This is an appeal and cross-appeal against parts of the judgment of the Special Court (for Income Tax Appeals) dated 11 October 2019 dismissing some of the appellant's objections against the respondent's amended assessments, and setting aside some of the respondent's amended assessments.
In this judgment, I will refer to the appellant as the main appellant and the respondent as the cross appellant.
FACTUAL BACKGROUND
The detailed facts of the case can be summarised as follows:
The main appellant is a company registered in terms of the laws of Zimbabwe and a subsidiary of Delta Corporation (the Holding Company). The two companies are separate and distinct from each other but share the same acronym. The holding company carries on business in the beverages and agro-industrial sectors of the Zimbabwean economy.
The cross-appellant is, in terms of the Income Tax Act [Chapter 23:06], the authority responsible for the collection of taxes in Zimbabwe.
In 1958, the predecessor to the holding company entered into an exclusive franchise agreement with a Canadian Company which owned the LL beverage trademark.
In 1970, two further trademarks, CB and CBL were included in the franchise agreement.
The last trademark, EL, was added to the franchise agreement in 2004.
The franchisee is the owner of four local beverage trademarks CL, BL, ZL and GPL. The parties interchangeably referred to trademarks as brands in their franchise agreements.
In terms of the 1970 agreement, the holding company had the right, subject to the terms and conditions of each agreement, to transfer, assign and sub-licence its subsidiaries to manufacture and sell the trademarked beverages. The holding company was obliged to pay to the franchisor royalty fees for the trademarks computed against prescribed sales and technical fees for the technical assistance provided and calculated on a cost-recovery basis.
Before the court a quo, evidence was led to the effect, that, in 2002, the Canadian Company was taken over by the Dutch company, International Management BV, which, in turn, executed an undated and unsigned Technical Support and Assistance (“TSA”) agreement with the holding company retrospectively to 1 January 2002.
The Dutch company was a subsidiary of SAB Miller International BV, an English public company.
The Dutch company undertook to provide, in person or by proxy, to the local holding company, its accumulated international expertise and know-how in the manufacture, management and distribution of beverages.
The Group of the holding company was defined as the holding company and “any existing and future subsidiaries.”
Know-how was elaborately defined to include all aspects of purchasing raw materials, product manufacture and brand development, plant and waste management, packaging and distribution, consumer research, and performance management systems.
The term subsidiary carried five different meanings which ranged from majority shareholder control, to majority votes garnered by agreement with other shareholders in financial policy, management, and supervision of the holding company by the Dutch company.
The term turnover encompassed Group gross sales revenue from all beverages and malt inclusive of taxes and excise duties.
Clause 3 contemplated the provision of know-how to the Group and “the relevant company in the Group” under the direction of the Board of the holding company.
The holding company undertook to do all such things and pass all such resolutions necessary to effect the terms of the agreement. It also agreed to ensure that its subsidiaries adopt, ratify, or confirm any lawful support rendered by the Dutch company to such subsidiaries.
In terms of clause 5, the holding company was responsible for the payment of an annual fee equal to 1.5 percent of the total Group turnover payable quarterly, on a pro rata basis, within 30 days after the end of each quarter.
The payment was to be in United States dollars, at the best available market rate in Zimbabwe, but, subject to the necessary exchange control and other Governmental approvals.
In the absence of foreign currency, the holding company would apply the fee to purchase its ordinary shares on behalf of the Dutch company in the name of an affiliate.
A new agreement was concluded on 1 September 2006 and renewed on 1 August 2011.
The Dutch company continued to provide know-how in the production, distribution, and management of beverages in the Group and the relevant company in the Group.
In the interim, on 30 April 2007, the holding company executed a royalty agreement with the Dutch company, International BV, which replaced the royalty agreement of 14 December 2001.
On 1 February 2008, the main appellant's Board of Directors resolved to execute an administrative and contractual services agreement with the holding company authorising the holding company to enter into administrative, technical, and contractual services arrangements with third parties on its behalf.
It resolved to be bound by such agreements and to bear the costs and benefits arising therefrom.
The contemplated Administrative, Technical and Contractual Service Agreement was concluded on 8 February 2008.
The main appellant bound itself to assume all royalty and exploitation of user rights and brands and trademarks agreements, services agreements, lease agreements, bonds, supplier contracts, employment contracts, and any other routine matters authorised for execution by the Board or its management executed by the holding company as its own.
On 19 August 2011, the exchange control authority granted authority to the holding company to pay royalties of up to 5 percent to the Dutch company less withholding tax.
