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[2016] ZASCA 5
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Commissioner for the South African Revenue Service v Kluh Investments (Pty) Ltd (115/2015) [2016] ZASCA 5; [2016] 2 All SA 317 (SCA); 2016 (4) SA 580 (SCA); 78 SATC 177 (1 March 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 115/2015
In
the matter between:
THE
COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE
SERVICE
APPELLANT
and
KLUH
INVESTMENTS (PTY)
LTD
RESPONDENT
Neutral
citation:
CSARS
v Kluh Investments (Pty) Ltd
(115/2015)
[2016] ZASCA 5
(1 March 2016).
Bench:
Ponnan, Willis and Zondi JJA and Fourie
and Kathree-Setiloane AJJA
Heard:
16 February 2016
Delivered:
1 March 2016
Summary:
Income Tax – whether taxpayer
conducting farming operations for the purpose of s 26 of the Income
Tax Act 58 of 1962 read
with paragraph 14 of the First Schedule to
the Act.
ORDER
On
appeal from
:
Western
Cape Division of the High Court, Cape Town (Traverso DJP, Allie and
Rogers JJ sitting as court of appeal): judgment reported
sub
nom
Kluh
Investments (Pty) Ltd v Commissioner, South African Revenue Service
2015 (1) SA 60
(WCC).
The
appeal is dismissed with costs, such costs to include those
consequent upon the employment of two counsel.
JUDGMENT
Ponnan
JA (Willis and Zondi JJA and Fourie and Kathree-Setiloane AJJA
concurring):
[1]
The Thesen Group of companies owned property in Knysna on which they
conducted forestry, timber-growing and a plywood manufacturing
business. During May 2001, Steinhoff Southern Cape (Pty) Ltd
(Steinhoff) concluded written agreements with Thesen Company (Pty)
Ltd and Thesen Properties (Pty) Ltd (collectively referred to as
Thesen) in terms of which the former or its nominee, as purchaser,
agreed to acquire for the total purchase price of R45 million, all of
the assets and the business as a going concern of the latter,
including the land and the plantation – with which this case is
concerned. However, the board of Steinhoff’s ultimate
holding
company blocked the acquisition of the land and plantation because it
was at that time their policy not to acquire fixed
property in South
Africa. As a result, as it was put in the evidence, Steinhoff had to
then ‘find somebody to own the land’.
In the event,
agreement was reached that Steinhoff would purchase Thesen’s
machinery and equipment, including the latter’s
sawmill for
R15 786 881, and the respondent, Kluh Investments
(Proprietary) Limited (Kluh), a special purpose subsidiary
of a Swiss
company, Fihag Finanz und Handels AG (Fihag), would acquire the
remaining assets for R29.5 million.
[2]
Consequently, Thesen agreed to the cancellation of the May 2001
agreements. And, although an oral agreement had been reached
between
the parties by June 2001, substitute agreements were only executed
during October of that year. On 29 June 2001, Kluh took
possession of
the plantation and the land. In terms of the written agreement
executed on 3 October 2001, the purchase price of
R29.5 million was
apportioned as follows: R11 596 121 to the plantation;
R12 528 459 to the land; and the balance
to other assets.
Kluh retained the land and plantation but onsold the other assets,
including an erf, the plywood business and
certain trademarks to
third parties. By the beginning of 2003, prompted in part by
escalating timber prices and the scarcity of
plantation resources,
Steinhoff had a change of heart – it arrived at the conclusion
that it would be desirable to acquire
the plantation and land that
Kluh had purchased from Thesen during 2001.
[3]
In the result, on 21 February 2003, Steinhoff and Kluh concluded a
written agreement of sale. The subject of the sale was described
as
being ‘the plantation business’, which was defined in
clause 3.1 of the agreement as ‘the business of commercial
forestry operations, which includes the plantation sales assets,
machinery and equipment and plantation contracts carried on by
[Kluh]
at the plantations and the plantation immovable property as defined,
as a going concern’. Clause 4 of the agreement
recorded that:
‘
4.1
The purchase price of the business will be established by an
independent nationally recognised
valuer, whose valuation will
specify the value of:
a)
the immovable land;
b)
the standing timber, plantation stocks and other assets.
4.2
The purchase price will be as valued by the valuer provided that the
value of the standing
timber and plantation stocks as at 30 June 2003
will be not more than R98 million (Ninety Eight Million Rand), and
the value of
the immovable land will not be less than R10.5 million
(Ten comma Five Million Rand).’
