Sunfresh Enterprises (Pvt) Ltd t/a Bulembi Safaris v Zimbabwe Revenue Authority (HB 78 of 2004) [2004] ZWBHC 78 (2 June 2004)

SUNFRESH ENTERPRISES (PVT) LTD T/A BULEMBI SAFARIS V ZIMBABWE REVENUE AUTHORITY High Court, Bulawayo Judgment No. HB-78-04 Cheda J Chamber application 24 November 2003 & 3 June 2004 Interpretation of statutes – intention of the legislature – expressio est exclusio alterius – what is not expressed is not intended Revenue & Public Finance – income tax – whether income tax can be collected on moneys whose source is outside Zimbabwe Statutes – Income Tax Act [Chapter 23:06] - Seventeenth schedule – meaning of “fees” The applicant is a safari operator in Zimbabwe which engages a foreign agent to market its services; the agent receives a commission on its sales from the client. Payments of the commission are made to the agent outside Zimbabwe by the client outside Zimbabwe. The respondent, which collects tax in Zimbabwe, claimed that tax must be paid on the commissions and had sought an order to freeze the applicant’s account in Zimbabwe for failing to withhold the tax. The applicant then sought an order barring the respondent from doing this. It argued that “fees” in the schedule to the Income Tax Act referred only to funds whose source is from within Zimbabwe, and that the definition of “payer” in terms of the schedule excluded the applicant. Heldr that: the intention of the legislature is revealed in what it includes, and where one or more things of a class are mentioned, by implication that is which not mentioned is excluded Held further that: in terms of the Seventeenth Schedule of the Income Tax Act “fees” includes only money sourced from inside Zimbabwe, hence could not include the commissions. Cases cited: Commissioner of Taxes v Shein 1958 (1) R & N 384 (FSC) Farrar’s Estate v Commission for Inland Revenue 1926 TPD (2) 501 Federated Employers’ Insurance Co Ltd v Magubane 1982 (2) SA 710 A S v Gampel Brothers & Barnett (Pvt) Ltd 1978 (3) SA 772 A S v Moroney 1978 (4) SA 389 A S v Ngwenya 1979 (2) SA 96 A Williams v Singer & Ors, Pool v Royal Exchange Assurance [1921] 1 AC 65 Legislation considered: Income Tax Act [Chapter23:06] ss 30 & 95 and Seventeenth Schedule AdvC Anderson, for the applicant A B C Chinake, for the respondent CHEDA J: On 16 January 2003 applicant filed an urgent chamber application seeking an interdict against respondent from freezing its accounts at National Merchant Bank as it believed that it had a right to withhold tax on commission or applicants’ accounts. The provisional order was granted by this court on 17 January 2003 and argued before me on 24 November 2003. The facts which are common cause are that applicant runs a safari operation as Bulembi Safaris in Bulawayo while respondent is a body corporate established in terms of Revenue Authority Act Chapter 23:11. In May 2002 respondent was conducting an audit into the tourism industry. During the audit it found that all taxes due and all amounts earned in foreign currency had been declared, save for a withholding tax on commission paid to a foreign independent operator. Respondent then calculated the commission purportedly in terms of section 30 as read with the 17th schedule of the Income Tax Act Chapter 23:06. Section 30 reads: HB 78/04 “Non Residents’ Tax on interest There shall be charged, levied and collected throughout Zimbabwe for the benefit of the Consolidated Revenue Fund a non-residents’ tax on fees in accordance with the provisions of the Seventeenth Schedule at the rate of tax fixed from time to time in the charging Act.” The Seventeenth Schedule deals with tax on fees and defines what a non- resident is and what the term fees means under the said Act. It reads: “SEVENTEENTH SCHEDULE (Sections 30 and 95) NON-RESIDENTS’ TAX ON FEES Interpretation 1. (1) In this schedule, subject to subparagraph (2) – “fees” means any amount from a source within Zimbabwe payable in respect of any services of a technical, managerial, administrative or consultative nature …” Respondent after its calculation of the withholding tax arrived at the amount of $6 957 054,03 which amount it sought to garnish in the above named bank. Applicant through Adv C Andersen argued that respondent had no authority to garnish respondent’s account for fees whose source is outside Zimbabwe. He further argued that applicant is not a payer as argued in the Seventeenth Schedule supra which in section 1 “non-resident person” means – “(a) a person, other than a company, who; or (b) a partnership or foreign company which; is not ordinarily resident in Zimbabwe; “Payer” means any person who or partnership which pays or is responsible for the payment of fees, including the State or statutory corporation or any person HB 78/04 who or partnership which pays or is responsible for the payment of fees for or on behalf of the State or any statutory corporation” It is further his argument that