You win some, you… cases where costs were awarded to the taxpayer against SARS
ITC 1816 68 SATC 316, year: 2006 In this matter the taxpayer had entered into a restraint of trade agreement (RTA), in terms of which she would be paid R1,1m in two tranches: R440 000 to be paid on 25 October 1999 and R660 000 on 30 September 2001. The employee was later retrenched on 17 August 2001.
Revenue had included the full R1,1m in the taxpayer’s gross income for the relevant tax year. Revenue argued the amount was actually for services rendered or to be rendered, which had the amount fall into sub- para (c) of the gross income definition. Revenue further argued that the RTA was a sham and a disguise for compensating the taxpayer for services rendered.
The court found Revenue had provided no explanation for its whimsical conduct in relation to the grounds of assessment. The taxpayer had been assessed for the year 2000 and the first tranche hadn’t been included in her gross income. That was also the case in the revised additional assessment for the same tax year.
On 18 December 2003, Revenue issued the disputed assessment and included the full RTA amount. When requested by the taxpayer to furnish full reasons for the disputed assessment in July 2004, Revenue responded in December 2004 with the same reasons it had furnished in its letter dated 22 December 2003.
In the course of the appeal, Revenue didn’t admit any evidence that showed any impropriety on the part of the taxpayer. It had not even been put to the taxpayer in cross-examination that she had participated in a dishonest transaction.
Revenue’s own witness also supported the taxpayer’s evidence. Revenue and its counsel knew their witness supported the taxpayer’s version. Yet Revenue persisted in the appeal with an outcome that was predictably adverse to it.
The court viewed such conduct as harassment of a taxpayer. The court ruled Revenue had acted unreasonably in pursuing tax of about R400 000 when its case was tenuous, if not weak, and subjected the taxpayer to enormous costs. The court fur- ther found Revenue displayed an arrogant disregard for the rights of the taxpayer to administrative action that was reasonable and procedurally fair. ITC 1806 68 SATC 117 In this matter, Revenue informed the taxpayers it would be abandoning its claim, which at that stage had brought the two taxpayers to bear the cost of three counsels each.
The court awarded costs, in terms of section 83(17)(e) where the appeal has been withdrawn or conceded by one of the parties after a date of hearing has been allocated by the registrar. The court further awarded costs on the scale of attorney and client, as Revenue’s representatives knew there were good commercial reasons for the transaction that had nothing to do with a scheme in terms of section 73 of
the vAT Act.
The failure of the representatives to recognise that fact hadn’t been explained to the court. The court found the failure of revenue to correct its erred position was vexatious. The court also granted the taxpayers costs for the preparation of the application, for costs on the attorney client scale in terms of section 83(17)(d) and (e). The court held revenue’s refusal to offer to tender costs was vexatious. ITC 1821 (2006) 69 SATC 194 (P) The taxpayer was a businesswoman and had filed her income tax returns for the tax years 1994 to 1998. Three years after the 1994-1996 tax years revenue decided the taxpayer had failed to declare her income in full. revenue contended it had been defrauded by the taxpayer, or at the least was a victim of misrepresentation.
on 30 January 2002, revenue raised an additional assessment, even though the taxpayer had provided a detailed explanation of the nature of the allegedly undisclosed income, which indicated that none of the relevant amounts were income in her hands. revenue also imposed additional tax at 100% of the allegedly undisclosed income, as well as penalties.
In the appeal, the taxpayer’s evidence remained largely unchallenged by revenue. It also hadn’t presented a case that would justify the conclusion that the taxpayer had set out to defraud revenue.
The court noted revenue had had literally several years during which the truth of the taxpayer’s assertions could have been scrutinised and the accuracy of her version checked. There was no evidence at all; revenue had done nothing more than stick to its disbelief of the taxpayer’s story.
mere suspicion, the court ruled, is no basis upon which the character and honesty of the taxpayer may be impugned. Neither is it an excuse to force a taxpayer to appeal against an assessment manifestly without merit.
The court found revenue had acted in a high-handed and reckless fashion and that it would be unjust to have the taxpayer pay costs in defending the matter.
The court believed the actions of the officials fell far short of the standard of professional conduct the public was entitled to expect of them. DJ Visser (Pty) Ltd v CIR 25 SATC 403 In this matter the taxpayer paid a transfer duty in respect of the sale of property. revenue then claimed additional transfer duty and cited certain versions of the applicable Act in the letter it sent the taxpayer. The taxpayer began notice of motion proceedings, appealing in terms of section 18 of that Act.
revenue then raised a point in limine that the incorrect section had been initially cited by it and that in terms of the correct section an appeal in terms of section 18 (as the taxpayer had cited) wasn’t possible.
The court agreed with revenue’s argument but stated it was obliged to pay the taxpayer’s costs, which flowed as a consequence of the incorrect citation of the section of the Act by revenue.