Commissioner for South African Revenue Services v Hulett Aluminium (Pty) Limited

Hulett Aluminium (Pty) Ltd, a manufacturer of aluminium products, deducted scientific research expenditure in its income tax returns for the 1983 to 1988 years of assessment under section 11(a) of the Income Tax Act 58 of 1962. These deductions were allowed and tax was paid accordingly. Subsequently, the taxpayer objected to its own assessments, contending that the same expenditure also qualified for deduction under section 11(p)(i), thereby entitling it to a double deduction. The Receiver of Revenue conceded the objection for the 1984 to 1988 years and issued reduced assessments in December 1991, expressly allowing the section 11(p) deductions and refunding the overpaid tax. Following later legislative amendments, including the retrospective introduction of section 23B(1) prohibiting double deductions, the Commissioner issued additional assessments disallowing the section 11(p) deductions. The taxpayer’s objection failed, but its appeal to the Natal Income Tax Special Court succeeded, prompting the Commissioner’s appeal to the Supreme Court of Appeal.

The appeal by the Commissioner was dismissed with costs, and the additional assessments were set aside.

The case is significant for clarifying the scope and effect of the third proviso to section 79(1) of the Income Tax Act, confirming that SARS may not raise additional assessments where the original assessment accorded with a generally prevailing practice at the time. It underscores the importance of administrative practice and taxpayer protection against retrospective reassessment, even in the face of later legislative changes.