Most Read Contributor in South Africa, September 2016
The South African Revenue Service ("SARS") increased
their audit activity and focus on the collection of tax. Taxpayers
often rely on protection in terms of administrative law and in
particular, the Promotion of Administrative Justice Act, No. 3 of
2000 ("PAJA"). An important rule under PAJA is that
judicial review can only be used as a last resort after all other
internal remedies have been exhausted and taxpayers therefore first
have to make use of the objection and appeal procedures provided
for in the Tax Administration Act, No. 28 of 2011. The case
outlined below highlights the nature of some of SARS' actions
that may be brought under judicial review in terms of section 6 of
PAJA and the circumstances under which such a review application
might be dismissed.
MTN International (Mauritius) Limited v Commissioner for the
South African Revenue Service (unreported, case number
In the recent North Gauteng High Court judgement of MTN
International (Mauritius) Limited v Commissioner for the South
African Revenue Service, the taxpayer brought an application
in terms of section 6 of PAJA for the review of the procedural
defects and actions of the Commissioner for SARS in the raising of
an additional income tax assessment. An order was sought to set
aside the assessment and to refund monies withheld by SARS.
The taxpayer in this case was a company registered in Mauritius,
registered as a taxpayer with SARS and a subsidiary of a South
African holding company. The taxpayer incurred interest
expenditures on loans granted by its holding company and claimed a
deduction on the interest in terms of the Income Tax Act, No. 58 of
1962 ("the Act"). The original assessment was issued on 1
April 2008. Issues arose regarding whether the taxpayer was allowed
to claim the deduction and the Commissioner for SARS decided to
conduct an audit based on its view that the interest expenditure
was 'unproductive interest'.
A letter of findings was issued to the taxpayer on 24 February
2011 and the taxpayer replied on 25 March 2011. On 31 March 2011
SARS raised an additional assessment and emailed the assessment on
the same day to the applicant, but indicated the 'due date'
of the assessment as 30 March 2011. It is important to note that
SARS' power to raise an additional assessment would have
prescribed in terms of section 79 of the Act on 31 March 2011. SARS
also indicated the 'second date' as being 31 March 2011
instead of setting it at 30 days later as normally done in
practice. The taxpayer submitted that SARS could not raise an
assessment that omitted the period for payment entirely, and that
by predating the 'due date', the taxpayer was deprived of
the 30 days from 'due date' within which to object or to
request reasons or time within which to pay the assessed
SARS relied on the Constitutional Court decision in Metcash
Trading Limited v Commissioner, South African Revenue Services 2001
(1) SA 1109 (CC) and submitted that where a specialist court,
such as the Tax Court, had been assigned to hear appeals against
tax assessments, the High Court did not have jurisdiction to
adjudicate where there is only a dispute of fact and no question of
law. The court agreed that there was indeed a dispute of fact
because of the allegation made against SARS, which revolved around
the reasons for raising the assessment and for fixing the 'due
date' and the 'second date'. The court held that it
could not decide whether the alleged manipulation of the dates was
mala fide (in bad faith) since it was an issue that had to be
decided by the Tax Court.
It is not clear from the case whether all internal remedies were
first exhausted by the taxpayer or whether the application in terms
of section 6 of PAJA was brought due to the fact that the taxpayer
felt it was deprived of the opportunity to object. The important
point illustrated by the case is that a review application under
PAJA is not suitable where there might be a dispute of facts.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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