AB v Zimbabwe Revenue Authority

### Preamble
1
HH 197-21
ITC 21/18
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AB								ITC 21/18

versus

ZIMBABWE REVENUE AUTHORITY

(IN THE SPECIAL COURT FOR INCOME TAX)

AB								FA 11/18

versus

ZIMBABWE REVENUE AUTHORITY

(IN FISCAL COURT)

HIGH COURT OF ZIMBABWE

NDOU AJ

HARARE, 26 November 2020 & 22 April 2021

Income Tax & Fiscal Appeal

D Moyana, for the appellant

S Tazviwana, for the respondent

NDOU AJ:  The appellant inherited a commercial property from her late husband, Stand Number 615 C Avenue, Mutare. The property houses several tenants who were paying rentals.

The respondent carried out a tax audit on the tax affairs of the appellant for the period 2011 to 2016. This audit commenced in July 2017. The audit findings were presented to the appellant, in which the respondent was liable to pay income tax as well as Value Added Tax. The appellant objected to those findings culminating in the present two appeals under ITC 21/18 (in the Special Court for Income Tax Appeals) and FA 11/18 (in the Fiscal Court). Although these two appeals were not formally consolidated, the parties requested that I hear both matters on the same date and time as it was convenient to do so because the matters involved the same parties and the tax issues arise from the same audit carried out by the respondent. In my view the parties should ideally have had the two matters formally consolidated. However, I do not see any prejudice to the parties if I adopt their chosen route. I was unable to find any legal impediment to the route so I obliged.

The parties agreed on the issues at the pre-trial hearing as follows:

Whether or not rental income was correctly taxed in the hands of the appellant prior to the year 2016;

Whether or not the disallowance by the respondent of the special initial allowance (capital allowance) claimed by the appellant for the Nissan Atlas and Toyota Corolla vehicles was proper

Whether or not respondent correctly disallowed cleaning expenses and general expenses that were claimed by the appellant

Whether or not respondent correctly disallowed rates claimed by the appellant

Whether or not respondent correctly disallowed the director’s salary claimed by the appellant for the year 2016

Whether or not the respondent’s use of estimated figures was proper in the case.

At the hearing the parties agreed to remove issue number 4, above. The basis for the removal was that the Commissioner had allowed the appellant’s objection rates but had disallowed water, electricity and refuse collection charges. It was therefore an error that adjustments were not made on the income tax assessments because the respondent had communicated that rates were allowed as a deduction.

At the hearing, the appellant further highlighted to the court that he was abandoning issue number 2 and as such, it was no longer an issue for determination before the court. the remaining issues are (1), (3), (5) and (6).

The appellant did not adduce oral evidence. Oral submissions were made on behalf of the appellant by her chosen representative, Mr Moyana. The appellant relied on documentary evidence filed of record.

The following facts are common cause or at least beyond material dispute.

The appellant inherited property known as 615 C Avenue, Mutare from her late husband.

The inherited property was leased out to tenants and income accrued from the inherited property in the form of rental proceeds.

The appellant was liable for Value Added Tax (VAT) registration

The respondent used estimated figures to come up with tax liability the appellant, both income tax and VAT.

The bone of contention is on the following issues:

The date of inheritance of property 615 C Avenue Mutare

The dates on which the tenants leased the property

The amount that the tenants paid as rentals

The effective date for VAT registration after having reached the registration threshold

The basis for the estimated figures, which did not tally with income actually derived from the property

The disallowance of the general and cleaning expenses claimed by the appellant

The disallowance of the director’s salary as claimed by the appellant.

The appellant’s contention was that she was not liable for taxation on rental income between 2012 and 2015 because at that time, Rackflash Investments was in the business of managing the rental income of the appellant’s property and all the rights to the rental income were ceded to the latter. The appellant contended that Rackflash had declared the rental income generated from the appellant’s property in its tax returns. As such, these rentals became part of Rackflash income. The appellant alluded that the rentals income was taxed twice, i.e. under Rackflash and under her person.

