IN THE TAX APPEAL TRIBUNAL
SOUTH-SOUTH ZONE
HOLDEN AT BENIN
APPEAL No.: TAT/SSZ/013/2020
BETWEEN:
BAYELSA STATE BOARD OF INTERNAL REVENUE ----- APPELLANT
AND
STERLING OIL EXPLORATION & ENERGY PRODUCTION COMPANY LTD- ---RESPONDENT
BEFORE:
PROF. OBEHI A. ODIASE-ALEGIMENLEN CHAIRMAN
DR DAVID ALA-PETERS COMMISSIONER
MRS HILDA OFURE OZOH COMMISSIONER
MR VITALIS FRIDAY AJOKU COMMISSIONER
PROF. OLATUNDE JULIUS OTUSANYA COMMISSIONER
THURSDAY 24THAUGUST 2023
JUDGEMENT
This Appeal is brought before the Tax Appeal Tribunal (South-South Zone Sitting in Benin), dated and filed on 31/08/2020 in Suit No. TAT/SSZ/013/2020.
BRIEF FACTS
The Appellant is a body corporate established by the Bayelsa State Board of Internal Revenue Law CAP B2 Laws of Bayelsa State, 2006 and is charged with the responsibility, amongst others, with the collection of all taxes, fees, levies and penalties due to the Government of Bayelsa State; and the administration of the relevant tax laws in Bayelsa State as provided for in the Personal Income Tax Act (PITA) 2011 (as Amended) while the Respondent is a corporate body registered with the Corporate Affairs Commission under the laws of the Federal Republic of Nigeria.
The Appellant being dissatisfied with the Respondent’s failure/refusal to file and pay the assessed tax liability in the sum of N350,000,000.00 (Three Hundred and Fifty Million Naira only) in respect of PAYE, Withholding taxes, Development Levy, Bayelsa State Infrastructural Maintenance Levy, appealed to the Tax Appeal Tribunal, South South Zone on the grounds set out as follows:
i. The Respondent has failed, refused and/or neglected to file and pay its Pay-As-You-Earn taxes of its staff whose principal place of residence is in Bayelsa State, and Development Levy and Bayelsa State Infrastructural Maintenance Levy (BIM).
ii. Consequent upon such failure, an assessment of N350,000,000.00 (Three Hundred and Fifty Million Naira only) being unremitted taxes (PAYE, Development Levy and BIM) inclusive of penalties and interest for the years 2011, 2012, 2013, 2014, 2015, 2016 and 2017 is outstanding and has become a debt owed by the Respondent to the Bayelsa State Government.
iii. The Respondent has failed, refused and/or neglected to pay the assessed liabilities despite letters of notifications, demand notices, letter of invitation and report of administrative assessment based on back duty investigation.
Consequently, the Appellant sought the following reliefs from this Honorable Tribunal.
(a) AN ORDER OF THIS TRIBUNAL that the Respondent is indebted to the Appellant in the sum of N350,000,000.00 (Three Hundred and Fifty Million Naira only) being unremitted PAYE of its Staff, Development Levy and Bayelsa State Infrastructural Maintenance Levy in accordance with Section 1(b) and (d) of the First Schedule to Personal Income Tax (Amendment) Act. 2011, Taxes and Levies (Approved List for Collection) Act and Bayelsa State Infrastructural Maintenance Levy Law 2003.
(b) AN ORDER directing the Respondent to pay to the Appellant the sum of N350,000,000.00 (Three Hundred and Fifty Million Naira only)being the assessed tax liability for the years, 2011, 2012, 2013, 2014, 2015, 2016 and 2017 due the Appellant, in accordance with the relevant tax legislations.
(c) AN ORDER demanding the Respondent to file its tax returns with the Appellant as prescribed by law.
(d)A declaration that the Respondent is liable to file returns and remit its P.A.Y.E. liabilities in accordance with Sections 81(2) and 82 of the Personal Income Tax Act 2011 (as amended).
(e) A declaration that the failure, refusal and/or neglect of the Respondent to deduct and remit its P.A.Y.E. of its staff is in breach of Sections 81 and 82 of the Personal Income Tax Act 2011 (as amended).
(f) A declaration that the failure, refusal and/or neglect of the Respondent to file tax returns and/or pay its tax as at when due amounts to tax evasion punishable under section 94 of the Personal Income Tax Act (as amended).
