CIVIL APPEAL NO 158 OF 2021 KABANGA NICKEL COMAPNY LIMITED VS COMMISIONER GENERAL TANZANIA REVENUE AUTHORITY

IN THE COURT OF APPEAL OF TANZANIA AT PAR ES SALAAM (CORAM: MKUYE, J.A.. MWAMPASHI. 3.A. And MGEYEKWA. J J U CIVIL APPEAL NO. 158 OF 2021 KABANGA NICKEL COMPANY LIMITED..................................... APPELLANT VERSUS COMMISSIONER GENERAL TANZANIA REVENUE AUTHORITY.................................... ......RESPONDENT [Appeal from the Judgment and Decree of the Tax Revenue Appeals Tribunal at Dar es Salaam] (Hon. D.C Kamuzora - Vice Chairperson) dated the 02nd day of December, 2020 in Tax Appeal No. 51 of 2019 JUDGMENT OF THE COURT 09th & 30th July, 2024 MWAMPASHI, J.A: The gravamen of this appeal, as it has been in a number of other cases before us, is once again, the interpretation and application of sections 6 (1) (b), 69 (i) (i) and 83 (1) (b) of the Income Tax Act, 2004 (the ITA), regarding the compliance with withholding tax in respect of service fees paid by a resident company to non-resident service provider. In view of the circumstances of this case, we think it is not premature if we remark, at this very stage, that the position regarding the interpretation of the above-cited provisions of law and their proper application, has already been settled by the Court. In its decision in Tullow Tanzania BV v. The Commissioner General, Tanzania Revenue Authority (Civil Appeal No. 24 of 2018) [2018] TZCA 82 (4 July 2018; TanzLII), the Court emphatically concluded by holding that, irrespective of the place of rendering services, where the payment is made by a person resident in the United Republic of Tanzania, for services utilized in the United Republic, the payment made is subject to withholding tax under the provisions of sections 6 (1) (b), 69 (i) (i) and 83 (1) (b) of the ITA. The decision in Tultow Tanzania BV (supra) in respect of the above settled position of the law, has been fully subscribed to and followed by the Court in many other decisions including, Shell Deep Water Tanzania BV v. Commissioner General, Tanzania Revenue Authority, Civil Appeal No. 123 of 2018 (unreported), Commissioner General Tanzania Revenue Authority v. Aggreko International Projects Ltd (Civil Appeal No. 148 of 2018) [2019] TZCA 178 (4 June, 2019; TanzLII), Ophir Tanzania (Block 1) Limited v. Commissioner General, Tanzania Revenue Authority (Civil Appeal No. 58 of 2020) [2021] TZCA 350 (6 August 2021; TanzLII), Dominion Tanzania Limited v. Commissioner General (TRA) (Civil Appeal No. 159 of 2021) [2022] TZCA 398 (28 June 2022; TanzLII) and Mantra Tanzania Ltd v. The Commissioner General, Tanzania Revenue Authority 2 (Civil Appeal No. 430 of 2020) [2021] TZCA 657 (5 November 2021; TanzLII), to mention but a few. Notwithstanding the above stated settled position of the law, the appellant in the instant appeal, seeks to challenge the judgment and decree of the Tax Revenue Appeals Tribunal (the TRAT) dated 02.12.2020 in Tax Appeal No. 51 of 2019 which upheld the decision by the Tax Revenue Appeals Board (the TRAB) in Tax Appeal No. 30 of 2015 dated 03.04.2019, the decision which relied on Tuliow Tanzania BV (supra). The facts of the case from which the instant appeal arises, as discerned from the record of appeal, are not complicated. The appellant, Kabanga Nickel Company Limited, is a resident company dealing in mining activities. In 2014, the respondent conducted tax audit on the appellant's business for the years of income 2010 to 2012 with a view of verifying the appellant's tax compliance. In the said audit, it was revealed that the appellant had procured services from non-resident persons and had made payments for the said services without withholding the relevant tax. Based on the said audit findings, the respondent issued a withholding tax certificate demanding TZS. 8,426,336,706.00 from the appellant, which was, however, objected to by the appellant. 3 In its objection to the above assessment and demand by the respondent, the appellant contended that, the payments made to the said non-resident service providers, had no source in Tanzania and were for services performed outside Tanzania hence, not liable to the withholding tax. The objection by the appellant was found unmerited by the respondent and when the appellant appealed to the TRAB, the appeal was dismissed. As we have alluded to above, relying on the decision of the Court in Tullow Tanzania BV (supra), the TRAB held that irrespective of the place of rendering services, as the payments were made by the appellant who is a resident in Tanzania, for services utilized by her in the United Republic of Tanzania, the payments were subject to withholding tax under sections 6 (1) (b), 69 (i) (i) and 83 (1) (b) of the ITA. On the second appeal to the TRAT, the decision by the TRAB was upheld hence, the instant third appeal. In this appeal, three grounds of complaint against the TRAT decision, as reproduced hereunder, have been raised: 1. The Tax Revenue Appeals Tribunal erred in iaw by confirming the decision o f the Board that payments including service fees attributable to services rendered outside Tanzania by the Appellant who is a resident company and regardless o f the place o fpayment are subject to withholding tax under the provisions o f sections 6 (1) (b), 69 (i)(i) and 83 (1) (b) o f the Income Tax Act, 2004. 