Again, on 18 March 2013, the exchange control authority granted the main appellant authority to renew the Technical Services Assistance agreement and make payment of fees of up to 1.5 percent of the Group's annual turnover excluding sales of CBL, LL and EL less withholding tax and an additional 1 percent of the holding company's turnover less withholding tax on another product, CL, in recognition of the invention, design and know-how of the franchisor.
The turnover and fees were to be certified by a reputable firm of auditors.
On 14 April 2016, the cross appellant issued six (6) amended manual Notices of Assessment for Income Tax to the main appellant. The amended assessments related to the tax years ending on 31 December 2009, 2010, 2011, 2012, 2013 and 2014. The cross-appellant levied a payment by the main appellant of over US$42 million, including penalty and interest.
By letter dated 20 April 2016, the main appellant objected to the assessments.
In response, the cross appellant issued revised assessments and sent these to the main appellant without an explanation.
In its revised assessments, the cross-appellant conceded several issues raised by the main appellant in its objection and reduced the total amount claimed to around US$30 million.
By letter dated 9 May 2016, the main appellant revised and re-lodged further objections.
The cross appellant disallowed all grounds of the main appellant's further objections.
Aggrieved by that decision, the main appellant appealed to the Special Court for Income Tax Appeals.
The issues placed before the court a quo for determination, as per the joint pre-trial conference minute, are as follows:
“1. Whether or not the respondent was correct in disallowing royalties pertaining to the brands/trademarks?
2. Does the fact that a written technical services agreement exists between Delta Corporation and SAB Miller Management BV prevent the appellant from deducting such fee payments as expenses?
3. Did the appellant incur technical fees, which it sought to deduct as expenses?
4. Was the respondent correct in disallowing technical fees, which are expressed as a percentage of turnover?
5. Had Delta's tax affairs, relating to the tax year ending 31 December 2009, prescribed as at the date of the assessment?
6. If not, whether the respondent correctly disallowed the expenditure apportioned by the holding company as management charges?
7. Whether or not the respondent was correct in disallowing consumable stocks claimed by the appellant.
8. Whether or not the respondent was correct in disallowing prepaid expenses claimed by the appellant?
9. Is appellant entitled to deduct the inventory revaluation in question?
10. Whether or not the respondent was correct in disallowing expenses described as computer software cost in the tax computation?
11. Is respondent's imposition of penalties of 50% justified?
12. Whether or not interest should be payable by the appellant.”
After hearing the parties and perusing documents filed of record, the court a quo ordered that:
“1. The revised manual assessments numbers 0006754, 0006755, 0006756, 0006757, 0006758 and 0006759 issued by the Commissioner on 5 May 2016 for the tax years ended 31 December 2009, 2010, 2011, 2013 and 2014 respectively be and are hereby set aside.
2. The Commissioner is directed to issue further revised assessments that incorporate the contents of this judgment. He shall specifically:
(a) Allow in full the deductions claimed by the appellant for royalties and technical fees in respect of the 2009, 2010, 2011, 2012, 2013 and 2014 tax years.
(b) Reopen the 2009 assessment and add back the sum of US$150,722 in respect of head office expenses, to the appellant's taxable income.
(c) Add back all the deductions, if any, made by the appellant in respect of head office expenses to the appellant's taxable income for the years 2010 to 2014.
(d) Add back the deductions for consumable stock, in their respective amounts, to the appellant's taxable income in respect of each tax year in issue.
(e) Add back the prepayments, in their respective amounts, in each tax year in issue.
(f) Allow the deduction in the sum of US$603,792 in respect of the stock revaluation adjustment in the 2010 tax year.
(g) Add back the computer software deductions of US$2,059,238 in their respective amounts, in the 2013 and 2014 tax years.
(h) Charge a penalty of 10% on the additional tax payable in each respective tax year.
(i) Waive in full any interest from the additional tax.”
Aggrieved by the decision of the court a quo, the main appellant noted an appeal against part of the judgment to this Court. The cross appellant cross-appealed against part of the same decision.
The appeals were noted on the following grounds:
GROUNDS OF APPEAL (MAIN APPEAL)
“1. The court a quo erred in law by holding, that, the legislative intent behind the Income Tax Act [Chapter 23:06] was clearly to match the expense incurred to the income produced in the same tax year.
2. The court a quo erred in law by holding, that, when determining the deductibility of the expense of unused consumables the relevant question was whether 'the appellant had an unconditional legal obligation to purchase' them.
