Federal High Court rules against income tax assessment based on the value of a property

FHC rules against ITA based on the value of a property

The Federal High Court (FHC) sitting in Abuja recently gave a judgement in favour of Theodak Nigeria Limited (TNL or “the Company” or “the plaintiff”) in its lawsuit against the Federal Inland Revenue Service (FIRS or “the defendant”).

Wole Obayomi

Partner, Tax, Regulatory & People Services

KPMG in Nigeria


The issue for determination was whether the FIRS had statutory power to deem the value of the Company’s property to be its turnover for any year of assessment (and impose income tax thereon) based on the provision of Section 30 of the Companies Income Tax (CIT) Act, Cap. C21, Laws of the Federation of Nigeria (LFN), 2004.

Generally, CIT is payable on the profits of a company “accruing in, derived from, brought into or received in Nigeria” in respect of any trade or business that may have been carried on. The CIT Act requires every company to file its tax returns for every year on a self-assessment basis, containing the amounts of profits from every source, with the FIRS. Section 30 of CIT Act empowers the FIRS to assess a company on a fair and reasonable percentage of the turnover from its trade or business where either the business produces no assessable profits; where the assessable profits are less than might be expected to be, or where the true assessable profits cannot be ascertained.

Facts of the case and issues for determination

The FIRS alleged that the Company did not file its income tax returns for 2015 and thereby failed to pay its income tax liability for that year. Hence, the FIRS invoked the provisionsof Section 30(1)(a) of the CIT Act by deeming 20% of the ascertained value of a property admitted to be owned by the Company to be the CIT payable, and issued its assessment notice for the amount.

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