New Adventure Shelf 122 (Pty) Ltd v Commissioner of the South African Revenue Service (7007/2015) [2016] ZAWCHC 9; [2016] 2 All SA 179 (WCC); 78 SATC 190 (17 February 2016)

New Adventure Shelf 122 (Pty) Ltd v Commissioner of the South African Revenue Service (7007/2015) [2016] ZAWCHC 9; [2016] 2 All SA 179 (WCC); 78 SATC 190 (17 February 2016)

The court held that the applicant is not entitled to have its 2007 income tax assessment amended following cancellation of the sale agreement in a subsequent tax year. The relevant provisions of the Eighth Schedule to the Income Tax Act require that any reduction in proceeds due to cancellation must be accounted for in the year the event occurs, not retrospectively. The redetermination of capital gain or loss is to be included in the taxpayer's assessment for the current year (2012), and does not expunge or substitute the original assessment for 2007. The principle of annual assessment and finality of tax liability precludes reopening prior assessments based on subsequent events. The...

Citation
[2016] ZAWCHC 9
Parties
Applicant: New Adventure Shelf 122 (Pty) Ltd; Respondent: Commissioner of the South African Revenue Service
Court
Western Cape High Court, Cape Town
Jurisdiction
South Africa
Judgment Date
17 February 2016
Case Number
7007/2015
Procedural Posture
Review Application / High Court Judgment on Review and Associated Relief
Outcome
Application for review and associated relief dismissed with costs, including costs of two counsel. Condonation for late institution of review granted.
Judges
Binns-Ward
Legal Topics
Capital Gains Tax, Income Tax Assessment, Review of Administrative Action, Promotion of Administrative Justice Act, Tax Administration Act, Finality of Tax Assessment
Tax Law Civil Procedure Capital Gains Tax Income Tax Assessment Review of Administrative Action Promotion of Administrative Justice Act Tax Administration Act Finality of Tax Assessment

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Parties

New Adventure Shelf 122 (Pty) Ltd

Applicant

Commissioner of the South African Revenue Service

Respondent

Procedural Posture

Review Application / High Court Judgment on Review and Associated Relief

Legal Issues

  1. 1 Whether the applicant is entitled to have its 2007 income tax assessment amended following cancellation of a sale agreement in a subsequent tax year.
  2. 2 Whether paragraph 35(3)(c) of the Eighth Schedule to the Income Tax Act permits a retrospective reduction of proceeds for capital gains tax purposes.
  3. 3 Whether the applicant exhausted internal remedies and complied with the time limits under PAJA for review.

Ratio Decidendi

The court held that the applicant is not entitled to have its 2007 income tax assessment amended following cancellation of the sale agreement in a subsequent tax year. The relevant provisions of the Eighth Schedule to the Income Tax Act require that any reduction in proceeds due to cancellation must be accounted for in the year the event occurs, not retrospectively. The redetermination of capital gain or loss is to be included in the taxpayer's assessment for the current year (2012), and does not expunge or substitute the original assessment for 2007. The principle of annual assessment and finality of tax liability precludes reopening prior assessments based on subsequent events. The...

Court Disposition

Application for review and associated relief dismissed with costs, including costs of two counsel. Condonation for late institution of review granted.

Orders

  • The late institution of the review application is condoned in terms of section 9 of PAJA, with retrospective effect to 21 April 2015.
  • The application for review, including relief sought in paragraphs (a), (c), (d), and (e) of the amended notice of motion, is refused with costs, including costs of two counsel. Costs include those for the application for relief under section 9 of PAJA.