MTN International (Mauritius) Ltd v CSARS 275/2013  ZASCA 8 - 14 March 2014
16 March 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
The North Gauteng High Court recently delivered a judgement in the matter between MTN International (Mauritius) and the Commissioner for South African Revenue.
This matter was an appeal to determine whether a revised assessment raised on 31 March 2011 in terms of the Income Tax Act, 1962, by the Commissioner of South African Revenue Service, to assess the appellant, MTN International (Mauritius), for the 2006 year of assessment, falls to be set aside.
MTN claimed interest on loans it incurred as expenditure in terms of the Income Tax Act, against its gross income for the 2006 year of assessment. The loans being a loan for the purposes of making investments in Nigeria of which the interest expenditure on this loan was claimed for a number of years up to and including the 2006 year of assessment and another loan for the purposes of making investments in the Middle East, the loan was incurred from MTN's holding company, MTN Holdings Limited, the interest expenditure on this loan was claimed for the first time during the 2006 year of assessment.
SARS raised the revised assessment disallowing the interest expenditure, which resulted in an income tax liability by MTN, on 31 March 2011 the last day before the original assessment was due to prescribe in terms of s79(1) of the of the Act. When raising the assessment the relevant SARS official manually fixed the 'due date' on the IT40 form to a day prior to the day on which the assessment was actually raised. Further, the 'second date' and 'process date' were fixed as 31 March 2011. SARS recovered the amount of the tax liability by setting it off against a tax refund due on MTN's provisional tax account. On 02 April 2011, as initimated by the IT40 form, an IT34 was issued to MTN and reflected the due date as 01 May 2011 and the 'second due date as 31 May 2011. Consequent to the receipt of the IT34, MTN applied to court to have the additional assessment withdrawn.
MTN argued that the manipulation of dates to meet SARS' needs was irregular and unlawful that the additional tax assessment stood to be aside on that basis alone. SARS contended that it acted within its powers in terms of section 79 of the Income Tax Act, as the original assessment had not yet prescribed and the amount which was subject to tax and should have been assessed for tax had not been assessed due to the fact that the interest expenditure claimed by the applicant was erroneously allowed by SARS as a deduction when raising the original 2006 assessment and the fixing of dates had no impact on the validity of the assessment.
The court held that SARS assessed MTN within the prescriptive period allowed by the Income Tax Act and the assessment was sent to MTN on that day. It is not a requirement that an order for a notification should be dated for a determination by SARS to be a valid assessment. The fact that the due date has been incorrectly fixed would be irrelevant. Further, there appeared to be no logical or rational distinction that can be drawn between the error which underpinned the SARS official to deciding whether or not the assessment is valid. The appeal failed and was dismissed with costs.
Please click here to access the full judgement.