Judgment summary
The applicant sought review of the Commissioner's refusal, under section 9 of the Tax Administration Act 28 of 2011 ("the TAA"), to reconsider an earlier decision declining to suspend payment of disputed additional income tax assessments totalling R531 082 580.51 [1].
The court held that the Commissioner's second decision was reviewable and fell to be set aside under the Promotion of Administrative Justice Act 3 of 2000 ("PAJA") on the grounds that irrelevant considerations were taken into account, relevant considerations were not considered, the decision was not rationally connected to the information before the administrator, and the decision was procedurally unfair [77, 78, 79, 80].
The court further held that exceptional circumstances existed warranting substitution of the Commissioner's decision with its own, rather than remittal, and granted a suspension of payment subject to delivery of the pledged shareholding within five days of the order [88, 91].
Background
The Commissioner raised additional income tax assessments against the applicant for the years of assessment 2009 to 2021 [2, 35]. The applicant disputed liability and, pending determination of the tax appeal before the Tax Court, requested the Commissioner to exercise the discretionary power under section 164 of the TAA to suspend payment of the disputed tax [7].
The applicant initially tendered certain race horses as security, and subsequently tendered Siyangena Technologies (Pty) Ltd's claim against PRASA [8]. Both tenders were refused by the Commissioner (the "first decision"), on grounds including that recovery of the tax debt would be in jeopardy, the security was inadequate, and the prejudice to SARS outweighed any hardship to the applicant [10].
The applicant then brought a section 9 TAA request asking the Commissioner to reconsider the first decision, tendering as further security his 80% shareholding in TMM Holdings (Pty) Ltd, valued at more than R1 billion on the basis of audited financial statements prepared on 03 June 2024 using the discounted cash flow method [11, 65]. The Commissioner again refused (the "second decision") [12]. By the time of the hearing, the applicant had abandoned his challenge to the first decision and sought review only of the second decision [13].
Core dispute
The central issue was whether the TMM Holdings (Pty) Ltd shareholding tendered by the applicant constituted adequate security for the disputed tax debt, and whether the Commissioner's second decision to refuse suspension of payment on the basis that the security was inadequate was reviewable under PAJA [5, 15].
The respondent raised a point in limine that the application was fatally defective because the applicant had not brought the Commissioner's decision-making process within the grounds of review in section 6(2)(f) of PAJA and had not raised a legality review in the alternative [16, 18, 19]. The court dismissed this point in limine, finding that the papers properly engaged sections 6(2)(c), 6(2)(e)(iii), 6(2)(f)(ii), 6(2)(h) and 6(2)(i) of PAJA, and that the amended notice of motion did seek legality review in the alternative [21, 22, 24].
The respondent also argued that the applicant had failed to demonstrate financial prejudice or irreparable harm, that the applicant had been non-tax compliant, that there were prima facie indications of fraud in the origin of the dispute, and that the security tendered was wholly insufficient [40, 42, 43, 44].
Court findings
The court accepted, on the basis of the Commissioner's own admission in the answering affidavit, that the value of the TMM shareholding exceeded R1 billion, removing that question from dispute [66, 67].
The court found that a pledge of the 80% TMM shareholding, valued at R1.25 billion (with R1 billion admitted by the respondent), was not inadequate security for a tax debt of approximately R531 million, and that the tendered security was close to double the disputed debt [77.1].
The court found that, given the nature of a pledge as a limited real right of security arising on delivery of the pledged asset to the pledgee, the applicant would have been unable to dissipate the pledged shares once delivered to the Commissioner, making the respondent's risk-of-dissipation reasoning unsound [77.3].
The court accepted the applicant's averment that the Commissioner's Independent Debt Committee ("IDC") was not informed of the tender of the TMM shareholding, on the basis that the Commissioner's bare denial was unsupported by facts and did not constitute a bona fide dispute of fact [74, 75, 76, 78].
The court found that the applicant was not given the opportunity to explain the increase in the value of the TMM shareholding from R400 in 2022 to R1.25 billion in 2023, or to provide substantiating documentation, and that no such concerns had been raised with him [79].
The court held that the second decision was procedurally unfair, took into account irrelevant considerations, failed to consider relevant considerations, and was not rationally connected to the purpose for which it was taken, the purpose of the empowering provision, or the information before the Commissioner [77, 78, 79, 80].
The court further found that the applicant had established severe financial prejudice and irreparable harm, which had not been properly considered by the Commissioner in reaching the second decision [77.4].
Applying the guidelines in Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd and Another 2015 (5) SA 245 (CC), the court held that it was in as good a position as the Commissioner to make the decision and that the decision was a foregone conclusion, warranting substitution rather than remittal [86, 88].
Outcome
The court reviewed and set aside the second decision [91, order paragraph 1].
The court substituted the second decision with its own decision suspending the applicant's obligation to pay the disputed tax and the Commissioner's right to receive or recover it, pending the outcome of the Tax Court proceedings, subject to the applicant delivering a pledge of his 80% shareholding in TMM Holdings (Pty) Ltd within five days of receipt of the order [91, order paragraph 2].
The Commissioner was directed to pay the costs of the application, with senior counsel costs taxed in accordance with Schedule C and junior counsel costs in accordance with Schedule B of Rule 67A of the Uniform Rules of Court [91, order paragraph 3].
Major issues / areas of contention
- Whether the Commissioner's second decision to refuse suspension of payment of approximately R531 082 580.51 in disputed additional income tax assessments was reviewable under PAJA.
- Whether the point in limine that the application was fatally defective for failure to bring the decision within the grounds of review in section 6(2) of PAJA was well-founded.
- Whether the TMM Holdings (Pty) Ltd shareholding, valued at R1.25 billion and admitted by the Commissioner to exceed R1 billion, constituted adequate security for the disputed tax debt.
- Whether the Commissioner's Independent Debt Committee was informed of the tender of the TMM shareholding before the second decision was made.
- Whether the applicant was afforded the opportunity to explain the increase in the value of the TMM shareholding from R400 in 2022 to R1.25 billion in 2023.
- Whether the second decision was procedurally unfair under section 6(2)(c) of PAJA.
- Whether the second decision took into account irrelevant considerations and failed to consider relevant considerations under section 6(2)(e)(iii) of PAJA.
- Whether the second decision was rationally connected to its stated purpose, the purpose of the empowering provision, and the information before the Commissioner under section 6(2)(f)(ii) of PAJA.
- Whether the second decision was so unreasonable that no reasonable person would have made it under section 6(2)(h) of PAJA.
- Whether exceptional circumstances existed justifying substitution of the Commissioner's decision by the court rather than remittal to the Commissioner.