REVISITING TSKJ II CONSTRUCES INTERNACIONALS
UNIPESSOAL LDA vs FEDERAL INLAND REVENUE SERVICE (FIRS), Abuja Federal
High Court, Suit No. FHC/ABJ/TA/11/12
UNIPESSOAL LDA vs FEDERAL INLAND REVENUE SERVICE (FIRS), Abuja Federal
High Court, Suit No. FHC/ABJ/TA/11/12
By Dr. Olumide
Kolawole Obayemi, LL.M.; SJD*
Kolawole Obayemi, LL.M.; SJD*
Introduction
Notwithstanding
the decision in TSKJ II CONSTRUCES INTERNACIONALS UNIPESSOAL LDA vs FEDERAL INLAND
REVENUE SERVICE (FIRS), Abuja Federal High Court, Suit No.
FHC/ABJ
/TA/11/12, the decision in Standard Trust Bank Plc –v- Chief
Emmanuel Olusola (2007) 9 CLRN 41, clearly shows that the Tax Appeal Tribunals can have concurrent
jurisdiction with the Federal High Courts on matters dealing with taxation. Tax
practice before tax courts range from the relatively simple to the complex
across both direct and indirect tax. Direct tax is a tax that is usually levied
directly on an individual or organization, such as income tax or corporation
tax. Indirect tax refers to tax that is usually levied on goods or services
rather than on an individual or organization, such as VAT or Customs Duty.
the decision in TSKJ II CONSTRUCES INTERNACIONALS UNIPESSOAL LDA vs FEDERAL INLAND
REVENUE SERVICE (FIRS), Abuja Federal High Court, Suit No.
FHC/ABJ
/TA/11/12, the decision in Standard Trust Bank Plc –v- Chief
Emmanuel Olusola (2007) 9 CLRN 41, clearly shows that the Tax Appeal Tribunals can have concurrent
jurisdiction with the Federal High Courts on matters dealing with taxation. Tax
practice before tax courts range from the relatively simple to the complex
across both direct and indirect tax. Direct tax is a tax that is usually levied
directly on an individual or organization, such as income tax or corporation
tax. Indirect tax refers to tax that is usually levied on goods or services
rather than on an individual or organization, such as VAT or Customs Duty.
The
jurisdiction, efficacy and practice before the Nigerian Tax Appeal Tribunal
(“NTAT”) are now at issue in Nigeria. The October 30, 2013 decision of Hon
Justice Adeniyi F.A. Ademola of the Abuja Federal High Court in TSKJ
II Construces Internacionals & Anor vs Federal Inland Revenue Service
(FIRS), Suit No. FHC/ABJ/TA/11/12, cursorily highlights the procedural
deficiencies in the enabling law setting up the NTAT. It also underscored the
need to amend the Nigerian Federal Inland Revenue Establishment Act (FIRSEA)
No. 13 of 2007 and the Tax Appeal Tribunals (Establishment) Order of November
25th, 2009 (TAT Order).
jurisdiction, efficacy and practice before the Nigerian Tax Appeal Tribunal
(“NTAT”) are now at issue in Nigeria. The October 30, 2013 decision of Hon
Justice Adeniyi F.A. Ademola of the Abuja Federal High Court in TSKJ
II Construces Internacionals & Anor vs Federal Inland Revenue Service
(FIRS), Suit No. FHC/ABJ/TA/11/12, cursorily highlights the procedural
deficiencies in the enabling law setting up the NTAT. It also underscored the
need to amend the Nigerian Federal Inland Revenue Establishment Act (FIRSEA)
No. 13 of 2007 and the Tax Appeal Tribunals (Establishment) Order of November
25th, 2009 (TAT Order).
That
TSKJ—an affiliate of Halliburton is a protagonist in this matter is not lost on
oil and gas and taxation law practitioners in Nigeria. The Nigerian Liquefied
National Gas terrain is dominated by the American giant. Nigeria LNG Limited
was incorporated as a limited liability company on 17 May 1989, to produce LNG
and natural gas liquids (NGL) for export. The plant was built by TSKJ
consortium, which was led by former Halliburton’s subsidiary KBR. Other
participants of the consortium were Snamprogetti, Technip and JGC Corporation.
TSKJ—an affiliate of Halliburton is a protagonist in this matter is not lost on
oil and gas and taxation law practitioners in Nigeria. The Nigerian Liquefied
National Gas terrain is dominated by the American giant. Nigeria LNG Limited
was incorporated as a limited liability company on 17 May 1989, to produce LNG
and natural gas liquids (NGL) for export. The plant was built by TSKJ
consortium, which was led by former Halliburton’s subsidiary KBR. Other
participants of the consortium were Snamprogetti, Technip and JGC Corporation.
T.S.K.J.
NIGERIA LTD is involved as EPCI Contractors in Nigeria.
NIGERIA LTD is involved as EPCI Contractors in Nigeria.
We
examine the enabling laws of the NTAT, and compare the prevailing rules and
practice at the NTAT with the American and British practices. We highlight our
disagreement with Ademola’s decision and proffer suggestions for the future of
tax appeals in Nigeria.
examine the enabling laws of the NTAT, and compare the prevailing rules and
practice at the NTAT with the American and British practices. We highlight our
disagreement with Ademola’s decision and proffer suggestions for the future of
tax appeals in Nigeria.