3. The court a quo erred in law by finding, that, the appellant decided to 'purchase consumables in excess of its annual requirements' in circumstances where there was no evidence warranting such a finding before the court.
4. The court a quo erred by disallowing all deductions for consumable stocks in circumstances where it has found that deductions for consumables are allowed in the year when they were consumed.
Relating to issue 5: 'Prepaid expenditure'
5. The court a quo erred in law by apparently expecting opinion evidence, on a question of law relating to the requirement of paying excise duty, from a witness of fact.
6. The court a quo erred in law by appearing to hold, without expressly stating its finding, that, the appellant's obligation to pay excise duty on clear beer removed from the excise bonded warehouse constituted a 'premature discharge of a contingent liability.'
7. The court a quo erred in law by appearing to hold, without expressly stating its finding, that, the appellant's obligation to pay for an annual insurance premium that straddled two tax years constituted a 'premature discharge of a contingent liability.'”
GROUNDS OF APPEAL (CROSS APPEAL)
“1. The Special Court for Income Tax Appeals erred in allowing as a deduction, in terms of section 15(2(a) of the Income Tax Act [Chapter 23:06], expenses relating to royalties in respect of each tax year in issue when the cross-respondent was not a party to the agreement in terms of which such royalties were payable.
2. The court a quo further erred in finding that payments made in respect of trademarks or brands were expenditure incurred for the purposes of the cross-respondent producing income.
3. The court a quo further erred in finding, that, the cross-respondent was entitled to pay fees in terms of the Technical Services Agreement which was concluded between Delta Corporation Limited and SAB Miller Management BV to which the cross-respondent was not a party.
4. The court a quo erred in finding, that, the cross-respondent was entitled to pay fees in terms of the Technical Services Agreement at the rate of 1.5% of turnover when it was clear that SAB Miller itself was charged fees on a cost-plus mark-up basis by its South African sub-contractors and when the Group policy was that the cost plus mark-up basis was the method of charging such fees.
5. The court a quo further erred in finding, that, the cross-respondent was entitled to pay and deduct the amount of US$603,792 in respect of inventory revaluation, as an expense incurred against its income in terms of section 15(2)(a) of the Income Tax Act when the value of the stock adjusted had already been factored into the computation of the gross profit which was subject to the income tax.
6. The court a quo further grossly erred in finding, that, the cross-appellant was not correct in imposing a penalty of 50% of the taxes due upon the assessments on the cross-respondent.
7. The court a quo further grossly erred in setting aside the interest imposed upon the cross-respondent when it was not shown that the Commissioner of the cross-appellant had been grossly unreasonable in imposing such interest at 10%.”
THE MAIN APPELLANT'S SUBMISSIONS ON APPEAL AND CROSS APPEAL
Counsel for the main appellant, in the main appeal, submitted, that, the appellant bought consumables which did not run out in the first year and were carried into the second year. He further submitted, that, deductions could only be made in the first year and that the matching principle did not apply.
Counsel for the appellant submitted, that, the matching principle cannot be used as it apportions costs over two tax years as there were un-utilised consumables carried over from the year of purchase.
He contended, that, the cause of action arose when the consumables were bought and the expense was incurred in year one. To that end, he argued that the appellant has to deduct the expenses of the purchases in year one and that there should be no splitting of the expenses into both years.
Counsel for the main appellant asserted, that, the statutory prepaid expenditure on record, establishes that the expenditure was incurred in terms of statute and cannot therefore be a prepayment as alleged by the respondent. He submitted, that, the court a quo was correct in allowing the deductions but it was not clear how it went on to make a finding in favour of the respondent.
Counsel for the main appellant submitted, that, the court a quo erred by disallowing all deductions for consumable stocks in circumstances where it had found that deductions for consumables are allowed in the year when they were consumed.
Concerning the fifth ground of appeal, relating to stock and trading stock, counsel for the main appellant argued, that, deductions were meant for stock in general to avoid double deductions.
On the imposition of penalties, counsel for the main appellant averred, that, the matter would have to be remitted to the court a quo for it to determine whether or not section 98 of the Income Tax Act applies.
In relating to the cross appellant's grounds of appeal number six and seven, on penalty and interest, counsel for the main appellant argued, that, the proceedings were neither an appeal in the strict sense nor a review, as the court a quo can consider evidence placed before it and come up with a decision on penalty and interest based on its own discretion.
On whether or not brands and trademarks contribute towards the making of income, counsel for the main appellant submitted, that, they significantly contribute in the making of income.