The appellant also contended that the final distribution of the assets from the estate to her was done through a memorandum on 15 October 2012. Prior to that, she contended that the estate was under the executor. She contended that if the court is to conclude that she is liable for taxation on the rental income prior to 2016, then the effective date should be in the month of October 2012.

The appellant further submitted that a position of a director can be found in the business of a sole trader because a director is a manager appointed to run the affairs of the business. As such, the salary of the director should be an allowable deduction as it is an expense incurred by the appellant.

The appellant contended that the figure of the rental income raised by the respondent was incorrect as there was no proof that was produced to show that the rentals were received by the appellant during the audit period. The appellant further contended that the third party verifications could not be relied upon because the third parties were not in occupation of the property during the relevant period but they all occupied in 2016 and 2017 except for Simrac Supermarket. The appellant submitted that in 2016 she registered as a tax payer and took over from Rackflash Investments. She also submitted that in 2016 she also registered for VAT with respondent because she had exceeded the registration threshold. She also submitted that prior to 2016, Simrac Supermarket was using the whole space on the property and that she only completed the subdivisions in 2016, and then leased to small retailers. In the circumstances, she contended that the respondent was wrong in placing reliance on third party verification to conclude that she had generated $72 000 as the said verifiers did not provide proof that they were in occupation prior 2017.

The appellant disputed the schedule of rentals obtained from Simrac by the respondent because the document did not bear the letter head or date stamp of Simrac. Further the document was not in affidavit form. There is no proof that it was emailed from Simrac and in any event the only lease agreement produced was for the year 2016. The appellant also disputed the rentals which were reflected on the schedule and argued that Simrac was paying $4800 per month in 2013 according to a receipt that was issued by Rackflash. This was in contradiction with the $5000 per month figure appearing on the respondent’s schedule. It was submitted by the appellant that in 2014 and 2015 Simrac rentals were $4000 per month and only increased to $5000 per month in 2016. The appellant submitted that the total rentals declared under Rackflash investments for 2014 and 2015 tally with the figures that she highlighted in her papers before this court. She further submitted that Rackflash’s accountant gave all these documents to the respondent’s officers during the audit. She submitted that she had intended to call the said accountant as a witness in these proceedings but unfortunately he passed on before the hearing.

The appellant conceded that she failed to provide source documents for the purpose of the audit because they were submitted to the respondent by the said late accountant. Whilst the appellant conceded that the respondent is allowed to use estimate figures, the third party verifications it carried out, in casu, do not support the respondent’s position when estimating the rental income. The respondent called oral evidence of its officer who was involved in its audit of the appellant’s tax affairs. He evinced that the audit commenced on 31 July 2017 and it covered the period 2012 to 2016. The audit unearthed that the appellant inherited property number 615 C Avenue Mutare and the effective date of inheritance was 8 March 2012 according to the First and Final Distribution account. The audit revealed that she was receiving rentals from small to medium enterprises which income she had not declared for the period in question i.e. 2012 – 2016.

In his view, the respondent had to levy income tax. It was his testimony that the appellant became entitled to the rental income from 8 March 2012 i.e. the date on which the first and final distribution account was signed. He testified that the memorandum dated 15 October 2012 being relied on by the appellant was just a notification to the tenants.

