Thisday, reports the A Federal High Court in Abuja has restrained Tax Appeal Tribunals established by the Federal Inland Revenue Service (FIRS) from adjudicating on tax matters and federal revenue. According to the paper the Judge 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.
Crux of the Case
- TSKJ had dragged the FIRS to court challenging the judgment of a tax appeal tribunal wherein the tribunal asked the company to pay the sum of $12.9 million as tax liabilities for 1997, 1998,1999,2000,2001 and 2002 to FIRS.
- TSKJ, a non-resident tax payer obtained a contract for the construction of the Nigeria Liquefied Natural Gas (LNG). In executing the contract, the company used TSKJ Nigeria, its subsidiary to render logistic support service to it in the course of the contract.
- The fact of the case as reviewed by the court showed that TSKJ filed self-assessment forms on deemed profits meaning that its profit could not be ascertained.
- The company 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. FIRS consequently issued additional assessment in respect of the wrong deductions made by TSKJ.
- The company objected to the additional deductions and filed an appeal at the tax appeal tribunal, asking that the additional assessment be set aside. The tribunal also dismissed the company’s claims following which an appeal was filed at the Federal High Court.
- Justice Ademola upheld the argument of the company that the tribunal 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.
- The judge said: “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.”
- 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 consequently, upheld the appeal by TSKJ.
The judge ordered the finance minister to disband the tribunals with immediate effect
For those who are wondering how big a deal this is, typically when the Tax Tribunal hears your Case and you loose there is little you can do except paying the outstanding liabilities inclusive of penalties (even though it also recognizes your rights to appeal to the courts). This ruling basically nullifies the Tribunal as the final decision maker in this instance and reinstates that power to the Court’s. It will be interesting to see if this ruling gets challenged at a higher court.