THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 893/2024
In the matter between:
BASELINE CIVIL CONTRACTORS (PTY) LTD APPELLANT
and
THE COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE SERVICE RESPONDENT
Neutral citation: Baseline Civil Contractors (Pty) Ltd v The Commissioner for the
South African Revenue Service (893/2024) [2026] ZASCA
20(24 February 2026)
Coram: ZONDI DP and GOOSEN and KATHREE-SETILOANE JJA and
OPPERMAN and NORMAN AJJA
Heard: 20 November 2025
Delivered: This judgment was handed down electronically by circulation to the
parties’ representatives by email, publication on the Supreme Court of Appeal website,
and released to SAFLII. The date for hand down is deemed to be 24 February 2026
at 11h00.
Summary: Tax Law – appeal against disallowance of objection to additional income
tax assessment in terms of the Income Tax Act 58 of 1962 and Tax Administration Act
28 of 2011 – Taxpayer pleading a new ground of appeal in the statement filed in terms
of rule 32 of the Tax Court Rules ( rule 32 statement) – whether on the correct
interpretation of Tax Court Rule 32(3) the new ground of appeal in the rule 32
statement is permissible – appeal dismissed.
2
___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from: Western Cape Division of the High Court , Cape Town (Henn ey et
Sher JJ and Nuku J sitting as a full court):
The appeal is dismissed with costs, including those of two counsel.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
Zondi DP (Goosen and Kathree -Setiloane JJA and Opperman and Norman
AJJA):
Introduction
[1] This is an appeal against a decision of the Western Cape Division of the High
Court (full court) on the proper interpretation of rule 32(3) of the Tax Court Rule s. It
concerns the dismissal of an interlocutory application brought by the appellant,
Baseline Civil Contractors (Pty) Ltd (Baseline) in an appeal before the Tax Court in
which Baseline was the applicant and the Commissioner for the South African
Revenue Service (SARS) the respondent . In the interlocutory application Baseline
sought to introduce a new ground of appeal in its statement of grounds of appeal under
rule 32 (rule 32 statement). SARS objected thereto on the ground that the new ground
of appeal constituted a ground of objection against a part or amount of the disputed
assessment not objected to under rule 7.
[2] The Tax Court upheld the objection and dismissed the application. Baseline’s
appeal to the full court was similarly dismissed. The appeal is with special leave
granted by this Court.
[3] The appeal turns on the proper interpretation of rule 32(3). The issue is whether
rule 32(3), properly interpreted, permits the new ground of appeal that Baseline seeks
to introduce in its rule 32 statement. A brief analysis of rule 32(3) and the related rules
that form part of the objection and appeal procedure under the Tax Administration Act
28 of 2011 (TAA), is necessary.
3
[4] In terms of s 104(1) of the TAA a taxpayer who is aggrieved by an assessment
made in their respect may object to the assessment. Before doing so , the taxpayer
may in terms of rule 6 of the Tax Court Rules request reasons for the assessment. In
terms of rule 7 which deals with ‘Objection against assessment ’, a taxpayer who
chooses to object to an assessment under s 104 of the TAA must deliver a notice of
objection in which it sets out the grounds of the objection in detail. A taxpayer must
specify the part or specific amount of the disputed assessment objected to as well the
grounds of assessment which are disputed. The taxpayer must, in addition, submit the
documents required to substantiate the grounds of objection that it had not previously
delivered to SARS for purposes of the disputed assessment.
[5] Under rule 8, SARS may, within 30 days after delivery of the objection, require
the taxpayer to produce additional substantiating documents necessary to decide the
objection. If the objection is disallowed in terms of s 107 read with rule 10, the taxpayer
may appeal the assessment to the Tax Board or Tax Court. The notice of appeal must
be in a prescribed form and must-
‘specify in detail-
(i) in respect of which grounds of the objection referred to in rule 7 the taxpayer is
appealing;
(ii) the grounds for disputing the basis of the decision to disallow the objection referred to
in section 106(5); and
(iii) any new ground on which the taxpayer is appealing;
…’
[6] This analysis will be incomplete without referring to rules 10(3); (4) and ( 5)
which provide as follows:
‘(3) The taxpayer may appeal on a new ground not raised in the notice of objection under
rule 7 unless it constitutes a new objection against a part or amount of the disputed
assessment not objected to under rule 7.
(4) If the taxpayer in the notice of appeal relies on a ground not raised in the objection under
rule 7, SARS may require a taxpayer within 15 days after delivery of the notice of appeal to
produce the substantiating documents necessary to decide on the further progress of the
appeal.
4
(5) The taxpayer must deliver the documents within 15 days after delivery of the notice by
SARS unless SARS extends the period for delivery for a further period not exceeding 20 days
if reasonable grounds for an extension are submitted by the taxpayer.’
