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[2018] ZASCA 36
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Lion Match Company (Pty) Ltd v Commissioner for the South African Revenue Service (301/2017) [2018] ZASCA 36; 80 SATC 383 (27 March 2018)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 301/2017
In
the matter between:
LION
MATCH COMPANY (PTY) LTD
APPELLANT
and
COMMISSIONER
FOR THE SOUTH AFRICAN
REVENUE
SERVICE
RESPONDENT
Neutral
citation:
Lion Match Company
(Pty) Ltd v Commissioner for the South African Revenue Service
(301/2017)
[2018] ZASCA 36
(27 March
2018)
Bench:
Ponnan, Mbha, Dambuza and Mathopo JJA
and Davis AJA
Heard:
13 March 2018
Delivered:
27 March 2018
Summary:
Income tax –
Tax Administration
Act 28 of 2011
– dismissal of an application by taxpayer to set
aside
rule 31
statement – not appealable.
ORDER
On
appeal from
:
Tax
Court of South Africa, held in Durban (Moodley J)
The
appeal is struck from the roll with costs, such costs to include
those of two counsel.
JUDGMENT
Ponnan
JA (Mbha, Dambuza and Mathopo JJA and Davis AJA concurring):
[1]
Internationally, Capital Gains Tax (CGT) is not uncommon. And, though
implemented by several of our trading partners many decades
ago, it
was only introduced in South Africa with effect from 1 October
2001.
[1]
CGT is
loosely defined as a tax payable on a capital gain and is triggered
by the disposal of an asset on or after that date. The
CGT provisions
are contained in the Eighth Schedule to the Income Tax Act 58 of 1962
(ITA). Section 26A of the ITA serves as a
link between the main body
of the Act and the Eighth Schedule.
[2]
The Eighth
Schedule determines the taxable capital gain or assessed capital loss
and s 26A provides that the taxable capital gain
must be included in
the taxable income of a taxpayer for the year of assessment.
According to
para 3 of the Eight Schedule to the ITA,
a
taxpayer’s capital gain for a year of assessment in respect of
the disposal of an asset is equal to the amount by which
the proceeds
received or accrued in respect of that disposal exceeds the base cost
of the asset.
[2]
During the 2008 year of assessment the appellant, Lion Match Company
(Pty) Ltd (the taxpayer), disposed of its entire shareholding
in the
Kimberly Clark Group. The market value ascribed by the taxpayer to
the shares as at 1 October 2001
[3]
was adopted
as the base cost in determining its taxable capital gain. However, in
assessing the taxpayer to tax by way of an additional
assessment on
30 April 2013, the respondent, the Commissioner for the South African
Revenue Service (SARS), adjusted the base cost
of the value of the
shares, which resulted in an increase in the taxpayer's taxable
capital gain.
[3]
On 12 July 2013 the taxpayer objected to the adjustment, which was
disallowed by SARS. The taxpayer then noted an appeal against
the
disallowance of its objection to the Tax Court, Durban. On 14 August
2015 SARS delivered its statement of grounds of assessment
and
opposition to the taxpayer’s appeal in terms of Rule 31 of the
Rules promulgated under section 103 of the Tax Administration
Act 28
of 2011 (the TAA). Rather than avail itself of the opportunity to
respond with a statement of its own in terms of Rule 32,
[4]
the taxpayer
launched an application styled ‘Appellant’s notice of
application in terms of Tax Court Rule 31(3) issued
in terms of the
provisions of the
Tax Administration Act 28 of 2011
’. Asserting
that SARS had included in its statement ‘a ground that
constitutes a novation of the whole of the factual
or the legal basis
of the disputed assessment issued on 30 April 2013’,
[5]
the taxpayer
sought an order in the following terms from the Tax Court:
‘
1.
declaration that the respondent has failed to comply with the
provisions of Tax Court
Rule 31(3)
in that the statement of grounds
of assessment include a ground or grounds that:
1.1
constitute a novation of the whole of the factual and/or legal basis
of the assessment dated
31 March 2013; and/or
1.2
require the issue of a revised assessment;
2.
setting aside the statement of grounds of assessment dated 14 August
2015 as
invalid for want of compliance with the provisions of Tax
Court
Rule 31(3)
;
3.
costs of suit’
The
Tax Court (per Moodley J) dismissed the application, but granted
leave to the taxpayer to appeal to this court.
