THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case no: 275/2013
Reportable

In the matter between:

MTN INTERNATIONAL (MAURITIUS) LTD
APPELLANT

and

THE COMMISSIONER OF SOUTH AFRICAN
REVENUE SERVICES
RESPONDENT

Neutral citation:
MTN International v CSARS (275/2013) [2014] ZASCA 8
(14 March 2014)

Bench:

Mpati P, Lewis, Ponnan, Maya and Wallis JJA

Heard:

26 February 2014

Delivered:

14 March 2014

Summary:
Income Tax Act 58 of 1962 – revised assessment – not invalid by
reason of error in fixing due date.

_______________________________________________________________________

ORDER
______________________________________________________________________

On appeal from: North Gauteng High Court, Pretoria (Tlhapi J sitting as court of first
instance):

The appeal is dismissed with costs, such costs to include those consequent upon the
employment of two counsel.
______________________________________________________________________

JUDGMENT
______________________________________________________________________

Ponnan JA (Mpati P, Lewis, Maya and Wallis JJA concurring):

[1] The issue that arises in this appeal is whether a revised assessment raised by the
respondent, the Commissioner for the South African Revenue Service (SARS), on 31
March 2011 in terms of the Income Tax Act 58 of 1962 (the Act) to assess the appellant,
MTN International (Mauritius) Limited (MTN), to tax for the 2006 year of assessment, falls
to be set aside.  The North Gauteng High Court, Pretoria (per Tlhapi J) held that it did
not, but granted leave to MTN to appeal to this court.

[2] MTN is a subsidiary of the MTN Group Limited, a South African Company listed on
the Johannesburg Securities Exchange and the intermediate holding company of cellular
telephone operating subsidiaries outside South Africa for the MTN group. MTN claimed
the following interest on loans it incurred as expenditure in terms of the Act, against its
gross income for the 2006 year of assessment:

(a)
R3 044 873 on a loan for the purposes of making investments in Nigeria (the
Nigeria loan). The interest expenditure on this loan was claimed for a number of years up
to and including the 2006 year of assessment; and
(b)
R238 171 121 on a loan for the purposes of making investments in the Middle
East (the Investcom loan). MTN incurred this loan from its holding company, MTN
Holdings Limited. The interest expenditure on this loan was claimed for the first time
during the 2006 year of assessment.

[3] The Nigeria loan was utilized to set up a new company in Nigeria as part of the
MTN Group of companies. This new company, referred to as MTN Nigeria, successfully
tendered for a mobile telephone licence in Nigeria. There are minority Nigerian
shareholders in MTN Nigeria as required by Nigerian law. Investcom, on the other hand,
was an already established mobile phone operator in the Middle East, with existing cell
phone carrier licences and an existing business. The holding company of the group was
situated in Dubai. MTN purchased that established, already functioning group, in its
entirety. No minority shareholders were maintained in the Investcom company, which
was renamed MTN Dubai.

[4] On 31 March 2011, which was the last day before the original assessment was
due to prescribe in terms of s 79(1) of the Act, SARS raised the revised assessment
disallowing the interest expenditure. When raising the revised assessment, the relevant
SARS official, Mr Tshilongo, manually fixed the ‘due date’ on the IT40 form as 30 March
2011, being one day prior to the day on which the assessment was actually raised. The
‘second date’ and something described as a ‘process date’ was fixed as 31 March 2011.
The IT40 form intimated that ‘a combined IT34 assessment [was] to follow’. The revised
assessment resulted in an income tax liability by MTN of R73 476 101. SARS recovered
this amount by setting it off against a tax refund due on MTN’s provisional tax account.
On 2 April 2011 an IT34 notice of assessment was issued to MTN. It reflected the ‘due
date’ as 1 May 2011 and the ‘second due date’ as 31 May 2011.

