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Oryx Mining and Exploration (Pty) Limited v Secretary for Finance (SA 15/90) [1991] NASC 4 (3 July 1991)
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IN THE SUPREME COURT OF NAMIBIA
CASE NO. SA 15 / 90
In the matter between
ORYX MINING AND EXPLORATION (PTY) LIMITED APPELLANT
versus
THE SECRETARY FOR FINANCE
RESPONDENT
CORAM: BERKER, C.J.; MAHOMED, A.J.A.; DUMBUTSHENA,A.J.A.
Delivered on: 1991/07/ 03
APPEAL JUDGMENT
MAHOMED, A.J.A.: The Appellant in this matter is Oryx Mining and Exploration (Pty) Limited. In an assessment of the Appellant for tax for the period
of assessment ending on the 30th June 1985, the Respondent, who is the Secretary of Finance, included in the Appellant's taxable income an amount R2 166 302,00 being the profit on the sale of certain mining plant and machinery and the Appellant was assessed accordingly.
The Appellant appealed against this assessment
to the
special Income-Tax Court in terms of section 73
of the
Income-Tax Act of 1981 ("the Act") on the grounds thai, this
profit constituted a receipt "of a capital nature"
within
the meaning of that expression in the definition of
"gross
income" in the Act. That appeal was dismissed
by the
special Income-Tax Court.
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The Appellant thereafter appealed to the Full Bench of the then Supreme Court of South West Africa in terms of section 76 of the Act
but that appeal was also dismissed by the Full Bench.
The Appellant subsequently made an application for leave to appeal to the Appellate Division of the Supreme Court of South Africa.
That application was opposed by the Respondent on two grounds:
(a)
The first ground advanced _iri limine, was that the Appellant had no further right of appeal at all, and that the Full Bench therefore had no right or jurisdiction to grant to the
Appellant any further leave to appeal to a higher court.
(b)
The second ground of objection was that the appeal in any event had no prospects of success, on the merits.
Both these objections were dismissed and leave was granted to the Appellant to appeal to the Appellate Division of the Supreme Court
of South Africa. The Respondent was however also granted leave to appeal to the Appellate Division, against the order of the Full
Bench dismissing its point in limine.
Subsequent to these events, however, Namibia attained its independence and the Constitution of Namibia created a new
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Supreme Court as the final Court of Appeal. In terms of section 138(2)(b) of the Constitution any appeal noted to the Appellate Division
of the Supreme Court of South Africa against any judgment or order of the former Supreme Court of South West Africa was deemed to
have been noted to the Supreme Court of Namibia. This Court accordingly came to be seized with the matter.
The point in limine.
Mr E.M. du Toit, S.C. (assisted by Mr G.B. Coleman) who appeared on behalf of the Respondent rightly contended before us that if the Respondent's objection ijn limine was sound in law, this Court lacked any jurisdiction to consider the appeal on the merits. It accordingly becomes necessary to examine
the point ir\ limine in greater detail.
Mr Du Toit, advanced two basic grounds in support of the point iji limine objecting to this Court's jurisdiction to hear the appeal at all.
His first and principle ground was that the Income-Tax Act created no mechanism for a further appeal after the then Supreme Court of South
West Africa had exhausted its appellate jurisdiction, following an appeal from a decision of the special Incom-Tax Court in terms
of the Act. He drew our attention to the provisions of section 73(18) (which provide that any decision of the Income-Tax Court under
section 73 shall, subject to the provisions of section 76, be final) and inter alia to section 76(1) and
4 -
section 76(2). Section 76(1) provides that the appellant in a special Income Tax Court or the Secretary may, in the manner provided
in section 76, appeal against any decision of such court. Section 76(2) provides that such appeal lies to the South West Africa Division
of the Supreme Court of South Africa (subsequently the Supreme Court of South West Africa and presently the High Court of Namibia).
