Page 732 - SAIT Compendium 2016 Volume1

CASE DIGEST 2011–2012
supplies and the amounts of the invoices. The arrangement was that D Bank would deposit the amounts invoiced into the appellant’s bank account and that the appellant would return the money immediately to PQR. Mr A duly compiled three invoices for R474 194.40, R332 766.00 and R217 436.76, respectively. The amounts included VAT.
The member rst testi ed that he had been forced to submit the fake invoices, but later explained that what he had meant was that Mr B and Mr C had badgered him on a daily basis until he relented. Mr B and Mr C left the country, leaving the member in the lurch.
Decision
The appeal was dismissed with costs on the following grounds:
1. The member did not provide a credible account of the circumstances under which he had submitted the tax invoices,
and thereafter a nil VAT return
2. Whatever his explanation may be, he is patently liable in terms of the provisions of the Act for the VAT collected as
well as the punitive levies.
11. Whether services in a duty-free area of an airport were subject to VAT at the standard rate?
[Master Currency (Pty) Ltd v CSARS [2013] ZASCA 17]
Background
The appellant, Master Currency (Pty) Ltd, had appealed against the dismissal by the Johannesburg Tax Court of its objection to, and appeal against, revised value-added tax assessments in respect of the October 2003 to January 2005 tax period where it was held that the commission and transaction fees received by the appellant’s two branches operating in the duty-free area of the then Johannesburg International Airport should be standard rated in terms of s 7(1)(a) of the Value-Added Tax 89 of 1991.
Facts
In 1999 the appellant was awarded the tender to operate two bureaux de change in the duty-free area of the Johannesburg International Airport. There were numerous ‘duty free shops’ in this area where departing passengers were able to purchase goods free of taxes and duties. There was also a VAT refund administrator stationed in the area where departing nonresidents could collect cheques for the VAT they claimed back on purchases they had made in South Africa. The services rendered by the appellant at the two bureaux were, for the most part, cash transactions concluded with departing non-resident passengers in possession of a boarding pass and a passport. These passengers would present South African rands to the appellant in cash, travellers’ cheques or cheques received from the VAT refund administrator.
The appellant would then convert the rand into foreign currency, calculate the exchange rate margin and the commission and transaction fee, and present the departing passengers with an invoice. The latter would then pay over a rand amount to the appellant in exchange for the equivalent in foreign currency, less commission and a fee.
Issue
Whether the services so rendered by the appellant in that duty-free area were subject to VAT at the standard rate in terms of s 7(1)(a) of the Value-Added Tax Act 89 of 1991 or whether, on a proper construction of s 11(2)(l), the services were zero-rated.
Decision
The appellant had failed to show that the Johannesburg Tax Court had reached the incorrect conclusion. The appellant’s services rendered in the duty-free area were subject to VAT at the standard rate and were correctly so assessed.
12. Whether sections of the Customs and Excise Act allowing searches without judicial warrant were unconstitutional?
[Gaertner and Others v Minister of Finance and CSARS 2013 (4) SA 87 (WCC)] Background
Searches conducted by SARS of cials of certain premises.
Facts
On 30 and 31 May 2012 of cials of SARS conducted a search at the third respondent’s premises at Muizenberg and on 1 June 2012 they conducted a search of a private residence in Constantia in terms of s 4(4) of the Customs and Excise Act 91 of 1964, which requires no prior warrant for the search. On 2 July 2012 the applicants applied to the High Court for an order: declaring the relevant part of s 4 of the Customs and Excise Act to be unconstitutional to the extent that it permitted targeted non-routine searches to be conducted without judicial warrant; declaring that the searches had been conducted in an unlawful manner, and requiring SARS to return everything taken or copied.
Issue
The constitutionality or otherwise of sub-paras (i) and (ii) of s 4(4)(a) of the Customs and Excise Act 91 of 1964.
Decision
It was held that sub-paras (i) and (ii) of s 4(4)(a) of the Customs and Excise Act 91 of 1964 were inconsistent with the Constitution and invalid.
13. Whether the proceeds of the disposal of shares were of a capital or a revenue nature?
[A (Pty) Ltd v CSARS (Case No 13003; Cape Town Tax Court) (ITC 1862 (2013) 75 SATC 34)]
724 SAIT CompendIum oF TAx LegISLATIon VoLume 1