Aeromaritime Nigeria Ltd V. Lagos State Internal Revenue Board (2001)
LawGlobal-Hub Lead Judgment Report
O. ADEREMI, J.C.A.,
By an originating summons, the respondent who was the applicant at the court below (High Court of Lagos State sitting at Lagos: coram Alabi J.) claimed against the appellant who was the respondent in that court as follows:-
(a) a declaration that by virtue of the provision of Section 50 and Section 56 of the Personal Income Tax Law Lagos State 1994 Cap 142, the applicant is empowered to distrain the the respondent of his goods chattels, land or premises etc for non-payment of Tax; being unremitted deductions in respect of P.A.Y.E. and W.H.T. under the said law or/and under Personal Income Tax Decree No. 104 of 1993.
(b) an order distraining the respondent of its goods, chattels, land, premises etc for non-payment of N10,445,637.75k (ten million for hundred and fifty-five thousand six hundred and thirty seven naira seventy-five kobo) being outstanding tax payable by the respondent to the applicant under the Pay As Your Earn (PAYE) deductions and withholding taxes for the year 1995 until the settlement of the tax liability.
The originating Summons was supported by a 17 – paragraph affidavit to which it attached some documents as exhibits. The appellant, in opposition, filed a 14 – paragraph counter-affidavit to which it attached a number of documents as exhibits. The appellant subsequently filed a Notice of Preliminary Objection to the suit contending that the court below lacked the jurisdiction to entertain the suit: The preliminary objection was argued and the learned trial judge dismissed it. In a considered judgment after entertaining arguments of counsel from both sides on the originating summons, the learned trial judge on the 2nd of October 1997 granted all the reliefs sought by the applicant.
Being dissatisfied with the judgment the respondent/appellant with leave of court entered an amended a Notice of Appeal which carries two grounds of appeal. Three issues were distilled for determinating and as set out in the appellant’s brief of arguments, they are as follows:-
(1) Can the High Court of Lagos State enter judgment to distrain for tax under the Personal Income Tax Law of Lagos State when there is a pending appeal against assessment before the Body of Appeal, Commissioners created under the law?
(2) was the judge right to adopt the originating Summons procedure in a claim to recover tax when there were sharp conflicting evidence in the numerous affidavits filed by the parties?
(3) was the judge right to make an order to distrain for tax when assessment was not yet final and conclusive as provided by the law?
For its part, the respondent raised, through its brief of argument, three issues for determination and they are as follows:-
(1) whether there is a pending valid appeal against tax assessment under the Personal Income Tax Law Cap. 124 before the commencement of this action in respect of the tax claimed?
(2) whether the learned trial judge erred in law when he decided the case on the Originating Summons and affidavit evidence alone?
(3) whether the learned trial judge was right to have made a distraining order against the appellant for non-payment of the tax claimed?
I shall take issues one and three together. On issue one the appellant argued that the State High Court cannot entertain a claim to distrain for tax when a notice of objection or an appeal against assessment is pending, it placed reliance on Section 47(2) of the Personal Income Tax Law of Lagos State 1991. According to it, ‘the effect and consequence of Section 47(2) of the afore-mentioned law are better explained by an examination of the provisions of Sections 36, 37, 38, 39, 40, 41, 42, 43 and 44 of the said law. Arguing, further, it contended that going by the facts of this case, the appeal in this matter could not be said to have arisen, under Section 43 of the Law because that appeal is still pending and no decision has been reached by the Body of Appeal Commissioners. It was its further submission that an action to recover tax under Sections 49 and 50 cannot be entertained by the High Court of Lagos State having regard to the provisions of Section 47 which stipulates that such recovery action must be put in abeyance pending the decision on the appeal by Body of Appeal Commissioners. It urged this court, on this 8 issue, to hold that the lower court was lacking in jurisdictional power to entertain a tax recovery action and make a distraining order against the appellant whilst its (appellant) appeal against assessment was still pending before the appeal Commissioners. On issue three, it was the contention of the appellant that having regard to the procedure for tax assessment as set out in Sections 36 to 43 of the Personal Income Tax Law the assessment placed on the respondent could not be said to be final and conclusive. And, therefore, an action will not lie to distrain for tax based on an incomplete assessment process, he founded this argument on Section 44(1) and (2) of the Law.