[7] Rule 31, which is located in a section dealing with ‘Procedures of tax court ’,
provides as follows:
‘31 Statement of grounds of assessment and opposing appeal
(1) SARS must deliver to the appellant a statement of the grounds of assessment and
opposing the appeal within 45 days after delivery of-
(a) the documents required by SARS under rule 10(5);
(b) if alternative dispute resolution proceedings were followed under Part C, the notice by
the appellant of proceeding with the appeal under rule 24(4) or 25(3);
(c) if the matter was decided by the tax board, the notice of a de novo referral of the appeal
to the tax court under rule 29(2); or
(d) in any other case, the notice of appeal under rule 10.
(2) The statement of the grounds of opposing the appeal must set out a clear and concise
statement of-
(a) the consolidated grounds of the disputed assessment;
(b) which of the facts or the legal grounds in the notice of appeal under rule 10 are admitted
and which of those facts or legal grounds are opposed; and
(c) the material facts and legal grounds upon which SARS relies in opposing the appeal.
(3) SARS may include in the statement a new ground of assessment or basis for the partial
allowance or disallowance of the objection unless it constitutes a novation of the whole of the
factual or legal basis of the disputed assessment or which requires th e issue of a revised
assessment.’
[8] At the time of the hearing of the interlocutory application and prior to its
amendment on 10 March 2023, rule 32 read as follows:
‘32 Statement of grounds of appeal
(1) The appellant must deliver to SARS a statement of grounds of appeal within 45 days after
delivery of-
delivery of-
(a) the required documents by SARS, where the appellant was requested to make discovery
under rule 36 (1); or
(b) the statement by SARS under rule 31.
(2) The statement must set out clearly and concisely-
(a) the grounds upon which the appellant appeals,
5
(b) which of the facts or the legal grounds in the statement under rule 31 are admitted and
which of those facts or legal grounds are opposed; and
(c) the material facts and the legal grounds upon which the appellant relies for the appeal
and opposing the facts or legal grounds in the statement under rule 31.
(3) The appellant may not include in the statement a ground of appeal that constitutes a new
ground of objection against a part or amount of the disputed assessment not objected to under
rule 7.’
[9] Post amendment, rule 32(3) reads as follows:
‘(3) The appellant may include in the statement a new ground of appeal unless it constitutes
a ground of objection against a part or amount of the disputed assessment not objected to
under rule 7.’
[10] In terms of rule 33 (1), SARS may deliver a reply to the taxpayer ’s rule 32
statement. In terms of rule 33(2) t he reply must set out a clear and concise reply to
any new grounds, material facts or applicable law set out in the statement. It is clear
from this analysis that the statements in terms of rules 31, 32 and 33 constitute the
pleadings in the Tax Court and the issues for the decision are those that are traversed
in such statements.
Facts
[11] Baseline is registered for income tax. It conducts business in the civil
construction industry. It claimed to be in an en commandite partnership with an entity
known as Baseline Group Limited Liability Partnership (BECP) or BG LLP in terms of
a partnership agreement. As a taxpayer, in terms of s 5(1) (d) of the Income Tax Act
58 of 1962 (the Income Tax Act), it was required to pay tax on its income earned or
accrued during each year of its financial years. As required, Baseline submitted its
income tax retur n for the 2018 tax year to SARS. In its annual financial statements
Baseline listed a gross income of R320 846 361 and in its income tax return declared
that this gross income had been received and /or had accrued to it for the 2018 tax
that this gross income had been received and /or had accrued to it for the 2018 tax
year. Baseline consistently reflected this amount in subsequent assessments after the
partial allowance of its objection.
6
[12] In terms of s 11(a)1 read with s 23(g)2 of the Income Tax Act, Baseline claimed
a total of R73 215 161 in expense deductions for the 2018 tax year. The deductions
included an amount of R11 072 237 (disputed amount) which it claimed related to the
distribution of profits which Baseline alleged it paid to BECP in terms of the partnership
agreement. Baseline contended that the payment to BECP was actually incurred in
the production of the income for the purposes of its trade and was therefore a valid
component of the deduction of R73 215 161 claimed. In terms of s 102(1) (b) of the
TAA Baseline bore the onus of proving that the amount of R11 072 237 paid as a profit
distribution to BECP, is an allowable deduction.
[13] On 31 January 2019 SARS issued an original assessment to Baseline for the
2018 tax year in accordance with the income tax returns it submitted. The amounts for
income and expenses which form part of the assessment corresponded with its
declarations. At the same time SARS also notified Baseline that its 2018 tax return
would be subject ed to a verification exercise. During the verification exercise SARS
noted issues which warranted the undertaking of an audit into Baseline s’ income tax
affairs for the 2016 to 2018 tax year.
