Page 744 - SAIT Compendium 2016 Volume1

CASE DIGEST 2012–2013
The appellant worked for certain divisions of a number of af liated companies and all income from the rendering of such services to those companies accrued to the trust. The appellant was not remunerated for the services he rendered to the trust and no formal agreement was entered into between the appellant and the trust, with regard to the services he rendered to the companies. The appellant, however, transferred income from the bank account of the trust to his own bank account and was not compelled to comply with the trust objectives when he spent the money from his personal bank account.
Held
The court held that a series of transactions was entered into by the appellant, with the sole purpose of avoiding income tax. The appellant was not compelled to account to the trust at all, even though he had allowed income received from the services he rendered to accrue to the trust and this showed an abnormal state of affairs. The arrangement between the appellant and the trust resulted in abnormal rights and obligations, that would have not been created between persons dealing at arm’s length and it was accordingly held that all four elements of s 103(1) were present in relation to the series of transactions entered into by the appellant.
[Link: http://c.ymcdn.com/sites/www.thesait.org.za/resource/resmgr/2014_case_law/income_tax_case_no_1864_75_s. pdf]
11. Liability of taxpayer, in terms of the Value-Added Tax Act, to pay output VAT, penalties and interest on ctitious invoices issued by it
[ITC 1865 75 SATC 250 (South Gauteng Tax Court Johannesburg – 13 November 2012)]
Introduction
The appellant objected to an assessment letter issued by the respondent, the appellant’s reason being that it did not constitute an assessment as envisaged in s 31(4) and (5) of the Value-Added Tax Act 89 of 1991 (the ‘VAT Act’). The appellant further lodged an objection to the assessed penalties and interest. The respondent had disallowed the appellant’s objections to the assessment on supplies provided by it to C (Pty) Ltd and D (Pty) Ltd. The appellant argued that it had not supplied services to C (Pty) Ltd and D (Pty) Ltd as contemplated in the VAT Act, and had therefore not under-declared output VAT. He was, therefore, not liable to the respondent for output VAT in respect of rental payable by C (Pty) Ltd and D (Pty) Ltd as speci ed in the VAT invoices on record.
Facts
The appellant, a company registered as a VAT vendor in terms of the VAT Act, was a property owner and had conducted business as a landlord. The appellant had entered into three lease agreements with three af liated companies. The appellant and the lessees constituted a group of companies. The appellant issued ctitious tax invoices to two of the companies being (C (Pty) Ltd and D (Pty) Ltd). Both companies, however, had no employees and therefore did not occupy any premises. These ctitious tax invoices were to be used for the purposes of opposing an application for its liquidation, and as a result, these invoices were never given to either C (Pty) Ltd or D (Pty) Ltd.
Held
The court held that the appellant had correctly acknowledged the assessment letter as the appellant’s legal representative had lodged an objection to the letter of assessment and the said objection referred to the contents of the letter of assessment as an ‘assessment’. The tax invoices generated by the appellant complied with the provisions of s 20(4) of the VAT Act. In terms of s 9(1), VAT was payable as soon as the appellant had issued tax invoices. In the case of a vendor who rented out property, the declaration of output tax was not dependent upon whether such vendor elected to enforce payment by the lessee in terms of a lease agreement during the term of the lease. In a previous case, the appellant was found to be liable for output tax in relation to ctitious VAT invoices it had issued when it had participated in fraud for its own gain. The appeal was dismissed with costs.
[Link: http://c.ymcdn.com/sites/www.thesait.org.za/resource/resmgr/2014_case_law/income_tax_case_no_1865_75_s. pdf]
12. Whether an application to review the Commissioner’s decision in terms of s 20(7) of the Value- Added Tax Act can be launched in the Tax Court?
[ITC 1866 75 SATC 268 (Pretoria Tax Court – 10 September 2012)]
Introduction
This appeal dealt with the question as to whether an application to review the Commissioner’s decision in terms of s 20(7) of the Value-Added Tax Act 89 of 1991 (the’ VAT Act’) should be launched in the High Court. The appellant argued that the review was possible and fell within the powers of the Tax Court.
Facts
The appellant, a previously registered VAT vendor, submitted VAT returns without their supporting documents. The respondent, being the CSARS, instituted an audit on the appellant’s affairs. The appellant objected against the audit and relied on s 20(7) of the VAT Act, which states that ‘where the Commissioner is satis ed that there are or will be suf cient records available to establish the particulars of any supply or category of supplies, and that it would be impractical to require that a full tax invoice be issued in terms of this section, the Commissioner may, subject to such conditions as he may consider necessary, direct that any one or more of the particulars speci ed in the Act shall not be contained in a tax invoice or that a tax invoice is not required to be issued.’
736 SAIT CompendIum oF TAx LegISLATIon VoLume 1