Eveready (Pty) Ltd v Commissioner for the South African Revenue Service (195/11) [2012] ZASCA 36; 74 SATC 185 (29 March 2012)

Eveready (Pty) Ltd v Commissioner for the South African Revenue Service (195/11) [2012] ZASCA 36; 74 SATC 185 (29 March 2012)

The Supreme Court of Appeal held that Eveready did not acquire the trading stock from Gillette 'for no consideration'. The sale agreement, when read as a whole, indicated that the purchase price for the business included the trading stock, with the final allocation determined by the working capital adjustment after the effective date. The blank spaces in schedule 6 did not signify a nil allocation but rather an amount to be determined later. The court found it implausible that Gillette would have given away trading stock valued at over R100 million for free. Accordingly, Eveready was only entitled to deduct the cost price of the trading stock, not its market value. On the cross-appeal,...

Citation
[2012] ZASCA 36
Parties
Appellant: Eveready (Pty) Limited; Respondent: Commissioner for the South African Revenue Service
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
29 March 2012
Case Number
195/11
Procedural Posture
Civil Appeal / Appeal From Tax Court, Port Elizabeth
Outcome
Appeal dismissed with costs; cross-appeal dismissed with costs including costs of two counsel.
Judges
Nugent, Heher, Malan, Tshiqi, Boruchowitz
Legal Topics
Income Tax Act 58 of 1962, Trading Stock Valuation, Acquisition for No Consideration, Deductibility of Opening Stock, Interest on Unpaid Tax
Tax Law Commercial and Corporate Income Tax Act 58 of 1962 Trading Stock Valuation Acquisition for No Consideration Deductibility of Opening Stock Interest on Unpaid Tax

Case Brief

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Parties

Eveready (Pty) Limited

Appellant

Commissioner for the South African Revenue Service

Respondent

Procedural Posture

Civil Appeal / Appeal From Tax Court, Port Elizabeth

Legal Issues

  1. 1 Whether trading stock acquired by Eveready from Gillette was acquired 'for no consideration' under s 22(4) of the Income Tax Act.
  2. 2 Whether Eveready was entitled to deduct the market value of the trading stock as opening stock for tax purposes.
  3. 3 Whether the Tax Court correctly exercised its discretion in waiving interest levied under s 89quat(2).

Ratio Decidendi

The Supreme Court of Appeal held that Eveready did not acquire the trading stock from Gillette 'for no consideration'. The sale agreement, when read as a whole, indicated that the purchase price for the business included the trading stock, with the final allocation determined by the working capital adjustment after the effective date. The blank spaces in schedule 6 did not signify a nil allocation but rather an amount to be determined later. The court found it implausible that Gillette would have given away trading stock valued at over R100 million for free. Accordingly, Eveready was only entitled to deduct the cost price of the trading stock, not its market value. On the cross-appeal,...

Court Disposition

Appeal dismissed with costs; cross-appeal dismissed with costs including costs of two counsel.

Orders

  • The appeal is dismissed with costs.
  • The cross-appeal is dismissed with costs that include the costs of two counsel.