John Musisi v Commissioner General, Uganda Revenue Authority and Attorney General (HCT-00-CC-CS 72 of 2005) [2005] UGCommC 80 (27 December 2005)

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KAMPALA \par \par COMMERCIAL COURT DIVISION \par \par }{\insrsid10383199 HTC\emdash 00\emdash CC\emdash CS\emdash 0072\emdash 2005 \par \par }{\b\insrsid10383199\charrsid7867352 JOHN MUSIS}{\b\insrsid7867352 I}{\insrsid10383199 alias \par Joseph Musiitwa Kabuusu }{\insrsid7867352 }{\insrsid10383199 PLAINTIFF \par \par VERSUS \par \par }{\b\insrsid10383199\charrsid7867352 COMMISSIONER GENERAL \par UGANDA REVENUE AUTHORITY}{\insrsid10383199 DEFENDANT NO.1 \par \par }{\b\insrsid10383199\charrsid7867352 ATTORNEY GENERAL }{\b\insrsid7867352 }{\insrsid10383199 DEFENDANT NO.2 \par \par \par \par }{\b\ul\insrsid10383199\charrsid7867352 BEFORE: THE HONOURABLE MR. JUSTICE FMS EGONDA-NTENDE \par \par JUDGMENT \par }{\insrsid10383199 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid10383199 \hich\af0\dbch\af0\loch\f0 1.\tab}}\pard \ql \fi-360\li720\ri0\sl480\slmult1\widctlpar\jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid2126020 { \insrsid10383199 That fact s of this case are substantially not in dispute, and were all agreed to by the parties. What is in dispute is the application of the law to those facts. The plaintiff provided information to defendant no.1 that Makerere University had been evading collect ion and payment of income tax on off-pay roll allowances from its staff for the period}{\insrsid3821636 ,}{\insrsid10383199 1966 to

2000. As a result of this information, defendant no.1 carried out an audit of Makerere University, and arrived at a figure of tax arrears of Shs4,757,404,500.00 owing from Makerere University. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid10383199 \hich\af0\dbch\af0\loch\f0 2.\tab}Defendant No.1 opted to recover the said tax arrears by filing an agency notice with the bankers of Makerere University}{\insrsid10514449 but subsequently lifted the same after reaching an agreement with Makerere University. As a result of t he said agreement Makerere University paid to defendant no.1 tax arrears of Shs1,118,566,919.00. The balance of tax arrears of Shs3,866,249,665.00, after a successful appeal by Makerere University was }{\insrsid5519607 waived}{\insrsid3821636 by the Minister of Finance}{\insrsid10514449 .}{\insrsid10383199 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid10514449 \hich\af0\dbch\af0\loch\f0 3.\tab}}{\insrsid10514449 The plaintiff was pa id Shs111,855,690.00 by defendant no.1 as the statutory 10% reward on the tax recovered from Makerere University. He now seeks, Shs386, 629,960.00, being 10% of the tax arrears remitted or waived by the Minister of Finance.}{\insrsid6497551 The basic question before this court is whether the plaintiff is entitled to a reward of 10% of the tax arrears ascertained as due or 10% of the tax arrears

recovered}{\insrsid4218840 ,}{\insrsid6497551 following the provision of information that leads either to the ascertainment or recovery }{\insrsid4218840 of tax arrears, }{\insrsid6497551 as the case may be.}{\insrsid10514449 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid4218840 \hich\af0\dbch\af0\loch\f0 4.\tab}}{\insrsid4218840 In the written submissions on behalf of the plaintiff, the plaintiff\rquote s advocates argue that the plaintiff enjoyed a statutory duty, under Section 7 of the Finance Act, 1999, which obliged the defendant no.1 to pay }{\insrsid3821636 the plaintiff}{\insrsid4218840 10% of the tax arrears recovered following the provision of information that the plaintiff provided. The plaintiff\rquote s advocates further assert that the defendant no.1 collected the tax arrears of shs4,757,404,500.00 when they issued Agency Notice on the bankers of Makerere Unive rsity on 23/4/01. It is contended for the plaintiff that issuance of the Agency Notice amounted }{\insrsid3821636 to }{\insrsid4218840 recovery of the tax arrears. The subsequent lifting of the notice was }{\i\insrsid4218840\charrsid3821636 ultra vires}{ \insrsid4218840 .}{\insrsid7608711 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid16453598 \hich\af0\dbch\af0\loch\f0 5.\tab}}{\insrsid16453598 Secondly, it is argued for the petitioner that the Commissioner General

of URA failed to strike a balance between the interests of Makerere University and the interests of the informant who provided the information leading to the discovery of the outstanding tax arrears.}{\insrsid2963442 In so doing the Commissioner General thwart}{\insrsid3821636 ed}{\insrsid2963442 the intention of the legislature to reward informants, block tax avoidance, and encourage the provision of useful information to URA. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid2963442 \hich\af0\dbch\af0\loch\f0 6.\tab}In forwarding the appeal of Makerere University to the Minister, defendant no.1 did not notify the minister of the plaintiff\rquote s interes t in the matter. By failing to do so, the Minister made his decision without taking into}{\insrsid3821636 account}{\insrsid2963442 the plaintiff\rquote s interest, leading to the current financial loss suffered by the plaintiff, for which the plaintiff holds the defendant no.1 liable. It is further contended for the plaintiff that the appeal by Makerere }{\insrsid2126020 University}{\insrsid2963442 was incompetent in law as it was not made under Section 163 of the Income Tax Act. \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid2963442 \hich\af0\dbch\af0\loch\f0 7.\tab}Defendant no.1 contends that the plaintiff is only entitled to 10% of the tax arrears recovered, rather than discovered, given