It is perfectly true that nothing contained in these or any other sections of the Act expressly create any right of further appeal
from any judgment or order of the Court ’ quo acting in terms of section 76, but Mr Swersky, S.C. (assisted by Mr Trichard) who appeared for the Appellant contended that the Income-Tax Act had to be read together with the relevant provisions of Proclamation
222 of 1981 of the Republic of South Africa (which created a Supreme Court of South West Africa in substitution of the previous South
West Africa Division of the Supreme Court of South Africa) and more particularly the relevant terms of section 14 of that Proclamation
(as amended by Act No.29 of 1985).
Section 14(1) of Proclamation 222 of 1981 provides that an appeal from a judgment or order of the Supreme Court in any civil proceedings
or against any judgment or order of the Supreme Court given on appeal shall, subject to the provisions of subsection (3), be heard
by the Appellant Division (which is defined as the Appellate Division of the Supreme Court of South Africa. Sections 14(2) and 14(3)
go on to provide inter alia for an appeal under section 14 to be heard by a Full Bench of the Supreme Court itself in
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certain circumstances and section 14(4) creates detailed machinery for the purposes of obtaining leave to appeal in terms of section
14. Finally section 14(7) of Proclamation 222 provides that notwithstanding anything to the contrary in any law contained, no appeal
shall lie from a judgment or order of the Supreme Court in proceedings in connection with an application pertaining to certain matrimonial
matters.
Our attention was further drawn to the provisions of section 20(1) of the Supreme Court Act No.59 of 1959 of South Africa which are
in substantially the same terms as section 14(1) of Proclamation 222 of 1981 as well as section 2K1A) which expressly provides that
the Appellate Division of the Supreme Court of South Africa shall have the same jurisdiction to hear and determine an appeal from
any decision of the Supreme Court of South West Africa(or of a supreme Court or a High Court of a State to which independence has
been granted by law,) as it has in respect of any decision of the Court of a Provincial or local division of the Supreme Court of
South Africa.
It is accordingly contended by Mr Swersky that the Appellant's right to appeal to the Appellate Division (and to this Court following upon the independence of Namibia) arises not from any express
provisions of the Income-Tax Act but from the provisions of that Act read together with section 14 of Proclamation 222 of 1981 and
sections 20(1) and 2K1A) of the Supreme Court Act of 1959.
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In countering this argument Mr Du Toit relied on the provisions of section 14(6)(b) of Proclamation 222 of 1981 which provides that the power to grant leave to appeal as
contemplated by section 14 "shall be subject to the provisions of any other law which specifically limits it or specifically
grants, limits or excludes any right of appeal." It was contended that no right of appeal to the Appellate Division in terms
of section 14 therefore existed unless there is provision in some other law which specifically grants such a right of appeal. I am unable to agree with this construction of section 14(6). Sections 14(4)
and 14(5) deal with the circumstances under which leave to appeal is required and the procedures pertaining thereto and what section
14(6)(b) seeks to make clear is that these rules pertaining to the power to grant leave to appeal are subject to the provisions of
any other law' which might specifically limit or specifically grant such powers or which might limit or exclude any right of appeal.
If any other law therefore specifically provides that there is a right of further appeal without any need to obtain leave to appeal
the provisions of such a specific law would therefore prevail and no leave to appeal would be required even if section 14(4) or section
14(5) otherwise provide. Section 14(6)(b) does not mean that unless there is a specific right of appeal provided for in some other
law (other than Proclamation 222 itself) an aggrieved party would not have the right to pursue an appeal pursuant to the provisions
of that Proclamation. (Exactly the same considerations would apply to section 20(6) . of the Supreme Court Act of 1959
7 -
which is substantially in the same terms as section 14(6) of Proclamation 222 of 1981.)
It was further contended on behalf of the Respondent that section 14(1) of Proclamation 222 of 1981 did not itself create a right
of appeal. It was argued that the subsection merely provided that if the right did exist, the appeal had to be heard by the Appellate
Division. In my view however section 14(1) (read with the other subsections of section 14) provides for two matters. In the first
place it confers jurisdiction on the Appellate Division (in terms of section 14(1)) to hear appeals from judgments or orders of the
Supreme Court of South West Africa in any civil proceedings or against any judgments or orders of the Supreme Court given on appeal.
