Page 716 - SAIT Compendium 2016 Volume1

CASE DIGEST 2008–2009
2008–2009
1. A High Court has no power to give a decision on the constitutional invalidity of a Bill
The taxpayer in Minister of Finance v Paper Manufacturers Association of South Africa (2008) 70 SATC 267 (SCA) had applied to the High Court in Pretoria for an interim interdict prohibiting the Minister of Finance from introducing into Parliament a bill to amend the Customs and Excise Act 91 of 1994 to the extent that it amended schedules to the Act which had the effect of reducing, removing, or lowering rates of duty and rebates on paper and paperboard products.
These amendments had been sought by the Paper Industries Federation of South Africa (the second appellant) who had sought a lower import levy on paper and paperboard. The respondent, the Paper Manufacturers Association of South Africa, whose members manufacture paper and paperboard locally, objected to the bill because the abolition or lowering of import levies would make their prices less competitive. The respondent wished to review the recommendation by the International Trade Administrative Commission which had given rise to the bill in question.
The Pretoria High Court had granted the requested interim interdict, and the matter went on appeal to the Supreme Court of Appeal.
The Supreme Court of Appeal set aside the decision of the High Court, and substituted a decision dismissing with costs the application for an interdict.
The basis of the decision of the Supreme Court of Appeal was that the respondent had no right to the relief sought because, in terms of the Constitution, a High Court has no power to give a decision on the constitutional invalidity of a bill, as distinct from an Act of Parliament.
2. Unilateral reversal of credit
In Pestana v Nedbank Ltd (2009) 71 SATC 1, 2008 (3) SA 466 (W) the Commissioner, acting in terms of s 99 of the Income Tax Act 58 of 1962 had appointed Nedbank Ltd as its agent, and had instructed the bank’s head of ce to debit the account of the taxpayer and to pay over certain amounts standing to the credit of the taxpayer. Before the relevant bank of the branch had received this instruction, it complied with instructions from the client to transfer funds in his account to a third party. Immediately the bank realised its mistake, it reversed the credit.
It was held that the bank could not unilaterally reverse the credit.
3. Legal Notice ultra vires the enabling statute
In 2005 the Commissioner of Taxes issued Legal Notice 150 pursuant to s 59B of the Income Tax Order 1975 – Order
no 21 of 1975 which was an income tax directive to all persons making payments to resident contractors and to persons supplying goods or services to the government or to parastatals.
Legal Notice 150 provided that every person who contracts with a resident contractor or subcontractor or with a resident person for the performance of construction operations performed in Swaziland was required to deduct or withhold tax at the rate of 10% of the gross amount so payable.
In Commissioner of Taxes v Process Automated (Pty) Ltd (2009) 71 SATC 9 (Supreme Court of Swaziland) the Supreme Court of Swaziland held that Legal Notice 150 was ultra vires the authorisation of the enabling statute, namely section 59B of the Income Tax Order 21 of 1975.
4. What is ‘entertainment’ for purposes of VAT?
The CIR v Namsov Fishing Industries (Pty) Ltd (2009) 71 SATC 16 (NamSC) case involved the issue of whether supplies of food and beverages to crew members for purposes of victualling shing vessels and providing meals to seamen when the vendor’s shing vessels were at sea constituted ‘entertainment’ as envisaged in s 19 of Namibia’s Value-Added Tax Act 10 of 2000, and whether the input tax payable was deductible by a vendor who was a harvester and processor of sh.
The Supreme Court of Namibia held that although the provision of food in these circumstances amounted to ‘entertainment’, the catching and marketing of sh could not be described as entertainment, but as the ordinary course of the vendor’s business. It was held that the input VAT paid in regard to such food or rations by the vendor was not deductible in terms of the Act.
5. STC payable on dividend distribution
In ITC 1834 (2009) 71 SATC 24 the taxpayer company, the holding company in a group, decided to sell and dispose of its assets in a group of companies. Thereafter, the taxpayer received a dividend from a subsidiary and resolved to distribute that dividend to its shareholders, and thereafter resolved to liquidate the subsidiary.
In determining the amount of STC payable with respect to the dividend distribution to shareholders, it was held that an incoming dividend that is exempt in terms of s 64B (5) (c) in the hands of the subsidiary is neither exempt nor deductible for the purpose of determining STC on a dividend declared by a holding company unless it was declared in the course of or in anticipation of the liquidation of the holding company. It was held accordingly that the disputed amount was not exempt from STC in the taxpayer’s hands.
6. The meaning of ‘trading stock’ in the Income Tax Act 58 of 1962
The issue in case ITC 1836 (2009) 71 SATC 115 was whether certain phoscorite ore dumps constituted ‘trading stock’, as de ned in s 1 of the Income Tax Act 58 of 1962. The taxpayer, a phosphate mining company, had entered into an agreement with another mining company whereby the latter would extract phosphate-bearing ore from the earth on behalf of the taxpayer, and the taxpayer in turn would bear a portion of the mining costs incurred by the other company in respect of the phosphate-bearing ore in issue. The phosphate-bearing ore was then crushed and separated and the nal product was sold to worldwide customers. SARS included in the taxpayer’s taxable income its share of the cost of extraction as representing closing stock on hand at the end of relevant year of assessment. The Tax Court held that the phosphate-bearing ore was not acquired for the purpose of manufacture and the ore stockpiles therefore did not
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