Page 792 - SAIT Compendium 2016 Volume1

CASE DIGEST 2014-2015
10. Miles Plant Hire (Pty) Ltd v Commissioner for the South African Revenue Service [2015] ZASCA 98; 2015 JDR 1023 (SCA); (SCA Case No: 20430/2014 (1 June 2015) (SARS Website))
Issue
Rules of the Supreme Court of Appeal: At issue was whether the Supreme Court of Appeal would condone the timeously prosecution of an appeal.
Posture of case
This case is before the Supreme Court of Appeal from the Gauteng Division of the High Court, Pretoria.
Facts
Miles Plant Hire (Pty) Ltd (Miles) was a company conducting plant hire and services in the construction and road industry. In 2013, SARS applied for a winding up of the company to collect taxes (income tax and VAT). This application for winding up was granted by the Gauteng Division of the High Court, Pretoria. The taxpayer’s appeal lapsed as a result of the company’s failure to prosecute the appeal properly and timeously in accordance with the rules of the Supreme Court of Appeal. The company consequently applied for condonation for these failures. The taxpayer argued that the liquidators unequivocally had no intention of having anything to do with the prosecution of the appeal, despite their initial indications to the contrary.
Outcome
The Supreme Court of Appeal dismissed the application for condonation and con rmed the lapsing of its appeal against a nal winding-up order granted by the High Court. The Supreme Court of Appeal further awarded a punitive costs against the director of the company, Ms Melanie Pandaram, as reimbursement for SARS costs.
Core reasoning
Acting Judge of Appeal Meyer (with all sitting judges concurring) held that on the facts of the case the taxpayer engaged in agrant breaches of the rules of court without any acceptable explanation. Furthermore, the cumulative effect of those factors coupled with SARS’ interest in the nality of the court’s judgment as well as prejudice to SARS and the body of creditors was such that condonation should be refused irrespective of the prospects of success on appeal.
In addition, a punitive costs order de bonis propriis was ordered against Ms Pandaram on the basis that she was responsible for the troubling manner in which the litigation had been conducted. She was said to have shown a general lack of candour and to have played fast and loose with the court rules.
11. AB LLC and BD Holdings LLC v Commissioner for SARS [2015] ZATC 2; GSJ HC Case No: 13276/2015 (15 May 2015) (SARS Website)
Issue
Article 5(2)(k) of the United States/South African Income Tax Treaty: At issue was whether the various short-term activities of the taxpayer at the client’s premises constituted a permanent establishment under the tax treaty.
Posture of the case
The Tax Court sat as the court of rst instance with the taxpayers appealing the decision taken by SARS.
The facts
The taxpayers (two US-resident entities (LLCs)) entered into an agreement with the South African client (a company based in and operating from South Africa). In terms of the consultancy agreement, the taxpayers would provide certain strategic and nancial advisory services to the South African client at the premises (boardroom) of the South African client.
This services were conducted between February 2007 and May 2008 (over a period of 16 months). The taxpayers made 17 of its employees available, but three employees whose work formed a core aspect of the project. Each of the three were in South Africa on a rotational basis, for three weeks at a time, while the other employees were sent to South Africa only as required.
The consultancy services provided on a daily basis required that the taxpayer’s employees be based in the boardroom. This boardroom was the “engine room” of the taxpayers business operations, even if some of its employees were at times located for brief periods in another area of the South African client’s premises. Furthermore, the taxpayer’s employees only had access to these premises on weekdays and during working hours.
Outcome
The Tax Court held in favour of SARS. The taxpayer’s myriad of transitory activities at the client’s premises constituted a permanent establishment.
784 SAIT CompendIum oF TAx LegISLATIon VoLume 1