Nigerian Breweries Plc. V. Oyo State Board Of Internal Revenue (2012)

LawGlobal-Hub Lead Judgment Report – COURT OF APPEAL

JOSEPH SHAGBAOR IKYEGH, J.C.A.: (Delivering the Leading Judgment)

The tax appeal is from a judgment of an Oyo State High Court holden at Ibadan (the court below) empowering the respondent to distrain the movable and immovable property of the appellant for non-payment of N21,233,213 (Twenty-one Million, Two Hundred and Thirteen Naira) unremitted deduction in respect of Withholding Tax until settlement of the tax liability by the appellant.

Skeletally put, the appellant is a public liability company engaged in the business of brewing and selling inter alia alcoholic beverages with its branch office in Ibadan, Oyo State; a disputed withholding tax (WHT) assessment made and served by the respondent on the appellant for the 1998 tax year in respect of trade transactions between the appellant and individual contractors caused the respondent to launch an action on originating summons to determine the dispute.

In the course of hearing the originating summons, the dispute became controversial or hostile, and evidence was tendered by the appellant and the respondent towards settlement of the dispute. At the end of the day, the court below accepted the respondent’s case that it is the appropriate tax authority to collect or recover WHT from the appellant which it adjudged to be N21,233,213. The court below accordingly ordered the movables and immovables of the appellant to be distrained by the respondent until liquidation of the adjudged sum of WHT liability by the appellant.

Aggrieved, the appellant filed a notice of appeal containing three grounds of appeal on 13.10.06. In a well prepared appellant’s brief of argument dated and filed on 7.12.07, but deemed properly filed on 22.2.10, Mrs. Akeredolu for the appellant identified one issue for determination on the appeal thus-

“Whether based on the evidence adduced, the Respondent substantiated its claim to the sum allegedly owed it (Respondent) as withholding Tax by the Appellant herein or to the amount held by the lower court to be owed by the Appellant to the Respondent.” (Grounds 1, 2 and 3).”

Section 1 of the Taxes and Levies (Approved List for collection) Decree No. 21 of 1998, section 63(1) and (7) of the Companies Income Tax Act (CITA) cap 60 Laws of the Federation, 1990, the Companies Income Tax (Rates, etc. of Tax Deducted at Source (withholding Tax) Regulations 1997, section 72(1) and (6) of Personal Income Tax Decree No. 104 of 1993, the Personal Income Tax (Rates, ETC. of Tax Deducted at source (Withholding Tax) Regulations 1997, part B sections 653 and 659 of the companies and Allied Matters Act (CAMA) were collectively cited for the propositions that Income Tax assessable on corporate bodies in respect of any payments made by any person to such company or corporate body is WHT collectable by the Federal Government; while Income Tax assessable on a person in respect of any payments made by any person to such person (Withholding Tax) is collectable by the State Government.

The appellant’s brief also contended that by Exhibit ‘AO3’ at pages 22-25 of the record of appeal (the record) relied upon by the respondent and the appellant as the transactions between the appellant and some other persons resident in Oyo State to whom the appellant had made payments in 1998 listed in entries numbers 1-199 thereof upon which the WHT was assessed by the respondent vide page 45 of the record, the total sum of the transactions was N229,210,209; that the respondent having relied on the entries number 1-199 in Exhibit ‘AO3’ to make the assessment, sections 19 and 20 of the Evidence Act and the cases of Olatunji v. Adisa (1995) 2 SCNJ 90, Adebambo v. Olowosayo (1985) 4 NWLR (Pt. 2) 740, Akinola & Ors. v. Oluwo & Ors. (1962) 1 ALL NLR 224 at 227, Okafor V. Idigo (1984) 1 SCNLR 481 at 512, Akintola v. Solano (1986) 2 NWLR (Pt.24) 598 and Law and Practice Relating to Evidence in Nigeria (1st Edition) at page 54 by Aguda the reliance of the respondent on the said entries was an admission against interest beneficial to the appellant’s case that only N225,197,974 attracted WHT of 5% thereon amounting to N12,759,889.70, not the N21,233,213 adjudged by the court below.

It was further argued that the entries listed in Numbers 1-708 are in respect of transactions comprising freight payment, grains supplied, medical bills etc. With individuals and corporate bodies not resident within Oyo State mixed with some residents in Oyo State valued N180,213,511 attracting 5% WHT thereon of N9,010,675 collectable by the Federal Government in respect of third parties resident in Oyo State vide section 63(1) of CITA and the 1997 Regulations made thereunder directing collection of WHT respecting transactions with corporate bodies by the Federal Government, consequently the respondent is not entitled to recover or collect the N9,010,675 collectable by the Federal Government and that the judgment of the court below should have excluded the said N9,010,675 limiting the judgment debt on WHT liability of the appellant to N12,759,889.70.

The respondent’s brief of argument settled by Mr. Ganiyu, Deputy Director, Civil Litigation (Ministry of Justice, Oyo State) identified three issues for determination to wit –

“(i) Whether the place of residence is relevant in determining the withholding Tax liability of an individual contractor.

(ii) Whether having regard to the evidence on record, the Lower Court was not justified in his decision, awarding judgment in the sum of N21,233,213.00 millions in favour of the Respondent.

(iii) Whether or not based on the evidence before the lower court, the respondent substantiated the judgment sum awarded in its favour and/or the sum being claimed by it”

It was submitted that in determining WHT liability the residence of the individual contractors listed in numbers 1-66, 1-99 and 1-708 of Exhibit ‘G’ is immaterial, as the dominant factor is their engagement in contracts with a corporate body like the appellant in Oyo State and payments made by the latter to the former vide Section 2(2) Personal Income Tax Decree No.104 of 1993, section 72(1) of the Personal Income Tax Act read with the cases of Elf Oil (Nig.) Ltd. v. O.S.B.I.R. (2003) FWLR (Pt.138) 1352, Total (Nig.) Plc. v. Akinpelu (2004) ALL FWLR (Pt.214) 141 at 151 – 152, 7Up Bottling Co. Plc. v. L.S.I.R.B. (2000) 3 NWLR (Pt.650) 565 at 576, Shittu v. Nigeria Agric and Coop. Bank Ltd. (2001) 10 NWLR (Pt.721) 298 at 307; therefore the contracts in question which were executed by the appellant with sundry individuals in Oyo State attracted 5% WHT of N18,972,134.00 with 10% penalty of N1,897,213.40 and 22.5% interest of N4,695,603.17k for delayed payment making grand total of N25,564,950.57K outstanding WHT for 1998 tax year, consequently the uncontradicted and unchallenged evidence of the DW1 at page 61 of the record established the WHT liability of the appellant, ail the more so the appellant did not appear to have a cause of action to sue to determine its indebtedness to the respondent vide Uzor v. Anyika & Co. (2002) FWLR (Pt. 107) 1155 – 1157 and U.B.N. Ltd. v. Penny MRT Ltd. (1992) 5 NWLR (Pt.240) 228 at 231.