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2 HARMS JA:
3 encompass a company incorporated or deemed to be incorporated in the Ciskei.
5 operation on 1 March 1985". (The other amendments to the Act by the Decree need
not be mentioned.)
9 amended did not conflict with the agreement and that the imposition of a withholding
tax upon a company having its place of effective management outside Ciskei did not
discriminate on the ground of nationality. The question is then what the effect was of
s 3 of the Decree (which, it will be recalled, provided that the Decree was deemed to
have come into operation on 1 March 1985) upon dividends that had been declared,
and a withholding tax that had been paid, before the date of the Decree. More
particularly, was the new withholding tax due and payable in respect of the dividends
declared by Allied and could the Commissioner retain the amounts paid for that
purpose?
12 that the Board was merely applying the principle quoted to the facts of the case. In any 15 basis, have been paid. It seems artificial to ascribe an intention to the legislature that 16 not cater for the fact that the liability for withholding tax had been established, it
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10
of effective business in Ciskei; companies brought into the net were companies
registered in Ciskei, having their place of effective business outside Ciskei and deriving
income by way of dividends from other Ciskeian companies. Anyone with a
smattering of knowledge of the so-called TBVC states will immediately appreciate that
it was highly unlikely that any or any appreciable number of companies fell into either
category. The only conceivable reason why the Act was amended retrospectively for
about eight years, was a legislative desire to keep what had been reaped under the
provision before amendment
Mr Kuper, for the appellants, countered this rather obvious conclusion
by reference, to what he called, the "principle" in Wijesuriya v Anit[1965] 3 All ER
701 (PC). That appeal emanated from Ceylon and concerned the interpretation of a
fiscal statute which had been amended retrospectively by much the same wording used
in s 3 of the Decree. Lord Wilberforce said (at 703A-C):
"The question therefore remains whether the express provision of the amending Act was sufficient to bring about the result for
which this government agent contends. This question is to be determined according
11
to the ordinary principles of construction which apply to a statute which is (a) retrospective, (b) fiscal, and (c) in parts penal. It must be shown that the enacting words clearly cover the case to which it is sought to apply them. The court will no doubt prefer an interpretation which gives effect to the amending Act, rather than one which denies it any efficacy, but it will not strain the language used, nor will it rewrite or adapt it to cover cases other than those to which it clearly applies."
On an analysis of the wording of the statute involved, he came to the conclusion that
the effect of the retrospective amendment in that case legalised the levy of the tax to
the extent that it had been paid or collected, but that it did not otherwise impose a tax
retrospectively. The main reason for the latter conclusion was found in the
administrative provisions which could not be applied to unpaid past taxes.
With the principle set out in the quotation no-one can quarrel, but Mr
Kuper sought to distill another principle from the reasoning of the Board, namely that
the Commissioner had to show that the pre-existing collection and enforcement
machinery could apply to the case of past unpaid taxes without modifications and
violence to the scheme of the Act (cf Wijesuriya at 703D-E). I have serious misgivings
about whether the Board ever intended to lay down any new principle. It seems to me
event, I find it singularly unhelpful for the interpretation of one statute to have regard
to how another court interpreted a different statute. More appropriate is the "general
observation" by Lord Dunedin (in Whitney v Inland Revenue Commisioners 1926 AC
37 52) to which Schreiner JA had occasion to refer in the context of estate duty
(Commissioner for Inland Reveneue v Lazarus Estate and Another 1958 (1) SA 311
(A) at 326D) namely that -
"(o)nce that it is fixed that there is [a tax] liability, it is antecedently highly improbable that the statute should not go on to make that liability effective. A statute is designed to be workable, and the interpretation thereof by a Court should be to secure that object, unless crucial omission or clear direction make that end unattainable."
In addition, in Shewab Tomes & Co Ltd v Commisioner of Customs And Ecise 955
(4) SA 305 (A), Schreiner ACJ said (at 312A):
"Where one is dealing with a case of true retrospectivity it will generally, I apprehend, be more difficult to draw inferences as to the Legislature's presumed intention not to produce injustice, since ex hypothese the Legislature is creating a situation in which the conduct of persons is affected by rules that did not exist at the time of the conduct."
