Below, please find issue 70 of ENSafrica's tax in brief, a snapshot of the latest tax developments in South Africa.
- High Court, Western Cape division | PERI Formwork Scaffolding Engineering (Pty) Ltd v Commissioner for the South African Revenue Service
- PERI Formwork Scaffolding Engineering (Pty) Ltd ("the Appellant") appealed to the High Court against a Tax Court finding that it was late in making payment of employees' tax and furthermore that no reasonable grounds existed for the late payment.
- the Appellant's first ground of appeal was that the Tax Court erred in its application of paragraph 2(1) of the Fourth Schedule to the Income Tax Act, 1962 ("ITA") as the due date for the payment was incorrectly determined by the Tax Court. The Appellant argued further that the Tax Court misinterpreted section 244(1) of the Tax Administration Act, 2011 ("TAA"), which resulted in the failure of the Tax Court in applying the rules regarding the computation of the last day within which the Appellant was permitted to tender the payment to the South African Revenue Service ("SARS").
- the Appellant's second and alternative ground of appeal was that it had reasonable grounds for making the alleged late payment to SARS and thus was entitled to the relief provided in section 217(3) of the TAA, which entails the remittance of penalties at SARS' discretion.
- the Appellant was unsuccessful on the first ground of appeal.
- in respect of the second ground of appeal, the court:
- dismissed the Appellant's reliance on the decision in Attieh v the Commissioner for the South African Revenue Service  ZAGPJHC 371 ("Attieh") on the basis that the facts were distinguishable: in Attieh, the taxpayer relied on the expert advice of a tax consultant to determine its capital gains tax liability to SARS; in the present matter the Appellant had relied on its book-keeper's advice regarding cash inflow over the "festive period", i.e. at a time when people do not have excess funds;
- held that although the Appellant should have predicted its inability to make payment of employees' tax to SARS, the manner in which it attempted to rectify this issue (namely, the Appellant had given instructions to its bank to process payment and raised additional funds to cover its tax liability) constituted a reasonable ground for which the penalty imposed should have been remitted, particularly in light of the fact that the non-compliance constituted a first incidence by the Appellant. The Court also considered that the payment was inevitably delayed because it was processed over a weekend;
- held that there was no prejudice caused to SARS, no mala fides in the Appellant's actions and the Appellant made every effort to cover its liability and meet its tax obligations once it realised that the payment would not be effected timeously.
- the appeal was upheld with costs.
- find a copy of the judgement http://www.saflii.org/za/cases/ZAWCHC/2021/165.pdf
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