Nesongozwi v Commissioner for the South African Revenue Service

The appellant, Mr James Matodzi Nesongozwi, transferred his shares in Nesongozwi Mining Corporation (Pty) Ltd (NMC) to the Nesongozwi Family Trust in October 2009 for R547 275. NMC was a holding company whose main asset was its shareholding in Umthombo Resources (Pty) Ltd, which held coal prospecting and mining rights and had entered into a consultancy agreement with Sumo Coal (Pty) Ltd. SARS issued an additional assessment for the 2010 year of assessment, determining that the shares had been disposed of at below market value and levied donations tax and capital gains tax. Expert valuations commissioned by SARS valued the shares substantially higher. The taxpayer objected, contending that the valuation was grossly overstated and that factors such as Sumo’s potential joint venture rights, a contingent liability arising from a dispute with Sumo, and restrictions in a shareholders’ agreement reduced the value of the shares to a negative amount.

The appeal was dismissed with costs, including the costs of two counsel.

The case is significant for clarifying and reaffirming the principle that, under the Tax Administration Act, a taxpayer is confined on appeal to the grounds raised in the original objection. It underscores the strict procedural framework governing tax disputes and reinforces certainty and fairness in tax administration by preventing taxpayers from shifting grounds on appeal.