BURS fights over P78m tax loss claim
Mpho Mokwape | Monday April 18, 2022 06:00
BURS on Tuesday approached the Court of Appeal (CoA) seeking to overturn High Court Judge, Michael Leburu’s judgement against the revenue services in which it had claimed an amount over P78 million in tax.
In the judgement, Justice Leburu agreed with the director of the company that BURS acted in bad faith by imposing a re-assessment and penalties solely based on the bank statements of the company.
Leburu explained that the director of the company made out a case for review and succeeded in showing that the decision of the BURS Commissioner General to include non-income receipts and receipts that did not constitute a taxable supply was irrational and unreasonable.
“The re-assessment by BURS is hereby set aside including the consequent penalties imposed,” the Judge said.
The security company was accused by the BURS of understating its income for the period between January 2013 and December 2017, with the tax agency fining it over P78 million. Prevailing Securities judicial manager, Danny Julius Guduli filed a review application before court after denying the allegations.
Now, BURS wants the CoA to set aside the judgement arguing that the below court erred in its findings that the tax agency acted in bad faith.
Revenue Services attorney, Kealeboga Tshane explained that the judge had erred in his judgement by overlooking that the company had understated its income as it was evident in the bank statements the company submitted to BURS.
“The judge ignored the evidence which indicated that the company had received more income than what they declared to BURS in the submitted returns,” he said.
He further explained that the appeal ought to succeed because the investigation by BURS clearly showed that the company did not declare all the income deposited into the company’s bank accounts subsequently forcing for an understated taxable income.
On the other hand, the security company opposed BURS’ appeal on grounds that it was not true that the judge was right to rule that revenue services acted unfairly towards it and overcharging the company in tax assessment.
The company’s attorney, Chale Manyepeza said the judge was not wrong to order that the re-assessment be set aside because BURS had imposed a re-assessment and put penalties solely based on the bank statements of the company.
“The judge in his judgement had explained that for BURS Commissioner General to include non-income receipts and receipts that did not constitute a taxable supply was irrational therefore rendering it unreasonable, the judge did not fault setting aside the re-assessment by BURS and the consequent penalties that were imposed,” he said.
He explained that Prevailing Securities understated its income as it had two types of income, with the first arising from its own ordinary course of business while the other source came from Non-Income Activities, which were not tied to the contractual income with different customers.
Manyepeza argued that although not all of the company’s customers paid for services rendered on time or in full, BURS levied tax for services rendered as if the customers had paid the contract sums.
On the Income Tax Assessment, the company argued that BURS erroneously treated deposits in Prevailing Securities bank accounts as income, which was wrong.
Meanwhile, according to the backdrop of the case, a tax compliance investigation was commenced against Prevailing Securities in the year 2018 and the company failed to avail all the documentation for taxation.
According to BURS, the investigation ascertained that the company did not declare all the income deposited in the company bank accounts and thereby understated its taxable income over the relevant periods.
“It was further established that the company’s income over the periods were understated in the tax returns for both VAT and Income Tax,” said BURS.
However, the security company denied the allegations saying it had provided all the requisite documents and that it never understated its income. The company then made an application before court after BURS imposed penalties including having to pay tax amounting to over P56 million.
Judgement on the matter is due on April 29, 2022.