Judgment No. HB 26/2003

                                                                                    Case No. HC 215-6/2003                                                                                                           HC 217-8/2003

                                                                                                    HC 219-20/2003                                                                                                         HC 121-22/2003

 

(1)        KERRIGAN INVESTMENTS (PVT) LTD

T/a RIFA WILDLIFE SAFARIS

 

1. MATUPULA HUNTERS

 

1. DHUMUKWA SAFARIS

 

1. WESTERN SAFARIS (PVT) LTD

 

Versus

 

ZIMBABWE REVENUE AUTHORITY

 

IN THE HIGH COURT OF ZIMBABWE

CHEDA J

BULAWAYO 14 & 27 FEBRUARY 2003

 

Ms N. Ncube for the applicants

A. B. C. Chinakefor the respondent

 

Urgent Application

 

            CHEDA J:     Applicants filed urgent applications seeking an interim order

 

interdicting respondent from freezing, garnishing or interfering with their bank

 

accounts held by several banks in Bulawayo.

 

            As all applicants present the same issue and were being represented by the

 

same legal practitioner and equally so, respondent, I decided to deal with them

 

together.  Applicants are registered safari operators in terms of the laws of Zimbabwe. 

 

Respondent is a parastatal empowered to collect revenue for and on behalf of the

 

Government of Zimbabwe.  They do so under various Acts of Parliament and the

 

appropriate one in this case being the Income Tax Act [chapter 23:06].  It is under this

 

Act that respondent is authorised to audit, investigate and also freeze any person or

 

 

 

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business concern’s account should they, during their investigations form an opinion

 

that there have been some irregularities, which may financially prejudice their fiscal

 

collection procedure.

 

            It is common cause that during audit inspections being carried out by

 

respondent such irregularities were found which led to the freezing of applicants’

 

accounts.

 

            It is pertinent to mention that applicants have, also filed separate applications

 

asking this court to declare that respondent’s actions in freezing the said accounts

 

acted ultra vires its powers in terms of section 30 as read with schedule 17 of the

 

Income Tax Act [chapter 23:06], in ruling that, the withholding tax is due and

 

collectable by applicant for commission paid by non-resident clients to non-resident

 

independent operators.  They further seek an order that in terms of section 30 as read

 

with schedule 17 of the Income Tax Act there is no statutory obligation on the part of

 

applicant to collect withholding tax on commission paid directly to a non-resident

 

operator by a non-resident hunter.  These issues are yet to be determined by this court.

 

            Ms Ncube for the applicants argued that respondent has no legal basis for

 

freezing the said accounts because the commission on which the withholding tax is

 

founded does not originate from Zimbabwe.  Her further argument, is that, if

 

respondent is allowed to continue freezing applicants’ account, applicant will be

 

rendered bankrupt as they cannot economically operate their businesses without these

 

accounts. 

 

Mr Chinakefor respondent has vigorously opposed this application as he

 

argued that respondent is empowered to withhold tax in terms of section 30 of the

 

 

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Income Tax Act which reads:

 

            “Section 30 - Non-residents’ tax on fees

 

There shall be charged, levied and collected through out Zimbabwe for the benefit of the Consolidated Revenue Fund on non-residents’ tax on fees in accordance with the provisions of the seventeenth schedule at the rate of tax fixed from time to time in the changing Act.” (my emphasis)

 

            The question which should be determined is whether the word “commission”

 

as used in the present context falls within the scope of section 30 of the Income Tax

 

Act.

            It is basically on that basis that respondent is of the view that it is entitled to

 

freeze these accounts.  It is clear that there is a need for the determination by this

 

court as to whether there is any legal basis for respondent to have acted in the manner

 

they did . 

 

Applicants also argued that it is essential that they be allowed to utilise

 

their accounts pending the final determination of the other court application referred

 

to above.  Their fears are that in the event that the court holds in their favour

 

respondent will not be able to reimburse them.  In fact, Ms Ncube argued that not only

 

does respondent have problems in securing foreign currency but local currency as

 

well.  In reply Mr Chinake pointed out that this in fact is not correct as in the current

 

year respondent has successfully collected Z$258 billion and has this year budgeted to

 

collect Z$728 billion in revenue.  While it is correct to say that respondent has

 

problems with foreign currency, it cannot be correctly said so of the local currency. 

 

This therefore stands to reason that respondent is in a position to reimburse applicants

 

should applicants succeed in their other applications.

 

 

 

 

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            This argument by Ms Ncube although sound however, it seems to overlook

 

one real possible route which applicants can take in the event that they are allowed to

 

utilise their accounts pending determination of their other applications by this court

 

that is of winding up their companies.  She buttressed her argument by pointing out

 

that the economy of the country in general is not favourable for business and that the

 

tourism industry in particular has taken a slump.  While these observations are indeed

 

correct, I find that there is reason enough for any business person to close shop or

 

diversify into other businesses.  It is possible therefore for applicants in those

 

circumstances to declare themselves insolvent after they have been allowed to utilise

 

their accounts.  Should this happen, then respondent will suffer irreparable harm as

 

they will not be able to recover tax in the event that, the court’s determination is in

 

their favour.  The situation will be however, entirely different if the courts determine

 

in applicants’ favour as their money will still be held in the bank.

 

            In an application of this nature applicant must show a prima facie case in order

 

to succeed.  In the present case it is clear that, there is a dispute as to the interpretation

 

of the relevant provisions of the Act under discussion.

 

            As pointed out above their fears are without justification in view of what they

 

might do after they have been allowed to freely utilise their accounts, this argument

 

is therefore rejected as it is devoid of any merit.  In addition they have failed to make

 

a prima facie case against respondent.  The reason for this is that, they have not been

 

truthful with the court in arguing that respondent will not be able to pay them in the

 

event of their success.  I am persuaded to agree with Mr Chinake’s argument that in

 

 

 

 

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the case of Western Safaris P/L, the account held is $1.8m, which represents, possibly

 

one asset of e.g. a motor vehicle.  To say that a business will be bankrupt as a result of

 

a freeze on an asset of $1.8m or so in a business which has been receiving such large

 

sums of foreign currency is not entirely correct.  It also emerged that the collection

 

percentage of the said commission is not uniform as it varies from one safari

 

operator to the other.  One wonders why this is so and applicants were unable to

 

explain this irregularity.  This on its own is reason enough to justify the freezing of

 

the accounts.  This goes to demonstrate their lack of bona fides.

 

            Having listened to both arguments and perused various documents before me I

 

am of the view that there is a need for the courts to determine the main application,

 

more particularly in view of the fact that the commission referred  to in the National

 

Parks Declaration forms lacks uniformity as far as the calculation of the commission

 

is concerned.  With all due respect, the fact that the calculation of commission is left

 

at the whims of applicants, is an indication that proper determination should be made

 

by this court.

 

            It is for the above reasons that respondent should be allowed to freeze

 

accounts in the meantime, which it reasonably believes, there have been irregularities

 

in the declaration of foreign currency.

 

            The court will therefore be failing in its duty, if it is seen to be hindering

 

respondent in its quest to correct what is prima facie an irregularity.  The balance of

 

convenience favours the freeze.

 

            There is no irreparable harm which will be suffered by the applicant if their

 

accounts are frozen and I accordingly dismiss this application with costs.

 

 

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Messrs Lazarus & Sarifapplicants’ legal practitioners

Kenntor & Immerman respondent’s legal practitioners