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MTN International (Mauritius) Limited v CSARS 23203/11

Thursday, 21 February 2013   (0 Comments)
Posted by: Author: SAIT Technical
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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 SARS.


MTN International (Mauritius) Limited ("applicant”) is a company registered in Mauritius and a subsidiary of MTN Group Ltd, a JSE-listed South African company.

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 years.

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 "unproductive interest”.

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 the issues.

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 section 31.

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 following reasons: 

  1. SARS issued the revised assessment on 31 March 2011 and, contrary to its powers, back-dating the due date to 30 March 2011.
  2. SARS refrained to apply the practice it consistently applied by setting the ‘second date' 30 days later.
  3. 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.

Please click here to access the full case.



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