He opined that even if the income had been invested somewhere, the appellant was supposed to account for the tax. He said that the audit unearthed that the rental income declared by Rackflash was different from what was discovered to have been received by the appellant. In 2015, Rackflash declared $48 000, but Simrac confirmed that during that year, it paid more than $60 000. Rackflash was supposed to submit amended returns if it was true that the same rentals which accrued to the appellant had been declared under Rackflash as it was upon her to prove to the respondent that the rental income was already taxed under Rackflash. The appellant was called to submit invoices and supporting documents to prove the expenses which she had incurred and she submitted contracts of employment between Rackflash and their respective employees. He said these expenses could not be allowed because they were not incurred by the appellant. The witness opined that on the issue of the director’s salary the expense was incurred in the maintenance of oneself and therefore was not an allowable deduction. He conceded that the position of a director can be found in sole trade ship but contends that the appellant in this case failed to prove the service rendered by the director was in the furtherance of her trade. In the absence of evidence of services rendered he averred that they properly disallowed the expense. He stated that the tax payer who is a sole trade is not entitled to a salary in terms of the Income Tax Act. Concerning the use of estimated figures, the witness testified that the basis for the estimates were the rentals which were confirmed by some of the tenants of the appellant which included, Cutview, Royal Cakes and Simrac. He testified that third party verification were also done with estate agents to serve as confirmation on whether the estimated figures were reasonable. It was his view that the burden of proof lies on the appellant and she was supposed to provide them with correct information during the audit. She failed to do so save for the lease agreement produced during these proceedings. He further testified that Cutview was paying rentals in 2012 according to the Post death income and expenditure account as clearly shown in the appellant’s own “Notice of Filing” in pp 23 and 24 (ITC 21/18). He also pointed out that the receipts for Rackflash produced for the first time during the course of these proceedings were never produced during the audit despite several requests to the appellant.

I am satisfied, that the witness gave detailed and reliable testimony on their audit of the appellant’s tax affairs for the relevant period. He was subjected to tactful and detailed cross-examination. The cross-examination was aggressive. In the end I am satisfied that the witness was truthful. This finding of fact does not necessarily resolve the appeal in favour of the respondent. I still have to take all facts and the law into account in the determining of the appeal. In the circumstances I proposed to consider all the issues raised in this appeal in turn.

Whether or not Appellant is liable to pay tax between 2012 to 2015

In his case, the Commissioner had initially raised a point in limine to the effect that this issue was not raised as one of the grounds of the objection filed by the appellant hence no determination was made to it. The basis of this preliminary point taken is that in terms of s 65(4) of the Income Tax Act [Chapter 23:06] (“the Act”), an appeal should arise from the determination by the Commissioner. In this case, the respondent had argued that no determination was done by the Commissioner on this issue as it was not a ground of objection. In that respect, this ground of appeal should have been struck off. This appears to have been the Commissioner’s main argument in his case. This was evinced by the following statement— “However, in the event that the court determines otherwise, the respondent wishes to respond to the ground of appeal as stated...”

In other words, the response to the appellant’s grounds of appeal on the merits was in the alternative. It does seem that this preliminary point was abandoned at the pre-trial hearing when the parties agreed on issue (1) supra.

This approach by the parties is permissible under the provision to s 65(4) which provides—

“...Provides that the High Court or the Special Court which hears such appeal may, on good cause being shown or by agreement of the parties, grant leave to the appellant to rely on other grounds” (emphasis added)

In the circumstances this court granted the appellant leave to rely on this ground. I now proceed to consider the issues raised on the merits:

INCOME TAX CASE NO ITC 21/18

WHETHER OR NOT RENTAL INCOME WAS CORRECTLY TAXED PRIOR 2016

On the date of inheritance of the property by the appellant the evidence before me is straight forward.

It is clear that the appellant inherited Stand Number 615 C Avenue Mutare on 8 March 2012. This is the only logical conclusion to be arrived at from the facts of the case. In her objection letter dated 11 April 2018 the appellant stated the following:

“...The truth is that according to the First and Final Distribution signed by the executor and confirmed by the Master of the High Court I inherited the property at stand number 615 C Avenue in Mutare on 8 March 2012”.

This letter of objection was filed of record at p 102 of the respondent’s r 11 documents.

Further, in her case under ITC 21/18, the appellant stated—

“In 2008 appellant’s husband passed on and amongst the property of the deceased estate was stand number 615 C Avenue Mutare. The said immovable property was awarded to appellant on 8 March 2012 in terms of the First and Final distribution account approved by the Master of the High Court...”

