FIRS Moves To Stop Order Disbanding Tax Appeal Tribunals
BEVERLY HILLS, February 04, (THEWILL) - The Federal Inland Revenue Services (FIRS) moved on Tuesday to stop the order disbanding the Tax Appeals Tribunals as it applied to a Federal High Court sitting in Abuja praying for a stay of execution of a judgment which declared the establishment of Tax Appeal Tribunals illegal.
The judgment delivered on October 30 last year ordered the Finance Minister to disband the tribunals.
In an application for a stay of execution pending appeal filed on Tuesday, FIRS said there would be 'monumental economic consequences' if the judgment was executed, stressing that that the execution of the judgment could result in a serious economic crisis.
In the judgment delivered by Justice Ademola Adeniyi, the court restrained the eight Tax Appeal Tribunals established by FIRS from adjudicating on matters relating to tax and federal revenue as it held that the existence of the tribunals was illegal on the ground that they were established in contravention of section 251 (1) (a) and (b) of the Constitution of the Federal Republic of Nigeria.
Justice Ademola, among others, ordered the Coordinating Minister for the Economy and Minister of Finance, Dr.
Ngozi Okonjo-Iweala, to immediately disband the eight tax appeal tribunals constituted by her, saying they were illegal.
A firm, TSKJ Construces Internacionals Unipessoal LDA,had instituted the suit against FIRS.
FIRS counsel, Lucius Nwosu (SAN), while filing the application for a stay of execution of the judgment on Tuesday , contended that the balance of convenience was in FIRS's favour, as he argued that 'more hardship will be done to this country if all the taxes collected previously by the Tax Appeal Tribunals will have to be repaid.
' He argued further that if that should happen, "All the state governments will have to refund the money allocated to them in relation to the revenue from the Tax Appeal Tribunals.
' He also drew the court's attention to the effect of the judgment on the fate of the staff attached to the tribunals and those who depended on them as he admitted that though the tribunal's activities affected people's rights , it has operated administratively and not judicially.
Nwosu therefore urged the court to stay the execution of its judgment pending the determination of the appeal by the tribunal.
In his response , counsel for the plaintiff,TSKL, Babatunde Ogundipe , queried FIRS's right to seek a stay of the judgment when it was merely a party before the tribunal and not its establishing authority.
He argued that all the orders made by the court, except that in relation to cost, were merely declaratory and which could not be stayed.
According to Ogundipe, 'The FIRS, being just a party before the tribunal, and having not set up the tribunal, cannot ask for a stay of the order disbanding the tribunals.
' Contending that non-executory orders could not be stayed, Ogundipe urged the court to refuse the FIRS' prayer for stay of the judgment's execution, tough he agreed that the court could grant a conditional stay of the order as to cost.
Nwosu, who replied on point of law, argued that as against Ogundipe's contention, the Tax Appeal Tribunals by virtue of the provision of Section 59 of the FIRS Act and the 5th Schedule of the Act, were part of the administrative arm of the FIRS.
He added that Section 75 of the Personal Incomes Tax Act gave the tribunals jurisdiction over personal incomes tax.
He argued that it was not out of place for the FIRS to seek to protect its administrative arm by applying for a stay of the execution of a judgment that affected the tribunals.
Justice Ademola however reserved judgment in the application for a yet to be announced date.
TSKJ, a non-resident tax payer, was awarded a contract for the construction of the Nigeria Liquefied Natural Gas (LNG).
In executing the contract, the company established a local subsidiary - TSKJ Nigeria - which rendered logistic support service to it in the course of the contract.
In compliance with the nation's tax requirement, TSKJ filed self-assessment forms on deemed profits, meaning that its profit could not be ascertained.
TSKJ also made deductions of recharges being the cost paid to its local subsidiary.
FIRS however disallowed the deductions on the ground that they were not allowed under the turnover basis assessment.
FIRS consequently issued additional assessment in respect of the wrong deductions made by TSKJ.
But TSKJ objected to the additional deductions and filed an appeal at the Tax Appeal Tribunal, asking that the additional assessment be set aside.
In its decision, the tribunal dismissed the company's claims and ordered TSKJ to pay $12.
9 million as tax liabilities for 1997, 1998,1999,2000,2001 and 2002 to FIRS.
Dissatisfied with the decision, TSKJ appealed to the Federal High Court.
In the judgment, Justice Ademola upheld the argument of the company that the tribunal lacked the jurisdiction to entertain the suit on the ground that the FIRS (Established) Act 2007 under which the tribunal was established conflicted with the exclusive jurisdiction of the Federal High Court conferred by section 251 (1)(a) and (b) of the constitution.
"The respondent counsel's arguments that Tax Appeal Tribunal created by FIRS (Established) Act 2007 as being an administrative panel and not a court affecting the exclusive jurisdiction of the Federal High Court on federal revenue and taxation of companies are mere semantics, misconceived and untenable in law in as much as their decisions affect the civil rights and obligations of companies in relation to taxation matters and revenue of the federal government.
" Justice Ademola said the jurisdiction of the tribunal was in direct conflict with the jurisdiction of the Federal High Court and therefore advised that the constitution should be amended before such jurisdiction could be conferred on the tribunals.