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3 after 1 October 1970. It read:
"There shall be exempt from tax -
5 1991 the words preceding the proviso were amended by sec 12 (1) (m) of Act
129 of 1991. Again the amended provision was deemed (sec 12 (2) (f)) to have
come into operation as from the commencement of years of assessment ended
or ending on or after 1 April 1990. The provision now read:
"There shall be exempt from tax -
9 and which has been approved by the two ministers concerned or does it suffice
that the scheme is one for the promotion or financing of exports? This is purely
a question of construction of the relevant provision. It is unnecessary to repeat
yet again the guidelines which have been laid down so many times by the courts
over the years as aids to interpretation. What is beyond cavil is that one cannot
come to the task with a priori assumptions as to what the legislature is likely to
have intended and that the primary and most important indication of its intention
is the language which it has chosen to express it. Nor of course should one be
astute to conjure up fanciful or overly subtle hypothetical considerations in
order to create ambiguity where none really exists.
10 is therefore not any scheme for the promotion or financing of exports which-
14 by officialdom in the department of internal revenue; reports in which
legislative amendments were recommended, made by the Board of Trade and
industry into foreign exchange saving systems in the automotive industry, and
"Explanatory" memoranda which accompanied the relevant Income Tax Bills
introducing the amendments. Coming closer to home, he relied upon certain
aspects of the provision itself. Thus, he submitted that the use of the words "as
well as" to introduce the second leg of the provision in preference to the word
"including" so beloved of parliamentary draftsmen, shows that a different
concept was being introduced and not simply more of the same. These words
("as well as") were, so it was suggested, particularly apposite if what the
legislature intended to achieve in 1991 was simply to combine in a single
provision the 1974 version and the 1990 version of the provision (but subject
of course to the inclusion now of interest paid under GEIS with some retroactive
effect). It was also contended that such a reading of the provision would
15 eliminate the tautology which would exist if the competing interpretation were
19 24 (leaving aside the matter of interest) it is very similar. The 1990 version speaks 25 of the words "on or after 1 April 1990" in the clause "which is paid by the State, 26 32 satisfied both those descriptions but I think it is at least equally possible that. 33 which I have set out. It was largely upon those judgments that the judgment of
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17
recognition by the courts that difficulties caused by the ill-considered resort of draftsmen to the use of the word "such" are to be met by a readiness on the part of the courts to mould the application of that not inflexible relative word so as not to defeat the intention gathered from the context. But the observations quoted suggest what is, I believe, the solution of the difficulty in the present case. It lies in recognizing that a draftsman in using the word "such" may not have in mind all the precise qualities which by an adjectival phrase he may have attributed to his antecedent in an earlier part of his text and may really intend to refer only to the general nature of the thing or concept to which he has occasion again to refer. In yielding to the temptation to employ the word "such" and avoid all repetition he may not have seen or been alive to all the implications which a logical application of the word involves. To borrow the phraseology of Lord Chelmsford (this is a reference to what Lord Chelmsford said in Eastern Countries Railway Co v Marriage (1860) 9 HLC 31 at 73 - 74) and give it a somewhat different application, there may for this reason be occasions when the relative "such" ought to be referred not to all the characteristics contained in the previous description of the antecedent but to the more general characteristics to which the context appears properly to attract it. Here I
think the truth is that the draftsman desired to confine the provision made in s. 209 to water districts within municipalities and to rivers, creeks and watercourses within the limits of water districts within municipalities. He sought to re-express the limitation by employing the word "such" but he did not intend by so doing to re-express the further limitation of water districts to those which theretofore had been controlled and managed by the council of a rural municipality or other abolished local body. That it
18
could not have been so intended is, I think, shown by the considerations I have already stated, and effect is best given to the real
intention by modifying the strictly logical application of the word "such" and doing so in accordance with what it may reasonably be
supposed was felt to be the sense of the word when it was employed." (The emphasis in the passage quoted is mine.)
These observations seem, with respect, so redolent of common
sense that I would not wish to demur. However, it remains of course a question
whether in any given case there is indeed adequate justification for concluding
that the "real intention" of the legislature is properly evidenced. In answering
the question the dividing line between impermissible speculation as to the
purpose of legislation and permissible reliance upon factors dehors the
language under consideration to discover it, is admittedly sometimes fine but it
"is a conceptually clear line which must be respected.