II. Tax Practice and Procedure in
Nigeria.
Nigeria.
In
Nigeria, a taxpayer (individual or corporate) that is aggrieved by the assessment
by a Relevant Tax Authority (“RTA”) may file an objection to the
assessment issued by the RTA. The RTA will then amend or refuse to amend the
assessment. Where the RTA refuses to amend the assessment, the RTA will then
issue a Notice or Refusal to Amend (“NORA”).
Nigeria, a taxpayer (individual or corporate) that is aggrieved by the assessment
by a Relevant Tax Authority (“RTA”) may file an objection to the
assessment issued by the RTA. The RTA will then amend or refuse to amend the
assessment. Where the RTA refuses to amend the assessment, the RTA will then
issue a Notice or Refusal to Amend (“NORA”).
Upon
receiving the NORA, and within 30 days,
the taxpayer may file an appeal with the Nigerian Tax Appeal Tribunal (“NTAT”)
under Section 59 the Nigerian Federal Inland Revenue Establishment Act (FIRSEA)
No. 13 of 2007, Section 11 of the Fifth Schedule to the FIRSEA and Paragraph 5
of the Tax Appeal Tribunals (Establishment) Order of November 25th,
2009 (TAT Order)
receiving the NORA, and within 30 days,
the taxpayer may file an appeal with the Nigerian Tax Appeal Tribunal (“NTAT”)
under Section 59 the Nigerian Federal Inland Revenue Establishment Act (FIRSEA)
No. 13 of 2007, Section 11 of the Fifth Schedule to the FIRSEA and Paragraph 5
of the Tax Appeal Tribunals (Establishment) Order of November 25th,
2009 (TAT Order)
In
Nigeria, a tax appeal must be filed before one of the Six (6) NTAT in the
region closest to the taxpayer, and after pleadings are completed, a hearing
follows.
Nigeria, a tax appeal must be filed before one of the Six (6) NTAT in the
region closest to the taxpayer, and after pleadings are completed, a hearing
follows.
The
Nigerian Tax Appeal Tribunal (NTAT) was established in 2007, and, it replaced
the former Body of Appeal Commissioners (BAC) and Value Added Tax (VAT)
tribunals. See, section 59, FIRSEA. The
NTAT courts are located in Abuja, Lagos, Ibadan, Benin, Enugu, Kaduna, Jos and
Bauchi while the coordinating secretariat located in Abuja is the central
coordinating office which renders support services and facilitates the
operations of the respective zones. See Paragraph
1(i),(ii),(iii),(iv),(v),(vi),(vii),&(viii).
Nigerian Tax Appeal Tribunal (NTAT) was established in 2007, and, it replaced
the former Body of Appeal Commissioners (BAC) and Value Added Tax (VAT)
tribunals. See, section 59, FIRSEA. The
NTAT courts are located in Abuja, Lagos, Ibadan, Benin, Enugu, Kaduna, Jos and
Bauchi while the coordinating secretariat located in Abuja is the central
coordinating office which renders support services and facilitates the
operations of the respective zones. See Paragraph
1(i),(ii),(iii),(iv),(v),(vi),(vii),&(viii).
III. Tax Practice and Procedure in the
United States.
United States.
Similarly,
in the United States, tax litigation usually involves disputes over federal
income tax and penalties—known as “deficiency”—i.e., the excess of the amount
the IRS contends is the correct tax over the amount the taxpayer showed on the
return—in both cases, without regard to how much has actually been paid.
in the United States, tax litigation usually involves disputes over federal
income tax and penalties—known as “deficiency”—i.e., the excess of the amount
the IRS contends is the correct tax over the amount the taxpayer showed on the
return—in both cases, without regard to how much has actually been paid.
Tax
disputes commence after an examination of a taxpayer’s return by the Internal
Revenue Service (IRS). If the IRS does not agree with the taxpayer, the IRS
will issue notices to the taxpayer. If, after issuance of a series of
preliminary written notices and a lack of agreement between the taxpayer and
the IRS, there is no resolution, the IRS will formally “determine”
the amount of the “deficiency” and will then issues a formal notice
called a “statutory notice of
deficiency,” aka “ninety
day letter“. See 26 USC, Section 6212
disputes commence after an examination of a taxpayer’s return by the Internal
Revenue Service (IRS). If the IRS does not agree with the taxpayer, the IRS
will issue notices to the taxpayer. If, after issuance of a series of
preliminary written notices and a lack of agreement between the taxpayer and
the IRS, there is no resolution, the IRS will formally “determine”
the amount of the “deficiency” and will then issues a formal notice
called a “statutory notice of
deficiency,” aka “ninety
day letter“. See 26 USC, Section 6212
Clearly,
once the IRS determines the tax amount, but before the formal IRS assessment of
the tax, a statutory notice of deficiency will be issued.
once the IRS determines the tax amount, but before the formal IRS assessment of
the tax, a statutory notice of deficiency will be issued.
What
follows is that upon issuance of the statutory notice of deficiency, the
taxpayer generally has 90 days to file a Tax Court petition for “redetermination of the deficiency“.
follows is that upon issuance of the statutory notice of deficiency, the
taxpayer generally has 90 days to file a Tax Court petition for “redetermination of the deficiency“.
