20130521 TZCA Dar es Salaam

IN THE COURT OF APPEAL OF TANZANIA i I AT DAR ES SALAAM CIVIL APPEA 1.! NO. 8 OF 2007 1 I M/S SKYLINKTRAVELS & TOURS (T) ...................APPELLANT I I VERSUS THE COMMISSIONER TANZANIA REVENUE AUTHORITY {TRA) ....... .,. ......... RESPONDENT I RULING E.Y. MKWIZU-TAXING OFFICER ' The respondent above subjected the applicant an airline travel agency, Skylink Travels & Tours (T) to a VAT on Airline travel tickets. The applicant objected to the tax assessment, the objection which was upheld by the tax Revenue Appeals Board and bn further appeal to the tribunal by the I . respondent,· the Tax Revenue appeals tribunal reversed the decision of the Tax Revenue Appeals Board. Aggrifved by that decision, applicant (now ' Decree holder) appealed to the Court of Appeal; Civil Appeal No. 8 of 2007 ' ' challenging the decision of the Ta~ Revenue Appeals Tribunal, Court of ! 1 Appeal allowed the appeal with costs which is now the subject of the present bill of cost. On 21st May, 2012, counsel for the applicant/Decree Holder filed a bill of costs in this court. with two main parties. The first part contains the costs incurred in the conduct of the case; while the 2nd part of the bill of costs are disbursements all making a total of Tshs. 24,117,000/=. Decree ~older was represented by Mr. Magusu Mugoka learned Advocate where as Mr. Juma Beleko represented the Judgment debtor. Arguing in support of the bill of costs Mr. Magusu Mugoka stated that in item 1, Decree holder claims for 20 Million as instruction fees for representing the appellant, including prosecution of the application for leave to appeal, preparation and filing of the Notice of appeal, memorandum of appeal, records of appeal; and the list of authorities. He elaborated that the amount charged is justifiable as the matter was complicated and of its kind before the court of appeal as there was no precedent on the matter and therefore it required enough research from other common law jurisdictions. He referred the court to the attached copy of the invoice of the bill raised by 2 l I his office and paid for by his client. Therefore, prayed ~r Magusu, item 1 of the bill of cost be taxed as presented. I On item 2, counsel for the decree holder prays for 1300,000 as costs for I . . I attending the court for hearing of the appeal. It was his submission that the hearing involved a length rival submissions which to him, justifies the claim I i of 300,000.Mr Magusu claims 10,000 each as cost for: attending court I for judgment, lodging bill of cost and for ruling on taxation in items 3,5 and 7 respectively. And 50,000 as cost for drawing this bill 1 bf costs under item 4 while 20,000 is claimed as cost for attending court for taxation in item 6. I I Lastly, Mr Magusu claims the amount of 3,672,000/= as 18%of the total I I amount of VAT paid and disbursements of 45,000/= as court fee paid for I drawn order and judgment of the court. On his part, Mr. Juma Beleko counsel for the Judgment debtor, The Commissioner Tanzania Revenue Authority (TRA) challenged the presented bill of costs. To him the amount of 20 million claimed in the first I item is on high side. The matter before the court was·I on an interpretation of YALUE ADDED TAX ACT Cap 148 (RE 2002) on the ipsue as to whether the kind of business the appellant (now decree holder) was doing falls under an 3 exempted supplies or not, there was nothing complicated, submitted Mr Juma Beleko. He insisted further that the case was not that unique to warrant the charge of 20 million. To him 3 million is enough and reasonable On item 2, Mr Beleko suggested that the amount is excessively high and therefore it should be reduced to 60,000/. While conceding to the claimed amount in items 3, 5, 6, 7 and 8 of the bill of cost, he prayed that the costs for drawing the bill of costs under item 4 be reduced to 15,000. Mr beleko strongly opposed the VAT claim arguing that VAT is part of the business and that burden to pay VAT is on the service recipient which cannot be shifted to any other person. To Mr beleko, Decree holder received service from his Counsel and therefore he was Hable to pay VAT. On the other side Mr Beleko submitted that Respondent is exonerated from paying any kind of Tax under Cap 399, thus cannot in any way be subjected to a refund of VAT. Having gone through the submission of the parties, I find only one issue to discuss and that is whether the amount claimed in each item is reasonable. 