In respect of inventory revaluation, he submitted that they were correctly allowed in terms of paragraph 4 of the Second Schedule of the Income Tax Act.
In respect of the technical services, he argued that the court a quo correctly found that they were deductible.
THE CROSS APPELLANT'S SUBMISSIONS ON APPEAL AND CROSS APPEAL
Counsel for the cross appellant submitted, that, the consumables the main appellant sought to deduct were not utilized in the year of purchase, therefore, in terms of section 15(2)(a) of the Income Tax Act, one cannot interpret the section without taking into consideration the purpose for which the expense was incurred.
He argued, that, the matching principle applied as the purchase of consumables should be for the purpose of making an income in the tax year in which the purchases were made.
Counsel for the cross-appellant contended, that, the consumables were bought in excess and could not all be deducted in the same tax year. He submitted, that, the excess consumables were not consumed and did not generate income.
He further submitted, that, it is by the reasonable interpretation of the law that the matching principle must be applied.
He argued, that, the deduction for payments of royalties should not be allowed as there is no nexus between the main appellant and the holder of the royalties.
Concerning ground of appeal number two, he submitted, that, trademarks, brands, and the know-how generate little money unless advertised.
He further submitted, that, the advertising costs are deductible and that it is the advertising that generates income and that if the products are not advertised they remain as stock.
Counsel for the cross appellant asserted, that, there was no evidence proving that brands and trademarks contribute towards the making of income.
In relation to the main appellant's third and fourth grounds of appeal, he submitted, that, the court a quo found that the main appellant's witness was not a credible witness.
He contended, that, it was the SAB Miller policy to pay on a cost-plus mark-up basis, but, the court a quo found that the appellant was obliged to pay the holding company on a turnover basis of 1.5 percent.
Concerning prepayment of excise duty insurance premiums, counsel for the cross-appellant averred that the court a quo did not hear evidence on this issue as none was placed before it.
On technical fees, counsel for the cross-appellant submitted, that, the court a quo should have determined whether or not the agreement between the Dutch company and Delta Corporation (Private) Limited and that between the main appellant and Delta Corporation was not aimed at tax avoidance.
In respect of inventory revaluation, he submitted that the deduction should not have been allowed as that would amount to a double deduction.
THE MAIN APPELLANT'S RESPONSE
Counsel for the main appellant submitted, that, the question of whether or not the main appellant was a party to the agreement was a factual finding on which the cross appellant had made a concession to the effect, that, the agreement was genuine.
He averred that the cross appellant's case was whether or not a deduction could be allowed, and, on the other hand, its case was that deductions were justified if there was an obligation to pay.
He therefore argued, that, the cross-appellant was approbating and reprobating.
In respect of the use of trademarks to make an income, counsel for the main appellant submitted, that, one can make an income from brands or trademarks, which is a sign of the quality of the product. He argued that section 8(1) of the Income Tax Act defines gross income and income in a way which establish that income can be generated by a brand or a trademark.
Counsel for the main appellant averred, that, the Exchange Control Act allowed the charging of these fees and sets an upper limit of 3 percent.
ISSUES FOR DETERMINATION
The appeals raise the following issues for determination:
IN RESPECT OF THE MAIN APPEAL
1. Whether or not the court a quo correctly found, that, the legislative intent behind the Income Tax Act was to match the expenses incurred to the income produced in the same tax year and to allow the deduction of statutory prepayments which cover a period beyond the year of taxation in the tax year of payment.
2. Whether or not the court a quo erred in ordering the Commissioner to add back to the main appellant's taxable income deductions for consumables used to make an income in the year of taxation.
IN RESPECT OF THE CROSS APPEAL
1. Whether or not the court a quo erred in allowing the deduction of royalties by the main appellant when it was not a party to the agreement between the Dutch company and its holding company for the use of the Dutch company's brands and trademarks.
2. Whether the court a quo erred when it allowed the main appellant's deduction of payments of technical services without resolving whether or not such deductions contravened section 98 of the Income Tax Act.
3. Whether the court a quo erred when it allowed the main appellant's deduction of US$603,792 for inventory revaluation.
4. Whether or not the court a quo was correct in reducing to 10 percent the 50 percent penalty imposed and waiving in full the interest charged.
APPLICATION OF THE LAW TO THE FACTS
It must be stressed, that, the Special Court for Income Tax Appeals is not a court of appeal in the strict sense because when it hears these appeals, it is a re-hearing of the matter and it exercises its own discretion. It can even hear and rely on evidence and submissions which were not placed before the Commissioner.
