IN THE TAX APPEAL TRIBUNAL
SOUTH-SOUTH ZONE
HOLDEN AT BENIN
APPEAL No.: TAT/SSZ/008/2023
BETWEEN:
BAYELSA STATE BOARD OF INTERNAL REVENUE APPELLANT
AND
SPECIALITY DRILLING FLUIDS
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 14TH MARCH
2024
JUDGEMENT
This Appeal is brought
before the Tax Appeal Tribunal (South-South Zone Sitting in Benin), dated and
filed on 09/01/2023 in
Suit No. TAT/SSZ/008/2023.
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 corporate body
registered with the Corporate Affairs Commission (CAC) that is engaged in
Drilling and other Oil and Gas Services and Contracting.
The
Appellant being dissatisfied with the Respondent’s failure/refusal to file and
pay the revised assessed
tax liability in the sum of N288,000,000.00
(Two Hundred and Eighty Eight Million Naira only) in respect of PAYE and Bayelsa State Infrastructural Maintenance Levy, appealed to the Tax Appeal Tribunal,
South-South Zone upon 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
Bayelsa State Infrastructural Maintenance Levy (BIM).
ii.
Consequent upon such failure, an assessment
of N288,000,000.00 (Two Hundred and Eighty
Eight Million Naira only) being
unremitted taxes (PAYE and
BIM) inclusive of penalties and interest for the years 2019-2021
tax years are
outstanding and has become a debt owned by the Respondent to the Bayelsa State
Government. 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 N288,000,000.00
(Two Hundred and Eighty-Eight Million Naira only) being unremitted PAYE of its Staff 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 and Bayelsa State Infrastructural Maintenance Levy Law
2003.
(b)
AN
ORDER directing the
Respondent to pay to the Appellant the sum of N288,000,000.00 (Two Hundred and Eighty-Eight Million Naira only) being the assessed tax liability for the years, 2019 to 2021 due to 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 fully deduct
and remit 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.
The Respondent after being served with the processes in this suit, filed a Reply
acknowledging receipt of the Notice of Appeal. This was dated 10/02/2023 and filed on 13/02/2023
stating its reasons of contending
this Appeal
as follows:
i.
The
Respondent is incorporated in Nigeria and carries on business in Port Harcourt, Rivers State where it has her principal office with
no branch, operational base, oil terminal, oil platform, flow station,
factories, quarries, or construction site in Bayelsa State.
ii.
The
Respondent is not an employer of labour whether regular, community,
itinerant/casual employee in Bayelsa State; Respondent employs its entire Staff
in Port Harcourt, Rivers State and they are all
resident in Port Harcourt, Rivers State.
iii.
The
Respondent remits all her employees PAYE taxes and submits Annual returns to
Rivers State Internal Revenue Service, Port
Harcourt in compliance with the provisions of the Personal Income Tax
(Amendment) Act 2011 (PITA) and all the relevant laws.
iv.
The
Appellant failed/refused/neglected to make adequate investigation and follow
due administrative process to determine the Respondent’s tax liability to
Bayelsa State and hastily reached conclusions.
v.
The
Appellant’s Reliefs before this Honourable Tribunal will amount to double
taxation on the Respondent.
vi.
Appellant’s
Infrastructure Maintenance Levy has no Joint Tax Board approval hence not
collectible.
vii.This Appeal is incompetent.
Trial in this matter commenced on TUESDAY 18TH APRIL
2023 with the Appellant opening its case where Appellant called Mr. Ransome Parode
Omukoro, its Technical
Adviser on tax matters who testified as AW1 and tendered
Ten (10) Exhibit (Exhibit BYS 1-10). At the close of his evidence in
chief, he was cross-examined by the Respondent
Counsel and thereafter the Appellant closed its case on TUESDAY 20TH JUNE, 2023. The Respondent opened its defence
on WEDNESDAY 19TH JULY, 2023 by calling Mr. Ndubisi
Alatta, its Consultant
who testified as RW1 and tendered Five (5) Exhibit, (Exhibit SPF1(1-10), SPF2(1-9),
SPF3(1-7), SPF4 and SPF5) and he was
fully cross-examined. At the close of the cross-examination of RW1, the Respondent
closed its case on MONDAY
13TH NOVEMBER, 2023 and
this Honourable Tribunal adjourned the Matter to MONDAY 19TH FEBRUARY,
2024 for adoption of Final
Written Addresses by the parties. Both parties adopted their Final Written Address on the said date and
the matter was then adjourned to today Thursday 14th March, 2024 for Judgement.
