Bosch and Another v Commissioner of South African Revenue Services (A 94/2012) [2012] ZAWCHC 188; [2013] 2 All SA 41 (WCC); 2013 (5) SA 130 (WCC); 75 SATC 1 (20 November 2012)

Bosch and Another v Commissioner of South African Revenue Services (A 94/2012) [2012] ZAWCHC 188; [2013] 2 All SA 41 (WCC); 2013 (5) SA 130 (WCC); 75 SATC 1 (20 November 2012)

The Court held that the scheme agreements created unconditional sales upon exercise of the option, and that section 8A was triggered at that point, not upon delivery of shares. The various clauses in the scheme, including those relating to continued employment and the stop loss provision, did not constitute suspensive conditions that would defer the creation of the right to acquire shares. The Court found that the scheme had clear commercial purpose and was not a simulated transaction. Accordingly, paragraph 2(a) of the Seventh Schedule was excluded by the proviso, and section 8C did not apply to shares acquired by rights granted before 26 October 2004. The additional assessments for the...

Citation
[2012] ZAWCHC 188
Parties
Appellant: Mariana Bosch; Appellant: Ian McClelland; Respondent: Commissioner for the South African Revenue Services
Court
Western Cape High Court, Cape Town
Jurisdiction
South Africa
Judgment Date
20 November 2012
Case Number
A 94/2012
Procedural Posture
Civil Appeal / Appeal From the Income Tax Court
Outcome
Appeal upheld with costs, including costs of two counsel. Additional assessments for the 2005 and 2006 years of assessment for first appellant and the 2005 year for second appellant are set aside.
Judges
Davis, Baartman, Waglay
Legal Topics
Income Tax Act, Employee Share Incentive Scheme, Section 8a, Section 8c, Seventh Schedule, Simulated Transactions
Tax Law Civil Procedure Income Tax Act Employee Share Incentive Scheme Section 8a Section 8c Seventh Schedule Simulated Transactions

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Parties

Mariana Bosch

Appellant

Ian McClelland

Appellant

Commissioner for the South African Revenue Services

Respondent

Procedural Posture

Civil Appeal / Appeal From the Income Tax Court

Legal Issues

  1. 1 Whether section 8A of the Income Tax Act applies to gains made by appellants upon delivery of scheme shares under the Foschini 1997 Share Option Scheme.
  2. 2 Whether the scheme agreements created an unconditional right to acquire shares upon exercise of the option or only upon implementation dates.
  3. 3 Whether paragraph 2(a) of the Seventh Schedule applies to the delivery of scheme shares.

Ratio Decidendi

The Court held that the scheme agreements created unconditional sales upon exercise of the option, and that section 8A was triggered at that point, not upon delivery of shares. The various clauses in the scheme, including those relating to continued employment and the stop loss provision, did not constitute suspensive conditions that would defer the creation of the right to acquire shares. The Court found that the scheme had clear commercial purpose and was not a simulated transaction. Accordingly, paragraph 2(a) of the Seventh Schedule was excluded by the proviso, and section 8C did not apply to shares acquired by rights granted before 26 October 2004. The additional assessments for the...

Court Disposition

Appeal upheld with costs, including costs of two counsel. Additional assessments for the 2005 and 2006 years of assessment for first appellant and the 2005 year for second appellant are set aside.

Orders

  • The appeal is upheld with costs, including the costs of two counsel.
  • The additional assessments in respect of the first appellant for the 2005 and 2006 years of assessment together with the additional assessment in respect of second appellant for the 2005 year of assessment are set aside.