The respondent, in its brief of argument, on issue one, submitted that because the appellant is a company incorporated under the Companies and Allied Matters Act 1990, it is subject to company tax under the Company Income Tax Act and not Personal Income Tax under the Personal Income Tax Law or Act. Therefore, it further argued, the right of objection and appeal against tax assessment conferred on the appellant is under the Company Income Tax Act (CITA) Cap 60, 1990. On the other hand, it again submitted under Personal Income Tax Law (PITL) Cap. 142 Law of Lagos State 1994 and Personal Income Tax Decree 104 of 1993 (PITI) the rights of objection and appeal against tax assessment are conferred on individual tax payers. It further reasoned that since it is the employees of the appellant that are subject to personal income tax, the appellant, being the employer, has no right of objection or appeal against any tax assessment on its employees under Personal Income Tax Law or Act. The role of the appellant is that of a collecting agent deducting tax Pay As You Earn (P.A.Y.E.) and withholding Tax (W.H.T) systems of tax collection reliance was placed on Section 55 and 56 of P.I.T.L. Therefore it is the employees of the appellant who are tax payers under the P.I.T.L. and Section 33; 36 – 45 of P.I.T.L. confer on them to the exclusion of the appellant, the right of objection and the right of appeal. There was therefore no pending appeal before the commencement of this suit. On issue three, while referring 50, 51, 54, 55 and 56 of Personal Income Tax Law Cap 142 Laws of Lagos State 1994, Regulations 25, 27 and 29 of Personal Income Tax (Employment) Regulation 1994 it concluded its submission by saying that the trial judge has the power and indeed, was right to have made a distraining order against the appellant for non-payment of the tax.
Before I start on the consideration of the arguments of counsel on both sides I wish to observe that from the welter of documentary evidence from both the appellant and the respondent it is quite obvious that tax payable by the employees of the appellant as opposed to the appellant itself is the basis of the action and it is the non-remittance of the tax deducted by the appellant from its employees in respect of P.A.Y. E. (Pay As You Earn) and W.H.T. (Withholding Tax) that has informed the bringing of this action to distrain the respondent/appellant of its goods for non-payment of the sum of N10,445,637.75 being outstanding tax payable by the respondent/appellant to the applicant/respondent as P.A.Y.E. deductions and W.H.T. for the year 1996. As I have said the contention of the appellant is that it is the Personal Income Tax Laws of Lagos State Cap 142 that is applicable and by virtue of that law, the High Court of Lagos State cannot entertain a claim to distrain for tax when a Notice of Objection or an appeal against assessment is pending. On the other hand, the respondent argued that since it is the employees of the appellant that are subject to personal income tax and the appellant being their employer lacks any legal right to object or appeal against any tax assessment that may be imposed on the employees. This is because according to it, the role of the appellant under the Personal Income Tax Law is that of a collecting agent. It is the employees who as the tax payers, that have the right of objection under Section 33 and the right of appeal under Section 36 – 45 of the Personal Income Tax Law in respect of assessment of tax and not the appellant, the employers who are mere collecting agents.
The above is the resume of the submissions of the two parties. As I have said above, the tax payers, in the circumstances of this case, are the employees of the appellant/company – their employers. It is they who bear the brunt of tax assessment. And if anybody is aggrieved or complains that the tax assessment is excessive it is the person who pays the tax.He is the aggrieved person. it is he alone (tax payer) that has the burden of proving that tax assssment is excessive: see IHEKWOABA VS COM. OF INTERNAL REVENUE (1958) 3 F.S.C. 67.
The appellant had contended that any action for the recovery of tax shall by virtue of the provision of Section 47(2) of the Personal Income Tax Law Cap. 142 Laws of Lagos State be put in abeyance once it is established that an appeal is pending. That sub-section provides:
“Collection of income tax in any case where notice of an objection or an appeal has been given by or on behalf of the taxable person shall remain in abeyance until such objection or appeal is determined, save that the Board may enforce payment of that portion if any, of the tax which is not in dispute.”
That submission by the appellant cannot be faulted.
Indeed, the respondent, in its brief of argument is agreeable with it. But for an action for such recovery to be put in abeyance a pre-condition must be complied with and that is the pendency of a valid appeal. And as I have said only an aggrieved party can appeal or raise an objection against a perceived excessive assessment. This court in interpreting Section 60 of Personal Income Tax Decree No. 104 of 1993 which is in pari material with the provisions of section 36 of the Personal Income Tax Law of Lagos State said 7UP BOTTLING COMPANY PLC. VS LAGOS STATE INTERNAL REVENUE BOARD (200) 3 NWLR (Pt. 610) 565 per Nzeako J.C.A. at page 605 thus:
“It is the employee from whom tax is recovered by deduction from his emolument, who has a right to objections. It is not the employer such as the appellant in this appeal ………………………………………………..
The taxable person under the PAYE system is the employee, not the employer.”
Who then in the instant case appealed or raised an objection to the assessment in this case. The answer can be found in paragraphs 4 and 5 of the counter-affidavit sworn to by Stephen Onyejose a legal practitioner in the firm of solicitors representing the defendant/appellant; and they are as follows:-
Para 4:
“By-a Demand Notice Number TA/05/0001 of April 7, 1997, the plaintiff herein sent to the Defendant a Tax Assessment of N10,445,637.75 based on the report of the plaintiff’s 1996 Statutory Tax Audit”
Para 5
“The defendant objected to the Assessment as contained in the Demand Notice by sending to the Plaintiff a Notice of Objection dated April 14, 1997. It is clear from the depositions in paragraphs 4 and 5 Supra that it is the defendant/appellant that objected to Assessment and not the employees themselves.The law is sacrosanct that where a party is dissatisfied with, and wishing to appeal from a decision in a case to which he is a party, he must act strictly in conformity with the procedure laid down failure to so do is fatal see AROYEWUN VS ADEBANJI (1976) 11 S.C. 33.
