By SAIT Technical
The Tax Court (Pretoria) recently delivered its judgment in case number 12906.The appellant (referred to as "AB Mining (Pty) Ltd”) a prospecting and mining enterprise lodged an appeal against the respondent’s (SARS) tax assessment in respect of the years 2003 to 2006 for a tax liability in the amount of R12 889 189.
The essence of the appeal relates to the following matters:
·Capital Gains Tax in the amount of R1 719 229 in respect of the alleged disposal of the C Mining Dump.
·Fair Value Adjustment in the amount of R2 638 070.
·Capital Gains Tax on the alleged "disposal” of chrome tailings rights in the amount of R8 million;
·Capital Gains Tax and Donations Tax on the "disposal” of 38% income share held in the L Consortium to the amount of – R14 993 024
·Donations Tax (deemed donation – R5 586 607)
·The accrual of management Fees – R368 167
·Deduction of overseas travel expenses – R393 725
·Penalties in terms ofSection 76 of The Act– R1 895 590
·Additional penalties and interest under Section 76 of The Act R5 024 2990
·The interest under Section 89(2) of The Act
·Capital Expenditure – R6 122 435
Evidence was submitted by,inter alia, the appellant’s former CEO (noted to be an unreliable witness), auditors and former auditors and former employees.
The judgment, which consists of 116 pages, cited cases such as New State Areas Ltd v CIR 1946 AD 610 14 SATC 155 (capital nature of expenditure) and Concentra (Pty) Ltd v CIR 12 SATC 95 (claiming expenditure in year of incurred).
The appeal was dismissed in its entirety save that in respect of the management fees, the respondent (SARS) was directed to recalculate the accruals of such management fees in accordance with the court’s finding inparagraph 240of the judgment because the appellant had not shown the connection between the accrual of the management fees and the accrual of the proceeds from the sale of the consortium concentrate. The appellant was ordered to pay the respondent’s costs.
Click here to download the judgment.