The Supreme Court has dismissed an appeal by the Zimbabwe Revenue Authority (ZIMRA) which was seeking to overturn a High Court ruling in favour of Swiss Food Company, Nestlé Zimbabwe over disputed tax deductions totalling US$15.9 million.
A bench comprising Justices Susan Mavangira, George Chiweshe and Joseph Musakwa ruled that the High Court's judgement cannot be faulted.
"The above excerpt negates any merit in the appellant's argument.
"The assessments were held to be a nullity and thus no legal consequences can arise from them.
"The court was clear in its language in setting aside the assessments and not simply the notices of assessment," said the bench.
The court ruled, "We find merit in the objection by the respondent.
"The issuance by the appellant of replacement assessments where no tax liability arises flies in the face of the principle of finality to litigation which is a pillar of the rule of law.
"Accordingly, it is ordered that the appeal be and is hereby dismissed with costs."
ZIMRA had filed an appeal against the whole judgment of the High Court (the court a quo) which granted a declaratory order in favour of Nestlé to the effect that ZIMRA could not issue replacement notices of revised tax assessments.
The matter before the Supreme Court related to an interminable income tax dispute between Zimra which is the relevant statutory body responsible for the collection of taxes and Nestlé, a corporate entity incorporated in terms of the laws of Zimbabwe.
Sometime in May 2016, ZIMRA issued several amended tax assessments to Nestlé in respect of the tax years 2009, 2010, 2011, 2012 and 2013.
It claimed to have discovered several anomalies that amounted to misrepresentation regarding the self-assessment declarations initially submitted by Nestlé.
This was disputed by Nestlé, with the matter finally spilling into the Special Court for Income Tax Appeals.
The Special Court for Income Tax Appeals upheld the determination of ZIMRA's Commissioner to the objections filed by Nestlé.
This prompted an appeal to the Supreme Court under which the revised assessments issued by ZIMRA were held to be invalid.
The Supreme Court in Nestlé Zimbabwe v ZIMRA SC 148/21 reasoned that the revised assessments issued by Zimra did not conform to the requirements of s 2 of the Income Tax Act [Chapter 23:06].
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Tax assessments for 2009, 2010, 2011, 2012 and 2013 were specifically invalidated for being made subject to audit when such an endorsement was not provided for under s 51 of the Income Tax Act.
Accordingly, the entire proceedings were set aside because they were premised on a nullity.
Thereafter, in January 2022, Zimra proceeded to issue novel assessments that were purportedly in compliance with the Income Tax Act.
It also attempted to pacify Nestlé by clarifying that there was no obligation to pay any further tax since the respondent had previously been making regular payments as per the nullified assessments.
Nestlé queried the legal basis upon which the replacement assessments were issued in light of the decision of this Court under SC 148/21.
In response, ZIMRA submitted that the Supreme Court had only set aside the notices of assessment as opposed to the actual assessments defined in s 2 of the Income Tax Act.
The impasse resulted in Nestlé applying for declaratory relief in the High Court.
In its founding affidavit, it averred that the replacement assessments issued were merely a scheme devised to avoid reimbursing amounts paid in respect of the invalid assessments.
It was contended that ZIMRA could only have issued any additional assessments in the matter by dint of s 47 of the Income Tax Act which was not applicable in the present circumstances among other arguments which were upheld by the High Court.