[14] Following the audit and the exchange of correspondence between the parties ,
on 25 March 2020, SARS issued an additional assessment. The disputed amount was
disallowed as a deduction by SARS because the Commissioner considered the
expense to have been incurred after the income was earned, and not during the
production thereof. According to SARS the amount was paid over on a voluntary basis
and if it had not been paid it would not have affected the production of past or future
income.
1 Section 11(a) provides as follows:
‘General deductions allowed in determination of taxable income
For the purpose of determining the taxable income derived by any person from carrying on any trade,
there shall be allowed as deductions from the income of such person so derived-
(a) expenditure and losses actually incurred in the production of the income, provided such expenditure
and losses are not of a capital nature… .’
2 Section 23(g) provides as follows:
‘Deductions not allowed in determination of taxable income
…
(g) any moneys claimed as a deduction from income derived from trade, to the extent to which such
moneys were not laid out or expended for the purposes of trade… .’
7
[15] On 23 June 2020 Baseline objected to the additional assessment. The objection
was founded on the ground that SARS erred in adding back the disputed amount since
Baseline had met the requirements of ss 11 (a) and 23 (g) of the Income Tax Act
(deduction ground). Baseline objected to the following adjustment in the additional
assessment:
(a) Employment tax incentive included in the gross income : R4 197 000
(b) Property rental : R300 000
(c) Profit share distribution : R11 072 237
(d) Understatement penalty
(e) Under estimation of provisional tax
(f) Section 89quat(2) interest
[16] The grounds of objection as regards the disputed amount were the following:
‘3.1 The taxpayer is a partner of the BG LLP. In order to comply with its obligations in terms
of the partnership agreement, the taxpayer had to contribute the amount of R11,072,237 to
the partnership. The amounts to be contributed to the partnership by the partners are
determined with reference to their level of activity, financial performance and exposure to
commercial risk on an annual basis, as the purpose of the partnership is to share and spread
risk amongst the partners. The amount was therefore calculated by taking into account, inter
alia, the taxpayer's financial performance, but it was not an expense incurred after profits had
been earned, as the taxpayer was all along contractually obliged in terms of the partnership
agreement. It follows that the payment to the partnership was not a charge upon the taxpayer's
profits. Rather, the payments which the partners are, in terms of the partnership agreement,
required to make are pooled in partnership for division to the partners in accordance with the
terms of the partnership. Amounts received by partners in t erms of the partnership
arrangements are included in the gross income of the partners who are entitled to receive
them from the partnership.
them from the partnership.
3.2 Consequently, should the amount of R11 ,072,237 be taxed in the hands of the
taxpayer (as a result of its being disallowed as a deduction), the same amount will effectively
be taxed in the hands of the taxpayer and it will be included in the gross income of the partners
who are entitled to receive this amount in terms the partnership arrangement. This amounts
to a form of double taxation.
3.3 On the basis of the taxpayer being legally obliged to pay the amount of R11,072,237
in terms of the partnership agreement, it is submitted that the payment of this amount was
--
8
done in terms of a contractual arrangement which arrangement did not result in a charge on
the taxpayer’s profits, but an obligation on the taxpayer to pay an amount, determined with
reference its risk profile, activities and financial performance during the particular year [and
compared to those of the other partners of the partnership], as a business expense.
3.4 It is submitted that such payment does not constitute "an appropriation of profits after
they have been earned". Rather, it is an expense which is closely connected to the taxpayer's
business operations, as discussed in more detail below.’
[17] SARS disallowed the objection to the disputed amount. On 9 November 2020
Baseline filed a notice of appeal against the disallowance of its objection repeating the
same grounds of objection. Baseline stated that the appeal was against the
assessment to which it lodged an objection.
[18] On 31 August 2021 SARS filed its Statement of Grounds of Assessment and
Opposing the Appeal (rule 31 statement) in terms of rule 31(2) of the Tax Court Rules.
The issues in dispute as set out in the rule 31 statement are: (1) whether Baseline
was entitled to a deduction claimed in terms of s 11(a) of the Income Tax Act for the
distribution of profits to a related party; (2) whether Baseline was entitled to a remission
of interest imposed in terms of s 89qua t(2) of the Income Tax Act ; and (3) whether
SARS was correct in imposing an understatement penalty of 10% on Baseline. SARS
submitted that the payment of the disputed amount by Baseline to the BECP was not
incurred in the production of income and failed to meet the requirement of s 11(a) of
the Income Tax Act.
[19] On 30 November 2021, Baseline filed its Statement of Grounds of Appeal (the
rule 32 statement) in terms of rule 32. Baseline stated that during its 2018 year of
assessment it was a limited partner of the BG LLP/BECP. In accordance with the
assessment it was a limited partner of the BG LLP/BECP. In accordance with the
partnership agreement, it was obliged to contribute an amount of R11 072 237 to the
BG LLP partnership in respect of its 2018 year of assessment which it duly did.