[5] On 15 April 2011 and after the issuance of the IT34 by SARS, MTN applied to the
North Gauteng High Court, Pretoria for an order (as amended) that:
‘1.
The additional tax assessment in respect of the Applicant’s 2006 tax year with a due date
of 1 May 2011, be and is hereby set aside;
2.
The additional tax assessment processed by the Respondent in respect of the Applicant’s
2006 tax year on 31 March 2011, be and is hereby set aside;
3.
The Respondent is ordered to credit or reverse any set-off that it has applied against the
refund owed by the Respondent to the Applicant;
4.
The Respondent is ordered to pay to the Applicant the amount of:
4.1.
. . .; and
4.2.
R73 476 101.00;
within 10 (ten) days after date of this order, together with any additional accrued interest in terms
of s 89quat(4) of the Income Tax Act, No. 58 of 1962, as amended, and interest a tempore mora
on the amount set-off by the Respondent against the Applicant’s refund;
5.
The Respondent is ordered to pay the costs of this application, including the costs
consequent upon the employment of 2 (two) Counsel.’

[6] The gist of MTN’s application is expressed in the affidavit of Mr Carel Gericke, the
Executive: Group Tax of the MTN Group, thus:
‘This application deals with the Applicant’s year of assessment for 2006 and the Respondent
raising an additional tax assessment on 31 March 2011. The additional tax assessment (also
referred to as a “revised” assessment) for 2006 is attached as “CG2”. May I immediately point out
that the additional tax assessment was backdated to show the due date as being 30 March 2011,
which is the date of the assessment, as prescribed in the Income Tax Act, No. 58 of 1962 (“the
Act”), as amended, even though the assessment was clearly only processed and created on 31
March 2011. It shall be submitted to the Honourable Court that such a manipulation of dates to
meet the Respondent’s needs is so irregular and unlawful that the additional tax assessment
stands to be set aside on this basis alone. . . .’

[7] In response to those allegations Ms Amanda Warner, a Senior Manager:
International Tax at SARS’ Large Business Centre, stated:
‘SARS contends that it at all relevant stages acted within its powers and duties in terms of the
Income Tax Act.  It was entitled and in fact duty bound in terms of s 79 of the Income Tax Act to

raise the 2006 additional assessment on 31 March 2011. The original 2006 assessment had by
then not prescribed. SARS was satisfied as envisaged in terms of s 79(1)(a) of the Income Tax
Act that an amount which was subject to tax and should have been assessed to tax had not been
assessed, due to the fact that the interest expenditure that the applicant claimed was erroneously
allowed by SARS as a deduction when raising the original 2006 assessment. SARS was satisfied
that the expenditure should from the outset have been disallowed, since it was not incurred for
the purposes of producing taxable income in the form of management fees and royalties. It was
expended for purposes of producing non-productive dividend income which was in terms of the
Income Tax Act exempt from tax.
SARS contends that the so-called “manipulation” or “backdating” of the “due date” of the
assessment and the fixing of the “second date” not 30 days in the future, are of no
consequence for present purposes. This, at best for the applicant, may theoretically have had a
one day detrimental impact on the period allowed within which applicant could file an objection or
when prescription started to run. However, the said detrimental effect never materialised insofar
as the objection period is concerned and the chances of it ever materialising in three years’ time
insofar as prescription is concerned is so remote that it can be ignored. However, from whatever
angle the matter is viewed, it had no impact on the validity of the assessment.’

[8] In explaining how the due date and second date came to be fixed on the IT40
form, Ms Warner stated:
‘An IT40 local assessment was therefore raised on 31 March 2011, which was sent to the
taxpayer under cover of the assessment letter. Mr Tshilongo informs me that he manually fixed
the “due date” and the “second date” of the local assessment, as respectively 30 March 2011
and 31 March 2011. According to Mr Tshilongo, he was under the impression that the two dates
could not be on the same day (erroneously, SARS has been advised) and was afraid that if he
fixed later dates, then it could perhaps be said that the assessment had prescribed (which was
also wrong since the relevant date was the date upon which the assessment was raised, SARS
has been advised). Mr Tshilongo therefore fixed the “due date” as the date prior to the date upon
which the assessment was raised. SARS contends that nothing inappropriate or untoward can be
inferred from this. In fact, little turns on this whole issue and the applicant’s contentions regarding
this are factually unfounded and legally untenable.’