(g) Cost of this action – N1,000,000.00 (One million naira) only.
(h) AND for such further order or other orders as this Honourable Tribunal may deem fit to make in the circumstance.
ALTERNATIVELY,
a) AN ORDER compelling the Respondent to submit to the Appellant log books of its Houseboat and other relevant documents showing place of business, names and designation of staff as well as salary or emolument.
b) AN ORDER compelling the Respondent to furnish the Appellant with documents and details evidencing payment of personal income taxes of its employees to the relevant tax authorities in Lagos and Delta States as claimed for the period under reference.
The Respondent on its own part filed its reply acknowledging receipt of the Notice of Appeal on the 7th day of October 2020 stating its intention to contest the Appeal. The grounds for contend the Appeal are that the Notice of Appeal served on the Respondent does not disclose reasonable cause of action as the Respondent cannot deemed to be resident in the relevant state (Appellant State) during the period under assessment since it has no location and, or office in the relevant state or relevant Tax Authority pursuant to section 87 of the PITA. That the Respondent is duly registered with relevant tax authorities in Lagos and Delta States where their operations are. That it had discharged her tax liabilities to date including tax audit up to all the relevant years under dispute in those states.
TRIAL
The Appellant opened its case on MONDAY 6TH SEPTEMBER 2021 by calling Appellant Witness 1 (AW1) - Omukoro Parode Ransom, its Technical Adviser who in support of its case, adopted his witness depositions dated 31/08/2020, 16/08/2021. He tendered Exhibits BYA 1 – BYA 11 and BYA 12 respectively. On the 26/04/2022, the AW1 was recalled through a motion taken and granted on the 21/02/2022. The witness deposition was dated 21/02/2022 and was adopted on 26/04/2022 and tendered Exhibit BYA 13. Appellant witness was duly Cross-Examined by the Respondent’s Counsel, Dr. M. O. Oseghale.
On the 10/5/22, the Respondent opened its defense and called their sole witness (RW 1) - Mr. Sushant Bidaye (Manager Tax). He adopted his written deposition dated 11/3/2021, 9/11/2021, 10/5/2022. The witness tendered Exhibits SEPC 1 - SEPC 5. Respondent Witness was also cross examined by the Appellant Counsel, I. M. Beinbein, ESQ.
Trial in this matter came to an end on TUESDAY 15TH NOVEMBER. 2022 and was adjourned to Wednesday 18th of January, 2023 for the adoption of Final Written Addresses. However, due to the Annual Retreat for all Chairmen and Commissioners of the Tax Appeal Tribunal in January 2023, and other High Court engagements by parties, both parties eventually adopted their Final Written Addresses on WEDNESDAY 19TH APRIL 2023 and Judgment was reserved for today the 24st of August, 2023.
ISSUES FOR DETERMINATION
In its Final Written Address, Appellant Counsel I. M. Beinbein formulated two issues for determination as follows:
1. Whether the Administrative Assessment by the Appellant on the Respondent is proper having failed, refused and/or neglected to open its books.
2. Whether the Appellant is entitled to the payment of additional taxes and levies sought from the Respondent and to all other taxes.
The Respondent Counsel, Dr. M. O. Oseghale ESQ, in his Final Written Address formulated a lone issue for determination which is:
Whether from the grounds of Appeal, reliefs sought and evidence in support, the appellant has proved its case on the preponderance of evidence to entitle it to the reliefs sought in this appeal.
After listening to the witnesses in this matter and evaluating the evidence tendered and arguments canvassed by their Counsels, the Tribunal is of the view that only one Issue calls for determination.
Whether from the preponderance of evidence in this matter, the Appellant has proved its case to be entitled to the reliefs sought in this appeal.
DETERMINATION OF THE ISSUE
Whether from the preponderance of evidence in this matter, the Appellant has proved its case to be entitled to the reliefs sought in this appeal.
