THE Abuja division of the Tax Appeal Tribunal (TAT) has ordered TSKJ Nigeria to pay N5.14billion as tax liabilities to the Federal Inland Revenue Service (FIRS).

Nnamdi Ibegbu (SAN), the Acting Chairman of the Tribunal, gave the order following an appeal by TSKJ Nigeria, challenging the FIRS’s tax assessments in a construction contract for the Nigeria Liquefied Natural Gas (NLNG).

Ibegbu also awarded N300,000 against TSKJ as cost of the three appeals decided in favour of FIRS.

The company had filed three separate appeals with suits No TAT/ABJ/APP1010/2008, TAT/ABJ/APP/006/2006 and TAT/ABJ/APP/017/2010 before the tribunal.

In the appeal to the Tax Appeal Tribunal by TSKJ II against the FIRS assessment, the company challenged FIRS’s refusal to amend its assessments for 1997-2002 and additional assessment raised by the Service and $550, 556.74 tax liabilities for 2008 and 2009 tax years among others.

In the first ruling on the appeal, the Tax Appeal Tribunal upheld FIRS’s assessment that TSKJ II is to pay $16, 688, 267 as tax.

Bright Igbinosa, supported by Patricia Gata, represented FIRS in the appeal.

Also, in the second ruling -representing assessment years for 2006, 2007, and additional assessment for 2008, the court upheld FIRS assessment of $19,249, 820. FIRS was represented by Adesola O Adeyemi while TSKJ II’s counsel in the appeals was Babatunde Ogundipe.

In the two suits, TSKJ II (Contuce International Sociaaade Umpessual Ltd), a multinational firm, was awarded contract by the Federal Government on the Nigeria Liquefied Natural Gas project.

It has a company called TSKJ Nigeria Limited, a subsidiary of TSKJ International, which offered services to TSKJ II, but was not party to the NLNG contract.

In trying to fulfil its tax obligations for the years in question, TSKJ II filed its tax returns, under Section 26 of Companies Income Tax, CITA, but made deductions on expenses incurred by TSKJ Nigeria, a subsidiary to TSKJ II- a multinational company. FIRS scoffed at this.

It maintained that since TSKJ II did not file its audited accounts, but filed under Section 26 of CITA, deductions in favour of TSKJ N (Nigeria)– a Nigerian subsidiary- should be allowed, which FIRS maintained were not allowable.

Rather, FIRS maintained, Section 26 of CITA gives the FIRS Board discretionary powers to allow 80 per cent turnover as expenses/costs, and assess the remainder of 20 per cent of turnover at 30 per cent.

Statutorily, companies are required to file returns based on audited accounts, but TSKJN filed its returns for the years in question based on the Section 26 of CITA, with turnover as basis for assessment.

The FIRS additional assessment was also based on the company’s refusal to file its returns based on its audited accounts, in accordance with the law.

The tribunal said that tax law on the issues raised were clear, certain and that there were no ambiguities whatsoever in Sections 41 and 26 of Companies Income Tax Act (CITA) on payments to a subcontractor in any transaction by the taxpayer is not an allowance deductible under section 20 of CITA.

Said the TAT Chairman: “On resolving this issue in favour of the respondent, it is not disputed that the appellant filed its returns on turnover basis, so under that basis, it is the respondent who defines what amount is fair and reasonable percentage of the turnover,” he said.

“It is undisputed that 80 per cent covers all the costs incurred by the taxpayer when using the Turnover Basis of Assessment. There is no provision of the law which makes subcontract allowable deduction,” Ibegbu said.

The tribunal chairman, Nnamdi Ibegbu (SAN), in his declaration dismissed appeal in suit T9AT/ABJ/APP1010/2008 and the two other consolidated cases in suits TAT/ABJ/APP/006/2006 and TAT/ABJ/APP/017/2010.