Page 780 - SAIT Compendium 2016 Volume1

CASE DIGEST 2013–2014
not being payable if a credit note had been issued in terms of s 21 (3) (a) of the VAT Act. The SCA agreed with the taxpayer’s contention that trade-in vehicles returned on cancellation of the offer to purchase such new vehicles, where no VAT invoice for such trade invoice had in any event been issued, did not result in an output VAT liability. The SCA upheld the taxpayer’s cross-appeal.
Incentive bonus liability
SARS was of the view that the dealer incentive bonuses received by the taxpayer from Toyota SA were taxable by virtue of the de nition of gross income in the Income Tax Act and also in terms of s 7 of the VAT Act. The taxpayer contended that SARS had included amounts from paper workings as well that should not form part of liability. The court partially upheld the appeal in respect of the working document but not in respect of the rest of the incentive bonuses, where the taxpayer had failed to support its objection.
Discount and over-allowance liability
To bypass the strict rules imposed by Toyota, the taxpayer bypassed the rule by issuing cheques to their clients that could be cashed at its front desk. The issue therefore was whether there was suf cient proof of discounts having been granted to clients. Documentary proof was provided by the taxpayer re ecting the process ow of each transaction. SARS did not refute the taxpayer’s evidence; it was merely of the view that it was for the wrong period. The court rejected this and the cross-appeal on this ground was therefore upheld.
Journals at year end added back
Two year-end journal entries that served to reduce the company’s income were claimed by the taxpayer as a deduction from income tax. SARS disallowed the deductions on the basis that they could not be explained together with the necessary proof. The taxpayer also failed in court to explain the amounts and the SCA held that the cross-appeal on this ground had therefore failed.
Stock liability
According to SARS, the taxpayer omitted certain vehicles still held in stock. The taxpayer submitted that the vehicles were sold and invoiced in the relevant year but only paid in following year, which submission was not refuted by SARS. The SCA agreed with the taxpayer’s contention and held that the removal of the vehicles from stock was correct, thus upholding the cross-appeal.
Creditors: accrued expenses and provision account
The taxpayer claimed various deductions in respect of provisions for accrued expenses. It was held that these deductions were allowable at the discretion of the Commissioner. The objection by the taxpayer to those disallowances failed because the Commissioner had exercised its discretion against the taxpayer and therefore the cross-appeal failed.
Expenses: liability
The taxpayer deducted a number of expenses for income tax and VAT purposes. Some of the expenses the taxpayer conceded were not deductible in terms of the Income Tax Act and for others there was no proof that those expenses had been properly incurred in the production of income. Therefore the cross-appeal failed.
Salaries and wages
The total expenditure incurred in relation to salaries, directors’ remuneration and commission did not agree to the amounts re ected on the taxpayer’s IRP5 certi cates and wage registers, nor did it agree to the amounts re ected in the trial balances; SARS therefore disallowed the difference. The fact that the taxpayer failed to indicate precisely where the amounts had been dealt with resulted in the court dismissing the cross-appeal.
Penalties of 200% raised
SARS imposed and the Tax Court con rmed penalties of 200% in respect of various amounts of tax held to be payable by the taxpayer. The SCA found that the Tax Court had merely ‘rubber stamped’ SARS’ decision instead of applying its own value judgement, which the SCA now had to do. The SCA held that, on the evidence before the court, the taxpayer was never found to have an intention to evade, nor was such an intention even imputed by SARS. The cross-appeal accordingly succeeded.
Costs:
The SCA substituted the Tax Court’s costs award in favour of the taxpayer with an order that each party pay their own costs for that court on the basis that the taxpayer’s success on the wide range of matters did not warrant such an order. Oddly, the SCA awarded costs in favour of the taxpayer on that exact same basis, namely that the taxpayer had substantial success on the various matters in the SCA.
25. SARS v Terraplas South Africa (Pty) Ltd (375/2013) [2014] ZASCA 69 (23 May 2014)
Introduction
In this case the SCA had to determine whether the North Gauteng High Court had correctly classi ed plastic interlocking tiles for protection of turf surfaces in stadia under tariff heading 3918.90.40.
Facts
The respondent, Terraplas South Africa (Pty) Ltd (hereinafter referred to as ‘Terraplas’), is in the business of importing and distributing ‘terratile pitch protection tiles’ and ‘terratrak plus temporary driveable roadway tiles’ from Terraplas
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