Secondly, it seeks to define the circumstances under which leave to appeal has to be obtained and the procedures which have to be
followed pertaining thereto. There is therefore no need to look for some other law for the purposes of determining whether the Appellant
had any right to appeal to the Appellate Division. Proclamation 222 of 1981 itself creates that right, subject to the provisions
of section 14 thereof.
Mr Du Toit further contended that section 73(18) of the Income-Tax Act justified the inference that only one appeal from a decision of the special Income-Tax Court was permitted and that no further appeal from the decision of a Superior Court
in terms of section 76 was contemplated. This submission is based on the fact that section 73(18) provides that a decision of the
special Income-Tax Court under
8 -
section 73 "shall, subject to the provisions of section 76, be final". His argument was that the finality of the decision
of the special Income-Tax Court in terms of section 73 was qualified only to the extent to which that decision was set aside or corrected
by a Superior Court acting in terms of section 76 and since section 76 itself made no reference to the Appellate Division, it followed
that once the Superior Court referred to in section 76 (the Court \ quointnecase) made its decision, "the matter became final". Counsel drew our attention in this regard to the decision of the Appellate
Division of South Africa in the case of Munisipaliteit van Windhoek v Ministersraad van Suidwes-Afrika en 'n Ander1985(2) SA 893 (A) which followed the earlier decision of the same court in the case of The Minister of Labour v Building Workers' Industrial Union1939 A.D. 328.
In the case of the Minister of Labour v Building Workers' Industrial Union, (supra) the Court was concerned with the proper interpretation of certain sections of the Industrial Conciliation Act No.36 of 1937.
Section 77(1) of that Act provided for an appeal to a defined division of the Supreme Court against inter alia a decision of the
Minister in terms of which a concilliation board is established and section 77(2) thereof provided as follows:
"The division of the Supreme Court to which an appeal is made shall confirm the Minister's decision or give such other decision
as in its opinion the Minister ought to have given; and its decision shall for the purposes of this Act be deemed to be the decision
of the Minister".
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The Court held that on a proper construction of the Industrial Conciliation Act, the decision of the Division of the Supreme Court
to which an appeal had been made in terms of section 77(2) of the Act was final and that no further appeal lied from a decision of
that division to the Appellate Division.
Section 77(2) of the Industrial Conciliation Act of 1937 is, in my view, however, distinguishable from the provisions of section 73(18)
of the Income-Tax of 1981. In the first place section 77(2) of the Industrial Conciliation Act provides that the decision of the
Division of the Supreme Court to which appeal is made "shall for the purposes of this Act be deemed to be the decision of the
Minister". There is no corresponding provision in section 73(18) of the Income Tax Act. Nothing contained either in section
73(18) or any other section of the Income-Tax Act provides that the decision of any court acting as a Court of Appeal in terms of
the Act, shall be deemed to be the decision of the secretary. Secondly, the element of finality suggested in section 77(2) of the
Industrial Conciliation Act by the deeming provision, attaches to the decision of the division of the Supreme Court to which the
appeal is made in terms of section 77 (a provincial division). In the case of the Income-Tax Act there is no corresponding provision
which attaches finality to the decision of the division of the Supreme Court to which an appeal is made in terms of section 76. All
that section 73(18) states is that any decision of the special Income-Tax Court in terms of section 73 shall
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(subject to the provisions of section 76), be final.
The legislature could easily have said, if such was its intention that the decision of the court to which appeal is made in terms
of section 76(2), shall be final.
These distinctions are in my view crucial because it is clear from the judgment of Centlivres, J.A. in the case of Minister of Labour v Building Workers' Industrial Union, (supra) that no further appeal from a decision by a Superior Court given under section 77 of the Industrial Concilliation Act was
competent, precisely because section 77 deemed the decision of such a court to be the decision of the Minister. At pages 332 - 333
of the report in that case Centlivres, J.A. stated that -
"Had the legislature intended that there should be a further right of appeal from a decision given by a provincial or a local
division under section 77 it would have enacted that the decision of the court hearing the further appeal should be deemed to be
the decision of the Minister. This it has not enacted.
