Court rules in favour of TRA in tax dispute
DAR ES SALAAM: THE Court of Appeal has dismissed an appeal filed by TPC Limited, a company engaged in sugarcane cultivation and sugar production, which sought to challenge a tax assessment of 3.32 bn/- on insurance compensation received, payable to the Tanzania Revenue Authority (TRA).
Justices Mary Levira, Lilian Mashaka and Deo Nangela ruled in favour of the Commissioner General of the Tanzania Revenue Authority (TRA), upholding the judgment previously issued by the Tax Revenue Appeals Tribunal in Dar es Salaam concerning tax liabilities for the income years 2016 to 2018. In the appeal,
TPC Limited, the appellant, was represented by Advocates Wilson Mukebezi and Mahmoud Mwangia. The TRA was represented by Principal State Attorney Juliana Ezekiel, Senior State Attorney Athuman Mruma and State Attorney Yohana Ndila.
Counsel for the TRA argued that the tax assessment against TPC Limited was justified on the grounds that the company had failed to file returns as required under Section 77(1) of the Value Added Tax Act.
In their judgment delivered recently, the justices referred to the provision in question and pointed out that a taxable person shall make an increasing adjustment in the tax period if the person receives payment under a contract of insurance and the amount of adjustment shall be equal to the tax fraction of the amount received.
ALSO READ: EAC to host major trade, investment summit in 2025
In his submissions, they noted, the appellant conceded that she did not make increasing adjustment as required under section 77 because there was no entry. At the same time, she did not dispute that she received payment under a contract of insurance.
“The reason of failure to make an increasing adjustment is not among the requirements or exemptions (if any) under section 77 of the VAT Act. What the appellant was required to do, was to comply with the mandatory requirement of that law as plain as it is,” the justices said.
Therefore, they said, the existence of regulation 35 (3) of the Value Added Tax (General) Regulations, 2015 which provided that an insured person is not eligible to claim input tax credit in itself, could not justify noncompliance with the mandatory requirement of the law.
The justices further noted that the appellant’s argument, that the impugned regulation was null and void for contravening the provisions of the Principal Act, did not absolve her from the obligation to make the necessary tax adjustment after receiving insurance compensation.
“We agree with counsel for the TRA that the appellant ought to have accounted for the compensation in her monthly tax returns. Otherwise, she cannot claim that no tax was payable,” they stated.
In fulfilling its mandate, the TRA conducted an audit of the appellant’s tax affairs for the income years 2016 to 2018, during which several issues were raised.
These concerns were addressed through various correspondences between the parties, ultimately culminating in the issuance of an adjusted Value Added Tax (VAT) assessment for the years in question.
The VAT assessed as payable amounted to 3,312,707,755.18/- , relating to insurance compensation received by the appellant. Dissatisfied with the adjusted assessment, the appellant filed a notice of objection.
