Page 795 - SAIT Compendium 2016 Volume1

CASE DIGEST 2014-2015
‘Where X holds money in trust on Y’s behalf or receives money from Y with instructions that it be used for a speci c purpose and X misappropriates that money by using it for a different purpose, X commits theft of the money. In these types of cases the rule that one cannot steal one’s own money is no bar to a conviction. Y, according to these decisions, has a special interest or property in the money. However, unless X is obliged to keep the money in a separate account, he does not commit theft if, at the time he uses the money for a different purpose, he has at his disposal a liquid fund large enough to enable him to repay it (see eg S v Gathercole 1964 (1) SA 21 (A) at 25; S v Visagie 1991 (1) SA 177 (A) at 182-183; S v Boesak 2000 (1) SACR 633 (SCA) paras 96 and 99).’
Outcome
The appeal was dismissed with costs, including the costs resulting from the employment of two counsel.
Core reasoning
By speci cally referring to the now repealed section 40 of the VAT Act, which held that VAT due or payable is a ‘debit to the State’, the court held that section 7(1) of the VAT Act creates a debtor-creditor relationship between the vendor and SARS and does not, expressly or impliedly create a relationship of trust. In this regard, Pillay JA stated the following at paras [15] and [17]:
‘[15] It is clear that the Act is a scheme with its own directives, processes and penalties. The relationship it creates between SARS and the registered vendor is sui generis – one with its own peculiar nature. The Act does not confer on the vendor the status of a trustee or an agent of SARS. If it did, the vendor would either have to keep separate books of account or alternatively, would have to be suf ciently liquid at any given time in order to cover the outstanding VAT. The Act makes no provision for this situation nor does it seek to compel a vendor to keep separate books of account in respect of VAT.
[16] To nd that the Act creates a trust relationship (in whatever form) would require an innovative approach. The Act, in particular s 58, does not incorporate theft as an offence. If the State wants the legislature to do so, or if the sentences provided for in s 58 are found to be inadequate, the obvious solution is to approach the Legislature. For the courts to extend the crime of theft to resolve the State’s dif culties, would be contrary to the principle of nullum crimen, nulla poena sine praevia lege poenali (without a law, no charge is possible).’
It was furthermore held that the reference to para [15] and [17] of the Metcash case stating that ‘vendors are entrusted with a number of important duties in relation to VAT’ and that ‘vendors are in a sense involuntary tax collectors’ was misconstrued by the State. In this regard, the following was held at para [10]:
‘...What Kriegler J said in para 15, after broadly discussing what the Act compels the registered vendor to do in calculating and VAT, was that ‘In the result vendors are entrusted with a number of important duties in relation to VAT’. In this sense ‘entrusted’ might very well be replaced with ‘burdened with’. In other words the vendor is expected to comply with various sections of the Act which serve to safeguard the operation thereof and minimise the effects of its weaknesses. The learned judge certainly did not suggest that a trust relationship or one resembling that as between a trustee and a bene ciary of a trust, had been created. Second, counsel for the appellant misconceives the import of the Metcash decision in citing the judgment as authority for the proposition that VAT vendors are involuntary tax-collectors on behalf of SARS, and are therefore in a position of trust and would commit theft if they appropriate such collected VAT for uses other than to submit it to SARS. What the learned judge in fact said at para 17 is ‘that vendors are in a sense involuntary tax-collectors’. The omission to consider the phrase ‘in a sense’ has far reaching consequences which give a totally different meaning to what the learned judge intended. It is clear that he did not classify VAT vendors as of cial tax-collectors but explained that ‘in a sense’ they could be described in this way. All the learned judge was conveying is that VAT is payable on every sale and that details of the manner of calculation of VAT, the timetable for periodic payment and the amount to be paid are statutorily controlled and it is left for the vendor to ensure compliance therewith. This is quite different from imposing the status of a formal tax-collector or a trustee of SARS on a registered vendor.’
The court further held that the reliance on the McLaggan case was incorrect given the fact that the element of dishonesty was of importance on appeal not to determine whether or not he was guilty of theft, but rather to determine whether McLaggan’s delity fund certi cate lapsed by reason of dishonesty.
15. Dr A v CSARS ITC 13132 WCTC (8 December 2014)
Issue
The meaning of ‘produce held and not disposed of ’ - paragraph 2 of the First Schedule to the Income Tax Act (No. 58 of 1962). At issue is whether grapes delivered to a co-operative for wine-making ought to be included in the taxpayer’s income as “produce held and not disposed of”.
Posture
This case is an appeal to the Western Cape Tax Court with the taxpayer appealing the decision of the Commissioner.
Facts
The taxpayer, a wine farmer, is a member of the co-operative and delivers grapes together with other farmers to the co-operative. The grapes are then pooled and wine is produced from it by the co-operative. The farmers share in the proceeds from the sale of the wine depending on the amount and quality of the grapes produced.
In his 2007, 2008 and 2009 returns, the taxpayer included the value of the grapes harvested and delivered to a co- operative for the purposes of producing wine, as produce held and not disposed of at the end of the year of assessment. He did not take this position in his 2009 tax return.
SAIT CompendIum oF TAx LegISLATIon VoLume 1 787
CASE DIGEST 2014-2015