JUDICIARY OF TANZANIA: TRA, AG WIN APPEAL OVER 145BN/- JUDICIAL REVIEW TAX DISPUTE

By FAUSTINE KAPAMA-Judiciary

THE Court of Appeal has nullified the proceedings of the High Court, which granted extension of time to Milambo Limited to apply for judicial review in a tax matter relating to payments of over 145bn/- to Tanzania Revenue Authority (TRA).

Justices Stella Mugasha, Zepharine Galeba and Issa Maige ruled against Milambo Limited, the respondent, after allowing an appeal lodged by the TRA and the Attorney General of the United Republic of Tanzania, the appellants, to oppose the decision of the High Court.

“We nullify the entire proceedings and judgment in Miscellaneous Civil Application No. 57 of 2020 and the incidental orders. Thus, the first ground of appeal is merited since it disposes the entire appeal (……). The appeal is allowed with costs,” they declared.

In one of the grounds of appeal, the counsel for the appellants had submitted that the trial court erred in law by holding that it has jurisdiction to invoke judicial review powers of matters including matters arising from Revenue Laws administered by the Tanzania Revenue Authority.

The justices said in their judgment delivered recently that the High Court embarked on a nullity having wrongly assumed jurisdiction which was expressly ousted by the prescribed specific forums established under the Tax Administration Act and the Tax Revenue Appeals Act.

“It erroneously crowned itself with jurisdiction that it did not possess in entertaining and determining the respondent's application for extension of time to apply for leave to pursue prerogative orders. In the circumstances, the High Court proceedings and the resulting ruling cannot be spared,” they said.

The justices noted that the respondent all along claimed TRA illegally collected her monies as settlement of outstanding liability of corporate tax, capital gain tax and stamp duty, which fall under the provisions of sections 88 (1), (2) and 89 of the Income Tax Act and section 5 (1) (a) and (b) of the Stamp Duty Act.

“These are the revenue laws administered by (TRA) which is prescribed as a central body for the assessment and collection of specified revenue mandated to administer and enforce the laws relating to such revenue and the related matters,” the justices said.

They pointed out that as the respondent complaint hinged on the assessment and collection of taxes arising from the revenue laws administered by TRA the grievances were justiciable in the Tax Revenue Appeals Board, thus outside the competence of the High Court be it in a suit or by judicial review.

Milambo Limited, the respondent, entered into a share purchase agreement with Vodacom Group Limited over the shares held by the respondent in Vodacom Tanzania Public Limited Company.

On November 20, 2017, the respondent sought the indulgence of the TRA to issue a private ruling in order to confirm if the intended share purchase transfer attracted corporate and capital gain taxes under the Income Tax Act, 2004 (the ITA).

The respective private ruling was handed down on January 11, 2018 confirming that the corporate income tax was not applicable under the intended share purchase agreement.

This prompted the respondent and Vodacom Group Limited to sign a share purchase agreement on February 15, 018 and proceeded with securing various approvals from the Capital Markets and Securities Authorities.

The compliance with the regulatory requirements for completion of the share purchase transaction was pursued. After the share purchase agreement was executed, the TRA revoked the private ruling on February 14, 2019, for a reason that its validity had expired.

In respect of the uncompleted share purchase transaction, the respondent sought and was granted a second private ruling which was however revoked on September 21, 2019. Undaunted, the respondent sought an administrative review against the revocation, but no response was given by the TRA.

On September 24, 2019 instead, the TRA notified the respondent on the existing tax liability on sales of shares in Vodacom (T) listed at the Dar-es-salaam Stock Exchange.

It was also brought to the attention of the respondent that since the realization transaction was concluded, a jeopardy assessment was issued and that the collection of due taxes was to be effected through Agency Notice in order to safeguard the interests of the Government.

This was effected to by the TRA who on September 25, 2019 issued an Agency Notice to the National Bank of Commerce directing the Bank with immediate effect, to collect a sum of 146,118,017,395/- from monies held in the Bank Accounts of Vodacom Group Limited and remit the same to the tax authority.

On September 26, 2019, the Managing Director of the Bank notified the respondent on existence of the Agency Notice. The Bank obliged and on September 27, 2019 notified the respondent to have remitted the sum in question to the TRA in settlement of the capital gains tax and stamp duty she owed to.

Discontented with the revocation of the second ruling and the Agency Notice, the respondent lodged a notice of objection against the assessment of the corporate tax and stamp duty.

However, despite several reminders as alleged, the matter was not attended to by TRA, which prompted the respondent to seek intervention of the Attorney General, which also bore no fruits. It is against the said backdrop, that the respondent opted to seek redress by invoking the remedy of judicial review.