[20] The new ground of appeal, which introduced the receipt/accrual ground, is
pleaded as follows in the rule 32 statement at paragraphs 6 to 8 and 16 to18:
‘The appellant’s obligation to contribute the amount of R11 072 237 to the BG LLP partnership
was either an expenditure actually incurred by it in favour of the BG LLP partnership, or it was
9
an obligation the effect of which was that, to the extent of R11 072 237, the appellant’s income
accrued to, and was received by it, not on its own behalf or for its own benefit, but on behalf
of or for the benefit of BG LLP partnership.
The appellant acted at all material times in the bona fide understanding and belief, and on the
basis that, its obligation to contribute the amount of R11 072 237 to the BG LLP partnership
was either a deductible expense for income tax purposes or that the amount of R11 072 237
accrued not to it, but to the BG LLP partnership, and was likewise received by it for the benefit
of the BG LLP partnership.
In the 2021 year of assessment, income was ' received by and accrued to the appellant qua
limited partner of the BG LLP partnership, this amount being determined in accordance with
the agreement, whether written or oral, between the partners of the BG LLP partnership as to
the ratio in which the profits of the partnership for the 2021 year of assessment were to be
shared.
The disputed amount of R11 072 237 was expenditure actually incurred by the appellant in
the production of income, not of a capital nature and laid out or expended for the purposes of
trade, as contemplated in section 11(a) and section 23(g) of the Act.
Accordingly, the amount of R11 072 237 was deductible from the appellant ’s “income” (as
defined in section 1 of the Act) and therefore excluded from its “taxable income” (also as
defined in section 1 of the Act).
In the alternativ e…, the disputed amount of R11 072 237 was neither a receipt by no r an
accrual to the appellant on its own behalf, and also neither a receipt by nor an accrual to the
appellant for its own benefit. Rather, the amount of R11 072 237 was impressed with an
obligation to pay it to BG LLP partnership, and in law accrued to and was received by the BG
LLP partnership in the 2018 year of assessment.’
[21] In its grounds of appeal , Baseline drew attention to the fact that it relied on a
[21] In its grounds of appeal , Baseline drew attention to the fact that it relied on a
new ground of appeal not previously relied upon, namely that the amount of
R11 072 237 was not received by nor did it accrue to it, but that such amount accrued
to and was received by the BG LLP partnership by virtue of the agreement between it
and the partners of the BG LLP partnership. The new ground alleges that the amount
of R11 072 237 paid as a profit distribution to the BG LLP partnership is not to be
deducted from its gross income for the purp ose of determining its taxable income by
virtue of this amount meeting the requirements of s 11 (a) read with s 23 (g) of the
Income Tax Act as part of the assessment. The new ground instead alleges that the
10
amount of R11 072 237 was not part of Baseline’s gross income as defined in the
Income Tax Act in that it was neither a receipt nor an accrual to Baseline for its own
benefit.
[22] Baseline contended that it was entitled to rely on this new ground of appeal in
terms of rule 32(3). It argued that the new ground is not a new ground of objection
against a part or amount of the disputed assessment not objected to under rule 7.
[23] In its rule 33 statement of reply to Baseline’s rule 32 statement, SARS took
issue with Baseline’s reliance on the new ground of appeal, maintaining that it was
prohibited from doing so in terms of rule 32(3). This was because Baseline had
included the amount of R11 072 237 as part of its gross income in its financial
statements for the 2018 financial year and had declared the amount as part of its gross
income for the tax year in its income tax return submitted to SARS. Baseline, continued
the argument, had neither objected nor appealed against the inclusion of the amount
of R11 072 237 in its gross income for the 2018 tax year, and had instead sought to
have the amount excluded from taxable income by means of it being a deduction in
terms of s11(a) of the Income Tax Act.
[24] As already stated, the Tax Court dismissed the application. It held that:
‘[T]he new ground of appeal essentially relates to a different amount (gross income amount)
of the assessment as compared to that of the objection. The new ground seeks alteration on
appeal of that different amount of the assessment , even though it uses the disputed amount
of R11 million as the tool to achieve such alteration. Having regard to the substance of
Baseline’s objection and the facts of the case it cannot be correct that an objection to the
disallowance of an expense amount for failing to meet the requirements of ss 11(a) and 23(g)
of the [Income Tax Act] is equivalent to an objection against the gross income amount of the
of the [Income Tax Act] is equivalent to an objection against the gross income amount of the
assessment on the basis that this amount is to be reduced because a portion thereof actually
accrued to a non-taxpayer third party’.