This position was stated in Sommer Ranching (Pvt) Ltd v Commissioner of Taxes 1999 (1) ZLR 438 (SC)…, where GUBBAY CJ emphasized that:
“Presently, it is well settled that in an appeal against a decision where the Commissioner exercised a discretion, the Special Court is called upon to exercise its own original discretion. Nor is it restricted to the evidence which the Commissioner had before him. The appeal to the Special Court is not only a rehearing, but, can involve the leading of evidence and the submission of facts and arguments of which the Commissioner was unaware: see also Commissioner for Inland Revenue v da Costa 47 SATC 87 (A) at 95; 1985 (3) SA 768 (A) at 775B-G; K v Commissioner of Taxes 1993 (1) ZLR 142 (S) at 147B-F; 55 SATC 276 (ZS) at 281.”
The appeal before the court a quo was therefore not merely a review of the correctness of the Commissioner's determination, but, the court was required to exercise its own independent discretion unaffected by that of the Commissioner....,.
IN RESPECT OF THE CROSS APPEAL
2. Whether the court a quo erred when it allowed the main appellant's deduction of payments of technical services without resolving whether or not such deductions contravened section 98 of the Income Tax Act
In determining this issue, the court a quo commented on its perception that there might have been tax avoidance in the manner in which the Technical Services Agreement was concluded between the parties.
It commented, that, if the Commissioner had attacked the deduction of these services from the main appellant's taxable income it would have been fatal to the main appellant's claim.
In his heads of argument and submissions before this court, counsel for the cross appellant argued, that, the court a quo erred when it raised this issue and did not deal with it conclusively.
He argued, that, the Special Court for Income Tax has jurisdiction to rehear matters brought before it on appeal. He submitted, that, such appeals are not appeals in the strict sense, therefore, the court a quo should have fully inquired into whether or not there was tax avoidance in the main appellant's holding company's agreement with the Dutch company.
He submitted, that, the Dutch company, Delta Corporation (Private) Limited, and the main appellant are related companies which could have colluded to agree on the payment to the Dutch company at the percentage of 1.5 percent, when services by the Dutch company's South African subsidiaries to the main appellant were being made at cost price plus margin. He submitted, that, this was meant to benefit the Dutch company to the prejudice of Zimbabwe's tax collection system.
Counsel for the main appellant submitted, that, there was no tax avoidance, but, concentrated on the deductibility of the technical services instead of the tax avoidance issue.
The determinant factor is whether or not the court a quo inquired into and determined the issue of tax avoidance.
In determining the issue, the court a quo said:
“The witness failed to explain why the Dutch company paid the South African entity that supplied the technical services to the appellant on its behalf on a cost plus mark-up basis but charged the local holding company on a percentage of turnover basis.
Such a failure may have been fatal to the appellant's case had the Commissioner disallowed the technical fees in terms of section 98 the Income Tax Act.
In the absence of a finding by the Commissioner, that, the charging of a percentage of turnover as opposed to a cost plus basis was a transaction, operation, or scheme designed to and which did avoid the payment of the appropriate tax due as contemplated by section 98 of the Income Tax Act, the contracted choice between the Dutch company and the local holding company, of applying the percentage of turnover instead of the cost plus mark-up formula, cannot be impugned.”…,.
It is apparent from the court a quo's comments, that, it perceived that there might have been a case of tax avoidance by the main appellant's holding company and the Dutch company.
It is also apparent, that, it took no further steps to inquire into that possibility but proceeded to determine the appeal on other factors not connected to tax avoidance as if the appeal before it was an appeal in the strict sense.
It thus left the issue of tax avoidance hanging as no further inquiry into it was made, nor did it make a decision on the issue.
Section 98 of the Income Tax Act provides as follows:
“98 Tax avoidance generally
Where any transaction, operation or scheme (including a transaction, operation or scheme involving the alienation of property) has been entered into or carried out, which has the effect of avoiding or postponing liability for any tax or of reducing the amount of such liability, and which, in the opinion of the Commissioner, having regard to the circumstances under which the transaction, operation or scheme was entered into or carried out -
(a) Was entered into or carried out by means or in a manner which would not normally be employed in the entering into or carrying out of a transaction, operation or scheme of the nature of the transaction, operation or scheme in question; or
(b) Has created rights or obligations which would not normally be created between persons dealing at arm's length under a transaction, operation or scheme of the nature of the transaction, operation or scheme in question;
and the Commissioner is of the opinion that the avoidance or postponement of such liability or the reduction of the amount of such liability was the sole purpose or one of the main purposes of the transaction, operation or scheme;
The Commissioner shall determine the liability for any tax and the amount thereof as if the transaction, operation or scheme had not been entered into or carried out, or in such manner as in the circumstances of the case he considers appropriate for the prevention or diminution of such avoidance, postponement or reduction.”…,.
