Transvaal Income Tax Special Court
| Jurisdiction | South Africa |
| Judge | Kirk-Cohen FC |
| Judgment Date | 31 March 1999 |
| Docket Number | 10406; 10407; 10408 |
| Court | Transvaal Income Tax Special Court |
| Hearing Date | 16 March 1999 |
| Citation | 1999 JDR 0261 (TSpCrt) |
Kirk-Cohen, J:
This is the unanimous judgment of the court.
The three appellants, for practical purposes, operate as one unit. All three own property which is part of a private game reserve, each owning approximately 3 000 hectares. The business of the appellants is to operate a property timesharing schemes, as defined in the Property Time Sharing Control Act, No 75 of 1983, pursuant to a share block scheme, as defined in the share Blocks Control Act No 59 of 1980.
It is common cause that the issues are identical in all three cases and that a finding on those issues will apply to all three appellants; in other words the parties have argued this matter as though it were one appeal.
A Mr A testified on behalf of the appellants. He is the chairman of all three share block companies and has been associated with them since 1991. He testified that the three appellants are operated as a unit known as B. Their properties are contiguous. All three appellants have similar memoranda and articles of association; one board of directors manages the three appellants
"... as a composite whole for the mutual benefit of the shareholders ... and their families, guests and invitees without derogating from the generality of the aforegoing for the purpose of :-
1999 JDR 0261 p3
Kirk-Cohen, J
facilitating the efficient and cost-effective management and administration of B; ...
providing services to the time-sharers and the whole-owners' such as maintenance services, refuse removal, laundry facilities and housekeeping services;
providing gardening, fire-fighting and security services;
providing financial and administrative services such as accounting and bookkeeping services and company secretarial services as may be applicable, ...
providing recreational facilities such as game drives, nature walks and trails, supervised picnics and the like, supervised horse trails and hiking trails, sport facilities and club house facilities;
the management, administration, maintenance, development and improvement of the game reserve including the roads, water courses, fences and dams;
the maintenance, management, upkeep and development of the ecology, flora and fauna in the game reserve;
1999 JDR 0261 p4
Kirk-Cohen, J
the management, administration, maintenance, development and improvement of the water reticulating systems and the maintenance of boreholes and borehole pumps."
All three appellants have erected chalets on their properties and their shareholders are entitled to timeshare facilities in those chalets. The shareholders pay levies (and at times also special levies) to the appellants for the operation, upkeep and improvement of all the facilities.
Mr A testified that the three appellants operate jointly two banking accounts, one a current account and the other a call account with the same bank. All monies received and which are not required at any given time are transferred to the call account upon which the appellants receive investment interest from their banker. It is this investment interest which is the issue before this court. In terms of the articles of the appellants the following provision is made for reserves:
RESERVES
The directors may set aside out of the profits of the company such sums as they think proper as a reserve.
Any reserve shall, in the discretion of the directors, be applied for meeting contingencies for which levies would otherwise be raised on the
1999 JDR 0261 p5
Kirk-Cohen, J
members or for any other purpose whatsoever for which a levy might be raised on the members and pending such application, and may at the discretion of the directors, be invested in such investment for the benefit of the company, as the directors may determine."
Mr A testified that the board of directors (quite properly) draw up budgets in the following manner: The total expenditure for the year is estimated; the interest which has accrued, and which is estimated will accrue, is calculated and subtracted from the estimated expenditure. The balance of the expenditure is then raised by way of annual levies.
The board of directors is obliged to maintain and repair inter alia the chalets and their contents in good order and condition; from time to time, as and when necessary, items must be renovated or replaced.
In determining the levies payable the directors have adopted a long term refurbishment policy which was introduced by C when it acted as the managing agent of the...
To continue reading
Request your trial