ABM (Pty) Ltd v Commissioner for the South African Revenue Services

• Jurisdiction: South Africa
• Judge: Goodey AJ
• Judgment Date: 07 December 2011
• Docket Number: VAT471, IT12008
• Court: Tax Court
• Hearing Date: 07 December 2011
• Citation: 2013 JDR 0351

Goodey AJ::

[1]

INTRODUCTION:

(1.1)

This is a tax matter. It involves value added tax (VAT) as well as income tax (IT).

(1.2)

I sat with two assessors, namely Mr Moosa and Mr Setshedi. We came to an unanimous decision.

(1.3)

The Taxpayer called two witnesses, namely Dr G and Mr W and Miss V testified on behalf of the Respondent (SARS).

[2]

DISPUTES:

(2.1)

Ad: VAT

ABM (PTY) LTD
VALUE ADDED TAX ASSESSMENTS
Tax year	Type	Due date	Tax(VAT) in dispute
29 February 2000	Additional	1 July 2005	5 298 987.33
28 February 2001	Additional	1 July 2005	3 919 129.48
28 February 2002	Additional	1 July 2005	6 378 162.98
28 February 2003	Additional	1 July 2005	7 473 370.82
29 February 2004	Additional	1 July 2005	243 942.72
			23 313 593.33

2013 JDR 0351 p3

Goodey AJ:

(2.2)

Ad: IT

INCOME TAX ASSESSMENTS
Tax year	Type	Due date	Tax (IT) in dispute ***
			*** These amounts include the 200% penalty
29 February 2000	Additional	1 July 2005	640 011.00
28 February 2001	Additional	1 July 2005	7 420 495.00
28 February 2002	Additional	1 July 2005	7 965 187.00
			16 025 693.00

(2.3)

Ad: SECONDARY TAX

SECONDARY TAX ON COMPANIES
Cycle end date	Type	Due date	Tax (STC) in dispute
20 June 2001	Estimation	31 July 2001	43 976.50

(2.4)

Ad: The disputes in more detail

2013 JDR 0351 p4

Goodey AJ:

[The summary is marked "X" and appears on the following 6 pages]

Annexure "X" :

ABM (PTY) LTD
ADDITIONAL ASSESSMENT RAISED IN FEBRUARY 2005
1		Sche	2000	2001	2002	2003	2004	TOTAL	VAT X 14%	IT x 30%	STC x 12.5%
ADDITIONAL VAT ASSESSMENT		R	R	R	R	R	R	R	R	R
2.	VAT RECONCILIATION
2.1	Difference Vat Reports & VAT 201	A		(192 822)	383 338	490 892		681 208	681 208
2.2	Difference Output and Turnover	B	27 157 662	731 072	4 124 990	3 077 742		35 091	486	4 912 808
2.3	Deemed Input	C	10 512 768	21 214 389	28 601 385	40 385 366		100 713 875	14 099 943
2.4	Zero % sales	D		373 059	313 697	489 232	231 291	1 407 279	1 407 279
3.	ADDITIONAL INCOME TAX ASSESSMENTS FOR UNDISCLOSED INCOME
3.1	INCOME
3.1.1	Sales at no consideration	E	3 321 190	2 236 847	466 989	90 268	6 115 294	856 141
3.1.2	Sales at no consideration	E	3 321 190	2 236 847		5 558 037		1 667 411

2013 JDR 0351 p5

Goodey AJ:

4.	EXPENDITURE DISALLOWED FOR INCOME TAX PURPOSES
4.1	EXPENSES	Sche	2000	2001	2002	2003	2004	TOTAL	VAT X 14%	IT X 30%	STC X 12.5%
4.1.1	Cash & AB Tjeks - IT	F.1		131 240	157 838			289 078		86 723
4.1.2	Cash & AB Tjeks - VAT	F.1		106 580	147 494	107 007		361 081	50 551
4.1.3	Insurance	F.2	24 490	25 335	28 739			78 564		23 569
4.1.4	Rental flat – IT	F.3		15 203	17 332			32 535		9 761
4.1.5	Rental flat –Vat	F.3		15 203	17 332	16 259		48 794	6 831
4.1.6	Rental - AB tjeks –IT	F.3		41 551	47 368			88 919		26 676
4.1.7	Rental - AB tjeks -Vat	F.3		41 551	47 368	45 706		134 625	18 848
4.1.8	Delivery cost - Charter expenses	F.4	72 000	72 000	72 000			216 000		64 800
4.1.9	Travelling Cost - Uvongo	F.4	30 057	22 863	33 000			85 920		25 776
4.1.10	Hanger Fees	F.4	17 058	15 280	15 700			48 038	6 725	14 411
4.1.11	Entertainment -Credit Cards	F.5	90 569	168 517	103 712			362 798		108 839
4.1.12	Invoices ask not received yet	F.6			1 410 057			1 410 057	197 408	423 017
5.	Incentive bonuses (Finance Income)
5.1	Income Tax	G	162 402	277 246	2 502 402			2 942 050		882 615
5.2	Output Vat levied	G	162 402	277 246	2 502 402	415 893		3 357 943	470 112

2013 JDR 0351 p6

Goodey AJ:

		Sche	2000	2001	2002	2003	2004	TOTAL	VAT X 14%	IT X 30%	STC X 12.5%
6.	Discount & Over allowance
6.1	Income Tax	H	983 864	1 475 943			2 459 807		737 942
6.2	Input Vat disallowed	H	983 864	1 473 943	1 866 801		4 326 608	605 725
7.	Vouchers
7.1	Demo Expenses Admin	I	314 547	393 414	405 801			1 113 762		334 129
8.	OTHER ADDITIONAL ASSESSMENTS RAISED FOR BALANCE ON THE STATEMENT OF ASSETS AND LIABILITIES
8.1	Journals
8.1.1	Year-end Journals added back	J		652 473				652 473		195 742
8.2	Stock
8.2.1	Stock reconciled to Creditors	K		1 321 531				1 321 531		396 459
8.2.2	Journal Drs Income	K		362 680				362 680		108 804
8.2.3	Diff on Reconciliation	K		237 930				237 930		71 379
8.3	Creditors
8.3.1	Accrued Expenses	L		143 603				143 603		43 081
8.3.2	Provisions Discount	L		36 989				36 989		11 097

2013 JDR 0351 p7

Goodey AJ:

		Sche	2000	2001	2002	2003	2004	TOTAL	VAT X 14%	ITX 30%	STC X 12.5%
8.4	Debtors
8.4.1	Credit Deposits	M		19 053				19 053		5 716
8.4.2	Provisional Salary (Suspense Acc)	M		3 033				3 033		910
9.	STC ON DEBIT LOANS ACCOUNTS
9.1	Loan Account in debit
9.1.1	STC Deemed Divided	N		351 812				351 812			43 977
10.	DISALLOWANCE OF WAGES CLAIMED
10.1	Salary & Wages	O			343 469			343 469		103 041
11.	TOTALS		38 543 975	35 468 139	48 698 971	47 361 687	321 559	170 396 331	23 313 579	5 341 898	43 977

2013 JDR 0351 p8

Goodey AJ:

		2000	2001	2002	2003	2004	TOTAL	VAT X 14%	IT X 30%	STC X 12.5%
12.	NORMAL TAXATION
12.1	% TAXATION	x 30%	x 30%	x 30%	x 30%	x 30%	x 30%	x 30%
12.2	CAPITAL	711 123	8 244 995	8 850 208	-	-	17 806 326	-
12.3	TAXATION	213 337	2 473 499	2 655 062	-	-	5 341 898		5 341 898
12.4	200% PENALTIES	426 674	4 946 997	5 310 125			10 683 796		10 683 796
12.5.	TOTAL ADDITIONAL ASSESSMENTS	640 011	7 420 496	7 965 187			16 025 693		16 025 693
13.	VAT
13.1	% TAXATION	x 14%	x 14%	x 14%	x 14%	x 14%	x 14%
13.2	CAPITAL	37 849...