The language of section 76 is clear and unambiguous. It precludes all notions of a further appeal to any other tribunal for it says
unmistakenly that the decision of the division to which the appeal is made - in this case the Transvaal Provincial Division - shall
be deemed to be the decision of the Minister. From this it follows that the decision of any other tribunal can have no legal effect.
Were this Court to allow any further appeal any decision it might "give on the merits would be
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a vox et praeterea nihil. These considerations lead us to the conclusion that the legislature intended to clothe with finality the decision of a provincial
or local division of the Supreme Court given in terms of section 77 of the Act."
It accordingly follows that the decision in the case of The Minister of Labour v Building Workers' Industrial Union, (supra) does not afford support for the arguments sought to be advanced on behalf of the Respondent. Exactly the same considerations
apply to the case of the Minister of Labour and Another v Amalgamated Engineering Union, 1950(3) SA 383(A). In that case also the section which fell to be interpreted was section 77 of the Industrial Concilliation Act
of 1937.
Counsel for the Respondent also referred us to the decision of the Appellate Division of the Supreme Court of South Africa in the
matter of Munisipaliteit van Windhoek v Ministersraad van Suidwes-Afrika en 'n Ander, 1985(2) SA 907(A). The Court in that case was concerned with the interpretation of section 77 of Ordinance 35 of 1952 (SWA) creating
machinery for an appeal to the Supreme Court of South West Africa (as it then was) from a decision of the then Council of Ministers
of South West Africa. Section 77(2) of Ordinance 35 of 1952 provided that the decision of such a court was to be deemed to be a decision
of a Council of Ministers. The Appellate Division, following the reasoning in Minister of Labour v Building Workers' Industrial Union, (supra), held that any decision of the
- 12 -
then Supreme Court of South West Africa given on appeal in terms of section 77 (including any decision confirming a decision of the
Counsel of Ministers) was therefore final and not subject to any further appeal to the Appellate Division. Again the relevant section
77(2) of Ordinance 35 of 1952 was entirely distinguishable from section 73(18) of the Income-Tax Act in the present matter. There
is nothing in section 73(18) or any other section of the latter ACT. which deems that a decision of any court acting in terms of section 73 or section 76, is a decision of the Secretary.
The second main ground upon which Mr E)u Toit relied was that in so far as section 14 of Proclamation 222 of 1981 purported to confer a right of appeal to the Appellate Division
of the Supreme Court of South Africa, it was ineffective because Proclamation 222 of 1981 was made by the South African State President
pursuant to the provisions of section 38(1) of Act 39 of 1968 of the Republic of South Africa which could only apply within the then
territory of the then South West Africa and not within any part of the Republic of South Africa excluding South West Africa.
For the purposes of this argument I shall assume that a Proclamation made by the South African State President in terms of section
38(1) of Act 39 of 1968 cannot lawfully provide for appeals from any Superior Court in the then South West Africa to the Appellate Division of the Supreme Court of South Africa and that any provision in Proclamation 222 of L981 purporting to confer
any such
- 13 -
jurisdiction on the Appellate Division does not in law operate extra-territorially (outside the territory of the then South West Africa)
to clothe the Appellant Division with such jurisdiction. Even on that assumption however the Respondent's argument cannot succeed
because section 2K1A) of the Supreme Court Act of 1959 which is a South African Act itself expressly confers jurisdiction on the
Appellate Division to hear and determine an appeal from any decision of the then Supreme Court of South West Africa, in the same
way that the Appellate Division has jurisdiction in respect of any decision of the court of the provincial or local division of the
Supreme Court of South Africa. Section 21(1A) (read with section 20 of the Supreme Court Act of 1959,) clearly therefore conferred
jurisdiction upon the Appellate Division of the Supreme Court of South Africa to hear and determine appeals from the then Supreme
Court of South West Africa and pursuant to the provisions of the Namibian Constitution that jurisdiction now vests in this Court.
