PL v Zimbabwe Revenue Authority

The appellant, a mining company operating under a Special Mining Lease (SML1) and Mining Agreement dated 24 August 1994, elected to maintain its books in US dollars as permitted under paragraph 11(1) of the 22nd Schedule to the Income Tax Act. The appellant submitted income tax returns for 2003-2006 based on USD financial statements. The respondent (Zimbabwe Revenue Authority) initially issued assessments in Zimbabwe dollars in 2007. After objection, these assessments were withdrawn and the respondent promised USD-denominated assessments. In 2012, during a tax investigation, the respondent found that the appellant had incorrectly claimed capital redemption allowances under the 5th Schedule (general mining operations) instead of the 22nd Schedule (special mining lease operations). The 22nd Schedule required capital expenditure to be deducted over four years, while the 5th Schedule allowed full deduction in the year of expenditure. Following discussions in September 2012, parties appeared to agree that assessments for 2003-2006 had prescribed, limiting liability to 2007-2012. However, the respondent subsequently invoked section 47 of the Act, alleging misrepresentation, and issued assessments covering 2003-2006 on various dates between October 2014 and September 2015. The respondent also imposed a 30% penalty on additional profits tax (APT).

• Whether the tax assessments for the years 2003 to 2006 had prescribed under section 47(1) of the Income Tax Act
• Whether the respondent was entitled to re-open prescribed periods on grounds of misrepresentation and wilful non-disclosure
• Whether the initial Zimbabwe dollar assessments were null and void ab initio, thereby preventing prescription from running
• Whether the Commissioner personally considered and applied her mind to the matter as required by section 47
• Whether the respondent could be bound by a concession made by its case manager that the assessments had prescribed
• Whether additional profits tax (APT) assessments for 2002-2006 were competent and whether penalty could be imposed on APT
• Whether a 30% penalty on APT was appropriate

The appeal was dismissed in its entirety. The 30% penalties on additional profit tax imposed by the respondent on 8 May 2015 were confirmed. Each party was ordered to bear its own costs.

Where a special mining lease holder has elected under paragraph 11(1) of the 22nd Schedule to the Income Tax Act to maintain books in US dollars, any tax assessment issued in a different currency (Zimbabwe dollars) is null and void ab initio, being issued contrary to peremptory statutory provisions. Prescription does not run from a void assessment; therefore, the issuance of assessments in the correct currency does not constitute a re-opening of assessments under section 47 but rather the first valid assessments. The Revenue Authority cannot bind itself through concessions made by its officers to 'untax' a taxpayer contrary to statute - such concessions are unlawful and unenforceable under the ex turpi causa non oritur actio principle. Taxpayers have a legitimate expectation to be taxed according to statute, not according to concessions or erroneous views of law. Additional profits tax falls within the definition of 'tax' under section 2 of the Income Tax Act and is therefore subject to penalty provisions.

The court observed that the Commissioner should properly compile Rule 11 documentation with the legal requirement for personal satisfaction in mind, particularly after the 2011 amendment repealing section 3 (delegation of functions). The court noted it should not ideally spend time on such procedural matters where a simple affidavit from the Commissioner could resolve the issue. The court also commented that whether assessments are labeled 'original' or 'amended' is irrelevant - the court looks to the substance of assessments, not their form. The court stated it deemed it unnecessary to deal with the alternative argument regarding section 47 misrepresentation, having found that prescription did not arise at all due to the nullity of the original assessments.

This case establishes important principles in Zimbabwean tax law regarding: (1) the absolute nature of statutory requirements for currency denomination of tax assessments under special mining leases - compliance is mandatory and non-compliance renders assessments void ab initio; (2) the limitation on the Revenue's ability to make concessions - tax collectors cannot make agreements that have the effect of 'untaxing' taxpayers contrary to statute, as taxpayers have a legitimate expectation to be taxed according to law, not concession; (3) the application of the ex turpi causa principle to unlawful tax concessions; (4) the scope of 'tax' for penalty purposes encompasses additional profits tax; and (5) the distinction between void assessments and voidable assessments for prescription purposes. The case reinforces that prescription periods only run from valid assessments, not from nullities. It also clarifies that where statutory provisions are peremptory (using 'shall'), substantial compliance is insufficient - strict compliance is required.