Aluminium Industries Aktien Gesellschaft V. Federal Board Of Inland Revenue (1971)

LawGlobal-Hub Lead Judgment Report

LEWIS, J.S.C.

Aluminium Industries Aktien Geselschaft (hereinafter referred to as “Appellant Company”) was assessed by the Federal Board of Inland Revenue for tax in the 1962-1963 year of assessment in the sum of 1,900 pounds, in the 1963 – 1964 year of assessment in the sum of 3,000 pounds and in the 1964 – 1965 year of assessment in the sum of 6,428 pounds, and appealed against that assessment to the Appeal Commissioners who by a majority on December 20th, 1968 allowed the appeal and discharged the assessment, though a minority of two of the appeal commissioners dissented from the decision of the majority. The Federal Board of Inland Revenue then appealed to the High Court, Lagos by virtue of the provisions of section 59 of the Companies Income Tax Act, 1961 (No. 22 of 1961). As no rules had been made under section 59(10) of that Act by the Chief Justice of the Lagos High Court, by virtue of that sub-section the Income Tax Appeals (Lagos) Rules (Cap. 85) applied. Rule 5(2) of those rules provides for the form and contents of the grounds of appeal and reads:

“(2) The grounds of appeal shall set out concisely in separate paragraphs the relevant facts (but not the evidence by which they are to be proved) or any point of law, or both, upon which the appellant intends to rely in support of his appeal and the concluding paragraph shall, where the appeal is against an assessment, set out-

(a) the amount of the income shown on such assessment and upon which tax has been assessed, and also the amount of the tax as assessed and the identification number of the assessment, and

(b) the amount of the income upon which the appellant considers the tax should have been assessed, and the amount of the tax thereon payable, which the Court is asked to find and adjudge as being the proper amounts:

Provided that this paragraph shall be read where necessary, subject to the modifications set out in rule 20.”

Rule 8 requires a respondent to file an answer, and rule 15(1) reads:

“15(1) Subject to the express provisions of section 61 of the Act and of these Rules, the practice and procedure of the Court in relation to an appeal under the provisions of these Rules shall be assimilated as nearly as may be to the practice and procedure of the Court in the exercise of its civil jurisdiction as if the appellant and the respondent were respectively the plaintiff and the defendant in an action, and the civil procedure rules of the Court for the time being in force shall apply with such modifications as may be necessary.”

The Federal Board of Inland Revenue accordingly filed amended grounds of appeal and in paras. 1 to 11 thereof set out the following particulars:

“1. The respondent company, Aluminium Industries A.G. (hereinafter referred to as ‘the company’) is a limited liability company registered and resident in Switzerland. 35;

2. The principal activities of the company are the production of aluminium and manufacture of aluminium products.
3. The company is not registered in Nigeria under the Companies Decree, 1968 and has no place of business in Nigeria but it is the beneficial owner of all the issued share capital of the Aluminium Manufacturing Company of 40 Nigeria Limited (‘Alumaco’), a company incorporated in Nigeria and enjoying pioneer status, whose principal activities are the manufacture and sale of various aluminium products.
4. The respondent company’s investment in Alumaco from the time of its incorporation in January, 1960 to December 31st, 1963 amounted to 100,000 pounds in share capital, subscribed mainly in cash by bank transfers from Switzerland, and approximately 421,330 pounds on current account, comprising expenditure incurred outside Nigeria on behalf of Alumaco. Of this 421,330 pounds, amounts totalling 330,000 pounds were transferred from current account to loan account during the three years to December 31st, 1963.
5. The decision to transfer part of the current account to a loan account was originally reached at a meeting held in Zurich on December 21st, 1961 at which it was also decided that the loan account would carry interest at 5% per annum.
6. The decisions reached at this meeting were confirmed in writing by the company to Alumaco on December 26th, 1961. No formal agreement was entered into between the parties.
7. It was agreed between the parties that the loan granted is a loan in Swiss francs to be repaid in that currency.
8. Interest was charged by the appellant company to Alumaco in the following amounts: for the year to December 31st, 1961, SF57,475 interest equals 4,750 pounds; for the year to December 31st, 1962, SF90,570 interest equals 7,500 pounds; for the year to December 31st, 1963, SF121,000 interest equals 10,000 pounds.
9. The Federal Board of Inland Revenue, the body established by law under the Companies Income Tax Act, 1961 as the lawful authority charged with the due administration, assessment and collection of tax under the income tax acts, assessed the company to tax on the interest payable by Alumaco to the company under the deeming provisions to the charging section of the Companies Income Tax Act, 1961, and appointed Alumaco as the agent for the purpose of collection of the tax due from the company.

10.The assessments by the appellant were made as follows:-

Assessment Year of Tax Profit Date of refusal

Number Assessment Assessed Assessed to amend

LCBA 142 1962/1963 1,900 4,700 7th Nov. 1965.