S. A. Authority Vs Regional Tax Board (1970)

LawGlobal-Hub Lead Judgment Report

LEWIS, J.S.C. 

In suit M/42/67 in the Ibadan High Court the plaintiff’s summons read:-
“The plaintiffs claim against the defendants a declaration that the Holy Apostles’ Community Aiyetoro, in Ilaje District Council Area, is not liable to pay tax under the Income Tax Law of Western Nigeria.”

On the 27th day of November, 1967 Thompson, J. dismissed the action and on the 13th day of December, 1968 in appeal CAW /46/68 the Court of Appeal of the Western State dismissed the appeal and upheld the dismissal of the action by Thompson, J. though it set aside certain consequential orders that he made. Against that dismissal the plaintiffs have appealed to this Court.

Now it is necessary to say at the outset that this appeal has been argued within a fairly narrow compass as it was not disputed by either party that the matter could be determined without necessitating any constitutional interpretation such as the Court of Appeal of the Western State thought necessary to embark upon, though that was not how the matter was argued by counsel for either party before it.

It was agreed before us by both parties that the Federal Legislature had validly enacted the Income Tax Management Act, 1961 (hereinafter in this judgement called “The Act”) in particular sections 2, 3 and 4, in accordance with its powers under section 76 (2) (c) of the Constitution of the Federation which reads:-
“(2) Parliament may make laws for Nigeria or any part thereof with respect to taxes on income and profits other than the income and profits of companies for the purpose of… (c) Securing uniform principles for the computation of income and profits of all persons (including members of partnerships) for purposes of assessment of tax and for the treatment of losses, depreciation of assets and contributions to pension or provident funds or schemes.”

This power had originally been incorporated in the Constitution of the Federation in 1960 as section 70 and section 76 of the Constitution of the Federation in 1963 reproduces that earlier provision in all material particulars. Prior to 1960 under the 1954 Constitution taxes on income and profits accruing in or derived from a Region were a Regional matter and accordingly in 1957 the then Western Region passed the Income Tax Law (now called the Income Tax and Development Contribution Law) (Cap. 48 of the Laws of the Western Region of Nigeria 1959) (hereinafter in this judgement called “the Law”).

In consequence of the new Constitutional powers of 1960 the Federal Legislature enacted the Act and the Western Region unlike the other Regions did not then enact a new Finance Law but only amended the existing Law without any specific reference therein to the Act.

The Issue before us now received itself into determining whether by virtue of section 8 of The Law, tax could validly be levied on a community, here the Holy Apostles Community Aiyetoro, in the Western State.

Section 8 of The Law reads:-
“8. (1) Tax shall, subject to the provisions of this Law, be charged
for each year of assessment of rate hereinafter specified:-
(a) Upon the income of any person resident in Western Nigeria accruing in, derived from, brought into or received in Western Nigeria;
(b) upon the income of any person from an employment by the Government of Western Nigeria wherever the remuneration is paid, if that person performs the duties of that employment in a country other than Nigeria and that country under any agreement or diplomatic usage exempts him from tax on such income;
Provided that for the purposes of deductions that may be allowed under the provisions of Part V of this Law, such a person shall be deemed to be resident in the Region in the year of assessment;
(c) Upon the income of any person not resident anywhere in Nigeria accruing in or derived from Western Nigeria.

(2) For the purposes of subsection (1) of this section “income” shall
mean income in respect of:-
(a) Gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on/or exercised;
(b)Gains or profits from any employment or office including any allowance paid or payable in money to or on behalf of an employee or office-holder, other than in respect of medical or dental expenses or any passage to or from Nigeria or the maintenance or education of any child;
(c) Dividends, interests or discounts;
(d) Any pension, charge or annuity;
(e) Rents, royalties, premiums and any other profits arising from property;

(2A) any sum which is fixed as or deemed to be the assumed minimum income of any male person by virtue of section 17 A of this Law or of any order made there under shall be income for the purpose of subsection (1) of this section.

(3) In this section “person” means an individual and includes a body of persons composed wholly of individuals.”
Sections 3 (1) and (4) and 4 of The Act, as amended by the Income Tax (Amendment) Decree 1966 (Decree 65 of 1966), read:-
“3. (1) Where the legislature of a territory imposes a tax on the income of individuals, communities or families, or arising to any trustee or executor under any settlement, trust or estate, that income shall be determined under, and the tax thereon shall be subject to, all the provisions of this Act.

(4) In the case of a village or other indigenous community, tax may be imposed for any year only by the legislature of the territory in which that community is to be found and such tax may be charged on either:-
(a) The estimated total income of all its members; or
(b) The estimated total income of those of its members whose income it is impracticable, in the opinion of the relevant tax authority, to assess individually; or
(c) The amount of any communal income which, in the opinion of the relevant tax authority in relation to such community, it is impracticable to apportion with certainty between its members.

4. (1) the tax shall, subject to the provisions of this Act, be payable for each year of assessment upon income accruing in, derived from, brought into, or received in Nigeria in respect of:-
(a) gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised;
(b) any salary, wages, fees, allowances or other gains or profits from an employment including gratuities, compensations, bonuses, premiums, benefits or other perquisites allowed, given or granted by any person to an employee;
(i) So much of any such sums as may be admitted by the relevant tax authority to represent reimbursement to the employee of expenses incurred by him in the performance of his duties, and from which it is not intended that the employee should make any profit or gain;    .
(ii) In respect of medical or dental expenses incurred by the employee;
(iii) In respect of the cost of any passage to or from Nigeria incurred by the employee;
(iv) In respect of maintenance or education of a child if the income tax law of the relevant tax authority provides that any such sums received by the employee during a year of assessment shall be deducted from the personal reliefs to be granted to him for the next following year.
(v) Any compensation for loss of employment;
(c) Gains or profits including any premiums arising from a right granted to any other person for the use or occupation of any property;
(d) Dividends, interests or discounts;
(e) Any pension, charge or annuity; if any profits or gains not falling within the proceeding categories.