oa De Rebus - Erf 3183/1 Ladysmith (Pty) Ltd and Another v CIR - the common-law principle of 'substance over form' applied to tax-avoidance cases
The common-law principle of 'substance over form' applied to tax-avoidance cases a landmark decision long overdue n March 1996 the then Appellate Division gave a judgment which, surprisingly, came as a shock to many tax consultants. In Erf 3183/1 Ladysmith (Pty) Ltd and Another v Commissioner for Inland Revenue 1996 (3) SA 942 (A) it was decided that the common-law principle of substance over form could be used to ignore a tax-avoidance scheme. Until this decision the Commissioner, mostly unsuccessfully, questioned schemes in terms of the general statutory anti-avoidance section, s 103(1) of the Income Tax Act 58 of 1962 (the Act) (see Hicklin v Secretary for Inland Revenue 1980 (1) SA 481 (A)). This created the mistaken impression that if a scheme is structured in such a way that all four requirements of the section are not complied with the Commissioner has to give effect thereto.
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