[4]
Certain disputes arose between the parties flowing from that
agreement. Those were resolved by way of a settlement agreement
concluded on 29 July 2004. In terms of that settlement agreement,
which had a new effective date of 1 June 2004, the ‘final
purchase price’ of the combined assets was agreed at R159.7
million, of which R144.7 million was in respect of ‘the
plantation’, which was defined in clause 2.5.9 as:
‘
the
Standing Timber on the Immovable Property and, for the purposes of
expressing the value thereof as part of the Purchase Price,
includes
the plantation business (ie the business of commercial forestry
operations) including the Plantation sale assets, machinery
and
equipment and Plantation contracts, all as a going concern’.
[5]
The appellant, the Commissioner for the South African Revenue Service
(SARS), assessed Kluh to tax on the basis that the proceeds
of that
sale formed part of its gross income by virtue of s 26(1) of the
Income Tax Act 58 of 1962 (the Act) read with paragraph
14(1) of the
First Schedule thereto. The Tax Court (per Davis J) agreed with SARS.
It accordingly dismissed Kluh’s appeal
to it and ordered that
‘[t]he initial assessment be amended by the addition of an
amount of R12 million by virtue of s
129(b) of the Tax Administration Act’. The full court of the
then Western Cape Division of the High Court, Cape Town (per
Rogers
J, Traverso DJP and Allie J concurring), in overturning the decision
of the Tax Court, held that the proceeds of the sale
were not gross
income in terms of s 26(1) of the Act. The full court accordingly
issued the following order (para 91 of its judgment):
‘
(a)
The appeal is upheld with costs, including those attendant on the
employment of two counsel.
(b)
The order made by the tax court on 19 August 2013 is set aside and
replaced with an
order in the following terms:
“
(i)
The appellant’s appeal against the additional assessment in
respect of its 2004
tax year, with a due date 1 September 2010,
succeeds and the said additional assessment is set aside.
(ii)
The capital gains tax treatment arising from the appellant’s
acquisition and
disposal of the plantation and land which was the
subject of the additional assessment is remitted to the tax court for
determination
on the pleadings already filed in the tax court on the
capital gains tax issues.”’
SARS
appeals with the leave of this Court.
[6]
Section 26(1) of the Act provides:
‘
The
taxable income of any person carrying on pastoral, agricultural or
other farming operations shall, in so far as it is derived
from such
operations, be determined in accordance with the provisions of this
Act but subject to the provisions of the First Schedule.’
The
term ‘farming operations’ in the provision shall, insofar
as it is derived from such operations, be determined in
accordance
with the provisions of the Act, but subject to the provisions of the
First Schedule (
Commissioner for Inland Revenue v D & N
Promotions (Pty) Ltd
[1994] ZASCA 176
;
1995 (2) SA 296
(A) at 304G). The First
Schedule is concerned with the ‘Computation of Taxable Income
from Pastoral, Agricultural or other
Farming Operations’. It
deals in detail with how taxable income derived from farming
operations is to be computed. To the
extent here relevant, paragraph
14 thereof reads:
‘
(1)
Any amount received by or accrued to a farmer in respect of the
disposal of any plantation
shall, whether such plantation is disposed
of separately or with the land on which it is growing, be deemed not
to be a receipt
or accrual of a capital nature and shall form part of
such farmer’s gross income.’
[7]
The primary issue in this appeal is whether Kluh was ‘carrying
on farming operations’ as contemplated by s 26(1)
of the Act.
As Corbett CJ observed in
D & N
Promotions (Pty) Ltd
(above) at 305G:
‘
It
is normally to the advantage of a farmer that income earned by him be
classified as derived from farming operations because he
can then
deduct therefrom the type of expenditure referred to above; whereas
such expenditure cannot be deducted from income not
derived from
farming operations. Conversely it is to the advantage of the
fiscus
that
such income be classified as income not derived from farming
operations.’
In
a somewhat ironical reversal of roles, in this case it is the
taxpayer who contends that it was not conducting farming operations
and SARS who asserts that it was. Both the Tax Court and the full
court approached the enquiry on the basis that the ‘critical’
or ‘important’ facts for the purposes of answering the
question whether the appellant was carrying on farming operations
were common cause. However, on those common cause facts they reached
starkly contradictory conclusions.