2. The Tax Revenue Appeals Tribunal erred in law by confirming the decision o f the Board that the appellant's company had obligation to withhold tax for the payments made to its non-resident service providers outside the United Republic o f Tanzania for services utilized in the United Republic under the provisions o f sections 6 (1) (b), 69 (i)(i) and 83 (1) (b) o f the Income Tax Act, 2004. 3. The Tax Revenue Appeals Tribunal erred in law to hold that the Finance Act, 2020 has not changed the position o f the law in S. 69(i) o f the Income Tax Act, 2004 and therefore the position in Commissioner General TRA vs Pan African Energy, Civil Appeal No. 146 o f 2015 is not relevant to the appeal at hand. In compliance with rule 106 (1) and (7) of the Tanzania Court of Appeal Rules, 2009, respective written submissions for and against the appeal, were filed by both parties and at the hearing of the appeal, the counsel for the parties adopted their submissions. Without much ado, having adopted the written submissions in support of the appeal, Mr. Alan Nlani Kileo, learned advocate, who appeared for the appellant alongside Mr. Norbert Mwaifwani, also learned advocate, urged the Court to consider the appellant's written submissions and allow the appeal with costs. In the written submissions in support of the appeal, the three grounds of appeal were argued in line of two issues, to wit, One, whether in terms of sections 6 (1) (b), 69 (i)(i) and 83 (1) (b) of the ITA, payments including service fees attributable to services rendered outside Tanzania by non-resident persons is subject to withholding tax and Two, whether the TRAT was correct in law to hold that the Finance Act, 2020 has not changed the position of the law in section 69 (i) of the ITA. The two issues were argued conjointly. It was submitted for the appellant that the TRAT mixed up the facts of the case and miscomprehended the dispute between the parties in that, while the dispute was whether service fees paid by the appellant to non­ resident persons for services rendered outside Tanzania are subject to withholding tax as depicted at page 13 of the record of appeal under the sub-heading titled 'WITHHOLDING TAX' and at pages 21 and 22 of the record of appeal, the TRAT took to it that the services were rendered in Tanzania. The Court was also referred to the decision of the TRAT, at page 101 of the record of appeal, where to the appellant's understanding, the TRAT said that it was not disputable that the services were rendered or utilized in Tanzania though their performance was done outside Tanzania and further that, the word 'rendering' means 'delivering' which is distinct from the word performing. It was further submitted that the TRAT was again wrong in concluding that it was of settled mind that the Board was right in holding that payment including service fee attributable to services rendered in Tanzania regardless of the piace of performance constitutes the payment with a source in Tanzania. Moreover, it was submitted for the appellant that, while it is not disputed by the appellant that the services were rendered by non-resident persons while outside Tanzania, the issue was whether the payments made for such services which were rendered by non-resident persons while outside Tanzania, attracted withholding tax in Tanzania. To the appellant, for services to attract withholding tax, the services must be rendered in Tanzania, which, to the appellant, was not the case in the instant matter. It was insisted that according to sections 6(l)(b) and 69(i) (i) of the ITA, a non-resident person is only taxed in Tanzania if his income has a source in Tanzania and further that, the law, in its strict sense, is clear that an income of a non-resident person arising from payment made by a non-resident person has a source in the United Republic of Tanzania if the service fee rendered or an employment exercised is rendered or exercised in the United Republic, regardless of the place of payment. Placing reliance on Commissioner General