In the result therefore I have come to the conclusion that the point _i_n limine raised on behalf of the Respondent is unsound in law and must be dismissed.
The MERITS.
The sole issue on the merits which requires to be determined in the present appeal is whether the profit of R2 166 302,00 which the
Appellant made on the sale of certain mining plant . and machinery during the tax-year
- 14 -
ending on the 30th of June 1985 constituted a receipt "of a capital nature". if it did it had to be excluded from the "gross
income "of the Appellant in respect of that year and was therefore not taxable.
The material facts relevant to the determination of this issue are not really in dispute. The Appellant was incorpora-ced during the
60's under the name of Falconbridge of South West Africa (Pty) Limited to conduct exploration and mining activities in what was then
known as South West Africa. Upon its incorporation and until October 1982 the Appellant was a wholly owned subsidiary of Falconbridge
Limited (which was formerly known as Falconbridge Nickle Mines Limited) of Canada ("Falconbridge"). In the early 70's Appellant
commenced the development of the Elbe Mine in the Okahandja district and expanded some R2 million pursuant thereto and this amount
was allowed by the Secretary for Inland Revenue as capital expenditure incurred pursuant to the company's mining activities. In 1974
after the collapse of base-metal prices the development of the Elbe Mine was terminated and the property was put on "a care
and maintenance basis".
Oamites Mining Company (Pty) Limited ("Oamites") was itself incorporated in the late 60's and until October of 1982 its
members were Falconbridge as to 74.9% and the Industrial Corporation of South Africa ("IDC") as to 25.1%. Oamites developed
and mined the Oamites ore body of Copper and Silver from 1970 tot 1984.
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In the early 70's the Appellant acquired a prospecting grant in the district of Rehoboth ("The Swartmodder claims"). Some
prospecting was carried out on the Swartmodder claims during the period 1974 to 1976 by the Appellant at a cost of some R500, 000.00.
Although the Appellant was a wholly owned subsidiary of Falconbridge, by agreement between Falconbridge and Superior Oil Company
("Superior") of the United States of America, both the cost and the benefit of this prospecting activity was shared between
Falconbridge and Superior. Certain feasibility studies were carried out by the Appellant on the Swartmodder claims during the years
1976 to 1979 and it was concluded that a separate mining venture would not be economically viable.
In May of 1979 a feasibility study was carried out by Oamites which indicated that a Swartmodder mine could be economically viable
provided that it was developed and operated as an integral part of Oamites entailing the transportation of Swartmodder ore for some
50 kilometres to the Oamites Mine, where, by utilising Oamites plant and infra-structure, the Swartmodder ore would be blended and
milled with ore derived from the Oamites Mine.
Following upon the feasibility study of May 1979 Oamites, Falconbridge, Superior, Oamites, the I.D.C., and the Appellant entered into
various negotiations and discussions with the object of exploiting effectively the Swartmodder claims.
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These negotiations led to two important agreements concluded on the 10th December 1979.
(c)
In terms of the first agreement Appellant granted to Oamites the right to develop and work the Swartmodder claims. In consideration
therefor Oamites undertook to pay Oryx tribute monies at the rate of R4 per ton of Swartmodder ore produced by Oamites.
(d)
In terms of the second agreement (entered into on the same date) Oamites sold to another wholly owned subsidiary of Fal-canbridge,
Falconbridge Exploration (Botswana (Pty) Limited ("Febots"), or its nominees, all the "non-renewable tangible assets"
which might be owned by Oamites at the date upon which the Board of Directors of Oamites passed
a resolution in the future approving a shutdown programme for the Oamites mine. (The "non-renewable tangible assets" were
to include the relevant mining plant and machinery. )The purchase price was to be an amount equal to the royalties which Oamites would have paid it to the Appelant in terms of the first agreement referred to in (a)
above.
