The Lion Match Company (TLMC) is to appeal a ruling by the Gauteng High Court (Pretoria) that SARS is within its rights to issue an additional assessment on capital gains tax for a transaction 15 years ago, BusinessLIVE reports.

‘TLMC was not given the opportunity to present its case. In our opinion, this is a violation of the constitutional rights of TLMC to a fair public hearing. After the Tax Court’s refusal to allow TLMC an adjournment, the full Bench of the Gauteng High Court (Pretoria) upheld the decision, which infringed (on) TLMC’s constitutional rights,’ the company said in written responses.

It said SARS was allowed to review and increase its own valuation 'for the second time, after the fact'. 

The dispute with SARS emanates from a 2008 deal in which TLMC disposed of its entire shareholding in Kimberly-Clark.

In 2013, SARS adjusted the base cost of the value of the shares, which resulted in an increase in the taxpayer’s taxable capital gain. TLMC disputed this adjustment and the matter has dragged on since then.

The matter was, after a protracted pretrial process, set down for trial by the registrar of the Tax Court, during January 2019, for a two-week trial. But on the eve of the trial, TLMC informed the court that its lawyers had withdrawn from the case due to conflict of interest, and requested a postponement.

The basis of the conflict of interest was that TLMC lawyer Ashwin Trikamjee was also its director.

The Tax Court refused to postpone the matter.

SARS’ counsel then moved for an order to have the initial assessment by the commissioner adjusted as set out in its papers.

This, too, the Tax Court refused.

This is because the court held that when TLMC’s representatives withdrew from the appeal after their request for postponement was refused, the appeal by TLMC was withdrawn.

No finding could be made in the absence of TLMC.

Aggrieved, both parties appealed to the High Court for different reasons.

The High Court dismissed TLMC’s appeal in May.

‘No explanation was given when the conflict arose in view of Trikamjee’s long-standing involvement in both entities, and the substance of the conflict remains a mystery. A red herring is afloat in the muddy water of the appellant’s pond where the application is drifting,’ the court found, says the BusinessLIVE report.

It also set aside the Tax Court’s decision not to hear the matter in TLMC’s absence. 

‘The Tax Court should have proceeded with the appeal and with no opposition to the relief sought by the respondent, should have considered the request to alter the assessment on uncontested evidence on behalf of the respondent.’

The High Court went on to alter the base cost of the 85 000 Kimberly-Clark shares TLMC sold in 2008 from R146m to R115m.

The High Court also changed the taxable capital gain from R85m to R119m.

Full BusinessLIVE report