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Income Tax Case No 1865 75 SATC 250

04 February 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical


The Appellant objected to an assessment letter issued by the Respondent, the appellant’s reason being that itdid not constitute an assessment as envisaged in ss 31(4) and (5) of the Value Added Tax Act 89 of 1991. The appellant further lodged an objection to the assessed penalties and interest. The Respondent had disallowed the Appellant’s objections to the assessment on supplies provided by it to C (Pty) Ltd and D (Pty) Ltd ,of which the appellant argued that it had not supplied services to C (Pty) Ltd and D (Pty) Ltd as contemplated in the Value Added Tax Act 89 of 1991, and had accordingly not under-declared output VAT and therefore, was not liable to the Respondent for output VAT in respect of rental payable by C (Pty) Ltd and D (Pty) Ltd as specified in the VAT invoices on record.


The appellant, a company registered as a VAT vendor in terms of the Value Added Tax Act 89 of 1991, was a property owner and had conducted business as a landlord. The appellant had entered into three lease agreements with three affiliated companies. The Appellant and the lessees constituted a group of companies. The appellant issued fictitious tax invoices to two of the companies being (C (Pty) Ltd and D (Pty) Ltd), however, both companies had no employees and therefore did not occupy any premises. These fictitious tax invoices were to be used for the purposes of opposing an application for its liquidation, and as a result, these invoices were never given to either C (Pty) Ltd or D (Pty) Ltd.


The court held that the appellant had correctly acknowledged the assessment letter as the Appellant’s legal representative had lodged an objection to the letter of assessment and the said objection referred to the contents of the letter of assessment as an ‘assessment’. The tax invoices generated by the Appellant complied with the provisions of s20(4) of the VAT Act 89 of 1991. In terms of s9(1), VAT was payable as soon as the appellant had issued tax invoices. Property, In the case of a vendor who rented out property, the declaration of output tax was not dependent upon whether such vendor elected to enforce payment by a lessee in terms of a lease agreement during the term of the lease. In a previous case, the appellant was found to be liable for output tax in relation to fictitious VAT invoices it had issued when it had participated in a fraud for its own gain. The appeal was dismissed with costs.

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