During the hearing the appellant changed her position and went at length to try and convince the court that the property was inherited on 15 October 2012. The appellant referred the court to a memorandum done by the executor bearing the latter date. The said memorandum appears in r 11 documents. An analysis of the memorandum does not suggest that 15 October 2012 was the date of inheritance. In fact, 15 October 2012 was the date when it was written and the date on which all tenants were advised that the appellant was now in charge of the lease matters concerning the property. The memorandum was authored by the executor on 15 October 2012 and addressed to “A11 Tenants at 615 C Avenue, Mutare.” (emphasis added)

The material; contents of the memorandum are as follows:

“Please be advised that with immediate effect Ms P. M ... shall no longer be dealing with any matter pertaining to No 615 C Avenue, Mutare. The control of the premises has with immediate effect been ceded to Mrs A. B, who shall assume all the roles that Mrs M used to play.

Therefore, all lease matters including payment of the rentals and everything of whatsoever nature that relates to the said premises.”

It is common cause that the property was transferred into the appellant’s name on 9 October 2012 under Deed of Transfer Number 0003146/12. It is illogical how ownership would be transferred to the appellant when the property had not been distributed to her according to the final and distribution account. The logical conclusion from these facts is that the final and distribution account was done in March 2012, transfer of the property was then done afterwards on 9 October 2012 and executor thereafter notified the tenants that she no longer had any business with the property on 15 October 2012. In any event the letter written by the executor to the tenants does not qualify to be a final and distribution account as defined in the Administration of Estate Act [Chapter 6:01] Further the record also has an exhaustive final and distribution account outlining all the properties in the deceased estate as how these properties were administered and distributed by the executor. Because the distribution of the property to her had been done in March 2012, the appellant was in control of the rental business and benefiting from rental proceeds. As such, the appellant therefore became liable to taxation on income produced by the property after its distribution to her. According to s 11(3) of the Income Tax Act, in the absence of any condition governing transfer of the property which says that the income from the property accrued to the deceased estate from the period when the appellant immediately became entitled to transfer of the property and ending immediately before the transfer from the deceased estate, then any income generated from that property entirely belongs to appellant. No evidence was adduced by the appellant concerning the existence of a condition which presupposes that the income from the property was supposed to vest in the deceased estate from 8 March 2012 to 9 October 2012, the income from the property belonged to the appellant.

In terms of s 10 of the Act “any amount received by a tax payer in any year of assessment forms part of taxable income”. In addition to the ordinary meaning of “received” a tax payer can be said to have received an amount even if it is not paid to him/her personally but to his/her agent or if it is banked on his/her behalf. That amount must, however, be one to which the tax payer has a legal claim. The appellant became entitled to the rental income from the date that the First and Final Distribution Account was signed i.e. 8 March 2012.

During the hearing and in her papers filed of record, the appellant alluded to the fact that Rackflash Investments received all the rental income, as such, that income was not supposed to be taxed in her hands.

I do not agree with the appellant on account of the provisions of ss 6 and 10(1) of the Act. In terms of these provisions, the rental income accrued to the appellant from the moment that she became unconditionally entitled to the rental income. Even if Rackflash Investment was responsible for receiving the rentals, ultimately, rental income remained the appellant’s income and not Rackflash’s because, this income subsequently accrued to her. The appellant had acquired the legal right to receive payment of the rentals from the tenants. Therefore, any tax arising from the rental income was taxable in her hands. The respondent’s witness was correct in stating that if at all Rackflash had been subjected to tax on the same rental income in which the appellant was levied tax, Rackflash was entitled to submit amended tax returns which portrayed this scenario. This was never done by Rackflash.

