IN THE TAX APPEAL TRIBUNAL
SOUTH-SOUTH ZONE
HOLDEN AT BENIN
APPEAL No.: TAT/SSZ/009/2020
BETWEEN:
BAYELSA STATE BOARD OF INTERNAL REVENUE ----- APPELLANT
AND
STERLING GLOBAL RESOURCES NIG. 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/009/2020.
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 its 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 laws of the Federal Republic of Nigeria that is engaged in oil and gas activities in Nigeria.
The Appellant being dissatisfied with the Respondent’s failure/refusal to file and pay the assessed tax liability in the sum of N300,000,000.00 (Three Hundred Million Naira only) in respect of PAYE, Withholding taxes, Development Levy, Bayelsa State Infrastructural Maintenance Levy did appeal 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, Development Levy and Bayelsa State Infrastructural Maintenance Levy (BIM).
ii. Consequent upon such failure, an assessment of N300,000,000.00 (Three Hundred Million Naira only)being unremitted taxes (PAYE, Development Levy and BIM) inclusive of penalties and interest for the years 2012, 2013, 2014, 2015, 2016 and 2017 is outstanding and has become a debt owned 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 N300,000,000.00 (Three Hundred 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 Act (Amendment) 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 N300,000,000.00 (Three Hundred Million Naira only) being the assessed tax liability for the years,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 emoluments.
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 as claimed for the period under reference.
The Respondent on its own part filed its Respondent’s reply to the Notice of Appeal on the 11th March 2021stating its intention to contest the Appeal. The grounds for contending the Appeal are that the Notice of Appeal served on the Respondent does not disclose reasonable cause of action as the Respondent cannot be 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 2011(as amended). That the Respondent did not fail, refuse and, or is not indebted to the Appellant in the sum of N300,000,000.00 (Three Hundred Million Naira only)being unremitted PAYE of its Staff, Development Levy and Bayelsa State Infrastructural Maintenance Levy for the period 2012 to 2017
TRIAL
The Appellant opened its case on MONDAY 6TH SEPTEMBER. 2021, by calling Appellant Witness (AW1)-Omukoro Parode Ransom, its Technical Adviser who in support of its case, adopted his witness depositions dated 31/08/2020, 24/04/2022. He tendered Exhibits BYS 1-8.AWI was recalled and he adopted his witness deposition dated 21/02/2022 and tendered Exhibit BYS 9 from the written deposition dated 31/08/2020. Appellant was duly Cross examined by the Respondent’s Counsel, Dr.M. O. Oseghale. Due to the recall of AW1, Appellant finally close its case on TUESDAY 26TH APRIL 2022 and the matter was adjourned to Tuesday 10th day of May 2022 for Defense. Respondent opened it defence on WEDNESDAY14TH DECEMBER. 2022 by calling their sole witness (RWI)-Mr. Sushant Bidaye (Manager Tax) and adopted its written depositions dated 11/3/2021, 6/9/2021 and 12/12/2021. The witness tendered Exhibit SGR1 to Exhibit SGR 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 21ST MARCH. 2023, The matter was adjourned to the 23rdof May 2023 for the Adoption of Final Written Address. Parties eventually adopted their Final Written Addresses on 21st of June, 2023 and Judgment was reserved for today
ISSUES FOR DETERMINATION
In its Final Written Address, Appellant Counsel I. M. Bein bein formulated one issue for determination as follows:
whether the Appellant has proved his case on the preponderance of evidence to entitle him to the reliefs sought in the appeal.
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 his case on the preponderance of evidence to entitled him 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 which is the issue formulated by both parties 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.
The Appellant case is that the Respondent is a company duly incorporated in Nigeria and carry on business at its operational Base Camp at Agge Community and FPSO TULGAS both located within the territory of Bayelsa State. Appellant argued that Section 1 (b) of the First Schedule to the Personal Income Tax Act 2011 (As amended) makes Agge Community the ‘‘principal place of residence’’ of the Respondent based on their life/base camp and location of their FSPO TULGAS both located in Bayelsa State. Based on this, the Respondent ought to pay tax to the Bayelsa State Government. Respondent denied these claims and contended that the Notice of Appeal served on the Respondent does not disclose reasonable cause of action as the Respondent cannot be deemed to be resident in the Appellant State during the period under assessment since it has no location and no office in the Appellant State, pursuant to section 87 of the PITA. That the Respondent as at the period under review had not started operation within Imo State, by extension, virtue of non-approval and or commissioning and completion of the project.
