SCHOOL OF LAW

L 360- TAX LAW

FINAL EXAMINATION

24 DECEMBER 2012

09:00 – 12:00 HOURS

TIME ALLOWED: 3 HOURS PLUS 5 MINUTES READING TIME

INSTRUCTIONS TO CANDIDATES

1. Check that you have the correct examination paper in front of you.

2. The paper consists of six (6) questions. Answer question one (1) which is
compulsory and any other (3) questions

3. All answers should be in an answer booklet given to you.

4. Write down the number of questions attempted on the cover page.

5. Begin each question on a new page.

6. Candidates are permitted to bring into the examination room any statute.

7. There shall be no form of any communication between students during the

examination. Any attempt to make such communication will lead to
disqualification.

DO NOT TURN THIS PAGE UNTIL TOLD TO DO SO BY THE INVIGILATOR

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QUESTION 1 (COMPULSORY) (40 MARKS):

(a) The Property Transfer Act of the Laws of Zambia does not have assessment
rules but relies on the assessment rules as provided in the Income Tax Act. Mr.
Ntota has just transferred his property to Mr Big Biz. Consequently the
Commissioner General of the Zambia Revenue Authority has assessed Mr
Ntota’s transaction for purposes of Property Transfer Tax Act using the
assessment rules as provided under the Income Tax Act. Mr. Ntota disputes this
assessment on the grounds that the Property Transfer Tax Act does not have
assessment rules and considers the assessment as being null and void as the
Income Tax Act does not provide for the imposition of tax on transfer of
properties.

Mr Ntota now seeks your opinion as to whether his objection has merit at law.
Please advise using the appropriate rule of construction of taxing statutes
accordingly and provide authorities. (10 Marks)

(b) The Bakasa government has embarked on revising its tax system. The
Government has requested you, a tax lawyer, to advise the good factors that
their new tax system ought to have. Give an explanation for each of them. (10
Marks)

(c) The term ‘an adventure in the nature of trade” is synonymous with the term
trading. However, due to the complications that are associated with defining
trading Courts have established badges or indicators of what constitute the
carrying of trade. State these ten badges of trade. (10 Marks)

(d) Mr Van de Merwe, a resident of the State of Malabi had excess cash amounting
to K100 million which he invested in South African Government treasury bills
issued on 1st April 2010. The maturity date of the South African Government
treasury bills was 31stMarch 2011. Consequently he received interest amounting
to K10 million upon maturity. Tax was deducted at the rate of 10% in South
Africa.

Note: the State of Malabi has similar legal provisions as what obtains under
Zambian legislation.

He now comes to you seeking advice as to what are the likely tax implications.
Provide authorities. (10 Marks)
Total Marks [40 Marks]
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QUESTION TWO

Contrast the case of Herbert v McQuade 4 TC 489 and Turner v Cuxson 2 TC 42

[20 Marks]

QUESTION THREE

(a) What is an excise tax? (10 Marks)

(b) What is an ad valorem tax? (5 Marks)

(c) Mr Ruud van Blerk, a South African contractor has been sub-contracted to
establish an air conditioning system for the new shopping mall being
constructed in Kitwe at a contract price of K1Billion. Mr Ruud van Blerk has
been resident undertaking his contractual obligations in Zambia for a period in
total amounting to 180 days during the 2012 charge year. After completion of
his sub-contractors he returned to South Africa where he resides and only came
back for a 2 week holiday in Chiawa Lower Zambezi within the same charge
year.

Does he qualify to be resident for income tax purposes? Provide your

authorities. (5 Marks)

[Total Marks 20]

QUESTION FOUR

Give the facts, holding and ratio decidendi in the cases of Gloucester Railway
Carriage and Wagon Co Ltd v CIR 12 TC 720 and CIR V Scottish Automobile &
General Insurance 16 TC 381. [20 Marks]

QUESTION FIVE

Mr. White, Mr. Gray and Mr. Blackson are business persons trading independent of
each other and involved in production of sun flower oil. They decided to come together
and purchase a large quantity of cotton seed cheaply (due to the poor cotton sales this
past season) with a view to make lint oil (extracted from cotton seed) and sale as one
lot.

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Due to low demand the processed lint oil was sold in several lots. This was the only
transaction they ever carried on together. They were assessed by the Zambia
Revenue Authority for the profit they received from this transaction as being liable to
income tax. They now seek your advice as they contend that this was not a trading
transaction but merely a single and speculative transaction. Provide statutory
authorities and at least two decided cases to support your answer. [20 Marks]

QUESTION SIX

“Where a sum of money is given to an incumbent substantially in respect of his

services as incumbent, it accrues to him by reason of his office. Had it been a gift of
an exceptional kind such as a testimonial or a contribution for a specific purpose as to
provide a holiday or a subscription peculiarly due to the personal qualities of the
particular clergyman, it might not have been a voluntary payment for services, but a
mere present.”

(i) State the parties’ names, facts and the holding of this case. (10 Marks)

(ii) In which Zambian case was this principle applied and what were the facts and
ratio decidendi. (10 Marks)

Total [20 Marks]

END OF EXAMINATION PAPER