Trek Petroleum (Private) Limited v Zimbabwe Revenue Authority

In 2010, Chaparrel Trading (Private) Limited opened a service station and commenced selling fuel. In June 2014, Trek Petroleum (Private) Limited was registered and all business conducted under Chaparrel Trading was transferred to Trek Petroleum, although Chaparrel Trading continued to exist but ceased business operations. At the time of transfer, Chaparrel Trading was under investigation by ZIMRA regarding tax obligations. On 3 June 2014, ZIMRA seized documents from a laptop computer and assessed that Chaparrel Trading owed tax of $44,263,133.48 (later revised to $45,220,636.28) based on profits made between 2010 and 2012. Chaparrel Trading objected to the assessment formally on 9 April 2017. On 6 July 2017, ZIMRA placed a garnishee on Trek Petroleum's accounts. Trek Petroleum brought an urgent application seeking to lift the garnishee and challenging the constitutionality of section 69 of the Income Tax Act.

• Whether the applicant had a prima facie right to an interim interdict against the garnishee order
• Whether section 69 of the Income Tax Act is unconstitutional
• Whether ZIMRA acted unlawfully or capriciously in garnishing Trek Petroleum's accounts for tax assessed against Chaparrel Trading (Private) Limited
• Whether ZIMRA properly invoked section 77(3) of the Income Tax Act regarding transfer of assets to avoid recovery of tax
• Whether the matter was urgent
• Whether the High Court had jurisdiction to determine the correctness of the tax assessment

The application was dismissed with costs.

An interdict cannot be granted against lawful conduct exercised in terms of statutory powers. Where a tax authority assesses tax and places a garnishee pursuant to sections 69 and 77(3) of the Income Tax Act, this constitutes lawful conduct that cannot be interdicted merely because the taxpayer disputes the quantum of the assessment. The correctness of a tax assessment is a matter for determination by the Special Court for Income Tax Appeals, not the High Court. An applicant seeking an interdict must establish a prima facie right to be protected; where a company transfers its business to a related entity while a tax dispute is unresolved, section 77(3) of the Income Tax Act empowers the revenue authority to recover tax from the transferee, and such recovery action is lawful. The aggrieved taxpayer, not the revenue authority, bears the onus of appealing an assessment to the appropriate forum.

The court observed that the argument regarding the feasibility of Chaparrel Trading having traded in such volumes of fuel on which the disputed tax was based was "neither here nor there" for purposes of the interdict application. The court also noted that calling relief an "interim interdict" does not make it one - the court must have regard to substance rather than form. The court suggested that urgency could not be founded on financial hardship arising from a garnishee as this is a necessary and valid way of enforcing a tax obligation, and that the applicant should have been aware of the possibility of a garnishee as far back as March 2017.

This case reinforces the principle that tax obligations are not suspended by lodging objections, and that ZIMRA has statutory power to garnish accounts to recover assessed tax. It confirms that the High Court does not have jurisdiction to determine the correctness of tax assessments, which is the exclusive domain of the Special Court for Income Tax Appeals. The case also clarifies the application of section 77(3) of the Income Tax Act regarding transfers of assets between related companies to avoid tax recovery. It demonstrates the limited scope for interdicts against lawful statutory conduct by revenue authorities, emphasizing that interdicts protect existing rights from unlawful conduct, not lawful exercises of statutory powers.