- 17 -
Pursuant to these 1979 agreements Oamites in fact mined the Swartmodder claims during the period 1979 to April 1981. In April 1981
mining at the Swartmodder Mine was terminated "because of various factors including the unexpected complexity of the geology
with the consequent dilution of all reserves, increases in the cost of transport of the ore from Swartmodder to Oamites and a plunge
in the price of copper on world markets". In May 1981 the Swartmodder Mine was placed "on a care and maintenance basis".
During August of 1982 Falconbridge issued a directive tc the managing director of its South African operations to dispose of its 74.9%
interest in Oamites. Following upon certain negotiations Falconbridge thereafter disposed of its interests in both the Appellant
and Oamites during 1982 for a consideration of Rl 050 000 to a sindicate led by Metorex (Pty) Limited ("Metorex"). There
were two important conditions attached to the sale.
(e)
Oamites was to be constituted as a subsidiary of the Appellant with the result that the Appellant became the owner of 74.9% of the
shares in Oamites previously owned by Falconbridge .
(f)
Falconbridge was to procure the assignment by Febots to the Appellant of all rights and obligations which Febots had acquired (in
terms of the agreement of December 1979) to the purchase of the non-renewable tangible
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assets owned by Oamites on the date upon which the Board of Directors of Oamites passed a resolution approving the shutdown programme
for the Oamites Mine.
In the result the relevant sindicates led by Metorex came to own 100% of the Appellant which in turn owned 74.9% of Oamites. The Appellant
became entitled to the rights which Febots previously enjoyed to acquire all the "non-renewable tangible assets" which
might be owned by Oamites at the date when Oamites resolved to approve the shutdown programme for the Oamites Mine to which I have
referred. (The "non-renewable tangible assets" included the mining machinery and equipment which the Appellant later sold
for the profit of R2 166 302.00).
In December 1982 the 25.1% share-holding in Oamites held by the I.D.C. was also sold to a sindicate which included Metorex.
At the beginning of 1984 the Oamites Board of Directors in fact resolved to approve a shutdown programme for the Oamites Mine. That
event entitled the Appellant as the cessionary of rights previously vesting in Febots, to acquire the relevant "non-renewable
tangible assets" (including mining plant and machinery) owned by Oamites on the date of this resolution. The Appellant duly
acquired these assets and without taking any physical delivery thereof and almost immediately, authorised Oamites to sell them.
That sale resulted in the profit of
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R2 166 302.00 which the Respondent has sought to include within the taxable income of the Appellant and which the Appellant contends
constitutes a receipt of "a capital nature".
The proper legal approach.
Relevant to the determination of the issue between the parties in this matter are a number of legal principles which were debated
in argument before us.
(a) The onus.
Section 72 of the Income-Tax Act provides that "the burden of proof that any amount is exempt from or not liable to any tax-charge
liable under this Act or is subject to any deduction, rebate or set off in terms of this Act, shall be upon the person claiming such
exemption, non-liability, deduction, rebate or set off, and upon the hearing of any appeal from any decision of the Secretary, the
decision shall not be reversed or altered unless it is shown by the Appellant that the decision is wrong." It is I think clear
from this provision that the onus was upon the Appellant to prove on a balance of probabilities that the profit of R2 166 302.00
which was made by the Appellant upon the sale of the relevant mining plant and machinery, was a receipt of a
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"capital nature".
) The Act contemplates that all receipts or accruals must be categorised as being either of a capital or of an income nature. The
concept of an amount which was both "non-capital" and "non-income" was described by Davis, A.J.A, in the case
of Pyott Limited v CIR,1945 A.D. 128 as a "half-way house of which I have no knowledge". It accordingly follows that the Appellant's appeal must
fail if the Appellant has not established on a balance of probabilities that the profit of R2 166 302.00 made by the Appellant on
the sale of the relevant mining plant and machinery constituted a receipt of a capital nature.
) A receipt or accrual of a "capital nature" is not defined in the Act. It is ultimately a question of law which has to
be decided upon the facts of each case by having regard to the totality of all the relevant circumstances SIR v The Trust Bank of Africa Limited, 1975 (3) SA 652 (A); Natal Estates v SIR, 1975 (4) SA 177 (A).