The rental income declared by Rackflash did not tally with the amount that was supposedly generated from the appellant’s property. It was the duty of the appellant to prove the source of the rental income declared by Rackflash to the respondent and the appellant failed to do so. The respondent was not aware of the source of the rentals declared by Rackflash in its financial statements. An audit which was done on Rackflash did not focus on the rentals received. The appellant and Rackflash are different persona with different business and tax responsibilities, in any event the beneficiary of the rental income was the appellant. She inherited the property and not Rackflash.

From the foregoing it is clear that the rental income accrued to the appellant and it was part of her gross income. For the purpose of income tax, income includes not only money, but also the value of what has accrued to the tax payer as earnings from his enterprise during the tax year i.e. the so-called the Lategan principle – Lategan v CIR 1926 CPD 203; (2 SATC 16), CIR v People’s Stores (Walvis Bay) (Pty) Ltd 1990 (2) SA 353 (A); Edgars Stores Ltd v CIR 1988 (3) SA 876 (A), M v Commissioner for SARS (14005) [2017] ZATC 1 (30 May 2017); MAN Ltd v ZIMRA HH 78-20, ITC 1587 (1994) 57 SATC 97 (T); Standard Chartered (Zimbabwe) Bank v ZIMRA 2009 (2) ZLR 251 (S) at 257B and BCM (Pvt) Ltd v ZIMRA HH 603-20 .

WHETHER OR NOT RESPONDENT CORRECTLY DISALLOWED CLEANING EXPENSES AND GENERAL EXPENSES CLAIMED BY THE APPELLANT:

The respondent’s witness stated that the appellant was requested invoices and supporting documents to prove the expenses that she incurred. She submitted contracts that were between Rackflash Investments t/a Betterclass Kools and the latter’s employees.

The respondent correctly disallowed cleaning and general expenses claimed by the appellant because these were made up of salaries which paid to Rackflash’s employees and not the appellant. The general deduction formula set out in s 15(2)(a) of the Act gives the basis of the deductibility of certain items. To be deducted the expenses shall be expenditure and losses to the extent to which they were incurred for the purposes of trade or in the production of the income except to the extent to which they are expenditure or losses of a capital nature. It is clear that the appellant in the production of rental income did not incur any cleaning expenses. The appellant claimed that the cleaning expenses were lumped together with the salaries. She produced contracts of employment entered into between certain individuals and Betterclass Kools. Betterclass Kools is a separate legal persona to the appellant, therefore she could not claim expenses incurred by Betterclass Kools in her financial statement. The expenses for Rackflash cannot be compared with the expenses for the appellant. The two are different and are likewise treated differently for taxation purposes. In any event the appellant and Rackflash declared different amounts as shown in the table below for electricity, water and rates-

If the expenses incurred by the appellant were the same expenses incurred by Rackflash then the appellant inflated her expenses.

Water and electricity charges which were presented by the appellant were disallowed as these were incurred by the tenants as provided in the lease agreements in clause 5(r) and 11. Rates were allowed as a deduction since the appellant was responsible for the same.

The respondent correctly disallowed these expenses which had been claimed by the appellant.

DISALLOWANCE OF DIRECTOR’S SALARY FOR 2016:

The appellant claimed director’s salary for 2016. The respondent disallowed it. The appellant is a sole trader, and as such her salary represents to costs of maintaining oneself, family or establishment. In the circumstances the claim was properly disallowed. I say so because a sole trader is a person who exclusively owns the business and is taxed on profits. Whatever earnings received they will not be considered as a salary but in terms of accounting principles and for taxation purposes as a drawing or a premature distribution of profit. Section 16(1) (a) of the Act disallows the cost incurred by any tax payer in the maintenance of oneself, family or establishment. In the circumstances the respondent correctly disallowed this expense.

USE OF ESTIMATED FIGURES FOR RENTALS:

During the audit the respondent noted variances between the appellant’s declaration and income verified through the appellant’s tenants.

