The Tax Appeal Tribunal (TAT or “the Tribunal”) Lagos Division recently delivered a judgement in favour of the Federal Inland Revenue Service (FIRS or “the Appellant”) in its tax appeal against New Cross Petroleum Limited (NCPL, “the Company” or “the Respondent”) on the validity of its tax assessments, including interest and penalties, following the Respondent’s failure to object to the assessments within the statutory period.
On 13 May 2013, the Nigerian Investment Promotion Council (NIPC), following the approval of the Honourable Minister of Finance, issued NCPL a five-year Pioneer Status Certificate (PSC) commencing 1 January 2008 to 31 December 2012. NCPL duly notified the FIRS of its Pioneer Status Incentive (PSI) status and submitted its self-assessed income tax returns without remitting any taxes thereon. However, on 26 January 2015, the NIPC notified NCPL of a reduction in the PSI duration from five years to three years, effectively ending NCPL’s pioneer status on 31 December 2010. Subsequently, the FIRS issued assessment notice and demand note dated 29 January and 30 January 2015, respectively, to NCPL, comprising Petroleum Profit Tax (PPT), Tertiary Education Tax (TET), and Capital Gains Tax (CGT) liabilities totalling US$5,095,361.22 on its profits of 2011 and 2012 tax years.
NCPL maintained that the five-year PSC was legal because it was approved by the Minister of Finance for 22 oil production companies, including NCPL, following the recommendation of the Inter-Ministerial Committee on Implementation of Pioneer Status Scheme in relation to oil producing companies. NCPL further alleged that it submitted an objection letter on 24 February 2015 to the FIRS stating that the Company was not liable to pay the additional tax assessments since its PSC was still valid for 2011 and 2012 tax years covered by the assessments. The Company, however, failed to provide a copy of the objection letter to the Tribunal. On the other hand, the FIRS asserted that it did not receive any letter of objection from NCPL on the subject, and that the assessments had become final and conclusive as the Company failed to object within the stipulated statutory period.
Following an impasse after several negotiation meetings between the parties, the FIRS filed a notice of appeal with the Tribunal on the grounds that the NIPC was not empowered by the Industrial Development (Income Tax Relief) Act, Cap 17, LFN, 2004 (as amended) (IDA) to issue a five-year PSI to NCPL, and that the assessments had become final and conclusive as no valid objection was received from the Company. The Respondent argued that the TAT lacked the jurisdiction to determine the validity of the PSI which was the basis of the appeal filed with the Tribunal by the FIRS.
After reviewing the arguments of both parties, the TAT, on 21 December 2020, ruled that while it did not have the power and jurisdiction to investigate the administrative competence of the NIPC to issue a PSI to the Respondent/ Applicant, it could determine the Respondent’s liability to the assessments raised by the Appellant.
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