It is the Appellant case that the Respondent carried out business activities in its tax Jurisdiction in Agge Community in Bayelsa State. That the Respondent failed, refused and/or neglected to file and pay its Pay-As-You-Earn taxes of its staff who worked in Bayelsa State, Development Levy and Bayelsa State Infrastructural Maintenance Levy (BIM). The Respondent primary argument is that the Respondent is the Operator of OML 143 located in Kwale, Delta State. And that the Respondent has two flow Stations which are located in Beneku and Aseomuku in Delta State. They argued that they do not have any location and or office in Bayelsa State, and so do not carry out any business operation in the Appellant jurisdiction to warrant the payment of taxes. And that it has met its tax obligations to Delta State which is the relevant State Tax Authority pursuant to section 87 of the Personal Income Tax Act (PITA) 2011 as amended.
During hearing, the Tribunal discovered that both parties are in agreement with some of the fundamental issues. Such issues include (the operator), the location of OML 143, and the ship that was used to convey crude oil. See extract of cross examination below:
Cross examination of Appellant:
Q: Do you know the name of the Flow Station?
A: No, however I know it’s located somewhere in Kwale from where they carried their crude oil in barges at the Tuljia FSPO which is in Bayelsa jurisdiction
Q: that flow station, I suggest to you that the respondent is the operator of OML I43 in Kwale.
A: That is based on the information available to you; however as a tax authority our focus has always been about those coperation that fall within our jurisdiction irrespective of other assert or activities taxable by other authority, our only concern is Agge and Tuljias operation and the personnel there.
Q: the flow station of the respondent you said you know at Kwale, that Kwale is known in Delta State
A: Yes you are correct.
Q: This FSPO, it’s real name is called Tuljia-Bhavani, and it’s a Ship.
A: Yes is the platform, it IS the same thing.
Q: Now have you ever heard of River - RAMOS?
A: Yes
Q: I will be correct to say that the Western side of that is located in Delta State while the eastern part is Bayelsa State of that river.
A: Yes, correct.
Cross examination of Respondent.
Appellant: In carrying out your work activities, the Respondent required the Use of a Floating Production Storage Facility (TULJAS.). That’s correct?
RW1: Not entirely correct, it is true that for the purpose of exporting Oil Production, we require Floating Storage Facility for that shipment, but the facility named TULJAS is not owned by Sterling Oil, that Is, the Respondent, that facility is hired from a third party.
Gleaning from the above, it is evidenced that the Respondent is the Operator of OML 143 located in Kwale, Delta State. It also carried out business activities along the River Forcados by carrying crude oil in a Floating Production Storage Facility or ship named TULJAS HAVANI from one point to another, within the River and then to the ocean for shipment or onward movement to other parts of the Country. This River is the boundary between Delta State and Bayelsa State hosting both Delta and Bayelsa Communities at the Bank of the River.
Against this backdrop, it has become apparent to the Tribunal that the next question begging for answer is whether this Agge Community is one of the Coastal Communities along the bank of River Ramos. Our answer is in the affirmative. This is confirmed by the exhibits tendered by both parties: Appellant tendered Exhibit BYA 13, an Administrative map of Ekeremor Local Government Area of Bayelsa State showing the location of Agge Community in Bayelsa State prepared by the Surveyor General of Bayelsa State. Respondent also tendered Exhibit SEPC 4 which is a letter from a Paramount Ruler dated 20th June 2014. This letter confirmed and admitted that the Respondent has been carring out ‘its operations of crude oil production and exports for about five (5) years in Agge.
In the oil and gas industry, based on the Residency Principles in tax administration and practice, the existence of two scenarios qualifies for tax payment: The Company has an Operational Site in the Territory or its workers are qualified as Itinerant Workers
Paragraph 1(d) of the First Schedule (Determination of residence) of PITA 2011 (as amended) defined as follows:
“principal place of residence” in relation to an individual with two or more places of residence on a relevant day, not being both within any one territory means—
(d) in the case of an individual who works in the branch office or operational site of a company or other body corporate, the place at which the branch office or operational site is situate:
Provided that operational site shall include Oil Terminals, Oil Platforms, Flow Stations, Factories, Quarries, Construction Site with a minimum of 50 workers, etc.
In the case of the Itinerant worker, Section 108 (10) of PITA 2011 (as amended) provides that an
“itinerant worker” includes an individual irrespective of his status who works at any time in any state during a year of assessment (other than as a member of the armed forces) for wages, salaries or livelihood by working more than one State and works for a minimum of twenty (20) days in at least three (3) months of every assessment year.”