ISSUES FOR
DETERMINATION
In its Final Written
Address, the Respondent
Counsel R. O. Ifebhor ESQ postulated
two (2) Issues for the
determination by
this Honourable Tribunal as follows:
(1) Whether from the facts and
circumstances of this Appeal, the respondent falls within the tax Jurisdiction of the Appellant
to be tax liable to the Appellant.
(2) Whether the Administrative assessment/Best of Judgment
assessment as carried out by the Appellant to determine the PAYE tax liability
of the Respondent was not raised in a questimated manner, unrealistic,
arbitrary and therefore not in compliance with the provisions of the law.
The Appellant Lead Counsel, I. M. Beinbein
ESQ, after being served with the Respondent Final
Written Address, formulated
a lone Issue for
determination in its Final Written Address which is:
Whether
the Appellant has discharged the burden of proof by showing through credible
evidence that the administrative assessment by the Appellant on the
Respondent’s employees and/or operations for P.A.Y.E. taxes and others is
unjust, thus entitled to the reliefs sought.
After listening to the witnesses in this matter and
evaluating the evidence tendered and arguments canvassed by their Counsels, the
Tribunal is of the opinion
that two issues call for
determination in this matter:
1 Whether from the facts and evidence of this Appeal, the Respondent falls within the tax Jurisdiction of the Appellant to be
tax liable to the Appellant.
2 Whether
the
Appellant has
proved
Its case as
required
by
Law
to be
entitled to the reliefs Sought?
DETERMINATION OF THE ISSUES
ISSUE 1: Whether from the facts and evidence of this Appeal, the respondent falls within the tax Jurisdiction of the Appellant to be
tax liable to the Appellant.
Tax
jurisdiction is a legally defined area that has the taxing authority to impose
and administer taxes within its territory. The tax jurisdiction of a taxing
authority is determined by Law in terms of whether such authority qualifies as
a Relevant Tax Authority or not. It means that no Authority has the
jurisdiction to impose taxes if such Authority does not qualify as a Relevant
Tax Authority. Section 108 of PITA 2011(as amended) defined a Tax Authority to
mean the Federal Inland Revenue Service, the State Board or the Local Government
Revenue Committee. Section 108 of
PITA 2011(as amended), defined the “State
Relevant tax authority” to mean
the State Relevant tax authority established under section 87 of PITA 2011(as
amended). Section 87 states thus: (1) There is hereby established for each
State, a Board to be known as the State Board of Internal Revenue (in this Act
referred to as the “State Board”) whose operational arm shall be known as the
State Internal Revenue Service (in this Act referred to as the “State
Service”). Thesame section 108 of PITA
2011(as amended) defined“itinerant worker” to include
“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 work for a minimum of twenty (20)
days in
at least three (3) months of every assessment year”.
In addition, Section (1A) of PITA 2011(as
amended) states that notwithstanding anything in the Principal Act, the relevant
tax authority in a State shall have powers to collect tax under this Act from
itinerant workers.
Section 3 of PITA 2011(as amended) regarding Persons
whom tax is to be collected provides as
follows:
“In the case of an itinerant worker, tax
may be collected for any year by any State in which
the itinerant worker is found during the year: Provided that— (a) in an assessment
for any year upon an itinerant worker credit shall be given against the tax payable,
but not exceeding the amount thereof, for any income tax already paid by him to
any other tax authority for the same year; and (b) collection of so much of any
tax
imposed in a territory on an itinerant worker for a year of assessment as
remains unpaid
on the itinerant worker leaving that territory during that year shall remain in
abeyance
during his absence from that territory, and if he returns to that territory having
during his absence paid tax in some other territory for that year, credit shall
be given
against any unpaid tax in the first-mentioned territory, but not exceeding that
unpaid
amount, for the tax paid in that other territory
A combined reading of the above provisions reveal that
an itinerant worker can be in two different tax jurisdiction in a particular
Year of Assessment and once a taxable person, individual or Company operates in
the territory of a Tax Authority, that Tax Authority has become a Relevant Tax
Authority notwithstanding whether or not that individual or business will
eventually be liable to tax or credit/refund will be granted to such taxable
person or individual.