Where
the taxpayer waives his right to appear before the US Tax Court with a petition
for redetermination of the deficiency issued by IRS–i.e., where no petition is
timely filed, the IRS may then statutorily “assess” the tax, by administratively
and formally recording the tax on the books of the United States Department of
the Treasury.
the taxpayer waives his right to appear before the US Tax Court with a petition
for redetermination of the deficiency issued by IRS–i.e., where no petition is
timely filed, the IRS may then statutorily “assess” the tax, by administratively
and formally recording the tax on the books of the United States Department of
the Treasury.
In
the United States, this formal statutory assessment is a critical act, as the
statutory tax lien that later arises is effective retroactively to the date of
the assessment, and encumbers all property and rights to property of the
taxpayer.
the United States, this formal statutory assessment is a critical act, as the
statutory tax lien that later arises is effective retroactively to the date of
the assessment, and encumbers all property and rights to property of the
taxpayer.
The
United States Tax Court provides a judicial forum in which affected persons can
dispute tax deficiencies determined by the Commissioner of Internal Revenue
prior to payment of the disputed amounts. The jurisdiction of the Tax Court
includes, but is not limited to the authority to hear: tax disputes concerning
notices of deficiency, notices of transferee liability, certain types of
declaratory judgment, readjustment and adjustment of partnership items, review
of the failure to abate interest, administrative costs, worker classification, relief
from joint and several liability on a joint return, and review of certain
collection actions,
United States Tax Court provides a judicial forum in which affected persons can
dispute tax deficiencies determined by the Commissioner of Internal Revenue
prior to payment of the disputed amounts. The jurisdiction of the Tax Court
includes, but is not limited to the authority to hear: tax disputes concerning
notices of deficiency, notices of transferee liability, certain types of
declaratory judgment, readjustment and adjustment of partnership items, review
of the failure to abate interest, administrative costs, worker classification, relief
from joint and several liability on a joint return, and review of certain
collection actions,
The
US Congress later amended the Internal Revenue Code, by inserting a new Section
7482, now providing that decisions of the Tax Court may be reviewed by the
applicable geographical United States Court of Appeals other than the Court of
Appeals for the Federal Circuit.
US Congress later amended the Internal Revenue Code, by inserting a new Section
7482, now providing that decisions of the Tax Court may be reviewed by the
applicable geographical United States Court of Appeals other than the Court of
Appeals for the Federal Circuit.
Also,
in the United States, “Small Tax Cases” are conducted under Internal
Revenue Code section 7463, and generally involve only amounts in controversy of
$50,000 or less for any one tax year. The “Small Tax Case” procedure
is available “at the option of the taxpayer.” These cases are neither
appealable nor precedential.
in the United States, “Small Tax Cases” are conducted under Internal
Revenue Code section 7463, and generally involve only amounts in controversy of
$50,000 or less for any one tax year. The “Small Tax Case” procedure
is available “at the option of the taxpayer.” These cases are neither
appealable nor precedential.
IV. Tax Practice and Procedure in the
United Kingdom.
United Kingdom.
The
Tax Tribunal system in the United Kingdom (“UK”), is administered by the
Ministry of Justice. It is a tiered court process, and, as such, cases are
allocated to each tier based on their complexity. Specifically, cases are
categorized into Default Paper, Basic, Standard and Complex. First–tier
Tribunal (Tax) hears appeals against decisions relating to tax made by Her
Majesty’s Revenue and Customs (HMRC). Appeals can be made by individuals or
organizations, single tax payers or large multi-national companies. Appeals
against HMRC decisions in relation to tax heard in the Tax Chamber include:
Income Tax, Corporation Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty
Land Tax, PAYE coding notices, National Insurance Contributions, Statutory
Payments, VAT or duties such as custom duties, excise duties or landfill tax,
aggregates or climate change levies, or, the amounts of tax or duty to be paid,
against penalties imposed upon them and against certain other decisions
Tax Tribunal system in the United Kingdom (“UK”), is administered by the
Ministry of Justice. It is a tiered court process, and, as such, cases are
allocated to each tier based on their complexity. Specifically, cases are
categorized into Default Paper, Basic, Standard and Complex. First–tier
Tribunal (Tax) hears appeals against decisions relating to tax made by Her
Majesty’s Revenue and Customs (HMRC). Appeals can be made by individuals or
organizations, single tax payers or large multi-national companies. Appeals
against HMRC decisions in relation to tax heard in the Tax Chamber include:
Income Tax, Corporation Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty
Land Tax, PAYE coding notices, National Insurance Contributions, Statutory
Payments, VAT or duties such as custom duties, excise duties or landfill tax,
aggregates or climate change levies, or, the amounts of tax or duty to be paid,
against penalties imposed upon them and against certain other decisions
According
to Olujimi Adedotun, the tax appeal process in the UK, is similar to that of
the United States and Nigeria. Her Majesty Revenue and Customs (HMRC) will
notify the taxpayer of the HMRC’s assessment of additional tax against the
taxpayer or a decision to disallow an expense or deduction as claimed by the
taxpayer.
to Olujimi Adedotun, the tax appeal process in the UK, is similar to that of
the United States and Nigeria. Her Majesty Revenue and Customs (HMRC) will
notify the taxpayer of the HMRC’s assessment of additional tax against the
taxpayer or a decision to disallow an expense or deduction as claimed by the
taxpayer.
