Last updated on August 16th, 2024 at 09:50 am
Topic: Payment of 30% of the Tax in Dispute in Installments
Date of Judgment: 5th July 2024
Court: Tax Appeals Tribunal at Kampala
Case Number/Citation: Miscellaneous Application No. 871 of 2024 (arising from TAT No. 135/2024)
Judges: Mr. Siraj Ali (Chairman), Ms. Christine Katwe, and Ms. Najjemba Rosemary
Summary Facts of the Case
Nile Breweries Limited ( the Applicant) allegedly exported goods and was assessed by the Uganda Revenue Authority (URA/the Respondent) for Local Excise Duty and Value Added Tax totaling UGX 18,509,052,729.
The Applicant challenged this assessment as unlawful and filed an Objection with the Commissioner General of URA who upheld the assessment prompting the Applicant to file for a review of the objection decision with the Tax Appeals Tribunal.
In the Instant application, the Applicant sought a temporary injunction against URA not to enforce the assessment pending the determination of the review of the objection decision.
URA challenged the application on the ground that the Applicant had no locus standi because it had not paid the mandatory 30% of the Tax amount in dispute as required under Section 15(1) of the Tax Appeals Tribunal Act.
The Applicant, on the other hand, contended that it had no problem paying the 30% of the Tax amount in dispute save that the amount be paid in 4 equal installments of UGX 1,388,178,955, citing that its business was heavily dependant on cash flow and given the significance of the amount in question, paying it in one go would affect its business performance.
URA argued that the Tribunal had no power to order the payment of tax in installments.
Legal Issues Before the Court
- Whether to grant a temporary injunction to restrain URA from enforcing the tax assessment pending the determination of the main application.
The Decision of the Tribunal
The Tribunal granted the temporary injunction, allowing Nile Breweries Limited to pay 30% of the disputed tax amount in 4 equal monthly installments starting on 15th July 2024.
The Applicant had met the standard conditions for a grant of a temporary injunction ie demonstrated a prima facie case with a probability of success, it would suffer irreparable injury if required to pay the full amount immediately, and that the balance of convenience favored the Applicant.
The Tribunal reasoned that the Applicant being willing to pay 30% of the tax amount in dispute albeit in installments could not be compared to a party that has not complied with Section 15 of the Tax Appeals Tribunal Act.
Further, the Tribunal noted the potential for irreparable damage that would be occasioned if the Applicant were to pay the entire 30% at a go, resulting in inadequate cash flows, given the nature of the Applicant’s business which involves long-standing contractual relationships with suppliers of raw materials and purchasers of finished products alike.
Key Quote: “The evidence before us shows that the Applicant is willing to pay 30% of the tax in dispute. However, owing to the substantial amounts involved, it can only pay the amount in question in installments. The Applicant cannot in these circumstances be compared to a litigant who has failed to comply with Section 15 of the Act. Owing to the substantial amounts involved, we are of the opinion that this is a proper case for the Applicant to be permitted to pay 30% of the Tax in dispute in installments.” – The Tribunal.
Law Applied
- Section 15 of the Tax Appeals Tribunal Act
- Kiyimba Kaggwa v. Haji Abdu Nasser Katende [1985] HCB 43
- Giella v. Cassman Brown & Co. [1973] E.A 358
- Kigongo Edward Nakabale v. Kakeeto Rogers & Anor Misc. Application No. 144 of 2017
Counsel on Record
- For the Applicant: Mr. Bruce Musinguzi, Henry Agaba, and Charlotte Ahabwe
- For the Respondent: Ms. Gloria Twinomugisha and Charlotte Katutu
Conclusion
This case demonstrates the Tax Tribunal’s flexibility to allow the payment by installments of the mandatory 30% of the tax in dispute where significant amounts of cash are involved and the taxpayer is a cash-intensive business.