Liberty Investors Ltd v Commissioner for the South African Revenue Service (353/2004) [2005] ZASCA 69; 2006 (2) SA 1 (SCA); 67 SATC 313 (30 August 2005)

Liberty Investors Ltd v Commissioner for the South African Revenue Service (353/2004) [2005] ZASCA 69; 2006 (2) SA 1 (SCA); 67 SATC 313 (30 August 2005)

The court held that the amount received as dividends from the subsidiary was of a revenue nature and that its subsequent transfer to share capital and share premium account did not alter its character. The relevant statutory provisions, specifically the proviso (i) to the definition of 'dividend' in s 1 of the Income Tax Act, require that unless the amount can be shown to consist of profits of a capital nature, it must be deemed to be profits of a revenue nature available for distribution. The appellant failed to demonstrate that the amount in question comprised profits of a capital nature, and therefore the exemption under s 64B(5)(c) did not apply. The appeal was dismissed and the...

Citation
[2005] ZASCA 69
Parties
Appellant: Liberty Investors Limited (in Members’ Voluntary Liquidation); Respondent: Commissioner for the South African Revenue Service
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
30 August 2005
Case Number
353/2004
Procedural Posture
Civil Appeal / Appeal From Tax Court
Outcome
Appeal dismissed with costs, including costs of two counsel.
Judges
Howie, Streicher, Brand, Lewis, Ponnan
Legal Topics
Secondary Tax on Companies, Dividend Definition, Capitalisation Shares, Liquidation Distribution
Tax Law Commercial and Corporate Secondary Tax on Companies Dividend Definition Capitalisation Shares Liquidation Distribution

Case Brief

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Parties

Liberty Investors Limited (in Members’ Voluntary Liquidation)

Appellant

Commissioner for the South African Revenue Service

Respondent

Procedural Posture

Civil Appeal / Appeal From Tax Court

Legal Issues

  1. 1 Whether the amount of R156 831 000 received as dividends and subsequently capitalised constituted profits of a capital nature for the purposes of exemption from secondary tax on companies.
  2. 2 Whether the transfer of dividend amounts to share capital and share premium account altered the revenue nature of the profits.
  3. 3 Whether the distribution on liquidation qualified for exemption under s 64B(5)(c) of the Income Tax Act.

Ratio Decidendi

The court held that the amount received as dividends from the subsidiary was of a revenue nature and that its subsequent transfer to share capital and share premium account did not alter its character. The relevant statutory provisions, specifically the proviso (i) to the definition of 'dividend' in s 1 of the Income Tax Act, require that unless the amount can be shown to consist of profits of a capital nature, it must be deemed to be profits of a revenue nature available for distribution. The appellant failed to demonstrate that the amount in question comprised profits of a capital nature, and therefore the exemption under s 64B(5)(c) did not apply. The appeal was dismissed and the...

Court Disposition

Appeal dismissed with costs, including costs of two counsel.

Orders

  • The appeal is dismissed.
  • The appellant is ordered to pay the costs of the appeal, including the costs of two counsel.