The
taxpayer may then petition the HMRC to amend the tax assessment or decision. If
the HMRC refuses to amend, the taxpayer has the right to appeal to the Tax
Tribunal. Thus, where any decision made by HMRC can be appealed, a taxpayer
would be informed of his right to appeal.
taxpayer may then petition the HMRC to amend the tax assessment or decision. If
the HMRC refuses to amend, the taxpayer has the right to appeal to the Tax
Tribunal. Thus, where any decision made by HMRC can be appealed, a taxpayer
would be informed of his right to appeal.
There
are two (2) options available to the taxpayer, which are either to request an
independent review or to appeal directly to the Tax Tribunal.
are two (2) options available to the taxpayer, which are either to request an
independent review or to appeal directly to the Tax Tribunal.
Where
the taxpayer chooses an independent review, such review would be conducted by
an officer of HMRC who did not previously handle the case and a decision would
be communicated to the taxpayer within 45 days.
the taxpayer chooses an independent review, such review would be conducted by
an officer of HMRC who did not previously handle the case and a decision would
be communicated to the taxpayer within 45 days.
Adedotun
also stated that cases in the Default Paper category are usually decided
without a hearing once the parties have submitted documents relevant to their
case. The Tribunal will base its decision on the documents submitted and inform
the parties of its decision as soon as it completes its review. The procedure
for cases in the Basic category is similar. However, in addition to the
documents that may have been submitted to the Tax Tribunal, the case is decided
at an informal hearing where the parties present their case. It is typical that
judgment is given at the end of the hearing. For cases in the Standard and
Complex categories, there is also a frontloading of evidence to the Tax
Tribunal. The Tax Tribunal reviews the evidence prior to the hearing date. On
the chosen date, after both parties have made their case, the Tribunal judge
would either give judgment on the same day or may decide to deliberate further
on the matter. In the latter case, the Tribunal would communicate its decision within
28 days.
also stated that cases in the Default Paper category are usually decided
without a hearing once the parties have submitted documents relevant to their
case. The Tribunal will base its decision on the documents submitted and inform
the parties of its decision as soon as it completes its review. The procedure
for cases in the Basic category is similar. However, in addition to the
documents that may have been submitted to the Tax Tribunal, the case is decided
at an informal hearing where the parties present their case. It is typical that
judgment is given at the end of the hearing. For cases in the Standard and
Complex categories, there is also a frontloading of evidence to the Tax
Tribunal. The Tax Tribunal reviews the evidence prior to the hearing date. On
the chosen date, after both parties have made their case, the Tribunal judge
would either give judgment on the same day or may decide to deliberate further
on the matter. In the latter case, the Tribunal would communicate its decision within
28 days.
V. The Adventures of TSKG Consortium,
TSKG II, and T.S.K.J. NIGERIA LTD in Nigeria.
TSKG II, and T.S.K.J. NIGERIA LTD in Nigeria.
According
to Chudi Offodile, the Nigeria Liquefied Natural Gas Limited (NLNG) was
incorporated in 1989 with the Nigeria National Petroleum Company [NNPC] having
majority stake. In 1993, the Administration of Chief Ernest Shonekan agreed to
a reduction of Nigeria’s equity in the company, ceding 51% to the foreign share
holders in this order: Shell – 25.6%, TotalFina ELF – 15%, ENI- 10.4%. The
remaining 49% is held by the NNPC.
to Chudi Offodile, the Nigeria Liquefied Natural Gas Limited (NLNG) was
incorporated in 1989 with the Nigeria National Petroleum Company [NNPC] having
majority stake. In 1993, the Administration of Chief Ernest Shonekan agreed to
a reduction of Nigeria’s equity in the company, ceding 51% to the foreign share
holders in this order: Shell – 25.6%, TotalFina ELF – 15%, ENI- 10.4%. The
remaining 49% is held by the NNPC.
In
November, 1995, the engineering, Procurement and construction (EPC) contract
was awarded to the TSKJ consortium owned equally by Technip (French)
Snamprogetti, (Italy) Kellog, Brown & Root (KBR) (Halliburton) and Japanese
Gas Corp (JGC) at the cost of $3.6 billion knocking out the rival consortium
BCSA, comprised of Bechtel, Chiyoda, Spibat and Ansaldo. The rivalry between
the two consortia was so intense that it nearly derailed the Project.
November, 1995, the engineering, Procurement and construction (EPC) contract
was awarded to the TSKJ consortium owned equally by Technip (French)
Snamprogetti, (Italy) Kellog, Brown & Root (KBR) (Halliburton) and Japanese
Gas Corp (JGC) at the cost of $3.6 billion knocking out the rival consortium
BCSA, comprised of Bechtel, Chiyoda, Spibat and Ansaldo. The rivalry between
the two consortia was so intense that it nearly derailed the Project.
The
TSKJ consortium through its subsidiary, LNG SERVICOS, engaged the services of a
Company called TRI-STAR Investments Limited to among other services, promote
and support the consortium in its commercial action and assist in the
maintaining of ‘favorable relationship’ with the client and other Government
and business representatives when deemed desirable.
