K C M v Commissioner South African Revenue Services (VAT 711) [2009] ZATC 2; 72 SATC 92 (14 August 2009)

K C M v Commissioner South African Revenue Services (VAT 711) [2009] ZATC 2; 72 SATC 92 (14 August 2009)

The court held that the appellant is not entitled to claim input tax credits for goods distributed free of charge, as these do not constitute taxable supplies under the VAT Act. The VAT system requires that supplies be made for consideration to qualify as taxable supplies. Gratuitous acts, such as the free distribution of religious material, do not meet this requirement. Section 10(23) of the VAT Act does not alter this position; it merely sets the value of a supply made for no consideration at nil and does not deem such supplies taxable. The respondent's assessment disallowing the input tax credits was therefore correct. The court also noted that the apportionment of input tax credits...

Citation
[2009] ZATC 2
Parties
Appellant: K C M; Respondent: Commissioner: South African Revenue Services
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
14 August 2009
Case Number
VAT 711
Procedural Posture
Tax Appeal / Final Judgment
Outcome
Appeal dismissed.
Judges
FHD Van Oosten
Legal Topics
Value Added Tax, Input Tax Credits, Apportionment of Input Tax, Non Taxable Supplies
Tax Law Value Added Tax Input Tax Credits Apportionment of Input Tax Non Taxable Supplies

Case Brief

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Parties

K C M

Appellant

Commissioner: South African Revenue Services

Respondent

Procedural Posture

Tax Appeal / Final Judgment

Legal Issues

  1. 1 Whether the appellant is entitled to claim input tax credits for goods distributed free of charge.
  2. 2 Whether such goods and services were acquired wholly for the purpose of making taxable supplies under the VAT Act.
  3. 3 Whether the respondent's apportionment of input tax credits was appropriate.

Ratio Decidendi

The court held that the appellant is not entitled to claim input tax credits for goods distributed free of charge, as these do not constitute taxable supplies under the VAT Act. The VAT system requires that supplies be made for consideration to qualify as taxable supplies. Gratuitous acts, such as the free distribution of religious material, do not meet this requirement. Section 10(23) of the VAT Act does not alter this position; it merely sets the value of a supply made for no consideration at nil and does not deem such supplies taxable. The respondent's assessment disallowing the input tax credits was therefore correct. The court also noted that the apportionment of input tax credits...

Court Disposition

Appeal dismissed.

Orders

  • The appeal is dismissed.
  • The apportionment of the input tax credits to which the appellant is entitled is referred back to the respondent for its reconsideration in conjunction with the appellant.