Olympus GOLD Mines Limited Versus Zimbabwe Revenue Authority

OLYMPUS GOLD MINES LIMITED

versus

ZIMBABWE REVENUE AUTHORITY

HIGH COURT OF ZIMBABWE

TAGU J

HARARE 15 November & 20 January 2021

Opposed application

M. Tshuma, for applicant

S. Bhebhe with H. Muromba, for respondent

TAGU J: The applicant is a company registered and operating in Zimbabwe and carrying on mining operations. The respondent is the Zimbabwe Revenue Authority (ZIMRA), an administrative authority established in terms of the Revenue Authority Act [Chapter 23.11] tasked with the obligation to collect taxes and other statutory dues and fees. The applicant holds in its possession some virgin land which it has held for over 30 years as an investment. The applicant has decided to start a new venture wherein it will develop this land and subdivide it into residential/housing stands. As the project to develop this new line of business involves significant cash flows, it was deemed prudent to seek an advance tax ruling with respect to possible deductions under section 15 (2) (v) of the Income Tax Act [Chapter 23.06] and section 17 (4) of the Value Added Tax Act [Chapter 23.12] which provisions provide relief where an asset previously held as a capital asset is now being held for a business/trading purpose. The applicant made three requests for an advance tax ruling which were all turned down by the respondent. In a bid to have the respondent reconsider its position the applicant provided additional documents but the respondent maintained its position in the Advance Tax Ruling (Reference COMM/DT/546/18). The applicant feels that there is no basis for the respondent to deny the relief which the applicant is entitled at law. The applicant has now approached this court seeking the following order.

“IT IS ORDERED THAT:

The Respondent’s Advance Tax Ruling (Reference COMM/DT/546/18) be and is hereby set aside.

Having shown an intention to change the use of the asset from a capital asset to an asset used as part of a scheme of profit making, the Applicant is thus entitled to the relief provided for in in section 15 (v) of the Income Tax Act, and section 17 (4) of the VAT Act.

In the event that this application is opposed, the Respondent shall pay the Applicant’s costs on a legal practitioner and client scale.”

The respondent opposes the application and raised two preliminary objections. The first objection is that the relief sought cannot be granted by this court. The second objection is that there is no cause of action.

RELIEF SOUGHT CANNOT BE GRANTED BY THIS COURT

A reading of the applicant’s draft order will show that the applicant is in simple terms seeking this Honourable Court to issue a tax ruling in its favour. The respondent’s contention is that this Honourable Court cannot issue a tax ruling. It said a tax ruling by its nature is an opinion rendered by the respondent to a tax payer on its own interpretation of the law as juxtaposed with the facts of each matter. It further submitted that in terms of Section 34D of the Revenue Authority Act (RAA) as read together with the fourth Schedule thereof, it is only the Commissioner –General of the respondent who can issue a tax ruling to any person. This court cannot then usurp the statutory functions reposed on the respondent and issue a tax ruling in favour of the applicant as claimed by the applicant. It further averred that this Honourable Court cannot offer legal opinions to litigants as the applicant is seeking this Honourable Court to do. It argued that even if the Court grants the applicant the relief that it is seeking, that judgment will not be of assistance to the applicant as it will not preclude the respondent from enforcing the provisions of the Income Tax Act (ITA) as well as the Value Added Tax Act (VATA) when the applicant consummates its Joint Venture. It prayed for the dismissal of the application on this basis alone.

In its answering affidavit the applicant submitted that it is misleading to describe a binding private ruling as a legal opinion. It further averred that a binding private ruling is more correctly defined as part of a formal advance tax ruling system. A binding private ruling is thus administrative action in the Administrative Justice Act, and the review of administrative action is within the purview of this Court’s jurisdiction hence this Court has the jurisdiction to grant the competent relief being sought.

In terms of Section 34D of the Revenue Authority Act [Chapter 23.11] it is only the Commissioner General of the respondent who can issue a tax ruling to any person. This position was affirmed in the case of Delta Corporation v ZIMRA HH-621-15 where Hlatshwayo J (as he then was) stated as follows:

“Regarding the standpoint taken by the appellant that the letter from the COT constitutes a tax ruling, one needs to understand the nature and import of an advance tax ruling which is defined in 4th Schedule to the Revenue Authority Act as ‘a written statement in the form of a binding general ruling, binding private ruling and binding class ruling issued by the Commissioner –General regarding the interpretation or application of the relevant Act.”