Appellant witness, Mr. Ransome
Parode Omukoro in paragraph 12 in its Written Statement of oath dated 9th
January 2023 alleged that Respondent had unpaid taxes for the year 2019 – 2021
having carried out series of drilling and allied services for Shell Petroleum
Development Company (SPDC) in the course of which the Respondent deployed
personnel over fifty Host Communities Workers of Tunu and sundry other staff. The Respondent witness, Ndubuisi Nnaedozie Alatta in
paragraph 9 of his Sworn Statement of Oath dated 13th February 2023
also admitted to have carried out drilling activities in Tunu located in
Bayelsa State when it stated that “The Respondent was awarded a contract by Shell Petroleum
Development Company (SPDC) to provide Drilling services at SPDC location at
TUNU Swamp in Bayelsa State. Also in Paragraph 10 of the same
Witness Statement, the Respondent stated that it “provided the drilling Rig SDF-BR 301 on hire to Shell
Petroleum Development Company to work at SPDC location with very few (about
eleven) of the Respondent’s specialist drilling personnel to man and service
the Rig from time to time”.
It is trite law
that facts admitted need no further proof. It is therefore evident from the
above submissions by both parties that the Respondent had a contract of
Drilling with Shell Petroleum
Development Company where the Respondent deployed some workers to work at
a Rig located in Tunu, Bayelsa State. The number of staff deployed, were
alleged to be 120 while the Respondent argued that it is about 11 workers. The
number of workers at this point is immaterial in determining the jurisdiction
of a tax authority; rather the question to be asked is whether there were
business or taxable activities carried out by the Respondent in the Appellant
Territory. The obvious answer is in the affirmative. And once business or
taxable activities are carried out by an individual or company in particular
state territory, that State Authority automatically becomes a Relevant Tax
Authority and thus clothed with the jurisdiction to find out what is happening
in its territory and can call for information and records on the payment of
taxes therein. In this circumstance, Respondent having a Drilling Contract in
Appellants territory with workers manning such Drilling Platforms, the
Appellant therefore has become a Relevant Tax Authority and can call for
records and Information for tax purposes concerning that territory.
Consequently, Issue One (1) is resolved in favour of the Appellant.
ISSUE 2 Whether the Appellant has proved Its Case as required by Law To be entitled to the reliefs Sought?
It is the
Appellants case that in
the year 2019 and 2021 the Respondent did not file its tax return in respect of P.A.Y.E. taxes of
its staff as at when due, neither did it remit the said taxes to the Appellant. That the Appellant wrote to the Managing
Director of the Respondent, notifying him of the unpaid taxes for the year 2019
– 2021; That the Appellant in its letter dated 21st September, 2021 also
intimated the Respondent of its obligations to pay taxes and requested
from the Respondent to furnish the
Appellant with:
(1) all the complete list of personnel
deployed and engaged for the projects;
(2) a payroll showing the names,
incomes, taxes deducted etc. for permanent staff, contract staff, community
staff and casual staff;
(3) Schedule of Guest Houses and
suppliers and evidence of remittance (if any) from September 2019 – date. This the
Respondent refused to do, thus necessitating the ‘’Administrative Assessment” dated 14th
December 2021. Inversely, on its part, the Respondent contended that its does not have a branch office,
Liaison Office or any form of Office whatsoever in Bayelsa State and is not an
employer of labour in Bayelsa State. That it only provided Drilling rig SDF-BR 301 on hire to SPDC location in Tunu; with very few (about eleven) not up to 50
workers of the Respondent’s specialist
drilling personnel to man and service the Rig from time to time. Thus these workers principal place of residence cannot be adjudged to be Bayelsa State,
pursuant to the provision to paragraph 1(d) to the First Schedule to PITA. That, apart
from the Drilling specialist
personnel moved from its office in Port Harcourt, Rivers State where they all
reside, the Respondent did not employ any other person or persons. Thus, based on
the Provisions of PITA 2011, it owed no tax to the Appellant.
In as much as
the above position might seem rational, Sections 1, 3 and Section 108 of PITA
2011(as amended) states that once an Itinerant worker is found in a state, that
State Revenue Authority has become a Relevant Tax Authority and has the right
to call for records and documents. Section
46 of PITA 2011 (as amended) gives Power to the Relevant Authority to call
for further returns as provided:
The
relevant authority may give notice in writing to a person when and as often as
it thinks
necessary requiring him to deliver within a reasonable time limited by such notice
fuller or further returns respecting any matter as to which a return is
required or
prescribed by this Act.