) The object of the enquiry is to determine in which of two possible classes a particular profit falls.
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"Income considered in relation to capital is revenue derived from capital productively employed. In a transaction of this nature,
therefore, where profit has undoubtedly resulted from the disposal of the company's assets, we have to enquire whether the profit
has resulted from the productive use of capital employed to earn it, or whether it has resulted from the realisation of capital at
an enhanced value. In the former case it falls within the definition of income and was rightly assessed; in the latter it remains
capital, and is not liable to duty" - per Innes, C.J. in COT v Boysen's Estate Limited, 1918 A.D. 576.
(e) Intention.
A very important guide which the courts have
generally used in deciding whether the
proceeds
arising upon the disposal of an asset
are in
the nature of income of capital is the
"inten
tion" of the tax-payer in acquiring
and in
holding the asset concerned.
"The proceeds will be in the nature of capital and tax-free if the asset was acquired and held not for the purpose of re-sale
at a profit, but, for example in order to produce an income in the form of rent, interest or dividends" (Silke on South African
Income-Tax 11th Memorial Edition Vol.1 paragraph 3.2.).
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What the Court is required to do is to consider all the circumstances which surround the acquisition of the asset, and the manner
in which it has treated the asset. The tax-payer's intention is important but it does not itself necessarily determine whether the
proceeds arising upon its disposal will be treated as capital or income (CIR v Stott, 1928 A.D. 252 to 264; CIR v Richmond Estates (Pty) Limited, 1956(1) SA 602 (A)).
Where the intentions of a tax-payer are "mixed" the correct approach is to give effect to the dominant motive in determining
the nature of the subsequent profit but "if a tax-payer has two alternative business methods of turning to account an asset
that he has acquired, that is, he is willing to secure a profit either by re-selling the asset or by using it to produce income,
the asset is of an income nature and the proceeds arising upon it sale will be included in his income" (Silke (supra) paragraph
3.5).
In the case of a company "with no body to kick and no soul to damn" the intention of the tax-payer is determined by reference
to the intention of its directors or those in effective control of the company (CIR v Richmond Estates (Pty) Limited, (supra)).
(f) The determination of intention:
The intention with which a tax-payer acquires and holds an asset is a question of fact. The tax-payer's ow-n evidence about his intention
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(or the evidence of the directors of a company or those in control thereof where the tax-payer is a company) must be given proper
weight but in order to determine properly and objectively what the real intention of the tax-payer was in a particular case, the
Court has to review all the relevant facts and circumstances and to test the assertion of the tax-payer against the objective facts including where this is relevant -
i. The inherent nature of the asset disposed.
ii. The circumstances under which it was acquired.
iii. The duration of the period for which it was held by the tax-payer.
iv. The use to which it was put by the taxpayer while it was so held.
v. The relationship between the tax-payer and the party from whom it was acquired and to whom it was disposed.
vi. The tax-structure, the tax-imperatives and the tax-needs of the tax-payer during the relevant period.
vii. The quality and character of the taxpayer's conduct in relation to the relevant asset and more particularly the issue as to whether such conduct could be said to constitute usual and normal conduct in the commercial community, or unsual.
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(g) Isolated transactions.
A profit made in consequence of the sale of an asset, might be taxable, notwithstanding the fact that the tax-payer is not ordinarily
engaged in the business of selling that kind of asset. The relevant test is not whether the transaction yielding the profit was an
isolated transaction. The relevant test is to determine the intention or motive behind the transaction. If the intention involved
a "scheme of profit-making" the resultant profit would attract tax even if there were no previous or subsequent similar
transactions. (ITC 382, (1937) 9 SATC.)
The application of the law to the facts.
Having carefully applied these legal principles to the facts in the present matter I have come to the conclusion that the Appellant
has not discharged the onus of establishing that the profit of R2 166 302.00 which the Appellant made in consequence of the disposition
of the relevant mining plant and machinery, constituted a receipt of a capital nature, within the meaning of that expression in the
definition of "gross income" in the Act.
It is common cause that almost immediately after Oamites
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