[5]
SARS contends that the appeal should be dismissed on the ground that
the order of the Tax Court is not appealable. In embarking
upon that
enquiry, the question is not whether the decision of the Tax Court,
if wrong, can be corrected on appeal. The real question
is whether
the decision can be corrected ‘forthwith and independently of
the outcome of the main proceedings’ or whether
the taxpayer is
constrained to await the outcome of the main proceedings before this
decision of the Tax Court can be attacked
as one of the grounds of
appeal.
[6]
In effect,
the question is whether the particular decision may be placed before
a court of appeal in isolation, and before the proceedings
have run
their full course.
[7]
[6]
The Tax Court is constituted in terms of the TAA.
[8]
As such, the
scope of its jurisdiction, its powers and the ambit of any right of
appeal from its decisions are defined in the TAA.
[9]
According to
s 117
, the Tax Court has jurisdiction over appeals lodged under
s
107.
In terms of
s 107(1)
‘a taxpayer objecting to an
assessment or “decision” may appeal against the
assessment or “decision”
to the Tax Court’.
‘Decision’ is defined in
s 101
as ‘a decision
referred to in
s 104(2)
’. Three decisions are referred to in
s
104(2)
, namely - (a) a decision not to extend the period for lodging
an objection; (b) a decision not to extend the period for lodging
an
appeal and (c) any other decision that may be objected to or appealed
against under a tax Act.
[7]
Section 133(1) of the TAA provides for an appeal against a decision
of the tax court under ss 129 and 130. Section 130 deals
with orders
for costs and is not presently relevant. Section 129 provides:
‘
(1)
The tax court, after hearing the “appellant’s”
appeal lodged under s 107 against an assessment or “decision”,
must decide the matter on the basis that the burden of proof as
described in s 102 is upon the taxpayer.
(2)
In the case of an assessment or “decision” under appeal
or an application in a procedural matter referred to in
section
117(3), the tax court may –
(a)
confirm the
assessment or “decision”;
(b)
order the
assessment or “decision” to be altered; or
(c)
refer the
assessment back to SARS for further examination and assessment’.
[8]
In determining whether the decision of the Tax Court is appealable
under s 129, the question is whether the decision is one
contemplated
by s 104(2) of the TAA. In this case it plainly is not. That ought to
be the end of the enquiry. However, counsel
for the taxpayer
submitted that the application which served before the Tax Court had
to be likened to an exception rather than
an application to strike
out in terms of Rule 6(15) of the Uniform Rules of Court.
[10]
It is trite
that
a
dismissal of an exception (save an exception to the jurisdiction of
the court), presented and argued as nothing other than an
exception,
is not appealable.
[11]
Accordingly,
so
the submission went,
the
Tax
Court in dismissing the application had spoken the final word on the
issue of its jurisdiction
[12]
and the
order was for that reason appealable.
[9]
Jurisdictional challenges should be raised either by exception or
special plea depending on the grounds upon which the challenge
arises.
[13]
In either event the issue must necessarily be disposed of first
because upon it depends the power of the court to make any further
order.
[14]
Here, the want of jurisdiction on the part of the Tax Court was
not raised by way of exception or special plea. And, not
having been
raised in that manner, it was neither presented nor argued as an
exception to jurisdiction. Instead, it was only tangentially
raised
as part of what counsel for the taxpayer conceded was a rather novel
application to the Tax Court. What is more, not having
been squarely
raised, the Tax Court did not as such pronounce on the issue. It must
follow that, absent a decision by the Tax Court
on the question of
jurisdiction, an appeal can hardly avail the taxpayer. For, an appeal
lies not against the reasoning, but the
substantive order of a
court.