[9] It is common cause in this case that: (a) on 31 March 2011 SARS assessed MTN
to additional tax; (b) that assessment was made within the prescriptive period allowed by
the Act; and (c) the assessment was notified to MTN on that day. An ‘assessment’ is
defined in s 1 of the Act as:
‘. . . the determination by the Commissioner, by way of a notice of assessment (including a notice
of assessment in electronic form) served in a manner contemplated in section 106 (2)—
(a)  of an amount upon which any tax leviable under this Act is chargeable; or
(b)  of the amount of any such tax; or
(c)  of any loss ranking for set-off; or
(d)  of any assessed capital loss determined in terms of paragraph 9 of the Eighth Schedule . . . .’
An assessment, so First South African Holdings (Pty) Ltd v Commissioner for South
African Revenue Service 73 SATC 221 para 15 held, is a determination by SARS of one
or more matters. What is required is at least a purposeful act – one whereby the
document embodying the mental act is intended to be an assessment (Commissioner for
the South African Revenue Service v South African Custodial Services (Pty) Ltd 2012 (1)
SA 522  (SCA) para 29).

[10] As is apparent from the definition of ‘assessment’ it is not a requirement that in
order for a notification of a determination by SARS to be a valid assessment, it should be
dated. Much less that a valid ‘due date’ should be fixed. On the contrary the legislature in
s 1 of the Act defined ‘date of assessment’ to mean ‘. . . the date specified in the notice of
such assessment as the due date or, where a due date is not so specified, the date of
such notice’. It follows that where no ‘due date’ (to be read ‘lawful or valid’ due date) is
specified (S v Mapheele 1963 (2) SA 651 (A) at 655D-E), it cannot be said that the
assessment is a nullity. Indeed, counsel for MTN accepted during argument that the
notice did not have to be dated and that ‘an undated notice’ would still constitute a valid
notice. Likewise, it was accepted that inadvertently fixing an incorrect date by way, for
example, of a simple clerical error would not have affected the validity of the assessment.
In those circumstances had the dates fixed by Mr Tshilongo (which plainly were
unworkable) been disregarded, the default position in terms of the Act would have been
the date on which the taxpayer was notified of the determination. In fact, it seems to me,
that it was open to Mr Tshilongo to have raised the revised assessment on 31 March

2011 and fixed the due date on some later occasion, which, I daresay, was the effect of
the IT34 that issued on 2 April 2011. If it is to be accepted (as I believe it must be) that
the fixing of a due date in the IT40 was not necessary for a valid assessment, it must
follow that the fact that the ‘due date’ may have been incorrectly fixed would be irrelevant
to deciding whether or not the assessment is valid. Much less, can it be said, that that in
and of itself must result in the revised assessment being set aside.

[11] That conclusion, ordinarily at any rate, ought to dispose of the appeal, but it may
nonetheless be necessary to touch, albeit briefly, on two further contentions advanced on
behalf of MTN. First, according to MTN, Mr Tshilongo’s approach left it with only 29 days
to object to the assessment. This, so the contention went, ‘robbed’ it of its right (being the
30 days afforded to it by the Act) within which to object. It goes without saying that the
Commissioner cannot ‘rob’ a taxpayer of a right afforded it by the Act. But, that plainly did
not occur here. It is important to note that it is not the notice of assessment that allows or
disallows MTN the 30 days within which to object. Its right to do so derives from the Act
as read with the rules promulgated under s 107A.1 Thus where, as here, the due date
was unworkable, the 30 days fell, in terms of the Act, to be computed from the date of
assessment, being 31 March 2011. In any event, MTN elected not to file an objection
within 30 days from the date of assessment. By 29 April 2011 it requested reasons for
the assessment, as it was entitled to do in terms of rule 3(1)(a). That suspended the
initial 30 day period, giving MTN a renewed 30 day period from the date when the
reasons were provided to file its objections (rule 4(e)). It can therefore not be said that
MTN was indeed deprived of the 30 day period within which to respond to the revised
assessment.