TSKJ consortium through its subsidiary, LNG SERVICOS, engaged the services of a
Company called TRI-STAR Investments Limited to among other services, promote
and support the consortium in its commercial action and assist in the
maintaining of ‘favorable relationship’ with the client and other Government
and business representatives when deemed desirable.
The
issues before Justice Ademola were whether the costs paid by TSKG Ii to its
Nigerian subsidiary were deductible as business expenses, whether the
Assessment and NORA issued by the FIRS were valid, and, whether the Order of
the NTAT that upheld the assessment and NORA can be enforced.
issues before Justice Ademola were whether the costs paid by TSKG Ii to its
Nigerian subsidiary were deductible as business expenses, whether the
Assessment and NORA issued by the FIRS were valid, and, whether the Order of
the NTAT that upheld the assessment and NORA can be enforced.
While
Ademola’s decision fell on the jurisdictional issues, we are of the opinion
that the court failed to deal with the substantive issues as to propriety of
the assessments and taxes assessed against TSKJ conglomerate.
Ademola’s decision fell on the jurisdictional issues, we are of the opinion
that the court failed to deal with the substantive issues as to propriety of
the assessments and taxes assessed against TSKJ conglomerate.
VI. TSKJ II Construces Internacionals
& Anor vs Federal Inland Revenue Service, Suit no. FHC/ABJ/TA/11/12. (the
judgment delivered by Justice A. F. A. Ademola on October 30, 2013, was
formally signed about 2p.m Tuesday, November 12, 2013.)
& Anor vs Federal Inland Revenue Service, Suit no. FHC/ABJ/TA/11/12. (the
judgment delivered by Justice A. F. A. Ademola on October 30, 2013, was
formally signed about 2p.m Tuesday, November 12, 2013.)
Herein,
TSKJ II Construces Internacionals (TSKJ) sued the Federal Inland Revenue
Service (FIRS) at the Federal High Court by challenging the judgment of the
NTAT—the tax appeal tribunal, after the NTAT had issued a ruling mandating TSKJ
to pay the sum of $12.9 million as tax liabilities for 1997, 1998,1999, 2000, 2001
and 2002 to the FIRS.
TSKJ II Construces Internacionals (TSKJ) sued the Federal Inland Revenue
Service (FIRS) at the Federal High Court by challenging the judgment of the
NTAT—the tax appeal tribunal, after the NTAT had issued a ruling mandating TSKJ
to pay the sum of $12.9 million as tax liabilities for 1997, 1998,1999, 2000, 2001
and 2002 to the FIRS.
As
we saw above, TSKJ, a non-resident tax payer had obtained a contract for the
construction of the Nigeria Liquefied Natural Gas (LNG). In executing the
contract, TSKJ II Construces Internacionals used its subsidiary—TSKJ Nigeria,
to render logistic support service to TSKJ II Construces Internacionals in the
course of the contract. TSKJ II Construces Internacionals then filed
self-assessment forms on deemed profits meaning that its profit could not be
ascertained.
we saw above, TSKJ, a non-resident tax payer had obtained a contract for the
construction of the Nigeria Liquefied Natural Gas (LNG). In executing the
contract, TSKJ II Construces Internacionals used its subsidiary—TSKJ Nigeria,
to render logistic support service to TSKJ II Construces Internacionals in the
course of the contract. TSKJ II Construces Internacionals then filed
self-assessment forms on deemed profits meaning that its profit could not be
ascertained.
TSKJ
II Construces Internacionals thereafter made deductions of recharges being the
cost paid to its local subsidiary.
II Construces Internacionals thereafter made deductions of recharges being the
cost paid to its local subsidiary.
FIRS
disallowed the said deductions on the ground that the deductions were not
allowed under the turnover basis assessment.
disallowed the said deductions on the ground that the deductions were not
allowed under the turnover basis assessment.
FIRS
consequently issued additional assessment in respect of the alleged wrong
deductions made by TSKJ II Construces Internacionals.
consequently issued additional assessment in respect of the alleged wrong
deductions made by TSKJ II Construces Internacionals.
TSKJ
II Construces Internacionals objected to the additional deductions and filed an
appeal with the tax appeal tribunal, asking that the additional assessment be
set aside. The NTAT dismissed TSKJ II Construces Internacionals’ claims
following which an appeal was filed at the Federal High Court.
II Construces Internacionals objected to the additional deductions and filed an
appeal with the tax appeal tribunal, asking that the additional assessment be
set aside. The NTAT dismissed TSKJ II Construces Internacionals’ claims
following which an appeal was filed at the Federal High Court.
Justice
Ademola upheld TSKJ II Construces Internacionals’ argument—i.e., that the NTAT lacked
the jurisdiction to entertain the suit on the ground that the FIRS
(Established) Act 2007 under which the tribunal was established conflicted with
the exclusive jurisdiction of the Federal High Court conferred by section 251
(1)(a) and (b) of the constitution. Justice Adeniyi Ademola, while giving
judgment in an appeal filed by TSKJ Construces Internacionals Unipessoal LDA,
declared tax appeal tribunals illegal saying the bodies were established in
contravention of section 251 (1) (a) and (b) of the Constitution of the Federal
Republic of Nigeria.