Consequently, in our view, both the Kwale Community in Delta State and the Agge Community in Delta or Bayelsa State as claimed by parties qualifies for an operational site
while the workers in these two locations and the workers in the Floating Production Storage Facility or ship named TULJAS HAVANI used for transportation of Crude from one part of the RIVER RAMOS to the Ocean for shipment qualifies as Itinerant workers. So, if the Agge Community is qualified as an Operational site, the workers there and those residence in the TULJAS HAVAN Ship or facility are to be subjected to PAYE and other personnel related applicable taxes. The question here is, then where is this Agge Community located? In providing answer to this, the Tribunal will review the veracity of the evidence presented before it.
The Appellant from the beginning of this case, has been very consistent with its claim that the Respondent carried out business activities in its tax Jurisdiction in Agge Community in Bayelsa State and failed, refused and/or neglected to pay its taxes while the Respondents position has been that, the Respondent is the Operator of OML 143 located in Kwale Delta State. And that they do not have any location and or office in Bayelsa State, and so do not carry out any business operation in the Appellant jurisdiction to warrant the payment of taxes. To buttress its claim, the Appellant tendered Exhibit BYA 13 which is an Administrative map of Ekeremor Local Government Area of Bayelsa State showing the location of Agge Community as part of Bayelsa State, prepared by the Surveyor General of Bayelsa State. The Respondent also tendered Exhibit SEPC 4 which is a letter from a Paramount Ruler dated 20th June 2014. This letter also states that the same Agge Community is in Delta State. Respondent also tendered Exhibit SEPC 5 which is a Map indicating that Agge Community is in Burutu Local Government Area of Delta State. Indeed, this matter bothers on a very sensitive issue of Boundaries between two states and as such should be treated with utmost discretion. The Tribunal is aware that when it comes to boundary issues between sister states, the offices that has the locus standi to make a position on such issues are the offices of the Surveyors’ General of the two states. Therefore, it will be an act of negligence for the Tribunal to rely on a letter from a surveyor or traditional ruler who do not have the authority and recognition to do so. So, the appropriate option for this Tribunal is to place less reliance on the two Exhibits presented by the Respondents or discountenance intoto and adopt the Evidence of the Appellant as the most appropriate and valuable evidence in this matter. Besides, it is of public knowledge that Agge Community is located in Ekeremor Local Government Area of Bayelsa State. We therefore conclude based on the evidence before us that the Respondent carried out business operations in Agge Community located in Bayelsa State which qualifies as an operational site. Thus, the Respondent personnel residence in the Agge Community and the ones deployed to TULJAS HAVAN production and Storage facility are liable to the payment of PAYE and any other applicable tax (es).
The Tribunal is aware of the fact that the Respondent tendered Exhibits SEPC 2A and SEPC 3 indicating payment of taxes and letters of tax clearance for the period 2012 to 2015 to the Delta State Government. This in our view is normal in tax administration in the oil and gas sector. If a company has Employees resident and working in its Headquarters office in Lagos, such staff PAYE taxes will be paid to the Lagos State Tax Authority. So, also if there are Company’s staff whose residency is at the OML 143 located in Kwale, such staff will pay their taxes to the Delta State Tax Authority whereas those Employees that are resident in the Agge Community in Bayelsa State as in this case will pay their PAYE and other applicable taxes to the Bayelsa State Tax Authority.
In totality, it is our considered opinion that the Appellant has been able to prove its case to be entitled to the relief sought from this Tribunal.
The Tribunal hereby Orders as follows
(a) That the Respondent pay to the Appellant the sum of N350,000,000.00 (Three Hundred and Fifty Million Naira only) being the assessed tax liability for the years, 2011, 2012, 2013, 2014, 2015, 2016 and 2017 due the Appellant, in accordance with the relevant tax legislations.
(b) There is no order as to cost
This is the judgement of the Tribunal
Dated this __ 24th _____ day of __ August___ 2023.
Signed:
Hon. Prof. Obehi Adetokunbo Odiase-Alegimenlen Chairman
Hon Dr. Ala-Peters David Hon. Mrs. Hilda Ofure Ozoh
Member Member
Hon. Barr. Ajoku Vitalis Friday Hon. Bar. Vitalis Friday Ajoku Hon. Prof. Olatunde Julius Otusanya
Member Member Member
REPRESENTATION:
I.M. Bein bein - Appellant
M. O. Oseghale - Respondent