In this day and age, with tax legislation becoming more complex and the process of applying the law ever more onerous, professional tax advice is valuable.

This was demonstrated in the recent judgement in the Tax Court of South Africa on 4 November 2016 in the matter between ABC Holdings (The Appellant) and the Commissioner for the South African Revenue Service (SARS).

The Appellant had erroneously claimed a section 24C deduction and SARS had disallowed the deduction as well as raising an underestimation penalty upon assessment.

Essentially the appellant contested that they had claimed the deduction in good faith, having obtained a professional opinion from a registered Tax Practitioner regarding the matter.

The Court then made two findings which will prove invaluable to taxpayers and practitioners alike.

Firstly, the Court defined a "bona fide inadvertent error" as "an innocent misstatement by the taxpayer resulting in an understatement while acting in good faith and without the intention to deceive". Although this definition was not applied to this court case, it will surely prove useful to future rulings.

Secondly, the Court found that due to the taxpayer being in possession of an opinion by an independent registered Tax Practitioner, which it had applied, SARS was required to remit the penalty in terms of section 223 of the Tax Administration Act.

Therefore although the taxpayer had made a mistake which would have to be corrected, SARS were ordered to remit the underestimation penalty due to the taxpayer being in possession of a written opinion by a Tax Practitioner.

This goes to show that the value of a tax opinion should not be underestimated and taxpayers should obtain opinions where possible for contentious matters.

Also read: Tax considerations surrounding cross border loans