The Tax Appeal Tribunal (TAT) sitting in Abuja has ordered the Nigeria Liquefied Natural Gas (NLNG) Limited to pay the Federal Inland Revenue Service (FIRS) $27.5 million as full and final settlement of the revised companies income tax (CIT) for the 2016 assessment year.
The News Agency of Nigeria (NAN) in a report today indicated that the order was part of the judgment of the five-member panel of TAT, chaired by Mrs Alice Iriogbe, based on the terms of settlement agreed to by parties in the appeal tax case
The NLNG had earlier challenged the FIRS’ Notice of additional assessment dated Dec. 15, 2021, and the Notice of refusal to amend (NORA) dated March 22, 2022.
In the appeal, the company argued that by the provisions of Clause 8(A) of the Time Charter Party Arrangements (TCPAs), the appellant was contractually obligated to pay for the use and hire of the vessels.
According to it, “this is at a daily hire rate, which consists of the Fixed and Variable Elements from the time of delivery of the vessels to the appellant and continuing until the time and date of redelivery i.e., handover date of the vessels by the appellant to Bony Gas Transport (BGT) at the end of the lease.”
In addition, the company stated that although the parties to the TCPAs agreed that the lease and the attendant lease payments would continue until the redelivery dates of the vessels which were to occur at the end of the agreed tenure of the lease, it had become expedient and necessary for the appellant to replace the old steam vessels with more efficient Dual Fuel Diesel Engine vessels in order to reduce the appellant’s operating expenses.
It clarified that in line with its business objectives, the firm entered into a termination agreement with BGT to exit the TCPAs prior to the expiration of the leases.
The NLNG argued that, however, the FIRS took the position that the terminal costs were not reasonably and necessarily incurred for its business operations.
It, therefore, sought seven reliefs, namely “a declaration that, having regard to the TCPAs, the refit and drydock payments in the sum of 141.7 million dollars were ultimately incurred by the appellant without any duplication in the books of BGT.
“A declaration that the provision of Section 90 of the CITA (Companies Income Tax Act) Is inapplicable to the appellant in this appeal.
“A declaration that having regard to the provisions of the CITA, the TCPAs, the International Accounting Standard 16 and 17 and other applicable laws, the respondent was wrong in its decision to refuse to set aside/discharge the notice of additional assessment reference number: PDBA/CIT/AUD/16/207 dated 15th December, 2021.”
In addition, the company sought an order setting aside the FIRS’ Notice of Additional Assessment for the reasons set out in grounds one to four and the accompanying particulars contained in this notice of appeal.
Also, it sought an order of injunction restraining the FIRS, its agents, officers or privies, from further assessing the company to tax for the 2016 year of assessment as set out in the demand note reference number: PDBA/CIT/AUD/16/207 dated December 15, 2021, among other reliefs.
Delivering the judgment on the appeal filed before it, the TAT observed that parties had engaged in process of settlement even when the trial was ongoing in the matter.
The tribunal, in the certified true copy of the judgment, which was delivered on Thursday and made available to NAN on Tuesday, said: “On the 10th July, 2024, parties filed a term of settlement in the tribunal.”
The panel held that in the terms of settlement signed by parties, the NLNG agreed to pay FIRS “the sum of USD$27,500,000 (Twenty-Seven Million, Five Hundred Thousand Dollars) as Full and final settlement of the Revised CIT Assessment and the subject matter of this appeal if payment is made on or before Friday, 12th July 2024.
“In furtherance of the above the appellant (NLNG) on Monday 8th July, 2024, duly remitted the said sum of USD$27,500,000 (Twenty-Seven Million, Five Hundred Thousand Dollars) to the respondent (FIRS), being the full and final settlement amount agreed upon by the parties.
“In the circumstance, the terms contained in the terms of settlement have been adopted and made judgement of this Honourable Tribunal.
“This is the judgment of this Honourable Tribunal.”
Earlier, the TAT dismissed the NLNG’s interlocutory motion seeking to disqualify it from further sitting on the grounds that the company did not have confidence in the tribunal to adjudicate on the matter.
In the motion, the company asked the tribunal to direct the chairperson, Mrs Iriogbe, and another member, Mr Ajayi Bamidele, who were former staff of FIRS before retirement, to excuse themselves from further participation in hearing of the matter as their presence in the panel posed likelihood of bias against the applicant.
Delivering the ruling, the tribunal maintained it had gone through the application and cannot see any cogent reason for it and agreed with the FIRS counsel’s argument, citing Section 59 of the FIRS Establishment Act 2007 (as amended) and Paragraph 8 of the 5th Schedule of the same Act, to justify its stance.
The TAT ruled: “The appellant (NLNG) counsel also said that he does not have any reason to suspect that the panel would be biased but that other people out there might have a contrary view.
“However, in view of the statutory provisions quoted above, the only option probably open to the applicant would be to seek to invalidate the statutory provisions in a superior court of law.
“In view of the foregoing, this tribunal sees this application as being frivolous and it is hereby dismissed with no order as to cost”, it added.