[12] Second, it was contended by MTN that we must make it clear that the
Commissioner is subject to the Constitution and the law and that the lack of probity and
good faith encountered here will not be countenanced by our courts. The effective way of
achieving that end, so the contention went, is to set aside the assessment in its entirety
(see Pretoria Portland Cement Co Ltd v The Competition Commission 2003 (2) SA 385

1 GN R467, 1 April 2003.

(SCA) para 71). Here though one is not dealing with conduct that even remotely comes
close to conduct of the kind encountered in Pretoria Portland Cement. Schutz JA
considered the conduct encountered there an abuse of power. Here, we are concerned
with no more than an official, in the form of Mr Tshilongo, who simply misapprehended
what was required. Labouring under that misapprehension he fixed the dates in the belief
that he was obliged so to do. Nothing in his conduct was clandestine or surreptitious.
According to MTN, however, Mr Tshilongo, in acting as he did, was ‘influenced by ulterior
motives’. But motive is irrelevant (National Director of Public Prosecutions v Zuma (Mbeki
and another intervening) 2009 (1) SCAR 361 (SCA) para 37). For, as Schreiner JA put it
in connection with arrests, the best motive does not cure an otherwise illegal arrest and
the worst motive does not render an otherwise legal arrest illegal (Tsose v Minister of
Justice 1951 (3) SA 10 (A) at 17). There thus appears to be no logical or rational
distinction that can be drawn between the error which underpinned Mr Tshilongo’s
conduct and the simple clerical error postulated earlier.

[13] It follows that the appeal must fail and in the result it is dismissed with costs, such
costs to include those consequent upon the employment of two counsel.

_________________
V M PONNAN
JUDGE OF APPEAL

APPEARANCES:

For Appellant:

M M Rip SC (with him T Emslie SC and H V Vorster)

Instructed by:

Maurice Phillips Wisenberg c/o Rooth & Wessels

Attorneys, Pretoria

Symington & De Kok, Bloemfontein

For Respondent:
J J Gauntlett SC (with him H G A Snyman SC and M P D
Chabedi)

Instructed by:

Edelstein-Bosman Inc, Pretoria

McIntyre & Van Der Post, Bloemfontein

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
14 March 2014
Status:
Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal.

MTN International (Mauritius) Ltd v The Commissioner of South African
Revenue Services (275/2013) [2014] ZASCA 8 (14 March 2014)
The Supreme Court of Appeal handed down judgment today in an appeal from the North
Gauteng High Court, Pretoria. The issue before the court was whether a revised assessment
raised by the respondent, the Commissioner for the South African Revenue Service (SARS),
in terms of the Income Tax Act 58 of 1962 to assess the appellant, MTN International
(Mauritius) Limited (MTN), to tax for the 2006 year of assessment, falls to be set aside.
MTN had claimed interest on loans it had incurred as expenditure, in terms of the Act, against
its gross income for the year of assessment. On 31 March 2011, which was the last day before
the original assessment by SARS was due to prescribe, SARS raised the revised assessment,
disallowing the interest expenditure. The revised assessment resulted in an income tax
liability by MTN of R73 476 101. When raising the revised assessment the relevant SARS
official manually fixed the ‘due date’ as 30 March 2011, being one day prior to the day on
which the assessment was actually raised.
MTN applied to the high court to have the revised assessment set aside, on the basis that the
‘manipulation of dates’ was irregular and unlawful. SARS, however, contended that the
‘backdating’ was of no consequence and thus did not affect the validity of the assessment.

The high court, per Thlapi J, held that the revised assessment did not fall to be set aside, but
granted leave to MTN to appeal to this court.
This Court noted that it is not a requirement in terms of the Act that an assessment be dated.
Consequently, the failure to specify a ‘due date’ did not have the effect of invalidating the
assessment. Likewise, inadvertently fixing an incorrect date – for example, by way of a
clerical error – does not affect the validity of the assessment. Accordingly, the fact that a ‘due
date’ may have been incorrectly fixed was not a ground for the setting aside of the revised
assessment.
In the result, the appeal was dismissed with costs.