Opposed Court Application
MATHONSI J: This is an
application for an order compelling the respondent to assess capital
gains tax payable in respect of the sale of stand 965 Mabelreign
Township Harare and to receive such tax from the Deputy Sheriff for
Harare on the pain of costs of the application.
The said property is currently registered in the name of a company
known as Ellseck Investments (Private) Ltd.
The genesis of the matter is that the applicant concluded a sale
agreement with Ellseck Investments (Pvt) Ltd for the purchase of
stand 965 Mabelreign Township for
US$48,000-00 on 14 January 2010. She says she paid the full purchase
price to the seller through mortgage finance from ZB Building
Society.
Conveyancers, Danziger & Partners were instructed to attend to
the transfer of the property into the applicant's name.
The applicant states that before purchasing the property aforesaid,
she had diligently conducted a deeds office search and satisfied
herself that indeed the property was registered in the name of the
seller and was not encumbered in any way.
It turns out that the seller did not co-operate in the process of
transfer of the property to the applicant resulting in the applicant
approaching this court in case No. HC6737/10 for an order compelling
the seller to perform its obligations in terms of the agreement of
the parties and the law.
On 8 December 2010, this court, per MAVANGIRA J, issued an order
against Ellseck Investments (Pvt) Ltd in favour of the applicant
which reads as follows:
“IT
IS HEREBY ORDERED THAT:
1. The Respondent shall, within
ten (10) days of service of this court order upon it, provide Messrs
Danziger & Partners
Legal Practitioners with all the information and documents necessary
for the registration of transfer of stand 965 Mabelreign Township,
Harare into the name of the applicant.
2. The Respondent shall, also
within ten (10) days of service of this court order upon it, appoint
a representative and execute all the necessary legal documents
authorizing such representative to do everything necessary for the
purpose of effecting transfer of Stand 965 Mabelreign Township,
Harare into the name of the applicant including complying with all
the administrative requirements of the registration of the transfer.
3. In the event of the Respondent
failing to comply with paragraphs 1 and 2 above, the Deputy Sheriff
for Harare shall be authorized to carry out all the acts required of
the respondent to enable transfer of stand 965 Mabelreign Township,
Harare to be registered into the name of the applicant.
4. The Respondent shall bear the
costs of this application on the legal practitioner and client
scale.”
One of the acts required to
enable transfer of the property to the applicant is payment of
capital gains tax assessed by the respondent in this case in terms of
the Capital Gains Tax Act [Cap
23:01].
It would appear that Ellseck Investments (Pvt) Ltd did not comply
with the court order issued by MAVANGIRA J. forcing the applicant to
fall back on the alternative term of the order, that of the Deputy
Sheriff performing the acts necessary to give transfer to the
applicant.
When the Deputy Sheriff
approached the respondent's office for assessment and payment of
Capital Gains Tax, he did not get any joy. The respondent refused to
perform his statutory duties according to the Deputy Sheriff's
return of 20 April 2011;
“Attempted to obtain assessment
of capital gains tax in the presents (sic) of
instructing attorney, Mrs Dzangare advised that they could not comply
with the requirements since there were outstanding
payments.”
In a letter written to the Conveyancer on 21 March 2011 on behalf of
the respondent, his position on the matter was set out thus:
“We wish to draw your attention
to the fact that the initial transfer of the
above mentioned stand from Clyde Chitsinde to Ellseck Investments
Private Limited was done fraudulently as no capital gains tax was
paid as is required by the law. The Zimbabwe Revenue Authority is
therefore not in a position to accept payment of capital gains tax
from Ellseck Investments Private Limited or to issue a capital gains
clearance certificate in respect of the transfer from Chivhu Property
Limited to your client as the initial transfer was tainted with
illegability. Thus, the original seller of the property
that is, Clyde Chitsinde should first come and pay capital
gains tax in respect of the sale of the property to Ellseck
Investments Private Limited before capital gains tax in respect of
the sale in question.”
It was not explained why the sins of the previous seller should be
visited upon the doorsteps of the current seller, or indeed the
applicant who, for all intents and purposes, is the only interested
party to the whole exercise.
Neither was it explained what prejudice would be suffered by the
collector of taxes if capital gains tax was assessed and paid by or
on behalf of Ellseck (Pvt) Ltd, which tax is now due, the property
having been sold to the applicant.
In his opposing affidavit the respondent also, made reference to the
fact that his investigations have revealed that the applicant
purchased the same property from Clyde Chitsinde and he wondered why
she had to buy the same property again from Ellseck.
In support of that claim he attached handwritten office notes of
interviews whose author is not disclosed.
He did not explain why an affidavit could not be obtained from the
author to buttress his case especially as those notes have no
evidentiary value whatsoever.
I therefore reject those notes.
Counsel for both parties are agreed that the only issue to be
determined is whether the respondent is empowered by the legislation
that he administers to refuse to assess and receive capital gains tax
on the basis that it has come to his attention that the previous
owner of the property sold did not pay capital gains tax when he sold
the property himself.
