The Tax Appeal Tribunal (TAT or “the Tribunal”) sitting in Lagos on 14 May 2019, delivered judgement in the case of Shell Nigeria Exploration and Production Company Limited (SNEPCO or “the Appellant”) and Lagos State Board of Internal Revenue (LSBIR or “the Respondent”) to the effect that penalty and interest are due on tax collected but not remitted as at when required by relevant provisions of the law.
Facts of the case and issues for determination
The LSBIR issued demand notices to the Appellant for outstanding Pay-As-You-Earn (PAYE) tax, withholding tax (WHT) and state development levy for 2009 – 2012 years of assessment (YOAs), inclusive of penalty and interest. SNEPCO objected to the alleged outstanding liabilities but was dissatisfied with the LSBIR’s refusal to amend the demand notices. Consequently, the Appellant filed a Notice of Appeal at the TAT seeking an order to set aside the demand notices. The Appellant and Respondent subsequently held reconciliatory meetings and reached an agreement on the settlement of the principal portion of the alleged outstanding tax liabilities on which the Tribunal entered a consent judgement. However, the parties could not resolve the dispute regarding the penalty and interest imposed on the additional PAYE and WHT liabilities, which was the crux of the appeal before the TAT.
The Appellant argued that penalty and interest cannot be validly imposed on the alleged PAYE and WHT liabilities which were not final and conclusive given that a valid objection was made to the Respondent within the statutory time limit. The Appellant further contended that the demand notice cannot be deemed to be final and conclusive, and collection of alleged liabilities ought to be held in abeyance pending the determination of the appeal by the TAT. This is in line with Sections 58, 60 and 68 (2) of the Personal Income Tax Act (PITA) and Paragraph 13 (3) of the Fifth Schedule to the Federal Inland Revenue Service (FIRS) Establishment Act.
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