13
Even if for the sake of argument one adopts the line of reasoning of the Board, the appellants' contention must fail. The Act, before and after amendment, levied the withholding tax on dividends paid or still payable. In other words, the mere fact that the Ciskeian company had paid dividends did not afvect its obligation to pay the withholding tax. The Ciskeian company (Allied in this case) was always "the person liable for the withholding tax", not the recipient (s 15). That liability remained whether the Ciskeian company had paid the dividends or was still liable to pay them (s 16(a)). Section 16(b) states that any person (Allied in this case) making payment of a withholding tax had a number of options: To deduct or withhold the amount of the withholding tax, to recover the amount from the recipient, or to retain it out of other monies belonging to the recipient. It follows from this, in the words of Lord Wilberforce, that the pre-existing enforcement machinery in the Act enabled the tax authorities to recover withholding taxes for past periods and after payment of the dividend concerned. More important, I would have thought, is the question whether
14 the post amendment enforcement machinery made recovery possible, but in this case
it does not matter because the effective machinery remained unchanged.
Having replaced the old withholding tax, the question is whether the
amounts paid are to be considered payments of the new tax. According to Lord
Dunedin (loc cit) there are three stages in the imposition of a tax -
"... there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next there is the assessment.... [An] assessment particularises the exact sum which a person liable has to pay. Lastly come the methods of recovery, if the person taxed does not voluntarily pay."
Pickard JP had some difficulty with the first stage of the enquiry, holding that he could
not decide on the papers whether Cohen Brothers had its place of effective
management outside Ciskei. The answer is that such an allegation was made in the
founding affidavit and admitted in answer. Assessment, the second issue, does not
arise because the Act envisages a self-assessment, the calculation of a percentage of
the dividends declared by the Ciskeian company, Allied. Concerning the method of
collection, that also causes no problem - the amounts, albeit on a slightly different
the old tax collected should be repaid simply in order to be recycled. The clear
intention was to legalise the payment and collection of the old tax save insofar as the
possible exceptions referred to are concerned. Section 17 always provided that
withholding tax was payable within 30 days after the date upon which (for present
purposes) a dividend is payable or within such further period as the Commissioner may
approve. This means, as far as transactions antedating the Decree are concerned, that
the new withholding tax became due when the Decree came into effect (cf Curtis v
Johannesburg Municipality 1906 TS 308), or was deemed to have become due on an
earlier date such as the date of payment of the dividend (Shewan Tomes & Co Ltd v
Commissioner of Customs and Excise supra). Upon either interpretation the tax
concerned was due by the time the application was launched.
It follows from this that the respondents were entitled to an order in
terms of their cross application. Par 2 of the order of the court below, which was
supposed to be in the favour of the respondents, did not do justice to their case. It did
assumed that the "respondents" - presumably the Commissioner - had to "apply the
provisions regarding withholding tax" while the Act provided for a self-assessment,
and it permitted a setoff by the Commissioner at some future date, something that was
unnecessary and legally ill-conceived.
Par 1 of the order declared that the amounts paid by the appellants are repayable to them, presumably because the old withholding tax had been repealed retrospectively. But, one can only assume, this declaratory order was intended to be subject to the setoff provision contained in par 2 of the order. It does not follow that the declaratory order should have been granted even if one concludes that the effect of the Decree was to require repayment of the tax already paid. In the light of the conclusion in connection with par 2, the order in par 1 was purely academic. A declaratory order cannot be granted in relation to an academic dispute, and it follows that the order cannot stand.
Mention has been made of the fact that the parties had to bear their own
17 costs. The reason given was that, taking into account the form of the order, "both
parties were substantially successful, or, if you like, that both parties were substantially
unsuccessful." It would therefore appear that the learned judge in the portion quoted
in [12] above, misinterpreted his own judgment. In any event, the appellants' success
in the court below was illusory and did not justify an order of costs in their favour.
In the result the following order is made:
1.
The appeal is dismissed with costs.
2.
The cross-appeal is upheld with costs.
3.
The order of the court below is substituted with the following order:
"(a) The application is dismissed.
(b) As far as the cross application is concerned, is it declared that the tax paid by the second applicant during 1991 was due and owing to the third respondent in terms of the provisions of the Income Tax Act, 1984 (Ciskei) as amended by Decree 2 of 1993 (Ciskei) as withholding tax and that the applicants are not entitled to a refund in respect thereof
18 (b) The Applicants are to pay the costs of the application and the cross
application, jointly and severally, including the costs of two counsel
where employed."
4.
All costs include the costs of two counsel.
5.
It is noted that the respondent undertook to pay certain wasted costs.
L T C HARMS JUDGE OF APPEAL
MAHOMED CJ
)
EKSTEENJA
) AGREED
SCOTT JA
)
ZULMAN JA
)
URL: http://www.saflii.org/za/cases/ZASCA/1998/15.html
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