[8]
In arriving at its conclusion, the Tax Court stated (paras 48 and
56):
‘
Without
wanting to impugn the credibility of any of appellant’s
witnesses, it would have been highly surprising if any other
version
would have been forthcoming from them. To this extent therefore, the
court is obliged to evaluate their evidence with a
great degree of
care through the prism of documentary evidence which was so
presented. The outcome of this evaluation may more
accurately
determine whether appellant has discharged the required onus.
.
. .
When
the objective evidence, particularly the range of documents to which
I have references, including contracts and financial statements
are
considered. They all indicate in the direction that appellant was
conducting a business of plantation farming. Even in the
event that
beneficial consideration is given to appellant’s case by virtue
of amendments to various documents, it would appear
that the thrust
of contemporaneous documentation supports respondents’ case, to
the extent that appellant has not discharged
the onus of proving that
its intention differed from that which is recorded in these financial
documents, contracts, minutes and
resolutions, namely that it had
bought and sold the plantation businesses as a going concern and that
it employed Steinhoff to
manage its plantation business on its
behalf. Expressed in the terms employed in ITC 1185, when the
evidence of Messrs van der
Merwe, Pretorius and Evans is tested
against the documentary evidence, the probabilities cannot be said to
favour appellant’s
version to justify a conclusion that it has
discharged its onus.’
[9]
It thus seems, as the full court observed, that: ‘the tax court
did not find persuasive the oral testimony of the witnesses
who said
that [Kluh] was not conducting and did not intend to conduct a
plantation business’. In my view, the full court
was justified
in declining to endorse the approach of the Tax Court, for, as this
court recently reiterated in
Commissioner, South African Revenue
Service v Pretoria East Motors
(Pty) Ltd
2014 (5) SA 231
(SCA) para 8:
‘
It
is so that the taxpayer’s
ipse
dixit
will not lightly be regarded as decisive. But it must be considered
together with all of the other evidence in the case. And, given
the
unfavourable position of having the onus resting upon it – a
“formidable and difficult” one to discharge
(per Trollip
JA;
Barnato
Holdings Ltd v Secretary for Inland Revenue
1978
(2) SA 440
(A) at 454A-B) – the interests of justice require
that the taxpayer’s evidence and questions of its credibility
be
considered with great care. Indeed the taxpayer’s evidence
under oath and that of its witnesses must necessarily be given
full
consideration by the court, and the credibility of the witnesses must
be assessed as in any other case that comes before the
court. (See
Maland
v Kommissaris vir Binnelandse Inkomste
1983 (3) SA 1
(A) at 18E.) It thus remains the function of the court
to make a determination of the issues that arise for decision on an
objective
review of all of the relevant facts and circumstances. Not
the least important of the facts, according to Miller J (
ITC
1185
[1972] 35 SATC 122
(N) at 124) –
“
will
be the course of conduct of the taxpayer in relation to the
transactions in issue, the nature of his business or occupation
and
the frequency or otherwise of his past involvement or participation
in similar transactions. The facts in regard to those matters
will
form an important part of the material from which the court will draw
its own inferences against the background of the general
human and
business probabilities”.’
[10]
There is no definition of ‘farming operations’ in the Act
and whether or not a person’s economic activity
constitutes
farming operations is essentially a question of fact (
D & N
Promotions (Pty) Ltd
(above) at 306A-B). The full court thus
correctly held in para 9 that: ‘the questions whether a person
is carrying on farming
operations and whether particular income has
been derived from farming operations are questions of fact . . .’.
It then added:
‘
But
the interpretation of s 26(1) and para 14 is a matter of law. Once
all the facts relevant to determining whether the case does
or does
not fall within s 26(1) and para 14 have been ascertained, the
question whether on those facts there has been a carrying
on of
farming operations seems to me to be a question of law. Even if it
were regarded as a question of fact or a mixed question
of fact and
law, it is not the sort of matter in regard to which an appellate
court would need to display the caution or deference
mentioned in
Mkhize
and earlier cases to similar effect.’
Later
the full court observed in paras 53, 55 and 60 respectively:
‘
Insofar
as SARS’ argument rests on the closeness of the connection
between the disposal proceeds and the conducting farming
operations,
I consider that the argument (and the finding of the tax court)
conflates two distinct issues. Section 26(1) does not
apply merely
because there has accrued to the taxpayer income which has “derived
from” farming operations; the section
applies to a person
carrying on farming operations to the extent that his income is
derived from such operations. Two questions
must therefore be
answered: (i) Was the person whom SARS wishes to tax a person
carrying on farming operations during the year
of assessment in
question? (ii) If so, did the particular item of income in dispute
derive from those farming operations?