v. Pan African Energy Tanzania Limited (Civil Appeal No. 146 of 2015) [2016] TZCA 807 (16 May 2016; TanzLII), it was insisted that section 69(i)(i) of the ITA does not impose a liability on an individual company to withhold tax where the service fee is paid in relation to services rendered out of Tanzania regardless of the fact that payment is made by a company registered and doing business in Tanzania. Moreover, it was insisted that the correct position of the law, which we were urged to follow, is as propounded in Pan African Energy Tanzania Limited (supra) and not Tullow Tanzania Limited (supra). It was contended that in distinguishing the former case, the Court moved from the strict interpretation of the law as applied in tax statutes to a purposive approach which was contrary the intention of the parliament when enacting section 69(i)(i) and (ii) of the ITA. Furthermore, it was argued that since section 69(i)(i) of the ITA is clear, the Court ought to have presumed that the legislature said what it meant in the statute. The provision needed no interpolation, it was argued for the appellant. With regard to ground 3 of the appeal, it was submitted that the repeal of section 69(i)(i) of the ITA in 2020 by section 33 of the Finance Act, 2020 was a result from the advice given by the Court in Pan African Energy Tanzania Limited (supra). It was argued that according to the amendments, which was also the position taken by the Court in Pan African Energy Tanzania Limited (supra), if services are consumed in 8 Tanzania, they are subject to withholding tax regardless of the place where they are rendered or where the payments were made. This, it was submitted, was what the Court intended to achieve in Tullow Tanzania Limited (supra) but which contradicted the law as it was by then. Citing the case of BIDCO Oil and Soap Limited v. Commissioner General TRA, Civil Appeal No. 89 of 2009 and Article 138 (1) of the Constitution of the United Republic of Tanzania, 1977, it was insisted that the law does not operate retrospectively. In conclusion, it was submitted that, before the amendments were made by the Finance Act, 2020, there was no law imposing a duty to the appellant to withhold tax on payments made to non-residents service providers for services rendered offshore. The Court was thus, urged to allow the appeal with costs. In attendance for the respondent, at the hearing of the appeal, was Ms. Consolatha Andrew, learned Principal State Attorney, who having adopted the respondent's written submissions earlier filed on 16.08.2021, made brief clarifications on few issues. In response to the submissions made in support of the appeal, Ms. Andrew began by expressing her stance that she was strongly opposing the appeal and supporting the decision by the TRAT. It was then 9 submitted for the respondent that, contrary to the submission by the appellant, the TRAT did not mix up or misapprehend the facts of the case. It was contended that the decision by the TRAT was based on the issues arising from the facts as clearly reflected in the record of appeal particularly from the audit findings that the appellant had made payments to non-resident service providers for services rendered and utilized in Tanzania for the appellant's mining activities in Tanzania. It was also contended that, as evidenced at page 36 of the record of appeal, the main issue was whether service fees paid by the appellant in respect of the appeal, are subject to withholding tax in Tanzania and not as put by the appellant that the issue was whether service fees paid by the appellant to non-resident persons for services rendered outside the United Republic of Tanzania are subject to withholding tax. Moreover, it was emphatically argued for the respondent that, the respective services were not rendered outside Tanzania as argued by the appellant but were rendered and utilised in Tanzania. The respondent was in agreement with the TRAT that even though the services were performed outside Tanzania, they were delivered and utilized in Tanzania by the appellant who benefited from the said services. It was contended that, adopting purposive approach, the Court in Tullow Tanzania Limited, correctly interpreted sections 6 (l)(b), 69(i)(i) and 83 (1) (b) of 10 the ITA, to the effect that for the payment to a non-resident person to be subjected to withholding tax; one, the services for which the payment is made must be rendered in the United Republic of Tanzania and, two, the payment should have source in the United Republic of Tanzania. Regarding the appellant's reliance on the case of Pan African Energy Tanzania Limited (supra), it was submitted for the respondent that the said