Durban North Traders Ltd v Commissioner for Inland Revenue

• Jurisdiction: South Africa
• Judge: Centlivres CJ,Schreiner JA, Steyn JA, Beyers JA and Hall AJA
• Judgment Date: 28 September 1956
• Hearing Date: 06 September 1956
• Court: Appellate Division

E Centlivres, C.J.:

I agree with the conclusion arrived at by my Brother SCHREINER. I also agree with his view that snippets from the evidence given before the Special Court should not have been included in the stated case. At the end of the stated case it is said that the appellant was dissatisfied with the decision of the Special Court on the ground

F 'that there was evidence from which it could reasonably be concluded that the profits derived from the realisation of the Northway and Broadway properties did not constitute income subject to income tax but were of a capital nature.'

This ground invites this Court to examine the evidence and to come to a conclusion of fact different from the conclusion reached by the Special G Court: in other words the appellant is attempting to appeal to this Court on a question of fact in spite of sec. 81 of the Act which says that 'there shall be no right of appeal against any decision of the Special Court on a question of fact'. Had the appellant's complaint been that there was no evidence from which the primary facts referred to by H my Brother SCHREINER could be found, the inclusion of the evidence in the stated case may have been justified. I use the word 'may' deliberately because I do not think that it is necessary for the purposes of this case to give a definite decision on the point.

Where there is no evidence on which a Special Court could reasonably have found the primary facts its determination may possibly be 'erroneous in law' within the meaning of sec. 81 of the Act. If it is, then certain consequences follow. To adapt the language used by

Schreiner JA

INNES, C.J., in R v Shein, 1925 AD 6 at p. 9, to illustrate what I mean, this Court would set aside the determination not as deciding the facts itself, but because the Special Court had not in its opinion duly discharged the judicial duty cast upon it. If, on the other hand, there is evidence on which the Special Court could reasonably have found the A primary facts, it would refuse to interfere, not because it would have come to the same conclusions itself, but because no ground existed for interference with the discharge of a duty which the law has entrusted to the Special Court alone.

I refrain from expressing a definite opinion on the point I have discussed not only because I consider that it is unnecessary to decide B it in this case but also because the matter has not been fully argued. I would, for instance, have liked to hear argument on the question whether this Court was correct in suggesting in Morrison v Commissioner for Inland Revenue, 1950 (2) SA 449 at p. 457 (A.D.), that findings of fact are 'assailable in a Superior Court if there was no evidence on which the findings could be properly reached'; and in C Commissioner of Taxes v Levy, 1952 (2) SA 413 at p. 421 (A.D.), that a finding of fact could be challenged in this Court 'by showing that it was a finding at which no reasonable person could arrive'.

STEYN, J.A., and HALL, A.J.A., concurred in the judgment of CENTLIVRES, C.J. D

Judgment

Schreiner, J.A.:

The appellant company, which I shall refer to as 'the company', appealed to a Special Court for hearing income-tax appeals against an additional assessment in respect of taxable income and income E subject to super tax for the year ended 30 June 1949, and against a revised assessment in respect of the same forms of income for the year ended 30 June 1950. The Special Court disallowed the company's appeals and it now appeals to this Court upon a stated case under the provisions of sec. 81 (1) (b) of Act 31 of 1941. The matter in issue is whether certain profits made by the company on the sale of land owned by it were capital accretions or income.

F The company was registered as a private company in July 1929, with a capital of £500 in £1 shares, of which 50 were issued, the great majority being held by the Durban North Estates Limited, which I shall call 'the Estates company', and which was the township owner of and carried on the business of selling plots in the township of Durban G North, which was formed about the year 1925. In September 1945, the entire shareholding in the company was bought by a public company named Industrial and Commercial Holding Group Limited, which I shall call 'I.C.H.'; under the then existing law the company thereby ceased to be a private company. In March 1946, its capital was increased to £501 and in December 1946, to £15,001.

H The Durban North Township was formed for residential purposes and the great majority of its plots could only be used for such purposes. Only 56 plots could be used for either residential or trading purposes at the owners' option.

On 1 February 1930, the company bought one plot (No. 1552) carrying trading rights from the Estates company for £2,400 and immediately

Schreiner JA

erected shops thereon at a cost of £5,600; in 1938 it made additions to the shops at a cost of £983; further shops were added in 1948 at a cost of £10,470. The cost of the original buildings and the additions was defrayed out of moneys raised on bond and out of the increase of A capital. The plot with its shops I shall refer to as 'the Northway property' From this plot the company derived a rent income which after the final additions reached £3,000, gross, per annum. The property was sold in 1948 at a profit of £16,533. It is this profit which is the subject of the additional assessment for the year ended 30 June 1949.

B The company acquired no land other than the Northway property until February 1948 but it laid the foundations for its acquisitions from that time onwards in September and October 1944, when it obtained two options which gave it the right during the period of the war and two years thereafter, not exceeding 9...