Some of the factors upon which appellant seeks to rely are not
factors which can legitimately be taken into account. The reports of the Board
of Trade and Industry fall into this category. They are investigative reports
containing various findings and recommendations, but they can throw no light upon which of them was accepted and translated into legislation.
Also falling within that category is the manner in which the 1991 provision was for a relatively short period of time interpreted by the Commissioner or members of his staff. That relatively quickly
jettisoned interpretation of the 1991 provision is not what is comprehended by the doctrines of subsecuta obervatio and contemporeana expositio. Those doctrines rest upon two foundations. One is that there must at least be room for the interpretation in the language of the provision. The other is that the interpretation must have been accorded it for sufficiently long without being gainsaid that it provides good reason for concluding
that that is what it was intended to mean. See Rex v Detody 1926 AD 198 at 202-3. It is true that it was said in Secretary for Customs and Excise v Millman NO 1975 (3) SA
20
544 (A) at 551 F that "it may well be" that a departmental interpretation of an
ambiguous provision is a factor which cannot be overlooked and that "it may
well be invoked to tip the balance where the language
may fairly be
construed in either of two ways", despite the absence of any indication as to how long that interpretation had been accorded
to it, but the observation was tentative and guarded and did not purport to be a considered and definite expression of opinion.
I turn to the provision itself. Whatever the permissible scope for, and the limitations upon, the use of the legislative history of a particular provision as an aid to interpretation may be, I think it is obvious that where a provision has been amended and the amendment is deemed to have taken effect while the provision in its unamended state was operative, one is entitled to examine the implications of that in order to see whether they throw any light upon the interpretation which should be accorded to the amendment. If on one
21
interpretation of the amended provision it would retroactively destroy vested
rights acquired (and even vested rights acquired for value given) in terms of the provision before its amendment, but on another interpretation it would not, that would provide, I think, a strong reason for preferring
the latter interpretation unless the language used cannot possibly accommodate it. To my mind, such an indication can be found if the 1990 and 1991 versions of the provision are compared and the implications of their respective commencement dates are appreciated.
While the 1990 version was operative it mattered not that the scheme for the promotion or financing of exports under which the State paid an amount to a taxpayer had not received ministerial approval.
The amount so paid was exempt from normal tax in the taxpayer's hands. Moreover it was also exempt from tax in the hands of a third party who had acquired the right to be paid the amount by virtue of an agreement of the kind contemplated in the
22
proviso to the provision. Third parties who acquired such rights did not acquire
them gratis. There would obviously have been a quid pro quo of some or other kind. In return the third party became entitled to receive a tax-free sum from the State. That was a fully vested right.
When the 1991 version of the provision was enacted it was deemed to have come into operation from the commencement of exactly the same tax years as those from which the 1990 version had been deemed to commence. The effect of this in law was that the 1990 version had to be regarded as never having existed and the 1991 version had to be regarded as if it had been operative during the period when the 1990 version was operative. It followed that unless rights to payment by the State of tax-free amounts acquired by virtue of the 1990 provision could have been acquired by virtue of the 1991 provision if it had existed at the time, they would retroactively be deprived of their tax-free status both in the hands of those who first became entitled to claim and in
23 the hands of third parties. This despite the fact that value had been given for
them by such third parties, because of their then tax-free status. That is a result
so manifestly unfair and so plainly in conflict with the well-grounded and
entirely understandable presumption against an intention to destroy vested rights
that it cannot but create serious doubt as to whether the legislature did indeed
use the word "such" in its strict grammatical sense. The more so when the
provision as amended is so framed as to lend considerable colour to the
suggestion that it was intended to synthesise in one provision two previous
legislative approaches to the matter each of which had found expression in
previous versions of the provision. The first leg of the 1991 version of the
provision is identical to the 1974 version (save that the reference to the Minister
of Economic Affairs becomes a reference to the Minister of Trade and Industry).
