Income Tax Case No 1865 75 SATC 250
04 February 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
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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