Exhibit SGR5 is a Ministry of Petroleum Resources Letter dated 6/6/2018 titled Request for startup pre-commissioning and commissioning of Sterling Global Oil Resources (SGORL) Agu OML 146, Facilities in respect of Evacuation Enroute to TULJa FSO.The opening paragraph of this letter state as follows:
This is the Department of Petroleum Resources Approval conveying the Approval to commence pre-commissioning and introduction of Hydrocarbon approval to your organization on your Agu – Ndoni Transit Facility.
It is a common knowledge in the petroleum industry that the Department of Petroleum Resources (DPR) now On-bundled by the Petroleum Industry Act 2021 into the Nigerian Upstream Regulatory Commission (NURC) and the Nigerian Downstream and Midstream Petroleum Regulatory Authority (NMDPRA) is saddled with the responsibility of supervising all Petroleum Industry operations being carried out under licenses and leases in Nigeria. The Petroleum Act Cap P10 LFN 2004 and Section 17(5)(D) of the Oil Pipelines Act Cap 07 LFN 2004, empowers the DPR in the Ministry of Petroleum Resources to process and approve all applications for leases, licenses and permits;and monitor/regulate the oil and gas industry to ensure compliance with relevant regulations and laws. This means that no business can operate in the Nigeria's Oil and Gas Industry without the permit from DPR, now the Nigerian Upstream Regulatory Commission (NURC) or the Nigerian Downstream and Midstream Petroleum Regulatory Authority (NMDPRA). This position was also highlighted during cross examination as shown in the extract below:
Respondent: You are aware that the Respondent by the nature of the business, it is regulated by DPR?
Answer: Yes
Respondent: It is also correct that for the Respondent to take off in business in any of the places, it has to be approved by the DPR?
Answer: Ideally Yes. But in practice it is established in several cases.
Answer: No. This regulation or supervision had been more in arrear after the event and that is evidenced by the pending issue of petroleum profit tax evasion against operators by the Federal/Government.
From the above, it is obvious that the Respondent cannot commence operations without the permit of DPR. Though, the Appellant tried to argue that the above scenario only exist in theory but not in practice. In our view, this oral evidence is a mere hearsay and an unfounded innuendo and thus the Tribunal did not see any merit in it. It is trite Law that documentary evidence is the best form of evidence in proof of a case.See the cases of Attorney - General of Rivers State v. Attorney-General Bayelsa State (2013) 3 NWLR (pt 1340) p.123 at163; Arije v. Arije & Ors (2018) LPELR-44193(SC). Besides, statutory laws are meant to be obeyed. So, if any party is of the opinion that such laws were not obeyed, he/she is at liberty to prosecute such offender.
Consequently, from Exhibit SGR 5, the Respondent can only legally start operations after 6th June 2018 which is the date on the letter. This is because, as already elucidated above, the approval of the DPR is mandatory for businesses providing services in Nigeria oil and gas industry either as a service provider or a production and exploration company. However in Exhibit BYS 3 – Administrative Assessment for 2012 to 2017 dated 4/9/2018, the period covered by that Assessment predates the date DPR approved the commencement of oil and gas operations for the Respondent. This means that the period the Appellant is accusing the Respondent of non payment of taxes; the Respondent hasn’t statutorily started hydrocarbon operations in Agu OML 146 in Imo State or operations of the TULJa FSO in Bayelsa State as alleged by the Appellant. This was also admitted by Appellant Witness during cross examination as seen below:
Respondent: The Tax audit your wrote, what period did your request for tax audit?
Answer: 2012 – 2017
Respondent: I would be correct to say that within the period under review (2012 – 2017), the Respondent has not started business whether in Imo State or in the presumed state of Bayelsa State?
Answer: That is Correct
From the above, it is limpid that there was admission of the fact that without the DPR certificate, the Respondent cannot commence operations. And this certificate was actually issued after the period the Appellant is alleging non payment of taxes by the Respondent. it is the position of the law that facts admitted need no further proof. See the case of AROWOLO VS. AKAIYEJO (2012) 4 NWLR (PT1290) PAGE 286.
It is also the position of law and a common practice in taxation, that no business is assessed for tax when it has not started operation or commenced business.
Specifically, Section 24(a) of PITA 2011(as amended) states that:
“for the first year, the assessable income shall be the income from the date on which the individual commenced such trade, business, profession or vocation in Nigeria to the end of its first accounting period”
The above clearly implies that no business should be subjected to payment of taxes when it hasn’t commenced operations. It’s unacceptable that a tax payer be subject to payment of taxes even before he has commenced activities.
In all, it is our opinion that whereas the Respondent has shown that it has not commenced hydrocarbon operations in Imo State or in the Appellant territory during the period under contest (2012 to 2017) in this Appeal, the Appellant has not been able to prove its case to be entitled to the relief sought from this Tribunal. We therefore dismiss this Appeal for Lack of merit.
This is the unanimous 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