I have said somewhere in this judgment that only an aggrieved person can raise an objection to or appeal against an excessive assessment. The appellant is not an aggrieved person. Therefore the objection it took on the tax assessment has no validity in law. A fortiori, Section 47(2) of P.I.T.L. of Lagos State is not applicable consequently, I answer issue one in the appellant’s brief of argument in the affirmative. And because there was no pending appeal against the tax assessment as at the time of the commencement of this action in respect of the tax claim going by the printed evidence I have reviewed supra, I answer issue one in the respondent’s brief of argument in the negative.
I shall now proceed to treat issue three on each of the briefs. It is whether the learned trial judge was right to make a distraining order against the appellant over the nonpayment of the tax claimed, where under the provisions of sections 36 .to 43 of P.I.T.L. which relate to procedure for tax assessment and collection of same, the assessment of the tax payable cannot be said to be final and conclusive in the sense that an objection or appeal has been properly lodged against the assessment, then a distraining order against the defaulting payer cannot be made. In the instant case, I have held that no valid objection to the tax assessment has been laid by the employees the tax payers under the PAYE system. It has been submitted rightly that an employer, by virtue of Sections 55(1) – 56 of P.I.T.L. is under a duty to income tax chargeable upon any employee and which has been deducted from the emoluments of the employee. The payment and recovery of tax deducted under P.A.Y.E. from an employee are regulated by Personal Income Tax (Employment) Regulations 1994. Regulation 25 thereof imposes a duty on the employer to pay over to the Tax Authority – all sums of money deducted from the net monthly emoluments of the employees. I pause to say that by virtue of Regulation 12 only employees whose emoluments, have been subjected to taxation can be said to be an aggrieved employee tax – payer with legal right to object to such taxation and the amount deducted. Exhibit A attached to the Originating Summons is the Report on 1996 Statutory Tax Audit which is a product of the respondent’s power of inspection under Regulation 29 Exhibit B is the Demand Notice showing the outstanding tax.
Again, as I have said, there was no objection to Exhibit B by the employees who are the rightful persons in law, to object. The power of the Tax Authority to collect or recover the tax assessed is provided for by Section 50(1) of P.I.T.L. which states:
“For the purpose of enforcing payment of tax due from any person charged with the payment of such tax and in addition to any other power conferred under this Part where any person fails, neglects or refuses to pay any tax charged upon demand made by the Board in the manner provided in the last foregoing section of this Part, the/Board may –
(a) for the non-payment of such tax distrain
(i) the person charged by his goods or other chattels including money bills of exchange, bond’s or other securities;
(ii) upon any land premises in place in respect of which the person charged is the owner
(b) subject to sub-section (4) below recover the amount of tax due by sale of anything so distrained.
Suffice it to say the sub-section (4) forbids the sale of any immovable property without the order of the High Court. From the provisions of the Law and Regulations which I have recapitulated supra, issue three, in each of the appellant’s and respondents brief must be answered in the affirmative. And I so answer them.
I now proceed to address issue two on each of the briefs. I am in full agreement with the appellant that the law is now well settled that originating summons is not a court process to be employed in the resolution of a case in which likelihood of a factual dispute will occur It is only ideal for construing and interpreting documents see (1) N.B.N. vs ALAKIJA (1978) 9 – 10 S.C 59 at 71 and (2) UNIVERSITY OF LAGOS VS AIGORO (1991)3 NWLR (pt. 179) 376.
Having stated the law as it is I wish to say that having balanced the affidavit in support of the originating summons against the counter affidavit sworn to by Stephen Onyejore Esq for the defendant/applicant in the court below I cannot decipher any factual conflict between the two. Even if there is, the deponent to the counter-affidavit Onyejose Esq had deposed in paragraph 3 of the counter-affidavit thus:
“The facts deposed to herein are those within my personal knowledge and, where so stated as in informed me by G. O. Olorunseyi, the Group Accountant of the Defendant Company which said information I verily believe.”
I have held above that it is only the employees – the tax payers – who can lawfully raise objection on the tax assessment, and not the defendant/appellant/company. That counter-affidavit to the extent to which it was not deposed to with the authority and consent of the employees is lacking in legal efficacy. It should not be countenanced. The result then is that the affidavit in support of the Summons remains unchallenged. I therefore without any hesitation answer issue, two on each of the briefs of the appellant and the respondent in the affirmative. There was no counter-affidavit, in law which conflicted with the affidavit.
In the final analysis, for all I have said, above, this appeal has no merit. It must be dismissed. And it is accordingly dismissed with cost of N5,000.00 to the respondent.
Other Citations: (2001)LCN/0953(CA)