed from the date of assessment, the assessment becomes final (i.e. it cannot be changed). The adjustments/assessments not placed under objection, therefore, became final.

The SCA reached exactly the same conclusion in upholding SARS’ appeal against the judgment of the tax court. In addition, the SCA held that:

  • rule 42 of the tax court rules cannot apply to objections as not representing a procedure in the tax court; and
  • that allowing amendment would effectively allow an impressible new ground into the dispute.

Apart from the non-application of rule 42 of the tax court rules in the context of objections, the main reason for the conclusion reached appears to stem from the actual meaning of the word ‘assessment’, something that, in our experience, is often misunderstood. The SCA previously held[2] that an assessment can be made of more than one thing. Stated differently, each determination made by SARS is an assessment on its own, even though a single notice of assessment is issued by SARS. Applied in the context of the case under consideration, the adjustments SARS made that were not placed under objection are assessments on their own. The taxpayer did not object to these assessments and allowing an amendment to the objection to bring these undisputed assessments into dispute would result in a circumvention of provisions of the TAA.

[1] The Commissioner for the South African Revenue Service v Airports Company for South Africa (Case no 785/2021) [2022] ZASCA 132 (7 October 2022)  

[2] First South African Holdings (Pty) Ltd v CSARS [2011] ZASCA 67 and HR Computek (Pty) Ltd v CSARS  [2012] ZASCA 178

Every effort was made to ensure accurate reflection of the law and the tax principles discussed in our articles or as set out on our website at the time of publishing on the website. Tax law develops all the time and it is therefore recommended that views expressed in the past be vented by users for current applicability and accuracy.  Comments made and views expressed in our articles and on our website does not constitute advice to any person or company. Unicus Tax Specialists SA will not be liable for any loss or damage of whatever nature or form caused due to reliance on this article.

Share this post