the wording of the Section 7 of the Finance Act. }{\insrsid13174240 An agency notice is only a demand for payment and cannot amount to recovery of tax arrears. Defendant no.2 submitted that the Minister was entitled to act as he did, in waiving the ta x arrears, under Section 163 of the Income Tax Act, after due recommendation from the Commissioner General under Section 162 of the Income Tax Act.}{\insrsid16453598 }{\insrsid13174240 As no recovery was made the plaintiff was not entitled to any payment. Further that the plaint did not disclose a cause of action against the defendant no.1.}{\insrsid16453598 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid13174240 \hich\af0\dbch\af0\loch\f0 8.\tab}}{\insrsid13174240 In considering the issue before}{\insrsid3821636 this court}{\insrsid13174240 I will}{\insrsid3821636 ,}{\insrsid13174240 at the outset}{\insrsid3821636 ,}{\insrsid13174240 set out Section 7 of the Finance Act, that authorises the payment of rewards. It states, }{\insrsid2126020 \par }\pard \ql \li1440\ri1440\widctlpar\aspalpha\aspnum\faauto\adjustright\rin1440\lin1440\itap0\pararsid2126020 {\insrsid13174240 \lquote The Commissioner General shall reward any person who provides information leading to recovery of tax or who seizes any goods, or by whose aid goods are seized under any law relating to tax or duty, with a reward of 10 percent of the tax

recovered.\rquote \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid7940093 \hich\af0\dbch\af0\loch\f0 9.\tab}}\pard \ql \fi-360\li720\ri0\sl480\slmult1\widctlpar\jclisttab\tx720\aspalpha\aspnum\faauto\ls1\adjustright\rin0\lin720\itap0\pararsid2126020 { \insrsid7940093 As was contended for defendant no.1, these provisions in their plain and ordinary meaning, grant to the person providing information, 10% of the tax recovered, and not tax discovered as due. There is no suggestion that this plain and ordinary meaning is so convoluted as not to have been the clear intent of the

legislature in this regard. I am unable to likewise accept the contention of the plaintiff that an agency notice by itself amounts to recovery of the amounts stated on the agency notice. It is plainly a demand for payment of monies, and may result either in the payment of the monies demand or part }{\insrsid2126020 thereof}{\insrsid7940093 , or none payment of the monies demanded.}{\insrsid13174240 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid3821636 \hich\af0\dbch\af0\loch\f0 10.\tab}}{\insrsid3821636 The plaintiff contended that withdrawal of the agency notice by defendant no.1 against the bankers of Makerere University was }{ \i\insrsid3821636\charrsid3821636 ultra vires}{\insrsid3821636 but did not mention which law barred withdrawal of agency notices or prohibited conduct of this nature. I am unable to see in what manner was the withdrawal of the agency notice }{ \i\insrsid3821636\charrsid3821636 ultra vires}{\insrsid3821636 . \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid7940093 \hich\af0\dbch\af0\loch\f0 11.\tab}}{\insrsid7940093 As to the issue of impropriety of the appeal to the Minister, this is not a matter that can be properly considered in these proceedings, where the appellant, Makerere University, is not a party. All I can say that the Commissioner }{\insrsid11237944 had the duty and discretion in this matter, which he or

she exercised in making the recommendations that }{\insrsid2126020 he/she,}{\insrsid11237944 did to the Minister. The Minister, after due consideration, made his decision in accordance with Section 163, (now Section 162(2)) of the Income Tax Act. The Minister had the authority, and the discretion, to make the decision that he did, taking into accoun t the }{\insrsid2126020 considerations}{\insrsid11237944 he did. The fact that he was not aware that the plaintiff had an interest in the recovery of tax arrears is not necessarily one of the }{\insrsid2126020 considerations}{\insrsid11237944 he had to take into account in arriving at his decision.}{\insrsid7940093 \par {\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid11237944 \hich\af0\dbch\af0\loch\f0 12.\tab}}{\insrsid11237944 The }{\insrsid2126020 considerations}{\insrsid11237944 that a Minister had to take into }{\insrsid3821636 account }{ \insrsid11237944 are set out in Section 162(1) of the Income Tax Act. These are considerations of hardship and impossibility, undue difficulty or the excessive cost of recovery. The letter conveying Makerere University\rquote s appeal, mentions thes e considerations. On the face of the decision, I am unable to }{\insrsid268384 say it was made on improper}{\insrsid9333246 or incomplete}{\insrsid268384 considerations.}{\insrsid11237944 \par

{\listtext\pard\plain\lang2057\langfe1033\langnp2057\insrsid268384 \hich\af0\dbch\af0\loch\f0 13.\tab}}{\insrsid268384 As no recovery was made of the sum of Shs3,866,249,665.00 from Makerere University, the plaintiff, is not entitled, in my view, to the c laim of 10% of the same, as put forth in this action. Accordingly I dismiss this suit with costs to the defendants. \par }\pard \ql \li0\ri0\sl480\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid2126020 {\insrsid268384 Dated, signed, and delivered this 27}{\super\insrsid268384\charrsid268384 th}{\insrsid268384 day of December 2005 \par }\pard \ql \li0\ri0\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0\pararsid268384 {\insrsid268384 \par \par \par \par FMS Egonda-Ntende \par }{\insrsid1448889 Judge \par }}