.
. .
However,
where the first of the two questions I have identified is in issue,
it is impermissible to proceed directly to the second
question as if
it will also provide an answer to the first. The question is not
whether the accrual to the taxpayer of a particular
item of income is
directly connected to the farming operations of any person but
whether it is directly connected to (ie derived
from) the farming
operations of the taxpayer himself.
.
. .
If,
on the facts of the present case, one were to conclude that the
appellant was conducting farming operations, I think it would
follow
almost as a matter of course that the proceeds of the disposal
accrued to the appellant as a farmer. Ordinarily such a disposal
would be of a capital nature but para 14 of the First Schedule deems
it to be gross income. The real issue in the present case
is not the
second one (a sufficiently close connection between the income and
farming operations) but the threshold enquiry whether
the appellant
was carrying on farming operations.’
[11]
The approach of the full court conduces to confusion. As Innes CJ put
it in
Commissioner for Inland Revenue v
George Forest Timber Co Ltd
1924 AD 516
at 523: ‘It is dangerous in income tax cases to depart from the
actual facts; the true course is to take the facts as they
stand and
apply the provisions of the statute.’ The facts here are:
Steinhoff had initially purchased the plantation itself,
with the
intention of carrying on its own farming operations thereon, as
already mentioned, but was not permitted to proceed with
this
agreement because the board of its ultimate holding company prevented
it from owning the land, due to the Group’s then
policy not to
own land in South Africa. Steinhoff thus acquired from Thesen,
independently of Kluh, all the equipment and the personnel
required
to carry on farming operations on the plantation. When Thesen
disposed of the plantation to Kluh in 2001, it was already
a mature
plantation in rotation. The plantation, which had been well managed
by Thesen (which was regarded by the witness Mr Van
der Merwe of
Steinhoff as having one of the best plantation teams in the country),
had reached the stage where it could annually
yield a steady and
sufficient number of mature trees for commercial felling, with
younger trees taking their place year by year.
Steinhoff, which owned
the equipment necessary for conducting the plantation operations and
employed the employees who worked on
the plantation (mostly taken
over from Thesen), was entitled to harvest the timber for its own
account. Kluh owned no equipment
and had no employees. All
operational income and expenditure were earned and incurred by
Steinhoff and reflected in its accounts.
Thus, Kluh’s financial
records and financial statements for the period between the
acquisition and the disposal of the plantation
reflect no operational
income and expenditure. The oral arrangement between Kluh and
Steinhoff was for an indefinite duration and,
due to the Steinhoff
group policy in 2001 not to own land in South Africa, it was expected
to endure for a lengthy period –
although either party could
obviously have terminated the arrangement on reasonable notice. On
termination of the arrangement,
the plantation would comprise trees
of the same volume and quality as at the commencement. This meant
that Steinhoff, in conducting
the plantation operations, had to keep
the plantation in rotation and perform such other pruning, thinning
and maintenance as would
ensure that, upon termination, it could
restore the plantation as in its June 2001 state. Planting was not
required as seedlings
grew naturally. Steinhoff was required to
manage the plantation using best practice so that, what was described
as, Forest Stewardship
Council certification could be obtained,
thereby ensuring that the timber would qualify for export to Europe.
Steinhoff, which
was responsible for fire protection, had insured the
plantation against fire in the light of its obligation to restore the
plantation
to Kluh at the end of the arrangement. In the event, Kluh
derived no income from the actual day-to-day plantation farming
operations
and incurred no corresponding day-to-day expenditure.
[12]
Thus from the very beginning Kluh wanted nothing to do with any
farming operations. Quite apart from the fact that it had neither
the
appetite for the risks associated with farming nor the requisite
skills, equipment and personnel to undertake farming operations,
the
whole
raison d’être
of Kluh’s involvement
was to acquire bare ownership of the land and the plantation, which
Steinhoff was prevented from doing.
That being so, it was hardly
surprising that the full court answered, what it described as the
‘threshold enquiry’,
thus (para 83):
‘
.
. . Here, however, the appellant did not even start to conduct
plantation operations. From the outset the appellant made the
plantation available to Steinhoff so that the latter could conduct
plantation operations for its own profit and loss.’
That
conclusion, ought, ordinarily at any rate, to have been dispositive
of the primary enquiry in the matter. It was thus unnecessary
for the
full court to have proceeded – as it did - to an interpretation
of s 26 of the Act. For present purposes, whether
it was correct in
its interpretive exercise need hardly detain us. I accordingly
specifically refrain from commenting one way or
the other on the
correctness of the full court’s approach.
