The Tax Court has delivered judgment in Taxpayer KG (Pty) Ltd v Commissioner for the South African Revenue Service granting the taxpayer leave to amend its Rule 32 statement of grounds of appeal to introduce new factual allegations in support of a disputed VAT input tax deduction. The judgment provides useful guidance on the limits of rule 32(3) of the Tax Court Rules, the interplay between the Baseline and TALT decisions, and the circumstances in which an amendment will be permitted at the appeal stage.
Background
In 2016, Taxpayer KG (Pty) Ltd ("the Taxpayer") purchased a mixed-use property from Investec Bank for ZAR54,150,000.00, inclusive of VAT of ZAR6,650,000. The property comprised commercial and residential units, four dumps of fly-ash estimated at approximately 25 million tons, and electricity infrastructure from a former Eskom power plant. The Taxpayer claimed an input tax deduction of ZAR6,650,000, which SARS initially refunded in full.
In April 2019, SARS commenced a VAT audit. Throughout the audit and objection process, the Taxpayer described its business as a township with rental income as its main revenue source. A section 47 inquiry with the Taxpayer's former accountant confirmed the acquisition objective was "to rent it out". SARS issued additional assessments disallowing the full input tax deduction in December 2021, and the taxpayer objected in March 2022 on a property development basis – that it had acquired the property for the purpose of constructing, renovating, and ultimately disposing of the individual units. No mention was made of any intention to exploit fly-ash commercially or to develop a solar project.
In May 2026, approximately two months before the scheduled hearing, the Taxpayer delivered a notice of amendment seeking to introduce two additional factual bases: the commercial exploitation of the fly-ash dumps and the development of a solar electricity project. The taxpayer attributed the late amendment to its present attorneys, appointed in November 2025, having "appreciated the significance" of these features.
The legal framework: Rule 32(3) and the Baseline and TALT Decisions
Rule 32(3) of the Tax Court Rules permits a taxpayer to include a new ground of appeal in its rule 32 statement, unless that ground "constitutes a ground of objection against a part or amount of the disputed assessment not objected to under rule 7".
The Supreme Court of Appeal in Baseline Civil Contractors (Pty) Ltd v CSARS confirmed that this subrule contains both a permission and a limitation. A new ground targeting a different part or amount of the assessment, one never disputed in the original objection, is prohibited. A new argument attacking the same part or amount already objected to is permissible, provided the substance of the original objection remains unchanged.
The court relied heavily on the Full Court's decision in TALT v CSARS (87 SATC 222), which applied Baseline in closely analogous circumstances. In TALT, the taxpayer had objected on prescription grounds alone and later sought to raise merits-based arguments in its Rule 32 statement. The court held this was permissible: the new ground related to the same part and amount of the disputed assessment. The fact that the taxpayer had originally relied on a different ground did not mean it had not objected to the amount itself.
Application to the present case
Mudau J found that the Taxpayer's position fell squarely within the TALT framework. The taxpayer had always disputed the disallowance of the ZAR6,650,000 input tax deduction. The new factual allegations (fly-ash exploitation and the solar project) were simply additional bases supporting the challenge to the same deduction.
The court distinguished Baseline, where the taxpayer's original objection (a deduction ground) and its new ground (attacking the gross income figure) were fundamentally incompatible and targeted different components of the assessment. No such incompatibility existed here.
SARS' argument that the residential premises precluded the Taxpayer from claiming the full deduction was held to go to the merits, not to the admissibility of the amendment. The Taxpayer was not using the amendment to launch a new objection.
The delay and prejudice
The court acknowledged that the Taxpayer's explanation for the late amendment was "admittedly weak", noting that the underlying facts were known from the outset. However, applying the established principles from Moolman v Estate Moolman and Commercial Union Assurance Co Ltd v Waymark NO, the court held that mere delay is not fatal. The application was not mala fide, the amendment raised a genuine triable issue supported by evidence, and any prejudice to SARS could be compensated by costs and a postponement.
Takeaways from the judgment
- Rule 32(3) permits new factual allegations at the appeal stage, provided they relate to the same part or amount of the assessment originally objected to under rule 7.
- Following TALT, the fact that a taxpayer originally relied on a different ground of objection does not preclude it from raising additional factual bases in support of the same disputed amount.
- Taxpayers and their advisors should, however, ensure that all relevant factual grounds are identified and disclosed as early as possible in the dispute process. A weak explanation for delay, while not necessarily fatal, places the taxpayer's credibility under scrutiny and leaves the amendment vulnerable to opposition.
- The court will weigh the prejudice to SARS against the risk that refusing the amendment may result in SARS collecting tax not properly due.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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