The second leg of the 1991 version commencing with the words "as well as" is
not framed in language which is identical to that of the 1990 version but
of "any amount
which is on or after 1 April 1990 paid by the State under
any scheme for the promotion or financing of exports". The 1991 version
speaks of "any amount
which is paid by the State, on or after 1 April
1990, under any such scheme". If the legislature did indeed intend the word
"such" in the 1991 version to refer back only to "any scheme for the promotion
or financing of exports" and not to "any scheme for the promotion or financing
of exports which is for the purposes of this paragraph approved by the (relevant
Ministers)", such a synthesis would be the result. If on the other hand, it
intended to bring about not a synthesis but a sudden reversal of a tax exemption
which it had only just conferred the previous year, I would have expected a very
differently framed provision.
Closer examination of the 1991 provision convinces me that a
synthesis was intended. How else can one account for the deliberate insertion
on or after 1 April 1990, under any such scheme"? That is the date after which,
in terms of the 1990 version, amounts (excluding interest) paid by the State
under any scheme for the promotion or financing of exports would be exempt
from tax even although the scheme had not been approved by the two ministers.
Significantly, such an amount paid by the State before 1 April 1990 does not
qualify for tax exempt status under the 1991 version even although the 1991
version is deemed to have come into operation sooner than that. It is deemed
to have come into operation as from the commencement of years of assessment
ended or ending on or after 1 April 1990, (sec 12 (2) (f) Act 129 of 1991).
These dates are precisely the same dates which governed the coming into
operation of the 1990 version and the date after which amounts paid by the State
would be exempt from tax in terms of the 1990 version. That is exactly what
one would expect if the intention in 1991 was to preserve and perpetuate the
1990 version (no ministerial consent required) where payments are made by the
State. If the intention had been to abandon it altogether and to replace it with
the 1974 version (ministerial consent required) there would have been no point
in differentiating between the period after 1 April 1990 and the periods from the
commencement of years of assessment ended or ending on or after 1 April 1990.
If ministerial consent was intended in 1991 to be a sine qua non in all
circumstances I can conceive of no rational reason why the legislature would
have wished to say in 1991 (for this would be the consequence):
"If you receive from the State at any time during the year of assessment commencing 1 July 1989 and ending 30 June 1990 a rebate or other assistance under a ministerially approved scheme for the promotion or financing of exports it will be tax exempt. If on the other
hand, you receive a payment from the State between 1 July 1989 and 31 March 1990 during that tax year under the selfsame scheme it will not be tax exempt. However, if during that same tax year you receive a payment from the State on or after 1 April under that scheme, it will be tax exempt."
The absurdity of the distinction is patent and requires no elaboration.
27
Nor can one escape from this by asserting that the reference to
amounts paid by the State "on or after 1 April 1990" is simply to respect vested rights to have payments made by the State while the 1990 version was operative treated as exempt from tax and to avoid them being stripped of that status retroactively. That purpose would not be achieved by interpreting
the word "such" as counsel for the Commissioner would have one interpret it. The reason is plain: if "such scheme" means a ministerially approved scheme payment made by the State in July 1990 under a scheme which had not been ministerially approved, would not qualify under the 1991 version of the provision because it would not be a payment made "under any such scheme".
It is also not possible to read the words "on or after 1 April 1990" in the second leg of the 1991 version as referring to both the words "any amount
which is paid by the State" in the second leg of the 1991 version and to
the words "any amount by way of rebate or assistance" referred to in the first
28
leg. It would be grammatically untenable to do so. Moreover, it would make
the deeming provision in sec 12 (2) (f) of Act 129 of 1991 (1991 version deemed operative as from the commencement of years of assessment ended or ending after 1 April 1990) entirely meaningless and inappropriate. It would have sufficed to simply enact the 1991 version as it is because the provision itself would have specified a single date (1 April 1990)
from which payments, rebates or other assistance would qualify for tax exempt status (subject only to the special qualification relating to the payment of interest under GEIS).