case was distinguished by the Court in Tulfow Tanzania BV (supra) and further that the distinction of Pan African Energy Tanzania Limited and interpretation of the relevant provisions of law by Tullow Tanzania BV (supra) have been held to be the correct position by the Court in Ophir Tanzania (Block 1) Ltd, Shell Deep Water Tanzania BV (supra) and Aggreko International Projects Ltd (supra). With regard to the complaint on ground 3 of the appeal, it was submitted for the respondent that, the complaint is baseless because the amendments made to the Finance Act, 2020 were meant to make the intention of the legislature clear. It was further argued that since the amendments came into operation on 01.07.2020 after the occurrence of the dispute in question, then the amendments were irrelevant to the case at hand as tax statutes do not apply retrospectively. li Finally, Ms. Andrew prayed for the appeal to be dismissed with costs not only because it is baseless but mostly because similar disputes based on similar facts and on sections 6 (1) (b), 69(i)(i) and 83 (1) (b) of the Income Tax Act, 2004 (the ITA), have already been determined and decided in the respondent's favour by the Court in Tullow Tanzania BV, Aggreko International Projects Ltd, Shell Deep Water Tanzania BV and Ophir Tanzania (Block 1) Ltd (supra). In his brief rejoinder with regard to the complaint on ground 3 of the appeal, it was submitted by Mr. Kileo, that if the amendments to section 69(i)(i) of the ITA were made for clarification of the law, as argued for the respondent, then the law by the time Tullow Tanzania BV (supra) was being decided, was ambiguous. If that was the case, it was argued, Tullow Tanzania BV (supra) ought to have been decided in the appellant's favour as it was in the case of Pan African Energy Tanzania Limited (supra). Having considered the submissions made for and against the appeal, and due regard being had to the fact that the relevant facts and the dispute in the instant appeal are the replica of what had already been considered and decided by the Court in a number of appeals, as listed at the inception of this judgment, we do not think that much belabouring in 12 the determination of this appeal, is necessary. As pointed out above, the issues for determination arising from this appeal and the gist of the grounds raised, were raised and have been determined and decided in a number of our decisions. The fact that the issues we are called on to determine in the instant appeal, have been raised in a number of previous appeals before us, is substantiated by ground 3 of appeal in the instant appeal which was the same ground, word to word, raised in Dominion Tanzania Limited (supra) thus: " The Tax Revenue Appeals Tribunal erred in law to hold that Finance Act, 2020 has not changed the position o f the law in S. 69(i) o f the Income Tax Act, 2004 and therefore the position in Commissioner General TRA vs Pan African Energy, Civil Appeal No. 146 o f 2015 is not relevant to the appeal at hand". It should also be noted that Mr. Wilson Kamugisha Mkebezi, learned advocate, who filed the instant appeal and the respective written submissions for the appellant, was the same advocate who filed and argued the appeal for the appellant in Dominion Tanzania Limited (supra). Be that as it may, we are duty bound and enjoined to determine the appeal which is brought before us, to which we now turn. In view of the three grounds of appeal raised in the instant appeal, we propose to determine grounds 1 and 2 of appeal conjointly. Both two grounds seek to challenge the decision by the TRAT which was made on the basis of our decision in Tullow Tanzania BV (supra) to the effect that, irrespective of the place of rendering services, where the payment is made by a person resident in Tanzania, for services utilized in the United Republic of Tanzania, then the payment made is subject to withholding tax under sections 6 (1) (b), 69 (i) (i) and 83 (1) (b) of the ITA. At this juncture, we also find it imperative to preface our determination of the appeal by giving the definition of "withholding tax" and then by restating the law as provided for under the relevant provisions of the law dealing with issues on withholding tax, the subject of the instant appeal. Firstly, let us see what does the phrase "withholding tax" mean. In Tullow Tanzania BV (supra), the Court defined the phrase, that is, "withholding tax" as follows: ”Withholding tax is a tax that is required to be withheld by the person making payment o f certain amount to another in respect o fgoods supplied or services rendered to satisfy the recipients tax liability Turning to provisions of the law relevant