The respondent evoked its powers to use estimated figures as empowered by s 45(1) of the Act. The appellant expressed bitterness on the respondent’s use its s 45 powers. She feels that it was not necessary in this case. She also avers that the respondent “has an obligation to prove to the court that its actions comply with the mandatory provisions of s 3 of the Administrative Justice Act” [Chapter 10:28]. She also referred the court to s 68 of the Constitution. She referred to several cases dealing with the latter provisions. It is apparent that the appellant is feeling the heat of the draconian aspect of the provisions of the Act. In the circumstances I feel obliged to state the correct legal approach to estimated assessments by the Commissioner and legal the principle applicable to the interpretation of fiscal legislation. In interpreting fiscal legislation, a strict approach is appropriate – CUS v COT 1988 (2) ZLR 27 (HC). In a taxing statute one has to look at what is said. there is no room for an intendment. there is no equity about tax. Cape Brandy Syndicate v Inland Revenue Commissioner (1921) I KB 64 71. A basic principle in tax law is that it is the duty of the Commissioner is to access and collect tax according to the laws enacted by Parliament and not to forgo a tax which is properly chargeable and payable – “Principles of Legal Interpretation (1995) by EA Kellaway at p 341. See also NOC (Pvt) Ltd v ZIMRA HH 765-19 and Commissioner for Inland Revenue v Simpson 1949 (4) SA 678 (A) at 695. Coming back to the issue of estimated assessments, in s 45, the Commissioner cannot make an assessment on purely imaginative estimate of the person’s income. He may have to justify his assessment before the court. the Commissioner must not act in an irresponsible manner in making his estimates in the face of draconian provisions of the Act. Care should be exercised by properly experienced and suitably qualified personnel since it may otherwise be reduced to an arbitrary guesstimate with gave consequences to the tax payer – Mokoena v Commissiuoner, SARS 2011 (2) SA 556 (GSJ), CIR v Taylor 1936 AD 199, 8 SATC 19 and SARS v Pretoria East Motors (Pty) Ltd 76 SATC 293.

In casu, in terms of s 63 of the Act, the burden of proof lies on the appellant to provide proof of the amount of rentals which was being paid by the tenants who were in existence during the audit period.

In my view the respondent did not thump suck figures as alleged by the appellant. The use of estimated figures was necessitated by the appellant withholding crucial information sought by the respondent. In the circumstances third party verifications which were done with the appellant’s tenants formed the basis upon which an estimate was arrived at. In this regard the respondent’s audit revealed that the appellant leased out the property to various sectors, which range from small to medium enterprises. One tenant, Simrac Supermarket was paying rentals ranging from $5000 - $5300 per month. There were other shops paying $350 and $500. Rentals paid by other tenants could not be ascertained.

In the circumstances the respondent was justified in placing reliance on third party verifications and lease agreements which, they obtained from the appellant’s tenants. During the hearing, the appellant chose to produce certain receipts which were in the name of Rackflash Investments. It boggles the mind why the appellant withheld this crucial information when asked to do so during the audit and only to produce it in court. One tends to agree with the respondent that the inference to be drawn is that the appellant did not have these documents when the audit was conducted and manufactured it later to suit its appeal in court.

The Commissioner acted within the confines of s 45(1) of the Act and properly, charged and never exposed the appellant to improper tax. Section 45(1) was promulgated to deal with tax payers who default in furnishing any return or information.

The appellant was uncooperative and misleading during the respondent’s statutory audit leaving the Commissioner no option but to utilise the powers vested in him by s 45(1) of the Act. There is thus no merit on this ground.

(2) FISCAL CASE NUMBER FA 11/18

In this case the issues forming subject matter of the appeal arise from the same audit discussed above. The witness who testified on behalf of the respondent also dealt with evidence on this matter so there is no need to repeat what has been previously stated. I propose to focus on what is specific to this fiscal matter.

The issues for determination were agreed upon by the parties at the joint pre-trial hearing. These are they-

Whether or not the appellant was liable for VAT registration prior to 2016

Whether or not rental income was correctly taxed in the hands of the appellant prior to the year 2016

Whether or not the respondent’s use of estimated figures is proper in this case.

