The Commissioner for the South African Revenue Service v Airports Company South Africa

SARS conducted an income tax audit of Airports Company South Africa (ACSA) for the 2011 year of assessment during December 2015 to February 2016. On 8 February 2016, SARS issued a Letter of Audit Findings indicating its intention to disallow deductions for corporate social investment (CSI) expenditure, section 13quin and section 12F allowances, and to impose understatement penalties (USPs). On 15 March 2016, ACSA conceded to SARS' findings regarding section 12F. On 30 March 2016, SARS issued an additional assessment disallowing the deductions and allowances and imposing USPs and interest. On 12 May 2016, ACSA lodged an objection only against the disallowance of CSI expenditure, not objecting to the section 13quin and 12F allowances or the USPs. The objection was disallowed and ACSA noted an appeal on 28 October 2016. Settlement discussions commenced but failed. On 6 September 2019, through new attorneys, ACSA sought to amend its May 2016 objection to include objections to the section 13quin and 12F allowances and the USPs. SARS refused. ACSA then applied to the tax court for leave to amend its objection in terms of Uniform Rule 28(1), read with rule 42(1) of the tax court rules. The tax court granted the application.

• Whether a taxpayer may amend grounds of objection against an additional assessment after the expiry of the prescribed periods in the tax court rules
• Whether Uniform Rule 28(1) applies to the amendment of objections in tax court proceedings via rule 42(1) of the tax court rules
• When legal proceedings commence in the tax court for purposes of applying the Uniform Rules
• Whether an objection is a pleading or document filed in connection with legal proceedings
• Whether the order of the tax court was appealable

The appeal was upheld with costs. The order of the tax court was set aside and replaced with an order dismissing the application for leave to amend the objection.

An objection to a tax assessment under section 104 of the Tax Administration Act 28 of 2011, read with rule 7 of the tax court rules, is part of the pre-litigation administrative process and not a pleading or document filed in connection with legal proceedings in the tax court. Legal proceedings in the tax court commence only when an appeal is noted, not during the objection phase. Uniform Rule 28(1) does not apply to objections via rule 42(1) of the tax court rules, as objections are not pleadings and rule 42(1) only applies when the tax court rules do not provide for a procedure, which is not the case for objections governed under Part B of the tax court rules. The peremptory time periods for filing objections prescribed in section 104 of the TAA and rule 7 cannot be extended by seeking to amend an objection, as this would undermine the principles of certainty and finality in tax collection. Where no objection is made to a part or specific amount of an assessment within the prescribed time, that assessment becomes final and conclusive under section 100(1) of the TAA, and new grounds of objection cannot be introduced through amendment.

The court noted with regret that the tax court's judgment offered no detailed analysis or guidance, failing to address SARS' legal arguments and making no findings as to the legal basis for its conclusion. This criticism of the lower court's reasoning, while not part of the binding ratio, emphasizes the importance of thorough judicial reasoning. The court also commented that the prescribed time periods in the TAA and rule 7, together with the ability to secure extensions within permitted parameters, achieve a fair balance between SARS and taxpayers. While addressing appealability, the court noted that although the order may have been interlocutory, the tax court had wholly misconceived the matter, making the order plainly wrong, and it could hardly be in the interests of justice to permit it to stand. The court referred to the definition of 'assessment' from First South African Holdings, noting it is a determination by the Commissioner of one or more matters, which is expressly contemplated in section 104 read with rule 7(2)(b).

This case is significant in South African tax law as it clarifies the strict procedural requirements for objections under the Tax Administration Act 28 of 2011 and the tax court rules. It establishes that: (1) objections form part of the pre-litigation administrative process and are not pleadings subject to amendment under the Uniform Rules; (2) the peremptory time limits for filing objections cannot be circumvented by seeking to amend objections after those periods have expired; (3) Uniform Rule 28 does not apply to objections via rule 42(1) of the tax court rules; (4) legal proceedings in the tax court commence only when an appeal is noted, not during the objection phase; and (5) the principles of certainty and finality in tax collection will be protected. The judgment reinforces that taxpayers must object to all disputed aspects of an assessment within the prescribed time limits, failing which the assessment becomes final and conclusive. It provides important guidance on the application of rule 42(1) and the limited circumstances in which the Uniform Rules may be utilized in tax court proceedings.