to issues on withholding tax, the first provision is section 6 (1) (b) of the ITA which does not only 14 provide for what is chargeable income to a non-resident person but it also imposes the source principle emphasizing that payment to a non-resident person would be subject to taxation if payment has a source in the United Republic of Tanzania. In other words, in terms of section 6 (1) (b) of the ITA, a non-resident person's income is taxable where the income has a source in the United Republic of Tanzania. It is provided under the said provision of the law that: "6(1) Subject to the provisions o f subsection (2), the chargeable income o f a person for a year o f income from any empioyment business or in vestment shaii be: (a) N/A (b) In the case o f a non-resident person, the person's income from employment, business or investment for the year o f income, but only to the extent that the income has a source in the United Republic". With regard to section 69(i) (i) of the ITA, which elaborates on what payments have source of payment in the United Republic, the law provided thus: "69 The following payments have a source in the United Republic: 15 (a) - (h) N/A (i) payments, including service fee o f a type not mentioned in paragraphs (g) or (h) or attributable to employment exercised, service rendered or a forbearance from exercising employment or "rendering service". (ii) In the United Republic, regardless o f the place o fpayment, or...". It is clear, from the above cited provision of the law that, service fees to a non-resident service provider, has a source in the United Republic of Tanzania oniy if the services for which the payment is made, was rendered in the United Republic. Finally, it is section 83 (1) of the ITA which imposes obligation to withhold income tax for payments made to a non-resident person only to the extent where the source of payment is in the United Republic of Tanzania. It is provided under section 83 (1) that: "83 (1) Subject to subsection (2), a resident person who - (a) ... (b) pays a service fee or an insurance premium with a source in the United Republic to a non-resident person shall withhold income tax from the payment at 16 the rate provided for in paragraph 4 (c) o f the First Schedule " As we also noted in Dominion Tanzania Limited (supra), the cumulative import of sections 6 (1) (b), 69(i)(i) and 83 (1) (b) of the ITA, was considered by the Court in Tullow Tanzania BV (supra), where the Court observed that: "Reading sections 6 (1) (b), 69 (i) (i) and 83 (1) (b) a ii together gives two conditions fora payment to a non-resident to be subjected to withholding tax. These are: (1) the service o f which the payment is made must be rendered in the United Repubiic o f Tanzania, and (2) the payment should have a source in the United Republic o f Tanzania". When grounds 1 and 2 of appeal are examined and in consideration of the submissions made in support of appeal, what can be observed is that, the crux of the two grounds of appeal is based on the appellant's contention that the respective services were rendered offshore and not in the United Republic of Tanzania. This contention by the appellant has been dominantly repeated in the submissions made in support of the appeal. In that regard, the appellant also complains that the TRAT mixed- up the facts of the case. The contention has, however, been strongly opposed by the respondent who has maintained that the TRAT did not mix- up the facts and further that the services were rendered in the United Republic of Tanzania and not offshore as claimed by the appellant. The question arising from the above stated appellant's contention is whether the respective services were rendered outside Tanzania as claimed by the appellant or not. This question entails not only revisit of the relevant facts of the case but also the determination or definition of the word "rendered" within the meaning of the relevant provisions of the law. Luckly enough, the said word, that is, "rendered" has already been judicially considered and defined by the Court. The word was defined in the case of Tullow Tanzania BV (supra) where it was stated that: "It is our strong view that the word rendered used under section 69(i)(i) is synonymous to words "supplied" or "delivered". In this regard, a non-resident who provides services to a resident, has delivered/supplied services to a resident o f the United Republic o f Tanzania. The recipient o f the services is actually the payer for such services, in which case, "source o f payment" cannot be any other place except where the payer resides. In other words, as the services o f which the payments were made were consumed or utilized in