Ademola upheld TSKJ II Construces Internacionals’ argument—i.e., that the NTAT lacked
the jurisdiction to entertain the suit on the ground that the FIRS
(Established) Act 2007 under which the tribunal was established conflicted with
the exclusive jurisdiction of the Federal High Court conferred by section 251
(1)(a) and (b) of the constitution. Justice Adeniyi Ademola, while giving
judgment in an appeal filed by TSKJ Construces Internacionals Unipessoal LDA,
declared tax appeal tribunals illegal saying the bodies were established in
contravention of section 251 (1) (a) and (b) of the Constitution of the Federal
Republic of Nigeria.
The
judge also ordered the Coordinating Minister for the Economy and Minister of
Finance, Dr. Ngozi Okonjo-Iweala, to immediately disband the eight tax appeal
tribunals constituted by her, saying they were illegal. The judge held thus:
judge also ordered the Coordinating Minister for the Economy and Minister of
Finance, Dr. Ngozi Okonjo-Iweala, to immediately disband the eight tax appeal
tribunals constituted by her, saying they were illegal. The judge held thus:
“The respondent counsel’s arguments that Tax
Appeal Tribunal created by FIRS (Established) Act 2007 as being an
administrative panel and not a court affecting the exclusive jurisdiction of
the Federal High Court on federal revenue and taxation of companies are mere
semantics, misconceived and untenable in law in as much as their decisions
affect the civil rights and obligations of companies in relation to taxation
matters and revenue of the federal government.”
Appeal Tribunal created by FIRS (Established) Act 2007 as being an
administrative panel and not a court affecting the exclusive jurisdiction of
the Federal High Court on federal revenue and taxation of companies are mere
semantics, misconceived and untenable in law in as much as their decisions
affect the civil rights and obligations of companies in relation to taxation
matters and revenue of the federal government.”
The
judge found that the jurisdiction of the tribunal was in direct conflict with
the jurisdiction of the Federal High Court. He therefore advised that the
constitution should be amended before such jurisdiction could be conferred on
the tribunals. He ordered Ngozi Okonjo-Iweala, the coordinating minister for
the economy and minister of finance, to disband the eight Tax Appeal Tribunals
(TAT) across the six geo-political zones of the country:
judge found that the jurisdiction of the tribunal was in direct conflict with
the jurisdiction of the Federal High Court. He therefore advised that the
constitution should be amended before such jurisdiction could be conferred on
the tribunals. He ordered Ngozi Okonjo-Iweala, the coordinating minister for
the economy and minister of finance, to disband the eight Tax Appeal Tribunals
(TAT) across the six geo-political zones of the country:
“The
judgment and orders of this court made today (October 30, 2013) are to be
served on the attorney general of the federation and the minister of finance.”
judgment and orders of this court made today (October 30, 2013) are to be
served on the attorney general of the federation and the minister of finance.”
This
implies that the NTAT as constituted further to the provision of the Federal
Inland Revenue Service (Establishment) Act, 2007 now does not have jurisdiction
to entertain corporate tax matters – matters relating companies’ income tax,
petroleum tax, capital gains tax, value added tax and any matter relating to
the revenue of the federation.
implies that the NTAT as constituted further to the provision of the Federal
Inland Revenue Service (Establishment) Act, 2007 now does not have jurisdiction
to entertain corporate tax matters – matters relating companies’ income tax,
petroleum tax, capital gains tax, value added tax and any matter relating to
the revenue of the federation.
In
addition to the implication of this judgment on settlements already entered as
judgment of the Tax Appeal Tribunals, it also implies that any tax payer who is
aggrieved with any assessment or decision or action of the tax authority will
now file an appeal at the regular courts.
addition to the implication of this judgment on settlements already entered as
judgment of the Tax Appeal Tribunals, it also implies that any tax payer who is
aggrieved with any assessment or decision or action of the tax authority will
now file an appeal at the regular courts.
All
the commissioners in the Tax Appeal Tribunals across the six geopolitical zones
had on November 4, 2013 moved down to Abuja where they held crucial meetings
with the minister of finance as a way to look for way out of the judgment and
continue to sit.
the commissioners in the Tax Appeal Tribunals across the six geopolitical zones
had on November 4, 2013 moved down to Abuja where they held crucial meetings
with the minister of finance as a way to look for way out of the judgment and
continue to sit.
VII. Section 251 of the Constitution of the
Federal Republic of Nigeria (1999).
Federal Republic of Nigeria (1999).
