The Tax Appeal Tribunal (TAT) has ordered the Nigeria Liquefied Natural Gas (NLNG) Limited to pay the Federal Inland Revenue Service (FIRS) 27.5 million dollars as full and final settlement of the revised companies’ income tax (CIT) for the 2016 assessment year. This was part of the judgment of the Tax Appeal Tribunal (TAT) sitting in Abuja.
The five-member panel of TAT, chaired by Mrs. Alice Iriogbe, entered the judgment in the terms of settlement agreed to by parties in the appeal.
The News Agency of Nigeria (NAN) reports that the NLNG Ltd had, in the appeal marked: TAT/ABJ/APP/331/2022, filed a notice of appeal dated and filed on April 21, 2022.
The company, an appellant, had sued the FIRS, a Federal Government’s revenue agency, as sole respondent.
The NLNG prayed the tribunal to restrain the revenue agency from collecting the sum of $141. 75 million dollars from it as CIT for the year under review. It 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, NLNG argued that by the provisions of Clause 8(A) of the TCPAs (Time Charter Party Arrangements), the appellant is contractually obligated to pay for the use and hire of the vessels.
This is at a daily hire rate, which consist 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 BGT (Bonny Gas Transport) at the end of the lease.”
The company said although the parties to the TCPAs agreed that the lease and the attendant lease payments will continue until the redelivery dates of the vessels which were to occur at the end of the agreed tenure of the lease, it became 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 said 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.
It said that the FIRS however took the position that the terminal costs were not reasonably and necessarily incurred for its business operations.
The NLNG therefore sought seven reliefs including “a declaration that, having regard to the TCPAs, the refit and dry-dock 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 December 15, 2021.”
The gas company therefore 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.
It equally 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. (NAN)
