Case No 12158

• Jurisdiction: South Africa
• Judge: Van der Merwe J
• Judgment Date: 08 May 2007
• Docket Number: 12158
• Hearing Date: 22 March 2007
• Citation: 2007 JDR 0943 (BSpCrt)

Van der Merwe J:

[1]

This is an appeal by the appellant in terms of section 83(1) of the Income Tax Act, No. 58 of 1962 ("the Act") against the assessments of the respondent ("the Commissioner") for the 2002 and 2003 tax years. The matter was initially referred to a tax board, which ruled in favour of the appellant. As the Commissioner is dissatisfied with the decision of the board, the appeal was referred to this Court, to be heard de novo in terms of section 83A(14) of the Act.

[2]

All the facts of the matter material for the decision of the appeal were commendably dealt with by the parties and are therefore common cause. Virtually all the facts contained in the record of the appeal are undisputed or common cause. In addition a statement of agreed facts was handed in by agreement between the parties. In the result, no evidence was led by either party.

[3]

The appellant resides permanently in the Republic of South Africa. The appellant is an attorney, admitted to practice as such in both South Africa and the Kingdom of Lesotho. The appellant is a partner of both the firm A in B and the firm C in D. The firm of attorneys D in Lesotho is a partnership in terms of a written agreement. As such C is registered in the Deeds Registry in Lesotho. C does business only in Lesotho from a permanent establishment in Lesotho. The partners of C are citizens or permanent residents of either Lesotho or South Africa. When rendering services as attorneys, the partners do not act individually but act on behalf of C. The client is billed for such services by C and payment is received from the client by C. Profits of the partnership so derived, are shared equally by the partners. C is registered in Lesotho as a tax entity and is required to file a partnership return. However the profits of the partnership are taxed in Lesotho in the hands of the individual partners. The profits earned by the appellant in Lesotho as a partner of C for the tax years 2002 and 2003 were thus taxed in Lesotho. However, in his assessments for these tax years, the Commissioner included these profits in the appellant's taxable income, but credited the appellant with the amounts of tax paid thereon in Lesotho.

2007 JDR 0943 p2

Van der Merwe J

[4]

The case of the appellant in essence is that his share of the profits of C is taxable only in Lesotho and exempted from tax in South Africa. In this regard the starting point is that South Africa has a residency based system...