L’Avenir Wine Estate (Pty) Ltd v CSARS ( 16112/2021)

Facts

On 17 September 2021, the applicant approached the High Court on an urgent basis for orders permitting it to submit income tax returns for the period 1 April 2009 to 31 December 2009 (“disputed period”) and for SARS to assess it for that period (“the main relief”). Coupled with the main relief were requests that SARS was to provide the applicant with a tax clearance certificate and to cease all collection steps against it in respect of the applicant’s 2019 tax year (“interim relief”).

After several postponements, the interim relief was resolved pending the determination of the main relief. It is common cause that the applicant’s appeal against the 2018 assessment is pending in the tax court, and one of the central issues in that appeal is whether or not SARS must take into account the applicant’s loss for the disputed period.

The applicant, which is a wine producer changed its year in February 2006 to a March year-end, and in March 2010 changed it again to a December year-end. Even though SARS and the applicant are in dispute whether or not the disputed period should have been submitted in the 2009 tax year, or the 2010 tax year, it is a fact that no return was submitted for the disputed period, whether it be in respect of the 2009 tax year or the 2010 tax year. SARS already assessed the applicant for both these years and for various reasons, is not prepared to permit the application to either submit a separate return for the disputed period or agree to issue a reduced assessment for the 2009 and/or 2010 tax years. The taxpayer previously contended that SARS should reduce the assessment, since there is a “readily apparent undisputed error in the assessment”, or a “processing error” as envisaged in section 93(3)(1)(d)(i) and section 93(1)(a)(ii) respectively of the Tax Administration Act No 28 of 2011 (“the TA Act”).  SARS rejected these requests under section 93 of the TA Act, and therefore, the crux of this application before the court is the refusal of SARS to assess the disputed period. In the answering affidavit, SARS pointed to the fatal defects in the procedure adopted by the applicant.

Firstly, SARS contended that the main relief is an attempt to sidestep the dispute resolution process in which the applicant is presently engaged. Secondly, section 105 of the TA Act provides that a taxpayer can only dispute an assessment in terms of that process, “unless a High Court otherwise directs”.  Thirdly, since the decision to decline the section 93 of the TA Act requests, the correct process should have been to follow a review of the decision under the Promotion of Administrative Justice Act No 3 of 2000 (“PAJA”).

In the replying affidavit of the applicant, it agreed that the dispute resolution process cannot be followed, but argued that SARS is frustrating the process. As far as SARS’ reliance on section 105 of the TA Act, the applicant maintained that if SARS suggested a two-stage application, i.e for leave to approach the High Court, and then to apply for the main relief, that this was without merit and an unnecessary proliferation of legal cost and other resources. However, the applicant overlooked the point SARS raised in respect of PAJA, and the counsel for the applicant appeared to accept that it should have indeed have approached this court for a review of SARS’ administrative decision. The parties were then granted the opportunity to file supplementary notes dealing inter alia with whether or not the papers as they stood, duly supplemented if necessary, could form the basis for a review (“a conversion”). SARS argued against a conversion since the parties are obliged to define the nature of the dispute in their papers, and the court is duty-bound to determine that dispute alone. In the present matter, SARS was not called upon to meet a case based on a review, and no factual foundation was laid by the applicant for a review, with the result that neither party dealt with it in their papers.

Issues

Issue 1: Whether or not the court should allow the conversion;

Issue 2: Whether or not the appeal proceedings be stayed pending the determination of a review application in the High Court.

Finding

The court found the arguments by SARS to be compelling. One of the issues raised by the court is that the present application is launched some 18 months after the impugned decision was communicated to the applicant. Secondly, the specific ground upon which it relies for a review of PAJA, or the common law, and SARS will need to deal with those grounds before the matter can be considered. Allied to this, is the requirement that the record of the impugned decision be placed before the court so that it has all the relevant facts against which to consider the lawfulness of the decision. Thirdly, what the applicant sought, by way of a conversion, is to introduce a fundamentally different relief, when the case presented is effectively to compel SARS to change the decision it has already made. Accordingly, the court found in favor of SARS.

Regarding the second issue, the court did grant the relief sought by the taxpayer, namely that the appeal proceeding be stayed pending the determination of a review application to the High Court. The court argued that it would make no sense to refuse the alternative relief, since the taxpayer will be forced to bring the matter, on essentially the same facts before another court. The court also considered that in the present matter, it would not benefit the fiscus to refuse the relief sought.

The application was therefore dismissed with cost, including all reserved cost orders.

Find a copy of the court case here.

28/03/2022