The Tax Court found that the new ground does not fall within the ambit allowed by rule
32(3) for introduction at the appeal stage. In its view the new ground, properly
considered, ‘constitutes an entirely new case on appeal, aimed at the reduction of an
amount [not] previously objected against, namely [Baseline’s] gross income. It was not
11
merely a ‘re -packaging’ of the legal basis upon which [Baseline] wished to have the
disputed amount disregarded for the purposes of the determination of its income tax
liability.’
[25] On appeal the full court endorsed the Tax Court’s finding that the new ground
raised by Baseline in its rule 32 statement was impermissible as it fell outside the
bounds of rule 32(3). According to the full court ‘any new ground of appeal that may
be raised is therefore subject to the bounds and limitations set out in rule 10(3) and
must be a new ground raised in relation to the selfsame part of, and/or amount in, the
disputed assessment that was initially objected to under and in terms of rule 7 ’. In its
view ‘what subrule 32(3) therefore effectively permits is the raising of a new reason or
argument on appeal for why the Commissioner was wrong in disallowing an objection
to an assessment, but does not permit the raising of a new factual or legal basis for
objecting to the assessment, which amounts to a new objection to it, which was never
raised at the time’. The full court accordingly dismissed the appeal.
[26] Baseline submitted before the full court and in this Court that , based on the
language, context and purpose of the new rule 32(3), the new ground of appeal it is
advancing in the rule 32 statement does not constitute a new ground of objection and
is therefore not ousted by rule 32(3). Baseline argued further that the new ground of
appeal relates to the same part and the same amount of the disputed assessment
objected to. Hence, its new ground of appeal is nothing more than an additional ground
in support of the same part and the same amount of the disputed assessment objected
to under rule 7. It contended that its objection was directed at its taxable income being
increased by the value of the disputed amount of R11 072 237, albeit on the basis that
the disputed amount constituted an income -deductible expense. For this contention
the disputed amount constituted an income -deductible expense. For this contention
Baseline relied on ITC 1912 80 SATC 41 7 (ITC 1912) in which it was held that ‘ An
appellant may raise a new ground of objection in the [Tax Court Rule] 32 statement,
provided that it relates to a part or an amount in the assessment that was placed in
dispute by the objection stated under [Tax Court Rule] 7’.3
3 Income Tax Case No 1912 80 SATC 417 para 30.
12
[27] As regards the language, Baseline correctly observed that it is apparent from
the wording of the rule that it comprises two parts. The first part is worded in permissive
language and the latter part after the word ‘unle ss’ which is worded as a proviso, is
couched in prohibitory language. The purpose of the proviso is to qualify what is
contained in the preceding part of the rule.4 What this means is that a new ground of
appeal is permitted under rule 32(3) unless it constitutes an objection levelled against
‘a part or amount’ of the disputed assessment to which the taxpayer did not object in
its notice of objection lodged under rule 7. In other words, a new ground of appeal is
permitted if it constitutes an objection against a ‘part or amount ’ of the disputed
assessment to which the taxpayer objected in its notice of objection.
[28] Baseline submitted that in substance there is no difference between its
reduction ground and the new receipt/ accrual ground. It argued that in terms of the
new receipt/ ac crual ground of appeal Baseline still objects to the disputed amount
being included in its taxable income, but on the alternative basis that it should not have
formed part of its gross income. It pointed out that the facts underlying the original
ground of objection and the new ground of appeal are identical as appear from its
objection. The new ground, Baseline argued, was foreshadowed in its notice of appeal.
It submitted that if the new ground was not allowed the Tax Court would be prevented
from ventilating the true issues between the parties . And this would result in SARS
being allowed to exact tax which was not due and payable to it . Baseline urged this
Court to prefer the construction of rule 32(3) it contended for , as it advances a
taxpayer’s right of access to courts which in turn guarantees a fair hearing as
contained in the Bill of Right, and that SARS’s construction should be rejected.
contained in the Bill of Right, and that SARS’s construction should be rejected.
[29] SARS argued that any interpretation of rule 32(3) must take into account the
purpose of the subrule, which is to confirm the limitation upon new grounds of appeal
being introduced into a rule 32 statement. It submitted that the sensible meaning to
attribute to rule 32(3) is that if a new ground is raised against a part or an amount of
the disputed assessment that was not objected to under rule 7, then the taxpayer is
not allowed to introduce such ground in its rule 32 statement. Thus, under rule 32(3)
4 South African Textile and Allied Workers’ Union and Others v Skipper International (Pty) Ltd 1990 (4)
SA 842 (A) at 847A.
13
if a new ground is against any part or any amount of the disputed assessment not
objected to under rule 7, then the new ground is impermissible.5 According to SARS a
reference to ‘part’ of a disputed assessment in rule 32 must therefore be a reference
to identifiable separate portions of assessments that are present.
[30] SARS further submitted that on Baseline’s interpretative approach, the internal
procedures leading up to the tax appeal will effectively be subverted. There would be
no point in considering objections on grounds (a), (b) and (c) and ruling on them only
for the taxpayer to introduce a ground (d) at some later stage.