As against all this, if "such scheme" is read as meaning merely "a scheme for the promotion or financing or exports" the selection of these dates and periods becomes rational and is no longer
in conflict with the presumption against retroactivity which violates vested rights. Benefits acquired from the commencement of the years of assessment ended or ending on or after 1 April 1990, under ministerially approved schemes, from whomsoever they emanated,
29
would be recognised as exempt from tax. Those were the dates from which
ministerial approval was no longer a condition precedent to tax exemption in terms of the 1990 version but, as against that, only amounts paid by the State qualified. So in one sense the provision was broadened; in another it was narrowed. The deeming provision which governed the coming into operation of the 1991 version had two effects. First, it reinstated the 1974 version which was broader as to source of benefit (it need not necessarily emanate from the State) but narrower in requiring ministerial approval, in such a way that there was no break in the continuity of its operation. Secondly, it preserved the 1990 version which was narrower as to source of benefit (it had to be an amount paid by the State) but broader in that it did not require ministerial approval, and did so from the date that such payments became tax exempt under the repealed 1990 provision thus again ensuring that there was no break in the continuity of operation of the 1990 version. (I have omitted reference to variations in regard
30
to the payment of interest because they do not derogate from the main thrust of
the argumentation).
The reference in the 1991 version to interest paid in terms of GEIS is also instructive. It is common cause that GEIS came into operation
on 1 April 1990 and that GEIS is an export promotion scheme but not a ministerially approved scheme within the meaning of the first leg of the 1991 version. Yet it is specifically enacted that payments of interest made after 1 April 1990 in _ terms of GEIS in respect of any period falling after
1 April 1991 are to be tax exempt. It would be strange indeed if the interest payable upon an amount paid by the State under GEIS was to be tax exempt but not the amount itself. Given the history of the provisions in so far as they related to interest in general it seems plain that the 1972 and 1974 provisions made no express reference to interest, that the 1990 provision excluded all interest,
and that the 1991 provision specifically included interest payable under GEIS but under no other
31 scheme. The exemption of interest paid under GEIS is explicable only if the
amount in respect of which it was paid was also exempt. But GEIS was not a
ministerially approved scheme. What this shows, so it seems to me, is that the
legislature intended other amounts paid by the State under GEIS to be tax
exempt and considered it to be unnecessary to say so in terms because GEIS was
in fact a scheme for the promotion of exports and would therefore be covered
by the words "any such scheme".
Then there is this consideration. There is a clear conceptual
distinction between describing a scheme, on the one hand, by reference to its
purpose and, on the other, by reference to a factor external to it, such as
approval by a third party. The former description is based upon the content of
the scheme itself; the latter description is based upon a factor dehors the
scheme. It is certainly possible that when the words "any such scheme" were
used in the second leg of the 1991 version what was meant was a scheme which
only the first description had to be satisfied. In short, the provision is
ambiguous. Regard being had to the cumulative impact of all the considerations
to which I have drawn attention, I conclude that the latter interpretation is to be
preferred as the correct interpretation.
There are two decisions in the Special Income Tax Court which go
the other way. They are Income Tax Case No 1600,58 SATC 131 (Froneman J)
and Income Tax Case No 9992 (unreported 22.03.1996, Transvaal Income Tax
Special Court, Wunsh J). With all due respect, I am unable to agree with them.
They are founded upon what the learned judges considered to be the
intractability of the words "any such agreement" and the considerations to
which I have drawn attention were not weighed. The other factors which were
thought to support the conclusion reached are, in my opinion, of dubious
validity and cannot outweigh the potent indicia of a contrary legislative intent
the court a quo in this matter was founded.
This conclusion obviates the need to comment upon any of the other submissions made by counsel for the taxpayer. However, there remains an argument raised by counsel for the Commissioner with
which I must deal. He submitted that it had not been established that the Phase VI Scheme under which the claims to tax exemption were made is a scheme for the promotion or financing of exports. It is certainly not a scheme for the financing of exports but I am satisfied on the evidence that despite a passing challenge during cross-examination by counsel for the Commissioner, the Phase VI Scheme was a scheme for the promotion of exports. It was not its only purpose; its purpose was also the provision of incentives to use local components when manufacturing vehicles. But that in turn was aimed at reducing the use of scarce foreign currency. Exports served to positively strengthen foreign currency
35
other hand, the services of attorneys were also used by the appellant and their
charges (subject to taxation) may legitimately be recovered. The Commissioner is therefore ordered to pay the costs on appeal excluding any costs occasioned by the engagement of counsel for the appellant.
R M MARAIS JUDGE OF APPEAL
MAHOMED
CJ) EKSTEEN JA) ZULMAN
JA) CONCUR FARLAM AJA)
URL: http://www.saflii.org/za/cases/ZASCA/1998/59.html
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