Relier (Pty) Ltd. v Commissioner for Inland Revenue (256/96) [1997] ZASCA 105; ; [1998] 1 All SA 183 (A); (25 November 1997)

Relier (Pty) Ltd. v Commissioner for Inland Revenue (256/96) [1997] ZASCA 105; ; [1998] 1 All SA 183 (A); (25 November 1997)

The Supreme Court of Appeal held that the series of agreements entered into by the parties constituted a package deal, and the interposition of the Fund as tenant and lessor was not genuinely intended but amounted to a simulated transaction. The substance of the arrangement was that Relier had an enforceable right to have improvements effected on its property in terms of the sublease agreement, even though the agreements were structured to avoid tax liability. The court found that the written agreements did not reflect the true intentions of the parties, and Relier must accept the consequences of the separate legal personalities involved. Accordingly, the building costs were properly...

Citation
[1997] ZASCA 105
Parties
Appellant: Relier (Pty) Limited; Respondent: Commissioner for Inland Revenue
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
25 November 1997
Case Number
256/96
Procedural Posture
Civil Appeal / Appeal From the Transvaal Special Court for Income Tax Appeals
Outcome
Appeal dismissed with costs, including the costs of two counsel where employed.
Judges
Harms, Mahomed, Van Heerden, Vivier, Zulman
Legal Topics
Gross Income Definition, Simulated Transactions, Tax Avoidance, Income Tax Act Section 1, Enforceable Rights, Substance Over Form
Tax Law Commercial and Corporate Gross Income Definition Simulated Transactions Tax Avoidance Income Tax Act Section 1 Enforceable Rights Substance Over Form

Case Brief

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Parties

Relier (Pty) Limited

Appellant

Commissioner for Inland Revenue

Respondent

Procedural Posture

Civil Appeal / Appeal From the Transvaal Special Court for Income Tax Appeals

Legal Issues

  1. 1 Whether the building costs formed part of Relier's gross income under paragraph (h) of the definition in section 1 of the Income Tax Act 58 of 1962.
  2. 2 Whether Relier had an enforceable right to have improvements effected on its property in terms of an agreement relating to the grant of use or occupation of land.
  3. 3 Whether the interposition of the Fund as tenant and lessor amounted to a simulated transaction.

Ratio Decidendi

The Supreme Court of Appeal held that the series of agreements entered into by the parties constituted a package deal, and the interposition of the Fund as tenant and lessor was not genuinely intended but amounted to a simulated transaction. The substance of the arrangement was that Relier had an enforceable right to have improvements effected on its property in terms of the sublease agreement, even though the agreements were structured to avoid tax liability. The court found that the written agreements did not reflect the true intentions of the parties, and Relier must accept the consequences of the separate legal personalities involved. Accordingly, the building costs were properly...

Court Disposition

Appeal dismissed with costs, including the costs of two counsel where employed.

Orders

  • The appeal is dismissed with costs, including the costs of two counsel where employed.