Interpretation
[31] In interpreting the provisions of rule 32(3) and in particular the phrase ‘a part or
amount of the disputed assessment ’ this Court must be guided by the following
principles: the inevitable point of departure is the language used in the provision of
rule 32(3) considering its text, context and purpose in the light of the overarching
scheme of the Income Tax Act and the TAA.6 The context is not limited to reading a
provision together with other provisions in the statute, but it includes the social and
historical background of the legislation.7
[32] The words ‘part’ and ‘amount’ are not defined in the Tax Court rules. There is
a difference of opinion between the parties concerning the meaning of the words in
question. Baseline, relying on the Oxford English Dictionary, contended that the word
‘part’ means ‘an amount or section which, when combined with others, makes up the
whole of something’ or ‘some but not all of something’. According to Baseline the word
‘amount’ means ‘a quantity of something , especially the total of a thing or things in
number, size , value, or extent’. Based on the dictionary meanings of the se words ,
Baseline submitted that their ordinary meaning is very wide and free from any internal
qualification.
5 Own emphasis.
qualification.
5 Own emphasis.
6 See Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA
262 (SCA); 2012 (4) SA 593 (SCA) para 18 and Capitec Bank Holdings Limited and Another v Coral
Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA 99; [2021] 3 All SA 647 (SCA); 2022 (1)
SA 100 (SCA) para 51.
7 Department of Land Affairs and Others v Goedgelegen Tropical Fruits (Pty) Ltd [2007] ZACC 12; 2007
(10) BCLR 1027 (CC); 2007 (6) SA 199 (CC).
14
[33] On the other hand , SARS, relying on the shorter Oxford English Dictionary ,
which defines an article ‘a’ as meaning ‘one, some, any,’ argued that the prohibition is
against any part or any amount of the disputed assessment not objected to under
rule 7.
[34] The phrase ‘a part or amount of the disputed assessment’ appearing in the old
rule 32(3) was considered by court in ITC 1912. Keightley J, as she then was, had this
to say regarding the meaning of the words:
‘This must mean that the excised phrase, "a part or amount of the disputed assessment", is
the working part, or focus, of the prohibition. In other words what is prohibited is for a taxpayer
to appeal against a portion of the assessment in respect of which no objection was ever raised.
For example, if an objection was raised to the penalties imposed but not to the VAT portion of
the assessment, an appellant is not permitted, through the guise of an appeal, effectively to
raise a subsequent objection to the VAT portion....
An appellant may raise a new ground of objection in the [Tax Court Rule] 32 statement,
provided that it relates to the part or an amount in the assessment that was placed in dispute
by the objection stated under [Tax Court Rule] 7.’
[35] This means that if a taxpayer raises a new ground of appeal that has a new
factual or legal basis that targets a different part or amount of the disputed assessment
that was never objected to in the rule 7 notice, that would be prohibited by rule 32(3).
On the other hand, if a taxpayer advances a new argument or different legal approach
to attack the same part or amount that was already objected to, that would be permitted
as long as the new argument does not change the substance of the original objection.
[36] I, therefore, disagree with Baseline’s submission that the words ‘part’ and
‘amount’ appearing in rule 32(3) have a very wide meaning free from any internal
qualification. Rule 32(3) allows the introduction of a new ground of appeal in the rule
qualification. Rule 32(3) allows the introduction of a new ground of appeal in the rule
32 statement, but that capacity is not without any constraint. It is su bject to the
parameters established by the subrule. The full court was therefore correct in
concluding that ‘an interpretation of rule 32(3) without having regard to the provisions
of rule 7 would not be proper , as it lays the foundation for the appeal process that
follows in the event of the disallowance of an objection.’
15
[37] The purpose of rule 32(3) is to prevent surprise and trial by ambush by ensuring
that a taxpayer who intends to rely on the ground of appeal not raised in its objection
and notice of appeal gives notice and obtain s leave before doing so . In this i t thus
promotes finality and efficiency in Tax Court proceedings. I therefore do not agree with
the following statement in ITC 1912 at paragraph 28:
‘It seems to me to be clear from the scheme of the TCR that an appellant taxpayer is no longer
restricted, on appeal, to the grounds of objection originally filed under TCR 7. Provision is
made for new grounds to be advanced in TCR 10(4) and in TCR 33. The latter rule introduces
the innovation that SARS may now file a reply to appellant’s TCR 32 statement. That reply
must deal with ‘any new grounds’. This innovation was included in the present TCR that were
promulgated in 2014. The other relevant innovations included in the present rules were TCR
31(3) and 32(3). It is also significant that under the present rules statements made under TCR
31, 32 and 33 may be amended, either by agreement or on application to court. This is further
evidence of an intention to broaden rather than to restrict the ambit of the issues that can be
dealt with in the tax appeal process.’
