The first step for an aggrieved taxpayer to dispute a tax assessment is generally to lodge an objection in terms of section 104 of the Tax Administration Act (the TAA).
In this article, I consider The Commissioner for the South African Revenue Service v Airports Company for South Africa (Case no 785/2021) [2022] ZASCA 132 (7 October 2022). This case illustrates the importance of lodging a thorough objection. The court considered whether the taxpayer could amend an objection after the expiry of the periods prescribed in the tax dispute resolution rules.
Facts of the case
SARS issued an additional assessment for ACSA in respect of its 2011 year of assessment. SARS disallowed the deductions for corporate social investment (CSI) expenditure and allowances in terms of sections 13quin and 12F. The assessment also imposed understatement penalties (USPs) and interest. In May 2016, the taxpayer objected to the additional assessment. However, it only objected to the disallowance of the deduction of the CSI expenditure. The objection did not find favour with SARS. In October 2016, ACSA appealed against the denial of the deduction of the CSI expenditure in October 2016. This was followed by unsuccessful settlement discussions and alternative dispute resolution proceedings in 2017.
In September 2019, the taxpayer requested SARS for indulgence to amend the objection. It intended to include objections against the adjustments in respect of the allowances claimed, the USPs and interest. SARS refused the request. They did so, firstly, because the tax dispute rules precluded such an amendment. Secondly, the taxpayer sought to introduce new grounds of objection, which is not permitted by those rules.
The matter before the court
ACSA applied to the tax court to amend the objection in terms of rule 28 of the Uniform Rules of Court. The taxpayer relied on this rule based on rule 42 of the dispute resolution rules. It states that if the tax dispute rules do not provide for a procedure in the tax court, a party or the tax court may utilise the most appropriate rule under the rules for the High Court made in accordance with the Rules Board for Courts of Law Act and to the extent that it is consistent with the TAA and the tax dispute rules.
Judgment
The SCA ruled that:
- Rule 42 only applies where the tax dispute rules do not make provision for a procedure in the tax court. It, therefore, does not relate to an objection, which is part of the pre-litigation administrative process.
- Being part of the pre-litigation administrative process, an objection is also not a pleading or document filed in connection with judicial proceedings, as envisaged in rule 28 of the Uniform Rules of Court.
- Rule 10(3) of the tax dispute rules specifically precludes an appeal on a ground that constitutes a new objection against a part or amount not objected to. Allowing the amendment sought would extend the period for filing an objection long after the peremptory periods prescribed in the TAA and the tax dispute rules. This would undermine the principles of certainty and finality.
Take-home message
If a taxpayer fails to object to an amount or part of an assessment, it is unlikely to be able to do so later in the dispute process. Those amounts or parts of the assessment become final. It is essential to ensure that an objection is complete in this sense.
A taxpayer is not precluded from appealing on a ground not raised in the objection. It may however not do so if this constitutes an objection against a part or amount not previously objected to. In my experience, taxpayers benefit from a well-considered and thorough objection that raises all the relevant grounds that could resolve a dispute at the objection stage. This avoids unnecessarily proceeding to an appeal and further costs associated with it.
