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De Beers Consolidated Mines Limited (503/11) [2012] ZASCA 103 (1 June 2012)

06 June 2012   (0 Comments)
Posted by: SAIT Technical
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The Commissioner of the South African Revenue Services appealed against the Tax Courts’ findings in a tax matter which involved De Beers Consolidated Mines Ltd (DBCM) who in turn cross-appealed against another finding of the Tax Court in the same matter.


During November 2000 a consortium approached DBCM and proposed a complex structure in which the consortium would become the holding company and effectively become the new owners of DBCM and a linked Swiss company. In order for DBCM to satisfy itself that the proposal was fair and reasonable, it appointed NM Rothschild and Sons Ltd (NMR), a London-based company as well as various South African advisors for purposes of finalizing the transaction.


Whether the findings of the Tax Court could be respectively upheld and dismissed.

CSARS appealed against:

1.)   the finding of the Tax Court that the services rendered by NMR to DBCM did not  constitute 'imported services'; and

2.)   the finding of the Tax Court that a part of the VAT on local services rendered by WWB to DBCM constituted deductible 'input tax' in DBCM's hands.

DBCM cross appealed against:

1.)   the finding of the Tax Court that the VAT charged to it by the providers of local services did not constitute deductible 'input tax'.


The court found that the same question must be answered in both the appeal and the cross-appeal; i.e. whether the services acquired by DBCM were required for the purpose of consumption, use or supply in the course of making 'taxable supplies', which means supplying goods or services in the course or furtherance of the 'enterprise'. In addition, the appeal requires a consideration of whether the 'imported services' were utilized or consumed by DBCM in the Republic.

It was found that DBCM is not a dealer in shares, the holding of shares and receipt of dividends by DBCM does not fall within the definition of 'enterprise' and this must therefore be disregarded. It must be found that DBCM's 'enterprise' for the purposes of the Act, consisted of mining, marketing and selling diamonds therefore NMR’s services were not acquired for the purpose of making ‘taxable supplies’. They could not contribute in any way to the making of DBCM's 'taxable supplies'. They were also not acquired in the ordinary course of DBCM's 'enterprise' as part of its overhead expenditure as argued by DBCM. They were supplied simply to enable DBCM's board to comply with its legal obligations.

The appeal was upheld with costs, including the costs attendant upon the employment of two counsel.

The cross appeal was dismissed with costs, including the costs attendant upon the employment of two counsel.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


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