[15]
Thus even on the basis postulated by counsel for the taxpayer an
appeal is not competent.
[10]
It follows that the decision of the Tax Court is not appealable and
in the result the appeal falls to be struck from the roll
with costs,
such costs to include those of two counsel.
_________________
V
M Ponnan
Judge
of Appeal
APPEARANCES:
For
Appellant:
A
R Bhana SC (with him C J Dreyer)
Instructed
by:
Garlicke
& Bousfield Inc., Umhlanga Rocks
Claude
Reid Attorneys, Bloemfontein
For
Respondent:
K
W Lüderitz SC (with him F Southwood)
Instructed
by:
The
State Attorney, Pretoria
The
State Attorney, Bloemfontein
[1]
In the 2000
Budget, the Minister of Finance announced the introduction of a
capital gains tax with effect from 1 April 2001. That
implementation
date was subsequently deferred until 1 October 2001.
See:
http://www.treasury.gov.za/documents/national%20budget/2000/speech/speech.pdf
at 18 and
http://www.treasury.gov.za/documents/national%20budget/2001/speech/speech.pdf
at 14.
[2]
Section 26A
and the Eight Schedule to the Act were introduced by the
Taxation
Laws Amendment Act 5 of 2001
.
[3]
1 October 2001 is the valuation date as defined in
s 1
of the Eight
Schedule to the ITA.
[4]
Rule 32(1)
(b)
provides: ‘the appellant must deliver to SARS a statement of
grounds of appeal within 45 days after delivery of the statement
by
SARS under
Rule 31
’.
[5]
In that
regard reliance was placed on
Rule 31(3)
, which reads: ‘SARS
may not include in the statement a ground that constitutes a
novation of the whole of the factual or
legal basis of the disputed
assessment or which requires the issue of a revised assessment.’
[6]
Beinash
v
Wixley
[1997] ZASCA 32
;
[1997] 2 All SA 241
(A) at 247.
[7]
Liberty
Life Association of Afrcia Ltd v Niselow
(1996)
17 ILJ 673 (LAC) at 676.
[8]
Section116.
[9]
Wingate-Pearse
v Commissioner for South African Revenue Service
2017
(1) SA 542
(SCA) para 6.
[10]
Rule 6(15)
of the
Uniform
Rules provides that:
‘
The
court may on application order to be struck out from any affidavit
any matter which is scandalous, vexatious or irrelevant,
with an
appropriate order as to costs, including costs as between attorney
and client. The court shall not grant the application
unless it is
satisfied that the applicant will be prejudiced in his case if it be
not granted.’ See
Maharaj &
others v Mandag Centre of Investigative Journalism NPC & others
2018 (1) SA 471
(SCA) paras 14-20.
[11]
Maize Board v Tiger Oats
Ltd and others
2002 (5) SA
365
(SCA) para 14.
[12]
In
Steytler
NO v Fitzgerald
1911
AD 295
at 305, De Villiers CJ observed:
'Whichever
way the decision was given it spoke the final word upon the issue of
jurisdiction. If the Court had decided that it
had no jurisdiction
the plaintiff's suit as against the executor would have come to
an end. The Court, however, decided
that it had jurisdiction, with
the result that whatever the final decision might be, the executor
was made amenable against his
will to a jurisdiction other than that
of his own-dwelling-place. Such an order, in my opinion, has also
the effect of a definitive
sentence.'
[13]
Makhanya v University of
Zululand
2010
(1) SA 62
(SCA) para 29.
[14]
Ibid.
[15]
Western
Johannesburg Rent Board & another v Ursula Mansions (Pty) Ltd
1948
(3) SA 353
(A) at 355.