Mr
Muchandiona for the
applicant argued that neither the Revenue Authority Act [Cap
23:11] or the
Capital Gains Tax Act [Cap
23:04] empower the
respondent to refuse to assess and collect capital gains tax.
He further submitted that the
respondent has both criminal and civil remedies to deal with tax
defaulters without resorting to the unorthodox actions he has
employed in this matter. He is aware of the particulars and
whereabouts of the defaulter, Clyde Chitsinde, and should pursue
those remedies against him.
On the other hand, Mr
Musitu for the
respondent strongly argued that the respondent is not obliged to
issue a tax clearance certificate to the applicant because she is not
a person entitled to it in terms of section 34(c) of the Revenue
Authority Act and is not covered by section 6 of the Capital Gains
Tax Act, which is the charging section.
He took the view that only the seller, Ellseck was entitled to be
issued with the clearance certificate. In terms of the court order
referred to above, it is the Deputy Sheriff who is entitled to the
clearance certificate.
When his attention was drawn to the Deputy Sheriff's return of
service to the effect that the respondent still refused to issue the
clearance certificate to him, Mr Musitu could not explain that.
In my view there is a court order clothing the deputy sheriff with
authority to enter the shoes of Ellseck Investments and pay Capital
Gains Tax on its behalf in order to facilitate transfer of the
property to the applicant.
That court order is still binding and must be complied with.
The respondent has refused to let the Deputy Sheriff satisfy the
terms of that order. For him to then argue that the applicant is not
entitled to a clearance certificate is red herring.
The Zimbabwe Revenue Authority
which the respondent heads, is established in terms of section
3 of the Revenue
Authority Act, [Cap
23:11] and its
functions and authority are set out in section 4 (four) as read with
the 2nd
schedule thereof.
Its main function is to act as an agent of the state in assessing,
collecting and enforcing the payment of all revenues.
In respect of capital gains tax
section
6 as
read with section 22B of the Capital Gains Tax [Cap
23:01] provides
for the charging, levying and collection of it against any person
receiving a capital gain.
As a creature of statute ZIMRA is required to act in terms of the
enabling statute.
The relevant statutes enjoin it to assess and collect the tax that is
due. On the face of it, it cannot set conditions for the performance
of its statutory obligations.
Regarding proof of title to
immovable property, section 14(a) of the Deeds Registries Act [Cap
20:05] provides;
“Subject to this act or any
other law the ownership of land may be conveyed from one
person to another only by means of a deed of transfer executed or
attested by the registrar.”
Section
8(1) of the same
Act provides:
“Save as is otherwise provided
in this Act or in any other enactment, no registered
deed of grant, deed of transfer, certificate of title or other deed
confirming or conveying title to land, or any real right
in land other than a mortgage bond, and no cession of
any registered bond not made, as security, shall be
cancelled by a registrar except upon an order of court.”
It is common cause that Ellseck Investment holds title to stand 965
Mabelreign Township which is registered at the deeds office.
The registrar is the custodian and keeper of such titles.
It must therefore be accepted
that the title deed held by Ellseck Investment is prima
facie proof of
ownership and an announcement to the whole world to deal with the
title holder in accordance with the deed of transfer.
The registrar of deeds had not
questioned the validity of that deed which, in any event, cannot be
cancelled without a court order in terms of section 8(1).
What we have here in a case in which the applicant has relied on the
records at the deeds office to purchase the property. She has gone
ahead to obtain an order authorizing the Deputy Sheriff to pay
capital gains tax.
The respondent has refused to assess the tax thereby frustrating the
execution of a court order.
His reasons for doing so are that the applicant may have colluded
with a previous owner to avoid tax.
I have already said that the respondents claim is not only
unsubstantiated but premised on the inadmissible evidence, the notes
of an unnamed officer, and have rejected that claim.
Therefore all that remains is
evidence of a bona
fide
purchaser who is
entitled to take transfer upon assessment and payment of tax.
I do not agree with Mr Musitu
that the respondent is entitled to refuse to assess and receive tax
in the circumstances of this matter.
I agree with Mr Muchandiona
that, if the respondent has proof that a previous owner avoided
paying capital gains tax, he has the latitude that in terms of the
Capital Gains Tax Act, to pursue the defaulter and recover that tax
as he has both Criminal and Civil remedies in that regard.
The respondent should, in the meantime collect capital gains tax from
the current seller.
The issues arising out of this dispute are such that it would not
have been obvious that the respondent could not contest the
application. I am of the view that he was entitled to bring his
argument before the court for adjudication and cannot be said to have
acted unreasonably. For that reason this is a case in which each
party should bear its own costs.
In the result, I make the following order; that:
1. The respondent shall, within
ten days of service of this order upon him assess the capital
gains tax payable in respect of the sale of stand 965 Mabelreign
Township, Harare by Ellseck Investments (Pvt) Ltd to the
applicant.
2. The respondent should receive
payment of the capital gains tax payable by Ellseck
Investment (Pvt) Ltd from the Deputy Sheriff for Harare and issue a
Capital Gains Tax Withholding Tax Certificate to the Deputy
Sheriff upon receipt of the payment.
3. Each party shall bear its own
costs.
Danziger & Partners,
applicant's legal practitioners