[38] If it is correct that rule 32(3) intended to broaden rather than restrict the ambit
of the issues that can be dealt with on appeal, this would have been achieved by
simply stating: The appellant may include the new ground of appeal in the statement’.8
A proviso that limits or qualifies what is stated in the first part of the provision would
have been unnecessary.
[39] Rule 32(3) should be interpreted with due regard to its historical background
and that background is material to understanding both its purpose and its proper
scope. In general, ru le 32 was introduced to crystallise the real issues in dispute ,
define the scope of the appeal and to ensure that the Tax Court adjudicates only those
define the scope of the appeal and to ensure that the Tax Court adjudicates only those
matters properly raised and ventilated in the pleadings thereby preventing litigation by
ambush. In other words, it was intended to prevent parties from shifting their case
midstream to protect the integrity of the objection and appeal process which is
foundational to tax administration.
[40] A new ground of appeal sought to be relied upon in a rule 32 statement is not
permissible if it is directed at an issue not covered in the grounds of objection and
8 Own emphasis.
16
notice of appeal. This is because it introduces a different case altogether. The new
ground in this case (receipt/ accrual) fundamentally differs from the deduction ground.
The deduction ground pleads that the disputed amount fell to be excluded from the
taxable income because it is a deductible expense, while the receipt /accrual ground
pleads that the disputed amount should be excluded from the gross income as it never
accrued to or was received by Baseline. The new ground is not , in substance , the
same as that stated or foreshadowed in the initial objection under rule 7.9
[41] In its r ule 10 notice of appeal, Baseline confirmed that its grounds of appeal
were precisely the same as its ground of objection. Up to that point what is evident is
that SARS and Baseline worked from the same figure of the gross income which was
accepted as correct. There was never, until the filing of the rule 32 statement, any
suggestion that Baseline disputed the gross income it disclosed in the relevant
financial statements.
[42] What Baseline seeks to achieve through the mechanism of its rule 32
statement, is a reduction of the assessment which is something it could have done in
terms of s 93 of the TAA or by way of an objection and appeal procedure in terms of s
104 of the TAA. Baseline is seeking to build a new case altogether.
[43] It was held in GB Mining and Exploration SA (Pty) Ltd v Commissioner for the
South African Revenue Service (GB Mining)10 that:
‘A taxpayer may seek a reduction in the Commissioner’s assessment in terms of s 79A without
objecting to the assessment in terms of s 81. The Commissioner’s power to reduce the
assessment exists ‘notwithstanding the fact that no objection has been lodged o r appeal
noted’. In addition, the power of the Commissioner is not restricted to its mero motu exercise,
because the error in the assessment has to be ‘proved to the satisfaction of the
Commissioner’. To discharge this burden of proof the taxpayer must place information before
Commissioner’. To discharge this burden of proof the taxpayer must place information before
9 Matla Coal Ltd v Commissioner for Inland Revenue 1987 (1) SA 108 (A) (Matla). See also Dr WAA
Gouws (Johannesburg) (Pty) Ltd v HR Computek (Pty) Ltd and Others [2025] ZASCA 103; 2025 (6) SA
89 (SCA) (HR Computek ); Commissioner for the South African Revenue Service v Free State
Development Corporation [2023] ZASCA 84; 2024 (2) SA 282 (SCA) ; 86 SATC 289 (Free State
Development). Taxpayer B v Commissioner for the South African Revenue Service [2022] ZATC 10;
85 SATC 388; and TALT v Commissioner for South African Revenue Services (A2023/077887) [2024]
ZAGPJHC 827; 87 SATC 222 (27 August 2024) (TALT).
10 GB Mining and Exploration SA (Pty) Ltd v Commissioner for the South African Revenue Service
[2014] ZASCA 29; 2015 (4) SA 605 (SCA); 76 SATC 347 (GB Mining) paras 22 to 25 and 28.
17
the Commissioner to substantiate the error relied upon. In doing so it may rely upon an error
that it made in its return.
The Commissioner may therefore act in terms of s 79A to reduce an assessment in the
absence of an objection in terms of s 81 of the Act and may do so even where it flows from
incorrect information provided in the taxpayer’s return. Can the taxpayer who has been the
cause of the incorrect assessment by the Commissioner instead claim to be ‘aggrieved’
thereby and object to an assessment in terms of s 81?
