South Africa Case Law

XYZ CC v Commissioner for the South African Revenue Service (13285)

XYZ CC v Commissioner for the South African Revenue Service (13285) [2015] ZATC 4 (10 September 2015)

Court

Tax Court

Case number

13285

Judge

M P Tsoka

The court found that the loans advanced by XYZ CC to JK Property CC and LM CC were, in substance, disguised dividend distributions to Mr. B, the sole member of all three close corporations. The court held that close corporations cannot form part of a group of companies for purposes of the Income Tax Act, and thus the exemption provisions relied upon by XYZ CC were inapplicable. The facts indicated that the loans were interest-free, not repaid within the stipulated period, and lacked genuine repayment agreements, amounting to an anti-avoidance scheme. The court distinguished the ABC (Pty) Ltd…

Source excerpt

• Secondary Tax On Companies
• Deemed Dividends
• Connected Persons
• Interest Free Loans
• Anti Avoidance
• Onus Of Proof

Lodhi 5 Properties Investments CC and Others v Firstrand Bank Limited (170/2014)

Lodhi 5 Properties Investments CC and Others v Firstrand Bank Limited (170/2014) [2015] ZASCA 72; [2015] 3 All SA 32 (SCA) (22 May 2015)

Court

Supreme Court of Appeal

Case number

170/2014

Judges

Maya, Majiedt, Pillay, Mbha, Schoeman

The SCA upheld the winding-up orders and held that the bank could recover the outstanding capital, with mora interest on the reduced amount owed by Mr Lodhi.

• Interest Free Loans
• Winding Up
• Suretyship Liability
• Mora Interest
• Shariah Compliance
• Restitution

Commissioner for the South African Revenue Service v Brummeria Renaissance (Pty) Ltd and Others (391/06)

Commissioner for the South African Revenue Service v Brummeria Renaissance (Pty) Ltd and Others (391/06) [2007] ZASCA 99; [2007] 4 All SA 1338 (SCA); 2007 (6) SA 601 (SCA); 69 SATC 205 (13 September 2007)

Court

Supreme Court of Appeal

Case number

391/06

Judges

Scott, Cloete, Van Heerden, Kgomo, Mhlantla

The Supreme Court of Appeal held that the right to use interest-free loans constitutes gross income accruing to the taxpayer, as it is a valuable right capable of being valued in money. The court rejected the argument that such a benefit must be convertible into money by the taxpayer to be taxable, emphasizing that the test is objective and based on whether the right has a money value. The court further found that the Commissioner was precluded by section 79(1) read with section 81(5) of the Income Tax Act from raising further revised assessments against Brummeria for the tax years 1996 to 19…

Source excerpt

• Income Tax Act
• Gross Income Definition
• Interest Free Loans
• Tax Assessment Finality
• Housing Development Schemes