I will consider these issues in turn.

(a)WHETHER OR NOT APPELLANT WAS LIABLE FOR VAT REGISTRATION PRIOR TO 2016:

It is the appellant’s contention that she was not liable for the registration because the rental income generated from her property did not reach the threshold for her to register for VAT. Further, the appellant’s position is that even if she was liable, Rackflash was the one running the business and an audit was conducted by the respondent and no rental income showed that it was subject to VAT as it was below the threshold. I have dealt extensively with the issue of the date of inheritance of the property subject matter of this appeal. I will not repeat, suffice to state my determination therein that the date of inheritance being 8 March 2012 is equally applicable to this issue. the VAT registration threshold during the audit period i.e. from 2012 up to the year 2016 was $60 000.

In terms of s 23 of the Value Added Tax Act [Chapter 23:12] (“the VAT Act”) a registered operator is required to account for VAT on all goods and services supplied unless the supply is specifically exempt or zero rated. There is a proviso to the effect that the Commissioner can determine the date of registration for any registered operator and that date shall be deemed to be the effective date of registration for that registered operator. From the evidence before me, the appellant became liable for VAT from 8 March 2012.

This is so because of the findings I made above. In particular, the sole witness for the respondent evinced that from investigations Simrac gave them proof that they paid $60 000. Even before considering the rental income for other tenants the income that accrued to the appellant fell within the threshold of VAT registration.

(b) WHETHER OR NOT RENTAL INCOME WAS CORRECTLY TAXED IN THE HANDS OF THE APPELLANT PRIOR TO THE YEAR 2016:

I explained in detail above the appellant’s liability for paying tax on the rental income. Suffice to say that VAT is payable by the appellant on account of the same principle. In absence of any condition governing transfer of the property, which says that income from the property accrued to the deceased estate from the period when the appellant immediately became entitled to the transfer of the property and ending immediately before the transfer from the deceased estate, then any income generated from the property entirely belonged to the appellant. No evidence was adduced by the appellant concerning the existence of a condition, which presupposes that the income from the property was supposed to vest in the deceased estate from 8 March 2012 to 9 October 2012. During the period under audit, the appellant had not declared rental income from the property despite the fact that she was the property owner and was entitled to all rentals accruing from the property. From the moment the appellant inherited the property, she was obliged to pay VAT from the rentals which accrued from the property. In terms of s 69 of the VAT Act, any price charged by a registered operator for the supply of goods and services is deemed to include VAT.

(c) USE OF ESTIMATED FIGURES

As alluded to above, the appellant was not co-operative and was not willing to divulge information regarding rentals which accrued to her. In the circumstances the respondent’s use of estimated figures in coming up with the appellant’s VAT liability was appropriate. The respondent was empowered by s 31(3) of the VAT Act to make use of estimates as explained in detail above. In terms of s 37 of the VAT Act, the appellant has a duty to prove that she is not liable to being taxed VAT. As such, when the appellant disputed the Schedule provided to the respondent by Simrac, the duty is on her to furnish the respondent with the requisite proof. The appellant, however failed to discharge this duty. She only produced three receipts for the property for three months. The appellant said that she failed to produce proof because she had initially submitted these to the respondent sand same were withheld. Assuming that is the case, the respondent does not insist on originals. Assuming that the appellant submitted the original copies, she still had a duty to keep photocopies to cover any exigencies. This is because in terms of s 57(3) of the VAT Act, the appellant is required to keep the records, in either their original form or any other form for a period of six years. This statutory requirement does not mean that in instances where same are submitted to the respondent, the duty falls away.

DISPOSITION

In AB v ZIMRA Case Number ITC 21/18 the appeal be and is hereby dismissed.

In AB v ZIMRA Case No. FA 11/18 the appeal be and is hereby dismissed.

ZIMRA Legal Services, respondent’s legal practitioners