The statement that the powers of the Commissioner under s 79A can be exercised
‘notwithstanding the fact that no objection has been made’, suggests that an alternative route
for the taxpayer to follow is by way of objection and, if necessary, appeal. That was the
conclusion of Hurt J in ITC 1785 67 SATC 98, where he said;
‘ . . . the fundamental object of tax legislation is to exact from each citizen his due. What is
“due” is, in each case (questions of penalty aside), strictly prescribed by statute and the
amount of the taxpayer’s taxable income must, in the process of ass essment, be accurately
determined preparatory to the calculation of the amount which he (or she) is required to hand
over to the fiscus. In that light, it is clear that a taxpayer whose taxable income has been
determined on an erroneous basis, is always “aggrieved” even if the source of error is entirely
attributable to him.’
I agree with Hurt J, notwithstanding the oddity of a taxpayer being aggrieved by an assessment
based on the erroneous information it provided in its return. Accordingly, it was permissible for
GB Mining to follow the course that it did.
…
The taxpayer accordingly bears the onus of satisfying the Commissioner that the information
furnished is incorrect and that a reduction in the assessment is justified. In order to do this,
additional evidence would have to be placed before the Commissione r. The nature of this
additional evidence would have to be placed before the Commissione r. The nature of this
evidence will depend upon the facts of each case and particularly the nature of the erroneous
information supplied to the Commissioner. So for example, the fiscus might rightly ask how it
can be expected to alter or reduce an assessment when information supplied by a taxpayer is
not withdrawn or substituted so as to enable the reduction or alteration contended for. This
problem arises in the present case as shown below.’
[44] The construction of rule 32(3) contended for by Baseline must be rejected as it
does not advance the finality of the tax proceedings. If it were to be ac cepted SARS
18
might be prejudiced by Baseline shifting the grounds of its objection to the
assessment. The inclusion of the new ground of appeal in the rule 32 statement would
require reconsideration of Baseline’s objection in the light of the new ground and if it
was disallowed then the appeal process would follow. This is clearly an untenable
situation. Matla, Free S tate Development, ITC 1912 and TALT cases do not assist
Baseline. The new grounds of appeal in those cases were permissible as in substance
they still amounted to the grounds of objection which were initially advanced in terms
of rule 7 or were foreshadowed in the initial grounds.
[45] In HR Computek the only amounts of assessment that the taxpayer had
objected to and appealed against were the levying of additional tax at 200%, interest
and penalty. In a rule 11 statement which the taxpayer subsequently filed, it asserted
for the first time that in calculating its VAT liability SARS had included the turnover
figures of a related entity. This Court confirmed the Tax Court’s determination that the
taxpayer was not entitled to raise the capital amount as an issue at the trial on the
basis that it had not raised an objection to the capital assessment in its objection.
[46] There is a further reason why Baseline’s construction of the subrule should be
rejected. It is not possible to argue that the disputed amount is an expense that was
incurred in the production of income, for the purposes of trade, and not of a capital
nature while simultaneous ly arguing that the same amount should be removed from
the gross income as it was not received by, or accrued to, Baseline.
[47] Consequently, Baseline’s new receipt/accrual ground and old deduction ground
cannot exist side by side. Thus, any effort by Baseline to argue the new ground would
have to be accompanied by a concession that SARS’ disallowance of the payment of
the profit distribution as a deduction was correct.
the profit distribution as a deduction was correct.
[48] From the outset, Baseline had declared the amount of R11 072 237 as part of
its gross income for the 2018 tax year and sought to exclude it from its taxable income
for that year by claiming it as a deduction in terms of s 11(a) of the Income Tax Act. In
its objection it did not seek to exclude the amount of R11 072 237 from its gross
income for the 2018 tax year and accordingly, the gross income of R320 846 361
19
which it reflected in its return and annual financial statements, was not objected to
under rule 7.
[49] Baseline was subjected to an audit. At no stage did it allege that the payment to
BECP involved the amounts that do not form part of its gross income . Had Baseline
done so, that would have afforded SARS the opportunity to scrutinise the transaction
further on the basis that it involved amounts declared as revenue now being alleged
to be income of a third party instead.
[50] It is therefore clear that Baseline is not pleading an alternative new ground that
is complementary to its grounds of objections, but rather a new ground that contradicts
those put forward in its objection. This is not permissible.11 The full court can therefore
not be faulted for concluding that the tax court was correct i n holding that the new
ground raised by Baseline in its rule 32 statement was impermissible, as it fell outside
the bounds of rule 32(3).
Order
[51] In the result the appeal is dismissed with costs, including those of two counsel.
_________________
D H ZONDI
DEPUTY PRESIDENT
11 African National Congress v Ezulwini Investments (Pty) Ltd (979/2022) [2023] ZASCA 154
(24 November 2023) para 38.
20
Appearances:
For the applicant: T S Emslie SC and R Kotze
Instructed by Werkmans Attorneys, Stellenbosch
McIntyre Van der Post Attorneys,
Bloemfontein
For the respondent: R Williams SC and T S Sidaki
Instructed by: State Attorney, Cape Town
State Attorney, Bloemfontein.