It is clear from the underlined part of the quotation, that, the issue of avoidance should be determined to enable the Commissioner, or, as in this case the Special Court, to determine how the tax payer should be taxed.
The determination of tax issues require clarity and incisiveness in decision making.
This is because the law requires that those who should pay tax should do so and those who fall outside that requirement should not be taxed.
There should be no room for those within the group which should be taxed escaping through failure by the Commissioner to net them in, and, if he fails, the Special Court, in the exercise of its full jurisdiction, should net them in.
In the case of Parkington v Attorney General 1869 LR 4 H.L. 100, 122 LORD CAIRNS, commenting on interpretation of fiscal statutes, said:
“As I understand the principle of all fiscal legislation, it is this: if a person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.”
It is therefore my view, that, once the court a quo realised that there might be tax avoidance it should have exhaustively inquired into and made a determination on it. It should have sought to determine the correct position of the law instead of identifying a possible error by the Commissioner and allowing it to pass.
Taxation is by the law and not official errors or laxity: see also the case of Commissioner of Taxes v CWP (Pvt) Ltd 1989 (3) ZLR 361 (SC)…,.
In the case of Commissioner of Taxes v Astra Holdings (Pvt) Ltd 2003 (1) ZLR 417 (S) MALABA JA…, said:
“The question must be stated and answered. Can it be said, that, in writing the letter of 1 July 1995, which contained the error of law, the Commissioner, by the Revenue Officer, purported to contract with Astra Holdings or purported to represent to it that the statement was true and that thereafter he would not asses it to unpaid tax which was, by law, due to revenue?
In other words, did the Commissioner bind himself to accept as valid the actions of Astra Holdings regarding the non-payment of the sales tax based upon the error of law?
There is no doubt, that, the purported contract would have been born out of the mistake of the law requiring that sales tax be charged and collected by the motor dealer on all motor vehicles sold locally. Although unknown to the parties, it would have been in contravention of the law for Astra Holdings not to charge and collect the sales tax which the statute required it to collect.
In my view, such an arrangement would be null and void ab initio.
It is a bargain the Commissioner could not make at law because it would have the effect of being in breach of his statutory duty to collect tax due to revenue.
It is one thing for revenue to enter into an arrangement with a taxpayer on how, in the exercise of its managerial powers, it will collect tax; but, it is another for it to seek to decide that a particular tax imposed by Parliament is not due from a taxpayer when in fact it is, and, in so doing, disclaim the right to the tax and abandon the statutory power to collect it.
In R v Board of Inland Revenue ex p. MFK Underwriting Agencies Ltd and Ors [1990] 1 All ER 91 BINGHAM LJ said…,.:
'I am, however, of opinion, that, in assessing the meaning, weight, and effect reasonably to be given to statements of the Revenue, the factual context, including the position of the Revenue itself, is all important.
Every ordinary, sophisticated taxpayer knows that the Revenue is a tax-collecting agency, not a tax-imposing authority.
The taxpayer's only legitimate expectation is, prima facie, that, he will be taxed according to statute, not concession or a wrong view of the law: see R v AG ex p. Imperial Chemical Industries PLC (1986) 60 TC 1 at 64 per LORD OLIVER.
Such taxpayers would appreciate, if they could not so pithily express, the truth of WALTON J's aphorism: 'One should be taxed by law, and not be untaxed by concession.'”…,.
I respectfully agree, and would add, that, where a tax matter has been placed before the Special Court for adjudication, a taxpayer should not escape liability simply because the Commissioner failed to invoke the appropriate taxing provision.
In casu, the omission by the court a quo to determine the issue of tax avoidance will have the effect of allowing the main appellant to get away with tax avoidance - if that can be proved on inquiry.
That view is strengthened by the court a quo's view, that, the failure by the main appellant's witness to explain the noted anomaly would have been fatal to its case if the Commissioner had taken into consideration the issue of tax avoidance.
I am therefore satisfied, that, the decision of the court a quo on this issue should be set aside and the case be referred back to it, for it to inquire into and determine whether or not the agreements between the Dutch company, Delta Corporation (Private) Limited and the main appellant do not constitute tax avoidance.
