Sunday, 7 June 2009
SARS lose twice in Court
The South African Revenue Services (SARS) find themselves on the wrong end of two recent Court decisions.
Marius Gerber (Bowman Gilfillan) kindly forwarded Afro Leo a link to this article published at Fin24.com describing how the tax court upheld a taxpayer's claim to deduct a payment of R50m (about $5.5million) for a radio station's trade mark and name for income tax purposes. The case arose when the SABC sold off its regional radio stations in 1996 in a public bidding process. The taxpayer was the successful bidder and purchased a radio station from the SABC for R65m. R50m of the purchase price was allocated to the trade mark and the name of the station. Sars was of the view that the trade marks and the name of the radio station was not worth R50m and that the bulk of the purchase price should have been allocated to goodwill. Sars consequently disallowed the taxpayer's claim. The Court held that the Income Tax Act does not require that taxpayers perform a formal valuation of trademarks to obtain a tax deduction and there was no evidence to suggest that the contract between the taxpayer and the SABC was a sham. The article clarifies that it is no longer possible to claim a deduction for such expenditure.
Afro Leo has always wondered about trade mark valuations and who is more qualified to do them; accountants or lawyers. In the UK his experience is that law firms were not prepared to take on the risk attached to what many consider to be a black art. In RSA however, IP lawyers feel uniquely qualified for the job. Comments welcome together with a link to the case.
Diligent Msa Gaxo (also Bowman Gilfillan) presented Afro Leo with this synopsis of the appeal decision in the Crocs/Moresport case reported on by Afro-IP last year here. Of relevance to practitioners will be these cites relating to the level of proof required for obtaining warrants for the search and seizure of counterfeit goods.
"Legal representative[s] presenting an application before a court might have an ethical duty to bring to the attention of the court issues of law that might affect its decision, but that is another matter. " “...this is clearly so, because at that stage the judge … is not required to adjudicate on the dispute on whether the goods are indeed counterfeit or not but merely to make a decision on whether there are reasonable grounds for believing that an act of dealing in counterfeit goods has taken place or is taking or is likely to take place.” The Supreme Court of Appeal accepted the submission that at that stage of the proceedings the customs officer need only satisfy the court that a prima facie case exists and is not required to prove on a preponderance of probabilities that the seized good are indeed counterfeit. The full case can be located here.
Afro Leo finds himself contemplating the balance between the dire need to stop counterfeiting by making it relatively easy to obtain search and seizure warrants, and the reality that courts with little or no knowledge of the intricacies of IP law are easily persuaded to issue warrants in circumstances where there is not likely to be an infringement at all. He suggests that this judgment leaves too much open to the vague concept of an "ethical duty" to disclose.