BD LAW DIGEST WITH CLRN & ALP NG & Co.
BAKER HUGHES COMPANY LIMITED v. DELTA STATE INTERNAL REVENUE SERVICE
TAX APPEAL TRIBUNAL (NIGERIA)
(ODIASE-ALEGIMENLEN; ALA-PETERS; OZOH; AJOKU; OTUSANYA, JJ.)
BACKGROUND FACTS
Baker Hughes Company Limited (Appellant) is a company incorporated in Nigeria with its registered office at 11 Babafemi Osoba Crescent, Off Admiralty Road, Lekki Phase 1, Lagos. Its principal activity is the provision of oilfield services, products, technology and systems to companies engaged in the exploration and production of crude oil and natural gas while the Delta State Internal Revenue Service (Respondent) is the body responsible for the administration and collection of taxes due to the government of Delta State. The Appellant’s contention is that Section 2 of the Personal Income Tax Act 2011 (as amended) (PITA) provides that the relevant tax authority of a State has the power to collect income tax from individual’s resident within the State. There is nothing in the law that grants the Respondent the power to impose Personal Income Tax on individuals who are resident in another state. In view of the foregoing, the Appellant remits PAYE for only employees working on the project in Delta State to the Respondent. Also, the Appellant filed annual tax returns to the Respondent for employees who worked as itinerant workers in Delta State between 2017 to 2020. The Appellant further contended that the Respondent erroneously and arbitrarily assessed the Appellant to additional PAYE liabilities in the sum of ₦6,319,133,339.37 (Six Billion, Three Hundred and Nineteen Million, One Hundred and Thirty-Three Thousand, Three Hundred and Thirty-Nine Naira, Thirty-Seven Kobo) for the period of 2015 – 2020, and that the Respondent in its assessment failed to rely on facts and the document provided to it by the Appellant. In arriving at the erroneous assessment, the Respondent relied on “undisclosed staff income” for 2015 – 2016 even when the Appellant had no workers in Delta State during those years. Furthermore, the Respondent included “undeclared income per invoice” for 2017 – 2020 without providing the basis for the inclusion or the invoice relied upon in generating the income. That the Respondent refused to rely on the Appellant’s payroll that captured the true position of the PAYE computed and paid for the assessment years. Despite being provided by the relevant documents required by the Respondent, the Respondent failed to review the documents and reconsider its position.
Consequently, the Appellant, amongst other declarations, sought the following relief from the Tribunal:
A DECLARATION that the Appellant does not have an obligation under PITA to remit withholding tax on business premises to the Respondent between 2015 to 2020 because the Appellant did not have a physical office in Delta State.
In the parties’ final written address, one of the issues submitted before the Tribunal for determination was: Whether from the evidence before this Honourable Tribunal, the Appellant is liable to pay Business Premises levies and WHT on rent and executed contracts and supply as assessed by the Respondent.
ARGUMENTS
In arguing this issue, the learned counsel for the Appellant contended on the illegality of applying Withholding Tax (WHT) on rent, executed contracts and supply. That in taking a critical view of Exhibit BHC 2 which is the Assessment Notice it is revealed that though WHT is captured in the Assessment, the computation is based on Business premises levy/tax imposed by the Respondent. The learned counsel stated that the Appellant did not have a physical office in Delta State between 2015 – 2020 and as such neither WHT on rent payable or business premises levy is applicable, and that the Respondent unlawfully included this item under the Appellant’s WHT liability in the Assessment Notice notwithstanding the fact that the Appellant has no business premises within Delta State.
In response the Respondent argued that Section 2 of the Business Premises Edict of Delta State, 1995 defines a business premises as a premises on which any business is carried out whether situated within or without a building or other structure, and whether fenced or unfenced. This implies that for a Business Premises levy/tax to be enforced there must be a premise. Counsel stated further that is immaterial whether the Appellant’s staff work from client’s project sites in Delta State, insofar as the activities carried out in that premises are within the scope of the Respondent’s services, the Respondent are liable to pay business premises levy and development levy.
DECISION OF THE TRIBUNAL
In resolving this issue, the Tribunal held that:
The Appellant agreed and stated that the Escravos Gas-To-Liquid (EGTL) Project commenced in 2015, but they only deployed workers to the project in 2017. This means that there is already a project location in 2015 be it a site or camp or whatever name it is called. Thus, in our opinion, the Appellant is liable to pay the Business Premises levy and the Development Levy with effect from 2015. From the above extract, it is obvious that the actual amount of Business Premises levy would have been a total N1,505,000, N5,000 for 2015 and N300,000 for each of the remaining 5 years. Clearly, the Delta State Authority may have given a discount or waiver to have captured N100,000.00 for year which was not made explicit during trial as shown in the extract above or there is a mistake or over computation of the Business premises amount in the Assessment. However, Section 59 of PITA 2011 as Amended provides mistake, error or defect in Assessment does not invalidate that Assessment provided the Notice of Assessment is duly served on the taxable person intended to be charged or the person in whose name the taxable person is chargeable and the notice shall contain, in substance and effect, the particulars on which the assessment is made. Consequently, it is our view that the Appellant is liable to pay the Business Premises Levy in the Sum of N510,000,00 and the Development Levy of N25,500 as giving rise to a total liability of N535,500.00 as captured in the Assessment Notice.
Issue resolved in favour of the Respondent
Emmanuel Akpeme and Damilola Bamisile – for the Appellant
P. O. Omatsone and A. Kam – for the Respondent
This summary is fully reported at (2024) 10 CLRN in association with ALP NG & Co.
See www.clrndirect.com ; www.alp.company
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