Section 47 of PITA 2011 (as amended) further empowers the Tax
Authority
to call for returns, books, documents and information as follows:
(1)
For the purpose of obtaining full information in respect of
the income or gain of a person, the relevant tax authority may give notice to
the person requiring him, within the time limited by the notice, to—
(a) complete
and deliver to the relevant tax authority, any return specified in the notice;
(b) attend personally before an officer of the
relevant tax authority for examination with respect to any matter relating to
such income gains;
(c) produce or cause to be produced for
examination at the place and time stated in the notice which time may be from
day to day for such period as the relevant tax authority may consider
necessary, for the purpose of the examination of any book, document, account
and return which the relevant tax authority may deem necessary; or
(d) give orally or in writing any other
information including a name and address specified in the notice
(2)
For the purpose of subsection (1) (a) to (d) of this
section, the time limited by a notice
shall not be less than seven days from the date of service of the notice, so however
that an officer of the relevant tax authority not below the rank of a Chief Inspector
of Taxes may act in any of the cases Personal Income Tax Act stipulated
in subsection (1) (c) or (d) of this section, without giving any of the required
notices set out in this section.
Exhibit BYS 1-5, show, that the Appellant wrote to
Respondent demanding for taxes after discovering that the Respondent is
carrying out Economic Activities in its territory. Exhibit BYS 1 dated 21st
September 2021 specifically requested the Appellant to furnish the Respondent
of some listed documents which the Respondent did not respond to, neither did
it comply with the Demand Notice. Section 54 (3) of PITA 2011 (as amended) provides that:
Where a taxable person has not delivered a return within the
time allowed and the relevant tax authority is of the opinion that tax is
chargeable on that person, the relevant tax authority may, according to the
best of its judgement, determine the amount of the assessable, total or
chargeable income and make an assessment accordingly, but that assessment shall
not affect any liability otherwise incurred by such person by reason of his
failure or neglect to deliver a return.
A combined reading of Section 47 & 54(3) of PITA
2011 reveals that if a tax payer did not file its Return to the Tax Authority
as required or refuses to furnish the Tax Authority with available documents as
requested, the Tax Authority has the power to resort to a Best of Judgement
Assessment. In fact, Appellant had to write five (5) letters in Exhibit BYS 1-5
before the Respondent eventually responded and objected the Assessment in
Exhibit BYS 6A. Yet, the Respondent did not still furnish the Appellant with
the documents requested. In our opinion, the Respondent should have responded
to the Appellant, it being a Relevant Tax Authority, by providing the documents
requested showing the names of workers who worked on the platform, number of
days or months, the taxes paid in respect of these workers etc to prove its
case. That the workers deployed are not up to 50 workers and their PAYE paid to
Rivers State as Relevant Tax Authority. Even the Exhibits SDF 1 to 5 tendered
before this Tribunal, did not have the attachment showing the list of workers
for whom such taxes have been paid. These receipts would also have been for the
those workers permanently residence in Rivers State and not the ones deployed
to work in the Tunu platform in Bayelsa. Morever, from the date Exhibit BYS 1
was issued to the Respondent, to the date of 2nd February 2022 when
the Respondent eventually woke up from its slumber to respond to the
Letters/Demands made by the Appellant, about a period of Four (4) months had
elapsed. Section 58(1) of PITA
2011(as amended) states that any assessment that has not been duly objected to, within the stipulated 30
days period
has become final and conclusive. Therefore, in our opinion, the window statutorily
given to the Respondent to respond to the Demand Notice has elapsed long before
the Respondent eventually responded in Exhibit BYS 6, and thus is statute
barred and the Assessment has become Final and Conclusive. See the cases FIRS V Oba International Services Ltd,
All Nigerian Tax Cases, Vol. 11, page 400; FIRS V Nigeria Services and Supply
Ltd, All Nigerian Tax Cases, Vol. 11, page 390; FBIR V Manila Industrial
Security Services Ltd, All Nigerian Tax Cases, Vol. 2, Page 62.
It is trite law that equity aids the vigilant not the
indolent. See the cases of AJAYI V. OSUNUKU & ORS (2008)
LPELR-8332 (CA), AG RIVERS STATE V. UDE & ORS (2006) LPELR-626 (SC)
In our opinion therefore, there is merit in the
Appellant claim and judgement is hereby entered in their favour.
The tribunal hereby order as follows:
(1) that the Respondent pays the Appellant the
sum of N288,000,000.00 (Two Hundred and Eighty Eight
Million Naira only) being the assessed tax liability for
the years, 2019 to
2021 due the Appellant in
accordance with the relevant tax legislations.
(2) There is no order
as to cost
Dated this __ 14th _____ day of __ March____ 2024.
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
APPEARANCES:
I.M
Bein Bein with B.E Cocodia Appellant
R.O
Ifebhor Respondent