The Commissioner for the South African Revenue Service v Absa Bank Limited and Another

Absa Bank Limited and its wholly owned subsidiary United Towers Proprietary Limited entered into an investment arrangement involving a series of interlinked transactions. They subscribed for preference shares in PSIC3, which used the proceeds to invest in PSIC4, which made a capital contribution to D1 Trust. D1 Trust made interest-bearing loans to Macquarie Securities South Africa Ltd and invested the interest earned in Brazilian Government Bonds, which under the Double Taxation Agreement provided a tax-free income stream. This income flowed back to Absa and United Towers as dividends. SARS initiated an investigation in 2016 and issued audit notices in May 2018. On 30 November 2018, SARS issued notices under s 80J of the Income Tax Act indicating its intention to apply the General Anti-Avoidance Rule (GAAR) provisions. On 15 February 2019, Absa and United Towers requested withdrawal of these notices under s 9 of the Tax Administration Act (TAA). SARS refused on 5 March 2019. On 29 March 2019, Absa and United Towers launched a review application seeking to set aside the refusal to withdraw the s 80J notices. On 17 October 2019, SARS issued additional assessments for the 2014-2017 tax years, determining that the investment returns constituted taxable income. Absa and United Towers amended their application to include a review of these assessments.

• Whether a decision refusing to withdraw a notice issued under s 80J of the Income Tax Act is reviewable under s 9 of the Tax Administration Act, either before or after the issuing of an assessment under s 80B of the Income Tax Act
• Whether the High Court had jurisdiction under s 105 of the Tax Administration Act to review tax assessments on the basis that the dispute raised solely a question of law
• Whether the refusal to withdraw the s 80J notices and the subsequent assessments were unlawful under the principle of legality
• Whether the parties participated in an 'impermissible avoidance arrangement' under the General Anti-Avoidance Rule provisions

The appeal was upheld with costs, including the costs of two counsel. The orders of the High Court were set aside and substituted with an order dismissing the application with costs, including the costs of two counsel.

A decision refusing to withdraw a notice issued under s 80J of the Income Tax Act is not reviewable under s 9 of the Tax Administration Act as it has no adverse effect or impact on the taxpayer until an assessment determining tax liability is made under s 80B. The s 80J notice is a procedural step in the GAAR process that is overtaken by the subsequent assessment. The High Court does not have jurisdiction under s 105 of the Tax Administration Act to review tax assessments unless exceptional circumstances exist, such as where the dispute raises solely a question of law. The determination of whether a taxpayer participated in an impermissible avoidance arrangement under the General Anti-Avoidance Rule provisions involves questions of fact, including the taxpayer's subjective purpose, knowledge of the arrangement, and whether a tax benefit was obtained. Such questions are not solely questions of law. Tax disputes involving factual determinations must be adjudicated through the dispute resolution process provided by s 104 of the Tax Administration Act in the Tax Court, not through review proceedings in the High Court.

The Court noted that it was not necessary to decide the full ambit of s 9 of the TAA and the 'jurisprudential bristles' to which the High Court referred, as the s 9 review was academic once the assessments were issued. The Court observed that the High Court lost sight of the provisions of s 80J(3) which does not contemplate a separate decision not to withdraw the notice as a precondition for the decision to determine tax liability under s 80B. The Court commented that if the issuing of a s 80J notice does not constitute administrative action susceptible to review, then as a matter of logic, a decision to keep it extant cannot constitute administrative action. The Court noted that tax avoidance, whether in part or in whole, is not per se unlawful or impermissible, citing CIR v Conhage. The Court observed that the employment of two counsel was warranted in this matter, but did not find it to be one of the rare circumstances justifying costs of three counsel.

This judgment clarifies important principles regarding the jurisdiction of the High Court in tax disputes and the proper avenue for challenging tax assessments. It confirms that the Tax Court has primary jurisdiction over tax disputes under s 105 of the Tax Administration Act, and that the High Court may only exercise jurisdiction in exceptional circumstances, such as where a dispute raises solely a question of law. The judgment emphasizes that whether a taxpayer participated in an impermissible avoidance arrangement under the General Anti-Avoidance Rule provisions involves questions of fact, including the taxpayer's knowledge, purpose, and whether a tax benefit was obtained. Such disputes must be adjudicated through the objection and appeal process provided by s 104 of the TAA. The judgment also clarifies that a s 80J notice is a procedural step without adverse effect until an assessment is issued, and that a refusal to withdraw such a notice is not independently reviewable. The case is significant for establishing the proper scope and limits of judicial review in tax matters and for reinforcing the statutory dispute resolution mechanism.