Section
251 of the Constitution of the Federal Republic of Nigeria (1999) enumerates
the jurisdiction of the Nigerian Federal Courts thus:
251 of the Constitution of the Federal Republic of Nigeria (1999) enumerates
the jurisdiction of the Nigerian Federal Courts thus:
251. (1) Notwithstanding
anything to the contained in this Constitution and in addition to such other
jurisdiction as may be conferred upon it by an Act of the National Assembly,
the Federal High Court shall have and exercise jurisdiction to the exclusion of
any other court in civil causes and matters –
anything to the contained in this Constitution and in addition to such other
jurisdiction as may be conferred upon it by an Act of the National Assembly,
the Federal High Court shall have and exercise jurisdiction to the exclusion of
any other court in civil causes and matters –
(a) relating to the revenue of the Government of the Federation
in which the said Government or any organ thereof or a person suing or being
sued on behalf of the said Government is a party;
in which the said Government or any organ thereof or a person suing or being
sued on behalf of the said Government is a party;
(b) connected with or pertaining to the taxation of companies
and other bodies established or carrying on business in Nigeria and all other
persons subject to Federal taxation;
and other bodies established or carrying on business in Nigeria and all other
persons subject to Federal taxation;
(c) connected with or pertaining to customs and excise duties
and export duties, including any claim by or against the Nigeria Customs
Service or any member or officer thereof, arising from the performance of any
duty imposed under any regulation relating to customs and excise duties and
export duties;
and export duties, including any claim by or against the Nigeria Customs
Service or any member or officer thereof, arising from the performance of any
duty imposed under any regulation relating to customs and excise duties and
export duties;
(d) connected with or pertaining to banking, banks, other
financial institutions, including any action between one bank and another, any
action by or against the Central Bank of Nigeria arising from banking, foreign
exchange, coinage, legal tender, bills of exchange, letters of credit,
promissory notes and other fiscal measures:
financial institutions, including any action between one bank and another, any
action by or against the Central Bank of Nigeria arising from banking, foreign
exchange, coinage, legal tender, bills of exchange, letters of credit,
promissory notes and other fiscal measures:
Provided
that this paragraph shall not apply to any dispute between an individual
customer and his bank in respect of transactions between the individual
customer and the bank;
that this paragraph shall not apply to any dispute between an individual
customer and his bank in respect of transactions between the individual
customer and the bank;
(e) arising from the operation of the Companies and Allied
Matters Act or any other enactment replacing the Act or regulating the
operation of companies incorporated under the Companies and Allied Matters Act;…
Matters Act or any other enactment replacing the Act or regulating the
operation of companies incorporated under the Companies and Allied Matters Act;…
We
disagree with Justice Ademola, when he declared that tax appeal tribunals
illegal saying the bodies were established in contravention of section 251 (1)
(a) and (b) of the Constitution of the Federal Republic of Nigeria. The fact is
that this Constitutional provision notwithstanding, the controversy rages on as
some borderline cases have presented difficulties to the Court to define. See,
e.g., Madukolu –v- Nkemdilim (1962) 2 SCNLR 341, S.P.D.C (Nig.) Ltd –v-
Sirpi-Alusteel Const. Ltd (2007) 1 NWLR (Pt. 1067) p 128; Jammal
Steel Structures Ltd. –v- African Continental Bank Ltd. (1973) All N.
L. R (PT 2) 208, Bronik Motors Ltd. –v- Wema Bank (1983) 1 SCNLR 296, Savannah
Bank (Nig.) Ltd –v- Pan Atlantic (1987) 1 A.N.L.R (PT 1) 31 etc.,
stating with exactitude which of the two courts has jurisdiction in a given
commercial matter.
disagree with Justice Ademola, when he declared that tax appeal tribunals
illegal saying the bodies were established in contravention of section 251 (1)
(a) and (b) of the Constitution of the Federal Republic of Nigeria. The fact is
that this Constitutional provision notwithstanding, the controversy rages on as
some borderline cases have presented difficulties to the Court to define. See,
e.g., Madukolu –v- Nkemdilim (1962) 2 SCNLR 341, S.P.D.C (Nig.) Ltd –v-
Sirpi-Alusteel Const. Ltd (2007) 1 NWLR (Pt. 1067) p 128; Jammal
Steel Structures Ltd. –v- African Continental Bank Ltd. (1973) All N.
L. R (PT 2) 208, Bronik Motors Ltd. –v- Wema Bank (1983) 1 SCNLR 296, Savannah
Bank (Nig.) Ltd –v- Pan Atlantic (1987) 1 A.N.L.R (PT 1) 31 etc.,
stating with exactitude which of the two courts has jurisdiction in a given
commercial matter.
VIII. Analysis and Deductions
As
we stated above, our position is that notwithstanding the decision in TSKJ
II CONSTRUCES INTERNACIONALS UNIPESSOAL LDA vs FEDERAL INLAND REVENUE SERVICE
(FIRS), Abuja Federal High Court, Suit No. FHC/ABJ/TA/11/12, the
decision in Standard Trust Bank Plc –v- Chief Emmanuel Olusola (2007)
9 CLRN 41, clearly shows that the
Tax Appeal Tribunals can have concurrent jurisdiction with the Federal High
Courts on matters dealing with taxation.
we stated above, our position is that notwithstanding the decision in TSKJ
II CONSTRUCES INTERNACIONALS UNIPESSOAL LDA vs FEDERAL INLAND REVENUE SERVICE
(FIRS), Abuja Federal High Court, Suit No. FHC/ABJ/TA/11/12, the
decision in Standard Trust Bank Plc –v- Chief Emmanuel Olusola (2007)
9 CLRN 41, clearly shows that the
Tax Appeal Tribunals can have concurrent jurisdiction with the Federal High
Courts on matters dealing with taxation.
