Commissioner, South African Revenue Service v Short and Another

• Jurisdiction: South Africa
• Citation: 2018 (3) SA 492 (WCC)

Commissioner, South African Revenue Service v Short and Another
2018 (3) SA 492 (WCC)

2018 (3) SA p492

Citation	2018 (3) SA 492 (WCC)
Case No	A 289/2017
Court	Western Cape Division, Cape Town
Judge	Waglay J, Binns-Ward J and Nuku J
Heard	February 7, 2018
Judgment	February 7, 2018
Counsel	MW Janisch SC (with S Mahomed) for the appellant.

Flynote : Sleutelwoorde

Revenue — Transfer duty — Amount of — Acquisition of bare dominium by one G purchaser and right of habitatio by another, under same agreement — Whether constituting single transaction for transfer duty purposes — Transfer Duty Act 40 of 1949, s 2(1).

Headnote : Kopnota

Section 2(1) of the Transfer Duty Act 40 of 1949 imposes transfer duty 'on the value of property . . . acquired by way of a transaction . . .'. Here the seller H sold the bare dominium in a sectional title unit to the first respondent, and a right of habitatio in respect thereof to the second respondent — in the same deed of sale and for one global amount. The Commissioner assessed it as a single transaction for transfer duty purposes. The respondents, who contended that two separate transactions were involved, paid transfer duty under protest and thereafter successfully appealed to the tax court. This I case concerned the Commissioner's appeal to the High Court against the tax court's decision.

Held

The tax court erred in being distracted by the fact that each of the purchasers stood to acquire separate and distinctive rights in the property under the agreement. The fact that separately registrable rights were to be acquired by J the purchasers was not determinative but begged the question whether the

2018 (3) SA p493

acquisitions were in terms of a single integral (or unitary) transaction or two A transactions. In order for the respondents' contention to prevail, the reservation of a right of habitatio to the second respondent would have had to be an acquisition that was independent of, and not integral to, the transfer of title of the property from the seller to the first respondent. For transfer duty purposes, an objective determination had to be made whether one or two transactions were in fact involved, and that turned on B the proper construction of the parties' contract. (See [11], [12] and [19].)

There were a number of salient pointers in the deed of sale to the contracting parties having contemplated a single indivisible transaction, such as the respondents' acceptance of joint and several liability for the whole purchase price (see [17]). The ordinary import of the language of the contract, when it is read as a whole, and any commercial sense as between themselves and C the seller, went against the meaning contended for by the respondents (see [18]). The appeal had to succeed (see [20]).

Cases cited

Southern Africa

Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk D 2014 (2) SA 494 (SCA) ([2013] ZASCA 176): referred to

Chrysafis and Others v Katsapas 1988 (4) SA 818 (A): referred to

Commissioner for Inland Revenue v Freddies Consolidated Mines Ltd 1957 (1) SA 306 (A): applied

Estate Smuts v Commissioner for Inland Revenue 1929 TPD 961: applied E

Joubert v Enslin 1910 AD 6: referred to

KPMG Chartered Accountants (SA) v Securefin Ltd and Another 2009 (4) SA 399 (SCA) ([2009] 2 All SA 523; [2009] ZASCA 7): referred to

Lloyds of London Underwriting Syndicates 960, 48, 1183 and 2183 v Skilya Property Investments (Pty) Ltd 2004 (2) SA 276 (SCA) ([2004] 1 All SA 386): dictum in para [14] applied F

Minister of Finance v Gin Bros and Goldblatt 1954 (3) SA 881 (A): compared

Modder East Orchards Ltd v Receiver of Revenue 1924 TPD (1 SATC 40): compared

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) ([2012] 2 All SA 262; [2012] ZASCA 13): referred to

Novartis v Maphil 2016 (1) SA 518 (SCA) ([2015] 4 All SA 417; G [2015] ZASCA 111): referred to

Picardi Hotels Ltd v Thekwini Properties (Pty) Ltd 2009 (1) SA 493 (SCA) ([2008] ZASCA 128): dictum in para [5] applied

Swart en 'n Ander v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A): referred to.

England H

Rainy Sky SA v Kookmin Bank [2011] UKSC 50 ([2012] Lloyd's Rep 34 (SC); [2012] 1 All ER 1137): referred to

Society of Lloyd's v Robinson [1999] 1 All ER (Comm) 545 (HL): dictum at 551 applied.

Legislation cited

Statutes

The I Transfer Duty Act 40 of 1949: see Juta's Statutes of South Africa 2016/17 vol 3 at 1-1230.