Therefore, once the respondent has advised a taxpayer of its interpretation of a tax provision, via a tax ruling, then the respondent would be bound by the said tax ruling in accordance with Section 34D as read together with the 4th Schedule to the RAA. Once the respondent has pronounced itself on an issue, via a private advance tax ruling then it is bound by its decision. The taxpayer has a choice to either accept the interpretation by the Commissioner General or proceed in a way it deems fit.

On interference by the courts in the case of Doctors for Life International v Speaker of the National Assembly & Ors 2006 (6) SA 416 (CC) at para 37 the court stated as follows:

“Courts must be conscious of the vital limits on judicial authority and the Constitution’s design to leave certain matters to other branches of government. They too must observe the constitutional limits of their authority. This means that the judiciary should not interfere in the processes of other branches of government unless to do so is mandated by the Constitution.”

In the case of International Trade Administration Commission v SCAW South Africa (PTY) LTD 2012 (4) SA 618 (CC) at para 95 the court stated as follows:

“Where the Constitution or valid legislation has entrusted specific powers and functions to a particular branch of government, courts may not usurp that power or function by making a decision of their preference. That would frustrate the balance of power implied in the principle of separation of powers. The primary responsibility of a court is not to make decisions reserved for or within the domain of other branches of government, but rather to ensure that the concerned branches of government exercise their authority within the bounds of the Constitution. This would especially be so where the decision in issue is policy-laden as well as polycentric.”

The applicant submitted that this court has jurisdiction to grant the relief sought because the decision made by the respondent is the administration action in the Administrative Justice Act.  However, the Supreme Court in the case of Zimbabwe School Examination Council v Victor Mukomera & Anor SC 10-20 had occasion to deal with when courts can interfere with actions or decisions of administrative bodies and the court stated as follows:

“The general principle is that the courts will not interfere with the actions or decisions of an administrative authority unless they are shown to be unlawful, grossly unreasonable or procedurally irregular or unfair. This fundamental cannon of the common law, as embodied in the so-called Wednesbury principle, is now codified in s 3 (1) of the Administrative Justice Act [Chapter 10.28]. The corollary to this principle is that the courts will generally not substitute their own decisions for those of the administrative authority. As was aptly recognized by McNally JA in Affretair (Pvt) Ltd & Anor v M.K. Airline (Pvt) Ltd 1996 (2) ZLR 15 (S) at 21:

“The duty of the courts is not to dismiss the authority and take over its functions, but to ensure, as far as humanly and legally possible, that it carries out its function fairly and transparently. If we are satisfied that it has done that, we cannot interfere just because we do not approve of its conclusion.”

“The duty of the court is not to dismiss the authority and take over its functions, but to ensure, as far as humanly and legally possible, that it carries out its function fairly and transparently. If we are satisfied that it has done that, we cannot interfere just because we do not approve of its conclusion.”

In casu the respondent is an administrative authority established in terms of Revenue Authority Act [Chapter 23.11] and tasked exclusively with inter alia the administration and collection of revenues due in terms of the Income Tax Act [Chapter 23.06] as well as in terms of the Value Added Tax [Chapter 23.12]. in terms of section 34D of the RAA, as read together with the 4th Schedule, it is empowered to make an advance tax ruling on the application by any person interested in a transaction that is or may be subject to tax. The applicant made an application for a tax ruling. The application did not find favour with the respondent. It now wants this court to substitute the decision of the respondent and grant a tax ruling. On the authorities cited above I agree with the respondent that this court cannot usurp the powers and functions of the respondent. The court therefore cannot impose its own decision. The relief sought by the applicant cannot therefore be granted on this basis alone.

It is not necessary to deal with the second point in limine because even if the court find s that the applicant has a cause of action at the end of the day the court cannot grant the relief sought.

IT IS ORDERED THAT

The preliminary objection is sustained.

The application is dismissed with costs.

Gill, Godlonton & Gerrans, applicant’s legal practitioners

Kantor & Immerman, respondent’s legal practitioners.