1. SPRIGG INVESTMENT CASE By Johan Kotze

2. 2 SPRIGG INVESTMENT’S CASE The precise nature of the relationship between Sprigg and its distributors. Sprigg – principals, SARS – employees SARS contended that the sales to consumers were Sprigg’s own sales, because the distributors were its ‘employees’. SARS issued assessments - VAT & PAYE Sprigg asked for reasons – which had 97 detailed questions SARS did not indulge Sprigg, said that the responses are akin to responding to questions in tax court.

3. 3 SPRIGG INVESTMENT’S CASE Rule 26(1) application: Tax Court is empowered to compel SARS furnish ‘adequate reasons’ Sprigg asked the Tax Court to order: To give adequate reasons that were structured ‘so as to motivate his assessment clearly and set out the findings or fact on which his conclusion depend; the relevant law upon which his conclusion are abased; and the reasoning process which led to those conclusions’ The Tax Court ordered

4. 4 SPRIGG INVESTMENT’S CASE On appeal – adequacy of SARS’ reasons Phambili Test: ‘Even though I may not agree with it, I now understand why the decision went against me. I am now in a position to decide whether that decision has involved an unwarranted finding of fact, or an error of law, which is worth challenging’ SCA in agreement with this test Question as seen by SCA: ‘Whether Sprigg has sufficiently been furnished with SARS’ actual reasons for the assessments to enable it to formulate an objection thereto’ SCA agreed with SARS that Sprigg employed a delaying tactic SCA held that reasons were adequate

5. 5 SPRIGG INVESTMENT’S CASE Matter of law and fact, consequences SCA held that the request for reasons = matter of law + matter of fact Tax Court to be constituted = judge + assessors, unless matter of law However, rule 26 provides for judge to consider application sitting alone Tax court which dealt with Sprigg’s matter was therefore before the judge sitting alone, without his assessors SCA held that the Tax Court application was a nullity, of no force or effect Rule 26 – ultra vires the Income Tax Act

6. 6 SPRIGG INVESTMENT’S CASE Other issues: Question whether SCA’s whole judgment, given that the Tax Court case was a nullity, is rather obiter The Constitution provides that the SCA can only consider appeals, but if the case a quo was a nullity, there could legally not have been an appeal. Ironically the SCA chastised the judge a quo for a poor judgment and violating the Constitutional