In
Nigeria, for a jurisdictional test, the foundations of such a test was laid by
the Supreme Court
Nigeria, for a jurisdictional test, the foundations of such a test was laid by
the Supreme Court
in
NEPA
–v- Edegbedero (2002) 18 NWLR (Pt. 798) p79 SC. per Tobi JSC at page
100 as follows:
NEPA
–v- Edegbedero (2002) 18 NWLR (Pt. 798) p79 SC. per Tobi JSC at page
100 as follows:
“ In construing section 230(1) of the 1979
constitution as amended, two important matters arise. They are the parties in
the litigation as well as the subject-matter of the litigation”.
constitution as amended, two important matters arise. They are the parties in
the litigation as well as the subject-matter of the litigation”.
Thus,
the elements of the jurisdiction test are (i) ‘what is the cause of action and
the subject matter of litigation as determined from the claimants writ of
summons, particulars of claim (if any) and statement of claim’, and (ii) ‘who
are the parties’.
the elements of the jurisdiction test are (i) ‘what is the cause of action and
the subject matter of litigation as determined from the claimants writ of
summons, particulars of claim (if any) and statement of claim’, and (ii) ‘who
are the parties’.
While
the two elements above may apply concurrently, they are independent and
disjunctive indices, dependent on the exact paragraphs of section 251(1) in
issue and the facts of each case. According to F.O Akinrele, it is very
important to consider the cause of action and subject matter first before
referring to the parties. A reference to the parties without first having a
clear view of the cause of action and subject matter may mislead the court.
Further, the exception created in the case of simple contracts can only be
determined by having regard to the cause of action and the subject matter first
and foremost. It is also not enough to conclude that it is a contractual matter
without having regard to the relevant paragraph of section 251(1) to determine
the subject of the contract.
the two elements above may apply concurrently, they are independent and
disjunctive indices, dependent on the exact paragraphs of section 251(1) in
issue and the facts of each case. According to F.O Akinrele, it is very
important to consider the cause of action and subject matter first before
referring to the parties. A reference to the parties without first having a
clear view of the cause of action and subject matter may mislead the court.
Further, the exception created in the case of simple contracts can only be
determined by having regard to the cause of action and the subject matter first
and foremost. It is also not enough to conclude that it is a contractual matter
without having regard to the relevant paragraph of section 251(1) to determine
the subject of the contract.
In
addition, a consideration of the parties is particularly relevant where the
Federal Government or any of its agencies is a party to the action, as section
251(1) paragraphs (a), (p), (q), (r) and (s) tends to deal with parties more
than the subject matter; subject to the exception as it relates to simple
contracts.
addition, a consideration of the parties is particularly relevant where the
Federal Government or any of its agencies is a party to the action, as section
251(1) paragraphs (a), (p), (q), (r) and (s) tends to deal with parties more
than the subject matter; subject to the exception as it relates to simple
contracts.
Coming
back to TSKJ II CONSTRUCES INTERNACIONALS UNIPESSOAL LDA vs FEDERAL INLAND
REVENUE SERVICE (FIRS), the matter was between TSKJ and the FBIR
related to contracts performed between TSKJ and its subsidiaries and had no
governmental flavor. The underlying project concerned the works performed by
TSKJ conglomerates. For instance, it had nothing to do with federal elections,
or Nigerian Airways. In addition, it was not a contract involving maritime or
construction of airport.
back to TSKJ II CONSTRUCES INTERNACIONALS UNIPESSOAL LDA vs FEDERAL INLAND
REVENUE SERVICE (FIRS), the matter was between TSKJ and the FBIR
related to contracts performed between TSKJ and its subsidiaries and had no
governmental flavor. The underlying project concerned the works performed by
TSKJ conglomerates. For instance, it had nothing to do with federal elections,
or Nigerian Airways. In addition, it was not a contract involving maritime or
construction of airport.
It
would have been a proper federal case if TSKJ was suing the federal and/or
state government, or it was for the enforcement of right of way over the seas.
would have been a proper federal case if TSKJ was suing the federal and/or
state government, or it was for the enforcement of right of way over the seas.
IX. Conclusion
For
the fact that the issues before Justice Ademola were whether the costs paid by
TSKG Ii to its Nigerian subsidiary were deductible as business expenses,
whether the Assessment and NORA issued by the FIRS were valid, and, whether the
Order of the NTAT that upheld the assessment and NORA can be enforced, these
are not strictly federal government issues.
the fact that the issues before Justice Ademola were whether the costs paid by
TSKG Ii to its Nigerian subsidiary were deductible as business expenses,
whether the Assessment and NORA issued by the FIRS were valid, and, whether the
Order of the NTAT that upheld the assessment and NORA can be enforced, these
are not strictly federal government issues.
These
are simple business deductions and have no bearing on governmental interests. Such
cases should remain in the tax court.
are simple business deductions and have no bearing on governmental interests. Such
cases should remain in the tax court.
Dr. Olumide
Kolawole Obayemi, LL.M. (Alberta Canada); LL.M. in Taxation Law; SJD in
International Legal Studies, is of the Bars of the Federal Republic of Nigeria
and State of California. He is admitted to practice before the United States Tax
Court in Washington, DC.
Kolawole Obayemi, LL.M. (Alberta Canada); LL.M. in Taxation Law; SJD in
International Legal Studies, is of the Bars of the Federal Republic of Nigeria
and State of California. He is admitted to practice before the United States Tax
Court in Washington, DC.