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Tax Court determines merit of tax assessmentsThe Tax Court is a specialist court specifically equipped to adjudicate on tax-related matters pertaining to the lawfulness and correctness of disputed assessments. ![]() © Olivier Le Moal – za.fotolia.com Sections 104 to 107 of the Tax Administration Act, No 28 of 2011 (previously s81 to 88 of the Income Tax Act, No 58 of 1962 (Act)) together with the rules of the Tax Court, prescribe the procedures to be followed where a tax assessment is disputed and essentially entrusts the Tax Court with the power to determine the merits of a tax assessment. In the recent matter of Medox Limited v The Commissioner for the South African Revenue Service (49017/11) [2014] ZAGPPHC 98, the North Gauteng High Court was faced with the question of whether the High Court has the necessary jurisdiction to rule on the legal status of income tax assessments. By way of background, the South African Revenue Service (SARS) raised assessments against the applicant in respect of its 1998 to 2002 and 2004 to 2009 years of assessment, before raising an assessment for the 1997 years of assessment. According to the applicant, certain assessed losses arising from previous years were therefore not properly brought forward and taken into account in determining the applicant's tax liability. Re-submission of returnsIn 2009, the applicant realised that its 1997 and 2003 returns had not been assessed (and that the losses from previous years were not brought forward) and decided to re-submit the 1997 and 2003 returns, but it did so only in 2011. However, SARS was not willing to entertain the taxpayer's dissatisfaction. The applicant subsequently approached the North Gauteng High Court for an order declaring all income tax assessments issued after 1997, null and void. The applicant contended that SARS acted ultra vires when issuing the assessments because it failed to take into account the assessed losses as provided for in s20 of the Act. SARS opposed the application on the basis that the High Court does not have jurisdiction to entertain the application as the dispute between the applicant and SARS concerned the merits of the income tax assessments. SARS submitted that:
The applicant submitted that:
Having regard to the submissions made by the parties, the court referred to the provisions of s81of the Act and the rules of the Tax Court: "a taxpayer who is aggrieved by an assessment may object to such an assessment in the manner and under the terms and within the period prescribed by the Act and the rules promulgated in terms of section 107A". Questioning assessmentsThe court further referred to the decision in Van Zyl NO v Master and Another 1991 (1) SA 874 (E) where Eksteen J confirmed that the only way in which assessments can be questioned is in the manner provided for in the Act. The Act specifically prescribes the procedure and entrusts the determination of the amount of tax to SARS (by way of objection), and on appeal, to the Tax Court. Eksteen J further confirmed that only the Tax Court can determine whether assessments were correctly made and that there was no intention to usurp that function of the Tax Court. In the case of Metcash Trading Ltd v Commissioner, SARS 2001 (1) SA 1109 (CC) the court held that the Tax Court is a specialist court specifically tooled to deal with disputed tax cases and further found that the High Court has jurisdiction to adjudicate upon tax matters only in circumstances where the relief sought is of an interlocutory nature. Based on the authorities mentioned above, the court held as follows:
In light of the above, the court held that the High Court does not have the necessary jurisdiction to grant the order sought. What is clear from the judgement is that courts discourage applications that come down to 'forum shopping' by the parties as it could not have been the legislature's intention to create competing and concurrent forums for the resolution of tax disputes. About Nicole PaulsenNicole Paulsen is associate, tax of Cliffe Dekker Hofmeyr. View my profile and articles... |