the United Republic o f Tanzania for the purpose o f earning income in the United Republic, then payments made for such services had a source 18 in the United Republic o f Tanzania, and the respondent had to withhold tax under section 83(1)( c) o f the Act" Guided by the above construction of the relevant law including the definition of the word "rendered" within the meaning of section 69 (1) (b) of the ITA, as above defined and having revisited the facts of the case, we find grounds 1 and 2 of the appeal baseless. It is clear and evident from the record of appeal that the appellant procured services from non­ resident service providers. The services procured were supplied or delivered to the appellant in the United Republic of Tanzania and the appellant utilized the services, for purposes of earning its income, in the United Republic. It is also not disputed that the appellant made payments for the services supplied to it while in the United Republic and from the income earned in the United Republic. That being the case, in terms of sections 6 (1) (b), 69(i)(i) and 83 (1) (b) of the ITA, the service fees payments made to the non-resident service providers had a source in the United Republic and were subject to withholding tax. The TRAT did therefore not err in upholding the TRAB decision that the payments made by the appellant to non-resident service providers were subject to withholding tax and that the appellant had obligation to withhold the relevant tax. Grounds 1 and 2 of appeal fails. 19 We also note that, in support of the appeal, the appellant has predominantly relied on Pan African Energy Tanzania Limited (supra). The appellant has also attempted to convince us depart from our decision in Tullow Tanzania BV (supra) on account that the Pan African Energy Tanzania Limited (supra) is good law and not Tullow Tanzania BV (supra). Without beating around the bush, we decline the invitation and reiterate what we observed in Dominion Tanzania Limited (supra) that: "...we decline the invitation from the appellant's counsel to depart from the decision o f Tullow Tanzania BV (supra) in favour o f Pan African Energy Limited (supra) as we are satisfied that the interpretation o f the provisions relating to payment o f withholding tax to non-residents made in Tullow Tanzania BV (supra) was correct and therefore good law. We wish to reiterate that there is no error in the said interpretation o f the law and we see no convincing argument to warrant us to do so". Finally, is ground 3 of the appeal which should not detain us at all. As we have alluded to earlier on, the complaint that the TRAT erred in holding that the Finance Act, 2020 has not changed the position of the law in section 69(i) of the ITA, was raised in Dominion Tanzania 20 Limited (supra). Having thoroughly discussed the said ground, the Court found it unmerited and dismissed it. For purposes of disposing of ground 3 of the instant appeal, based on our decision of the same point in Dominion Tanzania Limited (supra), we hereunder reproduce in extenso what the Court held in the above cited case on the merit of such a ground. The Court observed that: "As it is, our examination o f the decision in Tullow Tanzania BV's case (supra) and amendment by virtue o f Act No. 8 o f2020 has revealed that the said amendments amplified the taw as it then was by stipulating clearly that the services rendered or delivered by a non-resident irrespective o f the place o f where they are rendered, provided that such services are utilized or consumed in the URT, are subject to withholding tax. ... In this regard, as the said amendments were just meant to clarify the position o f the law that payments made by a resident to a non-resident for services rendered outside the URT for consumption in United Republic o f Tanzania are subject to withholding tax, it cannot be said that it changed the law. And, therefore, we are settled in our mind that the TRA T was right to hold that the amendments made in 2016 and 2020 did not change the position o f the law". 21 Without more, on the basis of the above, we find ground 3 of appeal baseless and dismiss it accordingly. All said and done and for the above given reasons, we find the appeal devoid of merit. Consequently, the appeal is dismissed with costs. DATED at DAR ES SALAAM this 29th day of July, 2024. R. K. MKUYE JUSTICE OF APPEAL A. M. MWAMPASHI JUSTICE OF APPEAL A. 2. MGEYEKWA JUSTICE OF APPEAL The Judgment delivered on this 30th day of July, 2024 in the presence of Ms. Noela Adam Mosha, learned counsel for the Appellant and Mr. Baraka Joram Mwakyalabwe, learned counsel for the Respondent is hereby certified as a true copy of the original. 22