[13]
The further branches of SARS’ argument must now be considered.
SARS contends that: first, the purpose of paragraph 14(1)
of the
First Schedule to the Act is to extend tax liability by treating the
proceeds of the disposal of a plantation as gross income;
second, the
mere disposal of a plantation by its owner constitutes the conduct of
farming operations for purposes of s 26(1), irrespective
of the
extent to which the owner was involved in the actual conduct of
farming operations prior to or separately from such disposal,
and,
third, the farming operations were conducted by Steinhoff ‘on
behalf of’ Kluh.
[14]
As to the first
:
Paragraph 14(1) is a deeming provision which, on its own wording,
only applies to a farmer in respect of such farmer’s gross
income. ‘A farmer’ in that provision is clearly a
short-hand for a person carrying on farming operations as
contemplated
in s 26(1). Carrying on ‘farming operations’
as contemplated in s 26(1), is clearly the necessary prerequisite
that triggers the applicability of the whole of the First Schedule,
including the deeming provision in paragraph 14(1). It must
follow
that the deeming provision itself cannot be employed to determine
whether or not a taxpayer is ‘a farmer’ or
differently
put ‘a person carrying on farming operations’.
Accordingly, the content of the deeming provision
in paragraph 14(1),
namely that ‘any amount . . . shall . . . be deemed not to be
of a capital nature and shall form part
of such farmer’s gross
income’, is the consequence of carrying on farming operations,
and cannot itself be determinative
of whether a person is or is not
carrying on farming operations ie whether a person is ‘a
farmer’ as contemplated in
paragraph 14(1). In short, the
deeming provision in paragraph 14(1), on its plain wording, only
applies to farmers, and logically
one cannot use the deeming
provision itself to determine who is and who is not a farmer. It must
follow that the first contention
advanced by SARS is fallacious
because one cannot use a deeming provision that only applies if Kluh
is a farmer to determine whether
Kluh is a farmer.
[15]
As to the second
:
To say, as SARS does, that the purpose of paragraph 14(1) is to
extend tax liability by including the proceeds of the disposal
of a
plantation in gross income may well be misleading. The general rule
is that s 26(1) and the First Schedule to the Act does
not apply
unless the taxpayer is carrying on farming operations. SARS suggests
that reading s 26(1) and paragraph 14(1) together,
the proceeds of
the disposal of a plantation must constitute income derived from
farming operations, otherwise they would not be
‘captured by s
26(1)’. SARS thus asserts that: ‘the act of disposing of
a plantation in its entirety is itself
recognised by the Act as a
farming operation. It must follow that in so doing, the owner is at
that very moment ‘carrying
on farming operations’, in
accordance with s 26(1), irrespective of what else he or she has done
in relation to the plantation.
As I have already pointed out,
paragraph 14(1) only applies where ‘farming operations’
as contemplated in s 26(1) are
carried on. Paragraph 14(1) then deems
the proceeds of the disposal of a plantation not to be of a capital
nature and requires
such proceeds to be included in the farmer’s
gross income. It does not cause any proceeds to be ‘captured by
s 26(1)’
as contended by SARS. Paragraph 14(1) recognises that
the disposal of a plantation is not per se a farming operation. As
Maasdorp
CJ observed in
Chotabhai v
Minister of Justice and Registrar of Asiatics
1911 AD 13
at 59, ‘. . . when it is said that a thing is to be
deemed to be something, it is not meant to say that it is that which
it is deemed to be. It is rather an admission that it is not that
which it is deemed to be, and notwithstanding it is not that
particular thing, nevertheless, for the purposes of the Act, it is
deemed to be that thing.’ Even where the taxpayer is a
farmer,
paragraph 14(1) contemplates that the proceeds of the disposal of a
plantation are in fact of a capital nature. This is
why a farmer’s
proceeds from the disposal of a plantation are deemed not to be of a
capital nature and are required to be
included in the farmer’s
gross income in terms of paragraph 14(1). Such proceeds are not
‘captured by s 26(1)’,
as suggested by SARS, but simply
included in the farmer’s gross income in terms of paragraph
14(1). It may be so that s 26(1)
brings the deeming provision in
paragraph 14(1) into operation, but it is wrong to say that the mere
disposal of a plantation is
therefore recognised as a farming
operation. It seems to me, that the presence or absence of what is
signified by the ‘carrying
on of farming operations’ as
contemplated in s 26(1), and by the words ‘a farmer’ and
‘such farmer’s’
in paragraph 14(1), must therefore
be determined without placing any reliance on the deeming provision
in paragraph 14(1). Indeed,
from the bar in this court, counsel for
SARS was constrained to concede that his argument would only be
tenable if we were to substitute
the word ‘taxpayer’ for
that of ‘farmer’ in paragraph 14(1). That we cannot do.