Case Information

MW Janisch SC (with S Mahomed) for the appellant.

An appeal against a tax court judgment. The order is at [20]. J

2018 (3) SA p494

Judgment

Binns-Ward J A (Waglay J and Nuku J concurring):

[1] The Commissioner for the South African Revenue Service has come on appeal from the judgment of the tax court (Cape Town), upholding the appeal by the respondents to that court against the assessment by Sars of transfer duty on the value of the property acquired by them in B terms of an agreement they concluded, as purchasers, with Morrow Investments 252 CC, as seller, in respect of an apartment in a sectional title development in Green Point, Cape Town. The agreement was subject to the formalities prescribed in terms of the Alienation of Land Act 68 of 1981, and its terms were entrenched in a deed of alienation, C dated 7 August 2009, accordingly. It stipulated that the agreed purchase price was R4,2 million, payable to the seller's conveyancers by way of a deposit of R250 000 within five days of the acceptance of the offer to purchase, with the balance to be paid 'in cash against transfer of the Property into the name of the Purchaser'.

[2] D Pursuant to the terms of the agreement, which will be considered in some detail presently, and against payment of the aforementioned purchase price, ownership of the apartment and its stipulated associated amenities was transferred to the first respondent, subject to a right of habitatio registered in favour of the second respondent. By reason of the definition of 'date of acquisition' in s 1 of the Transfer Duty Act 40 of E 1949, [1] transfer duty, as set forth in s 2 of the Act, became payable by the respondents within six months of the conclusion of the agreement. [2]

[3] In terms of s 14 [3] the parties to any 'transaction' by which 'property' is acquired are required to furnish declarations in the prescribed form to F the Commissioner for transfer duty purposes. The respondents completed separate transfer duty declarations, thereby implying that two transactions had been entailed. The first respondent declared that she had acquired the 'bare dominium' of the property for a consideration of R2 869 103,40, and the second respondent separately declared that he

2018 (3) SA p495

Binns-Ward J (Waglay J and Nuku J concurring)

had acquired the right of habitatio for a consideration of R1 330 896,60. A No mention of any consideration in the aforesaid amounts was made in the deed of alienation, but added together they make up the sum of R4,2 million that was stipulated in the contract as 'the purchase price'.

[4] The seller, on the other hand, made a single transfer duty declaration in which, under 'Details of purchase transaction', it was indicated that B transfer duty was payable on R4,2 million 'being total consideration'. The seller's declaration gave the details of the purchaser(s)/transferee(s) as follows: the first respondent's name ('bare dominium holder') and the second respondent's name ('right of habitatio'). The fact that the seller made a single transfer duty declaration necessarily implied that it C considered that its disposal of the property had involved a single transaction.

[5] Treated as separate transactions in accordance with the respondents' transfer duty declarations, and because the rate of transfer duty is determined on a sliding scale in terms of s 2(1)(b) of the Act, the total D amount of duty payable would be R225 998,49 (R174 526,77 in respect of the declared value of the 'bare dominium' and R51 471,72 in respect of the value imputed by the second respondent to the right of habitatio). The Commissioner determined, however, that the transfer duty fell to be calculated in the amount of R281 000 with reference to the agreed consideration of R4,2 million in respect of a single transaction. F

[6] The respondents paid the transfer duty in the amount assessed by the Commissioner under protest. Their subsequent appeal against the Commissioner's determination was upheld by the tax board and thereafter, on rehearing in terms of s 115 of the Tax Administration Act 28 of 2011, also by the tax court.

[7] The res vendita was 'property' as defined in para (a) of the definition in s 1 of the Act, which at the time read as follows:

'''property'' means land in the Republic and any fixtures thereon, and includes — G

(a)

any real right in land but excluding any right under a mortgage bond or a lease of property other than a lease referred to in paragraph (b) or (c); . . .'.

It was common ground between the parties, correctly so, that a right of habitatio constitutes a limited real right in land and qualifies as 'property' under the aforementioned paragraph of the definition. H

[8] The following further provisions of the Act are of particular relevance to the issue that falls to be determined in this appeal:

A.

Section 2(1), which insofar as relevant provides:

'Imposition of transfer duty I

(1) Subject to the provisions of section 9, there shall be levied for the benefit of the National Revenue Fund a transfer duty (hereinafter referred to as the duty) on the value of any property (which value shall be determined in accordance with the provisions of sections 5, 6, 7 and 8) acquired by any person on or after the date of commencement of this Act by way of a transaction or in any other manner, or on...