the commission on which tax is to be deducted is not included in the definition of “fees” as defined in the Act. Mr Chinake for respondent argued that, applicant has clearly stated in paragraph 13 that its relationship with the independent operators is that it engages them to market their operations and the particular animals on offer for hunting. And further stated that whatever they pay to the independent operator is part of the operating expenses not as a commission but as marketing services. It is for this marketing service that Mr Chinake argues that such payment brings them within the ambit of “payer” as defined in section 30 as read with the 17th Schedule. He further argued that the originating cause is in Zimbabwe. It is for these reasons that he is of the firm belief that applicant is obliged to pay tax and it is on that basis that respondent is entitled to withhold tax on commission. Whereas, it is a legal obligation for individuals, companies etc to pay tax, there has to be a clear legal basis for so doing. Respondent is a creature of a statute and is therefore obliged to act within the four corners of the said statute at all times. The issues in my view are:- (1) (2) whether or not applicant is a payer as defined in the Act; or whether “fees” as defined in the Act includes commission. The two words referred to above are capable of various meanings. It is therefore essential to link the relevant meaning to the use of the words in question in relation to the intention of the legislature. HB 78/04 The intention theory was defined in Farrar’s Estate v Commission for Inland Revenue 1926 TPD (1) 501 508 where STRATFORD J stated: “The governing rule of interpretation – overriding the so called “golden rule” – is to endeavour to ascertain the intention of the law-maker from a study of the provisions of the enactment in question and there is no doubt that the literal grammatical meaning of the words must give way to that rule. (See Venter v Rex 1907, TS, page 910 and cases there cited.)” The intention of the legislative theory has been followed for over a long time as evidenced by the following cases: S v Gampel Brothers & Barnett (Pvt) Ltd 1978 (3) SA 772 A 784-785; S v Moroney 1978 (4) SA 389 A 399-400 and 405-406; S v Ngwenya 1979 (2) SA 96A 100-01; Federated Employer’s Insurance Co. Ltd v Magubane 1981 (2) SA 710 A 716. The definition of “fees” in the Act in my view limits the meaning to an amount whose source is within Zimbabwe, see Commissioner of Taxes v Shein 1958 R & N 384 and Williams and Singer and Others, Pool and Royal Exchange Assurance 1921 (1) AC 65. It has been argued that the agents work on behalf of applicant is that of an administrative nature which brings it within the ambit of fees. I do not agree with this argument for the reason that first and foremost there must be from a source within Zimbabwe which in this case, the source is foreign and is paid by the client directly to the agent and not to the Safari Operator who conducts his business in Zimbabwe. I am of the respectful view that if the legislature intended it to be so it would have so expressed in order to avoid doubt. This is where the maximum expressio est exclusio alterius at times stated expressum facit cessure tacitum (that which is expressed puts an end to that which is unspoken). The mention of one or more things of a particular class may be regarded HB 78/04 as by implication excluding all other members of the class. The definition of “payer” as stated in my view completely excludes applicant from the legal obligation to pay “fees” both definitions exclude applicant. In addition to that there is no mechanism provided to allow the respondent to make an assessment in respect of taxes not held by applicant. In casu, the commission withheld is outside the country and as such cannot be legally assessed by respondent. Respondent in my view has no right to freeze applicant’s accounts In conclusion the following order is made:- 1. That respondent be and is hereby interdicted from garnishing, freezing or interfering with applicant’s accounts with the National Merchant Bank (account number 0210005897) and Stanbic Commercial Bank (account number 014003707970). 2. That respondent acted ultra vires its proviso in terns of section 30 as read with schedule 17 of the Income Tax Act chapter 23:11 in ruling that the withholding tax is due and collectable by applicant for commissions paid by non-resident hunters to non-resident operators. 3. That in terms of section 30 as read with schedule 17 of the Income Tax Act Chapter 23:11 there is no statutory obligation on the part of applicant to collect withholding tax on commissions paid directly to a non-resident independent operator by a non-resident hunter. 4. That respondent be and is hereby ordered to pay the cost of this application. Lazarus & Sariff , applicant’s legal practitioners Kantor & Immerman respondent’s legal practitioners