Moreover, paragraph 14(1),
triggered by s 26(1), recognises that the
proceeds of the disposal of a plantation are in fact of a capital
nature, but only in
the case of a farmer. If such proceeds were in
fact not of a capital nature there would be no need for the deeming
provision and
indeed for paragraph 14(1). In
Commissioner
for Inland Revenue v George Forest Timber
(above)
at 523-4, Innes CJ stated:
‘
The
facts here are that the company did not purchase the timber
separately; it bought the land, and the trees went with it, because
they were attached to and formed portion of the realty; that they
were by far the most valuable portion, and that they induced
the
purchase, cannot affect the legal position. As and when acquired the
trees growing on the soil were not in the same position
as goods in a
warehouse.’
The
Learned Chief Justice added (at 526):
‘
.
. . Land with a valuable forest upon it was bought in order that a
revenue might be obtained from it by felling, working-up and
then
selling the timber. No doubt the trees constituted the chief value of
the property, and formed the inducement for its acquisition.
But the
same might be said of the stone or the clay in land purchased for the
purpose of a quarry or a brickfield. They formed
part of the realty
to which they acceded, and they passed with it.’
[16]
As to the third:
SARS’s counsel put his case to Mr
Evans, the CEO of Kluh, as follows:
‘
Mr
Sholto-Douglas: I’m going to ask you to comment on a final
proposition, and that is simply this, that Kluh farmed the
plantation, not by itself getting its hands dirty, but by employing a
manager in the form of Steinhoff to do the dirty work, and
paying it
in wood that was harvested, and R12 million. That is what we get out
of all the documentation and all this history, and
that’s the
true state of affairs.
Mr
Evens: I’m sorry, I can’t agree.
[Mr
Sholto-Douglas]: In short, Kluh was a plantation farmer and SSC
[Steinhoff] its manager.
Mr
Evans: Again, I’m sorry, I can’t agree.’
But,
even if Steinhoff in some sense acted on behalf of Kluh, that would
not make Kluh a farmer as contemplated in paragraph 14(1).
On the
facts, Kluh did not have the right to the yield of the plantation –
it had granted this right to Steinhoff for the
duration of the
agreement. Kluh also did not have the use of the land and the
plantation, which right it once again had granted
to Steinhoff for
the duration of the agreement between them. And Kluh did not derive
any income from the land and the plantation,
the use of which it had
granted to Steinhoff to farm for its own benefit, on its own behalf,
and for its own account. Thus, the
only entity which could be
regarded as a ‘farmer’ (as contemplated in paragraph
14(1)) in relation to the plantation
owned by Kluh, was Steinhoff. On
this score the full court (para 86) concluded:
‘
I
think Mr Kuschke was correct in submitting that, at most, Steinhoff
was managing the appellant’s investment while at the
same time
managing its own farming operations. I do not believe that the
documents or witnesses intended to convey more than this.
Steinhoff
could not be regarded as having been managing the farming operations
on behalf of the appellant for a fee (in the form
of felled timber)
when the appellant stood to make no profit or loss from the farming
operations. The only risk which the appellant
faced, if Steinhoff
failed to conduct itself in accordance with the agreed standard, was
that its investment’s value might
suffer, a risk which a
landlord or bare
dominium
owner would also face if the tenant or usufructuary breached his
obligations.’
In
my view that conclusion cannot be faulted.
[17]
In the result, SARS’ appeal must fail and it is accordingly
dismissed with costs, such costs to include those consequent
upon the
employment of two counsel.
_________________
V
M Ponnan
Judge
of Appeal
APPEARANCES:
For
Appellant:
AR
Sholto-Douglas SC (with him MW Janisch SC and H Cassim)
Instructed
by:
The
State Attorney, Cape Town
The
State Attorney, Bloemfontein
For
Respondent:
L
Kuschke SC (with him T Emslie SC)
Instructed
by:
Werksmans
Attorneys, Cape Town
Lovius
Block, Bloemfontein