The Supreme Court of Appeal (SCA) hasdismissed an appeal application by South African Revenue Service (SARS) commissioner Edward Kieswetter in a case between the commissioner and African Bank Limited.
In an electronic judgement handed down on Tuesday, the SCA ruled that Kieswetter’s appeal application arguing that the Tax Court in the Western Cape lacked jurisdiction to adjudicate upon and determine the appeal lodged to it by African Bank in terms of Section 107 of the Tax Administration Act 28 of 2011, is without merit.
The oral arguments in the matter were heard on May 15 2025 before SCA deputy president judge Dumisani Zondi, judge Raylene Keightley, acting SCA judges Vuminkosi Dlodlo, Esther Steyn and Thandi Norman.
Dispute started in 2020
According to the evidence presented in court in May, the dispute between Kieswetter (referred to as the ‘Commissioner’ in the judgement and by name), and African Bank, began on September 21 2020.
“African Bank’s representative addressed a letter to the commissioner in which it requested the commissioner to issue a binding VAT ruling. It sought confirmation from the commissioner that African Bank ‘may continue to apply transaction count apportionment method as set out in its previous ruling dated 12 August 2019’…
“In a letter dated 23 September 2021 the Commissioner summarised African
Bank’s binding ruling request as follows: ‘[African Bank] requests in terms of section 41B, read with section 17(1) of the VAT Act that – the Commissioner for SARS (the commissioner) confirm by way of a ruling that it may continue to apply the transaction-based method of apportionment as approved in the Amended’…,” read the judgement.
“In light of the above, SARS’s ruling is that [African Bank] may apply the varied turnover-based method of apportionment as set out…to deduct VAT incurred in respect of mixed
expenses, excluding mixed expenses in respect of the IT system,” read the judgement.
Section 17(1) of the VAT Act
“On 13 October 2021 African Bank objected to the Commissioner’s ruling. Its
complaint was that the commissioner did not approve the alternative method of
apportionment for determining the ratio contemplated in s 17(1) of the VAT Act as
requested by it.
“Instead, the commissioner unilaterally approved another alternative method, not requested by African Bank…
“The commissioner disallowed the objection and advised African Bank to appeal
if it was dissatisfied with the decision. As advised, African Bank lodged an appeal in
the tax court. In the appeal, African Bank requested that the ruling be altered to one
approving the alternative method of apportionment requested by it. The commissioner
opposed the appeal,” said Zondi.
The tax court then ruled in favour of African Bank, and the commissioner challenged the tax court’s decision at the SCA.
Tax court’s jurisdiction
“On 3 November 2023 the commissioner amended its rule 31 statement, made
in terms of the rules issued under s 103 of the TAA (TAA rules), by introducing a
special plea in which he challenged the tax court’s jurisdiction to hear the appeal.
“In short, the commissioner’s plea is that the tax court did not have jurisdiction to
determine the appeal against the imposition of the varied standard turnover-based
method as opposed to the revised transaction count method, which was requested by
African Bank,” said Zondi.
“African Bank opposed the amendment of the commissioner’s rule 31 statement
on the grounds, first, that the commissioner had no prospect of succeeding should the amendment be granted.
Proposed amendment
“Moreover, and in any event, the amendment should be refused to the extent that the Commissioner had not in terms of rule 35(2) of the TAA rules, first requested African Bank to agree to the proposed amendment before approaching the tax court,” said Zondi.
Zondi said the tax court was correct, therefore, in finding that “because the commissioner
had made an alternative ruling to the one requested by the African Bank, this
amounted to a refusal to approve a method for determining the ratio as contemplated…”
“The special plea of lack of jurisdiction was properly dismissed. In the result the appeal is dismissed with costs including the costs of two counsel, where so employed,” said Zondi.
