Page 741 - SAIT Compendium 2016 Volume1

CASE DIGEST 2012–2013
The second respondent in this case, the South African Revenue Service (SARS), submitted that the Constitution only protects reasonable expectations of privacy and does not refer to business premises registered and licensed under the Customs and Excise Act, or those used to conduct the business of persons registered in terms of this Act. Furthermore, SARS argued that the distinction between routine and non-routine searches is not a constitutional requirement and not practical to apply. SARS also opposed the wording of the High Court’s reading-in and stated that it was overly constraining, impractical and confusing.
Held
Firstly it had to be determined whether s 4 was unconstitutional and invalid. The court found that this section did limit the right to privacy but that it could be justi ed. It was concluded that the limitation of the right to privacy in this instance was necessitated by the loss of revenue resulting from the evasion of payments which is experienced by SARS in the Customs and Excise industry. It further stated that monitoring and inspection are integral parts of this industry and it would be unreasonable for an industry participant to expect a wholesome right to privacy. However, the right to privacy in respect of private homes is stronger than the right relating to business premises. Although the Act does not discriminate between these types of premises, it is reasonably expected that the law will respect and protect the privacy of participants when their private dwellings are concerned. The court stated that a warrant is needed to govern the time, place and scope of the search unless there are clear and justi able reasons for deviation from this requirement. The court also suggested that current legislation must be amended to ensure common decency and limited intrusion during a search.
The court found it to be problematic to make a distinction between routine and non-routine searches and considered it to be the duty of the lawmaker who should use the guidelines of this judgment to formulate the inner and outer reaches of search power. In conclusion, the court con rmed the constitutional invalidity of s 4 as it was made by the High Court. It ordered that the declaration of invalidity is not retrospective, in other words it had no effect on cases that were already nalised before the order was made. The legislature was granted a six-month period to cure the invalidity. It was ordered that certain reading-in to the Custom and Excise Act will apply during the period of suspension.
[Link:http://c.ymcdn.com/sites/www.thesait.org.za/resource/resmgr/2014_case_law/gaertner_&_others_(incl._ori. pdf]
8. Whether s 103 of Act 58 of 1962 applies to share buy-back transactions entered into by a taxpayer?
[A Ltd v Commissioner for the South African Revenue Services 2013 JDR 0357 (WCC) (ITC 1862 75 SATC 34)]
Introduction
This matter was an appeal against an assessment issued to the appellant by the respondent, namely the CSARS, and to get clarity on the question as to whether s 103 of the Income Tax Act 58 of 1962 (‘the Act’) applies to the share buy-back transactions entered into by the appellant.
Facts
The taxpayer, a JSE listed company, had effected a share buy-back through its wholly owned subsidiary, in order to utilise them in its employees share incentive scheme. The acquisition of the shares was funded through interest-free intra-group loans. The subsidiary, thereafter, acquired additional shares from the appellant’s company, as part of the investment-driven repurchase programme.
The respondent argued that the appellant had entered into a series of transactions in order to avoid paying STC on the share buy-back and had consequently disallowed the claim by the appellant for exemptions from STC in terms of s 64B(5)(f) of the Act, in respect of the dividends declared, based on the view that the exemptions were claimed following a transaction, operation or scheme as contemplated in s 103(1) of the Act.
Held
The court a quo held that the share repurchase programme was carried out in a normal fashion for achieving bona de business purposes and was not entered into and carried out in a manner that would not normally be employed for bona de business purposes, other than the sole purpose of obtaining of a tax bene t. The court upheld the appeal and the disputed STC assessments were set aside.
9. The application of the meaning of the word ‘disposal’ as envisaged in para 11 of the Eighth Schedule to the Income Tax Act, allowable deductions in terms of s 11(a) of that Act, and the application of s 76(1) of that Act
[ITC1863 75 SATC 125 (Pretoria Tax Court – 5 July 2012)]
Introduction
The appellant, a mining and prospecting enterprise, appealed against a tax assessment issued by the respondent (CSARS), in respect of the 2003–2006 years of assessment. The objection did, however, raise numerous issues. The matters dealt with in this appeal, includes amongst others, application of the meaning of the word ‘disposal’ as envisaged in para 11 of the Eighth Schedule to the Income Tax Act 58 of 1962 (‘the Act’), allowable deductions in terms of s 11(a) of the Act, and application of s 76(1) of the Act.
Facts
The appeal related to the following principal issues:
SAIT CompendIum oF TAx LegISLATIon VoLume 1 733
CASE DIGEST 2012-2013