The Commissioner for the South African Revenue Service v African Bank Limited

African Bank Limited is a registered bank and VAT vendor engaged in providing credit, which is partly exempt under s 12(a) read with s 2(1)(f) of the VAT Act, but taxable where consideration constitutes fees. It therefore makes mixed supplies (partly taxable, partly exempt). Under s 17(1) of the VAT Act, vendors acquiring supplies for mixed purposes must apportion input tax according to a ratio determined by the Commissioner in accordance with a ruling under Chapter 7 of the Tax Administration Act 28 of 2011 (TAA) or s 41B of the VAT Act. On 21 September 2020, African Bank requested the Commissioner to approve a specific transaction-based apportionment method. On 23 September 2021, the Commissioner issued a ruling but approved a different method - a varied turnover-based method - instead of the one requested. African Bank objected on 13 October 2021, arguing that the Commissioner refused to approve its requested method and unilaterally imposed a different one. The Commissioner disallowed the objection. African Bank appealed to the Tax Court. The Commissioner then filed a special plea challenging the Tax Court's jurisdiction, arguing that the ruling did not constitute a "refusal to approve a method" under s 32(1)(a)(iv) of the VAT Act because the Commissioner had approved a method (albeit not the one requested), and therefore no appealable decision existed.

• Whether the Tax Court has jurisdiction to hear an appeal where the Commissioner for SARS refuses to approve a method for determining the apportionment ratio in the terms requested by a taxpayer, but instead approves a different method
• Whether such a decision constitutes a 'refusal to approve a method for determining the ratio contemplated in section 17(1)' under s 32(1)(a)(iv) of the VAT Act, subject to objection and appeal
• The proper interpretation of s 32(1)(a)(iv) read with s 17(1) of the VAT Act
• Whether the word 'refusing' in s 32(1)(a)(iv) is limited to an outright refusal to approve any method, or includes refusal to approve the specific method requested by the taxpayer

The appeal was dismissed with costs, including the costs of two counsel where so employed. The Tax Court's dismissal of the Commissioner's special plea of lack of jurisdiction was upheld.

Where the Commissioner, in response to a taxpayer's request for approval of a specific method for determining the apportionment ratio under s 17(1) of the VAT Act, approves a substantively different method instead of the one requested, such a decision constitutes a "refusal to approve a method for determining the ratio" within the meaning of s 32(1)(a)(iv) of the VAT Act, and is therefore subject to objection and appeal procedures. The word "refusing" in s 32(1)(a)(iv) must be interpreted purposively, in its context, and is not limited to an outright refusal to approve any method at all. It includes situations where the Commissioner refuses to approve the specific method requested by the taxpayer and imposes a different method. The purpose of s 32(1)(a)(iv) is to provide remedies to vendors aggrieved by the Commissioner's decisions through objection and appeal procedures. A literal interpretation that would deprive vendors of these statutory remedies must be rejected in favour of a purposive interpretation that gives effect to this purpose.

The Court made several obiter observations: 1. The Commissioner suggested that taxpayers have alternative remedies including judicial review under the Promotion of Administrative Justice Act 3 of 2000 (PAJA), declaratory relief, or requesting reconsideration by the Commissioner. The Court implicitly rejected this as an adequate alternative by holding that it makes no sense to force taxpayers into administrative law remedies where the complaint is aligned with the statutory scheme. 2. The Court noted that the Commissioner's interpretation would encourage piecemeal adjudication of disputes, prolong litigation, and lead to wasteful use of judicial resources - though this was not the primary ratio. 3. The Court observed that the Commissioner's approach was "inconsistent with" the Constitutional Court's judgment in United Manganese, citing that case's rejection of similar jurisdictional arguments. 4. The Court noted that "legislation must be interpreted purposively" as a general principle. 5. The Court observed that s 17(1) of the VAT Act does not stipulate a specific ratio - that is to be determined by way of binding ruling from the Commissioner - highlighting the importance of the ruling mechanism. These observations provide guidance on the Court's broader approach to tax court jurisdiction and statutory interpretation in tax matters.

This judgment is significant in South African tax law for several reasons: 1. Jurisdiction of Tax Court: It clarifies the scope of the Tax Court's jurisdiction under s 117 of the TAA read with s 32(1)(a)(iv) of the VAT Act, confirming that the Tax Court has jurisdiction over appeals where the Commissioner approves a different apportionment method than the one requested by the taxpayer. 2. Interpretation of 'refusal': The judgment establishes that a 'refusal to approve a method' under s 32(1)(a)(iv) is not limited to an outright rejection, but includes situations where the Commissioner approves a different method than the one sought by the taxpayer. 3. Access to justice: The judgment protects taxpayers' access to the streamlined, statute-specific remedies of objection and appeal under the VAT Act, rather than forcing them to pursue more cumbersome administrative law remedies in the High Court. 4. Purposive interpretation: The case reinforces the importance of purposive statutory interpretation in tax matters, requiring courts to consider the context and purpose of provisions, not merely their literal wording. 5. VAT apportionment: The case is important for understanding the operation of s 17(1) of the VAT Act concerning mixed supplies and the apportionment of input tax. 6. Administrative efficiency: By rejecting an interpretation that would encourage piecemeal litigation, the judgment promotes judicial efficiency in tax disputes. The case has implications for all VAT vendors who make mixed supplies and seek rulings on apportionment methods from SARS.