MTN International (Mauritius) Limited v CSARS 23203/11
21 February 2013
Posted by: Author: SAIT Technical
Author: SAIT Technical
The North Gauteng High court delivered its judgment in the matter
between MTN International (Mauritius) Limited and SARS (case number 23203/11)
on 31 January 2013. The taxpayer brought an application in terms of
section 6 of PAJA for the review of the procedural defects and actions of the
Commissioner for SARS in the raising of an additional income tax assessment. An
order was sought to set aside the assessment and to refund monies withheld by
MTN International (Mauritius) Limited ("applicant”) is a company
registered in Mauritius and a subsidiary of MTN Group Ltd, a JSE-listed South
The applicant acquired operating groups ("investments”) in MTN
Nigeria and Investcom (Middle East) through loans made from its holding company
(MTN Holdings). A new company was incorporated in Nigeria in which interests
were acquired. The interest expenditures on the loans were claimed as a
deduction amounting to R3 044 873 in 2006 in respect of the Nigerian investment
and R238 171 121 in respect of Investcom.
SARS ("the respondent”) had allowed such deductions during previous
As a result of an overpayment of provisional tax, the applicant claimed
substantial tax refunds and the respondent conducted a refund audit.
The respondent had queried the interest expenses in previous audits. An
apportionment of interest was agreed at a meeting in 2008.
An independent audit conducted by the Johannesburg office held the view
that the interest did not qualify for a deduction as it considered it to be
On 23 February 2011, the respondent requested the applicant to agree to
an extension of the prescription period to the 2006 assessment.
The applicant stated that it was not amenable to request since it had
made full disclosure and had given the respondent sufficient time to resolve
A letter of findings was issued on 24 February by the respondent to
which the applicant replied on 25 March stating that the management services
agreement was negotiated between the parties at arm's length in compliance with
The respondent raised an additional assessment on 31 March 2011.
The applicant argued that the respondent had not properly considered all
matters in its reply and that its conduct was unlawful and reviewable for the
- SARS issued the revised assessment on 31 March 2011 and, contrary to its
powers, back-dating the due date to 30 March 2011.
- SARS refrained to apply the practice it consistently applied by
setting the ‘second date' 30 days later.
- The decision taken was not rationally connected to the reason
contained in the respondent's letter of findings.
It was held that the application required considering factual issues
(such as determining whether the altering of the dates by SARS and on issues
regarding legitimate expectation) was in bad faith and that the power to do
this was that of the Tax Court.
The application was dismissed.
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