Commissioner of Taxes v Levy

• Jurisdiction: South Africa
• Judge: Centlivres CJ, Greenberg JA, and Schreiner JA
• Judgment Date: 13 March 1952
• Citation: 1952 (2) SA 413 (A)
• Hearing Date: 03 March 1952
• Court: Appellate Division

B Schreiner, J.A.:

This is an appeal, under sec. 57 of the Income Tax Consolidation Act, 1948, of Southern Rhodesia, from a judgment of the C High Court, which allowed the taxpayer's appeal from a decision of the Commissioner assessing the taxpayer to Income Tax, Gold Industry Contribution Tax and Super Tax for the year of assessment ended the 31st March, 1948. The Act provides for an appeal from the Commissioner either to a Special Court, with a subsequent appeal to the High Court, or D direct from the Commissioner to the High Court. In the present instance the latter form of procedure was adopted. The statutory rules provide for pleadings and the issues are ascertainable from 'The Appellant's Case', which corresponds to a declaration, and 'The Commissioner's Case', which corresponds to a plea. Evidence is led as at an ordinary E trial but the appeal to this Court lies only 'on any question of law decided by the High Court'.

It was admitted or proved that a company called Combined Investments Limited was promoted by certain Gelman and Blumenthal and registered on the 7th August, 1945, to acquire three adjoining stands in Bulawayo, F which were situated in a part of the city which was thought likely to develop; there were buildings on the stands which though dilapidated were rent producing. The company bought the property for £10,000 and in October, 1945, the taxpayer, whom I shall refer to as Levy, acquired 2,500 of the shares owned by Blumenthal for £2,750. These shares G represented approximately one fourth of the issued capital of the company. Levy became one of the four directors of the company. In June, 1947, one Crombie purchased all the shares in the company for £22,141, and Levy received as his share the sum of £5,531. The Commissioner included in Levy's taxable income for the year ended the 31st March, H 1948, the sum of £2,781, being the difference between what he paid for the shares and what he sold them for. Levy lodged an objection on the ground that the amount of £2,781 was a capital accrual and not income.

Schreiner JA

The scheme of taxation under the Act is similar to that under the Union Income Statutes. 'Gross Income' is defined in sec. 8 as

'the total amount, whether in cash or otherwise, received by or accrued to or in favour of any person, excluding such receipts or accruals of a capital nature as are not referred to in para. (a) to (i) of this definition. . . .'

A Paras. (a) to (i) are not relevant to the present inquiry. There is, in the Act, no definition of 'capital' or of 'receipts or accruals of a capital nature', but the meaning to be given to these expressions has been dealt with in a number of decided cases.

Sec. 54 of the Act reads:

B 'In any objection or appeal under this Act the burden of proof that any amount is exempt from or not liable to the tax, or is subject to any deduction or rebate in terms of this Act, shall be upon the person claiming such exemption, non-liability, deduction or rebate.'

In the case of Realisation Company v Commissioner of Taxes, 1951 (1) SA 177 (SR) C , BEADLE, J., in giving the judgment of the High Court, consisting of TREDGOLD, C.J. and himself, expressed a doubt whether, in view more particularly of the history of sec. 54 in the Rhodesian legislation, the onus on the question whether a receipt or accrual was of a capital nature or was income rested upon the taxpayer. The Court in D that case found it unnecessary to resolve the doubt, since it held that even assuming that the onus lay upon the taxpayer that onus had been discharged. The present case was decided by BEADLE, J., sitting alone, and the learned Judge was invited by counsel for Levy to hold, on the E authority of the doubt expressed in the Realisation Company's case, that the onus lay upon the Commissioner and not upon Levy. The learned Judge, however, pointed out that in the Realisation Company's case the point was not really argued and that no decision thereon was required for the purposes of the judgment. In the present case, too, BEADLE, J., came to the conclusion that it was unnecessary to decide whether the F onus rested upon Levy, since, as clearly appears from the tenour of the judgment, assuming that the onus did rest upon him, that onus had in the Court's view been discharged. In this Court counsel for Levy conceded that the onus was upon him to prove that the sum of £2,781 was a receipt G of a capital nature. Counsel for the Commissioner, however, asked the Court for a decision as to the effect of sec. 54 in a case of this kind because, although the Statute has recently been amended, there are a number of assessments the appeals in respect of which would, as in the case of the present appeal, have to be decided under the Act of 1948, H unamended. This Court would naturally wish to meet this request if possible, but there are difficulties in the way. In the first place this Court's jurisdiction is to decide appeals 'on any question of law decided by the High Court', and it is not easy to reach the conclusion that the High Court has given any decision as to the effect of sec. 54. Moreover in view of the attitude taken up on behalf of Levy we have not had the benefit of argument in support of the doubt expressed by BEADLE, J., in the Reakisa...