4 It is a settled law that in establishing the quantum of costs involved the taxing officer has to evaluate the nature of the proceedings gave rise to the bill of costs being taxed. Paragraph 9(2) of the third Schedule of the Tanzania Court of Appeal Rules 2009 gives guideline to what should be charged as an instruction fees. · The rule provides specifically:- Par 9(2) The fees to be allowed for instructions to appeal or to 11 oppose an appeal shall be such sum as the taxing officer shall consider reasonable, having regard to the amount involved in the appeal, its nature, importance and difficulty, the interest of the ' parties, the other costs to be allowed the general conduct of the proceedings, the fund and person to bear the costs and all other relevant circumstances" [See also the case of Joretu Ltd vs Kigano & Associates (2002) 1 EA 92,and Premchand Rainchand vs quarry services of EA. Ltd and others(1972) HCD. This was also the position in Haji Athumani Issa v. Rwetama Matatu (1997)TLR,374 where the court stated that briefing should be on the 5 J. amount of work involved, difficulties and amount of money involved, time in hearing and the amount of research in tackling the issue. Again, the Court of Appeal in Hotel Traveltime Ltd v/s National Bank of Commerce, taxation civil reference no. 9/2006 stated that in allowing instruction fees, the taxing officer has to take into consideration a ·number of factors namely the amount involved in the appeal or application, its nature, importance and difficult; the interest of the parties; the other costs to be allowed, the general conduct of the proceedings, the fund or the person to bear the costs and all other relevant circumstances . I had an advantage of going through the court of appeal record in Civil Appeal No. 8 of 2007. The court dealt with the issue as to whether or not the commission earned by a travel agent for issuing a travelling ticket is the kind of taxable supply covered by the VAT Act and therefore chargeable to VAT. The Appellant filed three grounds of appeal and a two paged list of authorities with five annexture. The Parties appeared before the court for hearing only once on the 16th day of April 2012 and on 1ith May 2012 the Judgment was delivered to them. Though the counsels had to make substantive oral submission before the Justices of Appeal on the proper interpretation of provision of the VAT Act. lam of the view that the issue 6 before the court was not that much complicated to attract the instruction fees of 20 million. In East African Development Bank Vs Blueline Enterprises LTD, Civil Reference No. 12 of 2006, Court of appeal ·observed at page 8, "Our mission is to administer timely and affordable justice to all. In order to realize this as well as to enable all to acce·ss the courts, of whatever grade justice ought to be cheap ... After all, • costs are not meant to be a penalty, but to indemnify a successful party against expenses reasonably incurred in vindicating one's rights." Taking all the above into account, I am of the considered view that the amount of 20,000,000 claimed as instruction fees is excessively high. The I amount of 10,000,000 (ten million) is.reasonable in the circumstances. I therefore tax item one to that extent only and the rest is taxed off for being unreasonably on the high side. Mr Magusu prayed for VAT at 18% of the instruction fees. On his part Mr Beleko strongly opposed the VAT claim arguing that VAT is part of the ·business and that burden to pay VAT is on the service recipient which ' 7 cannot shift to any other person. He went further arguing that The Commissioner, Tanzania Revenue Authority (Respondent), is exonerated from paying any kind of Tax under Cap 399, thus cannot in any way be subjected to a refund of VAT. I was so interested to see as to what Cap 399 provides as regard costs payment by the Respondent particularly on the issue of VAT. Section 28 of Tanzania Revenue Authority Act, Cap 399 (RE 2002) provides, ''S.28:The Authority is hereby exempted from payment of any import and other duties, taxes, and levies in respect of its operations, capital property or documents or any transaction, deed agreement, fees or promissory note to which itis a party" And section 29 of the same Act provides "... where in any civil proceedings by or against the Authority, any order, including an order as to costs, is made by a court in favour of any person against the Authority. .. a/1 the provisions of section 15 of the Government Proceedings Act shall apply to the suit as if the suit were a proceedings by or against the Government .. 'remphasis mine) Section 28 above exonerates payment of any tax by the respondents on its operational activities on which is a party. Section 29 of the same act quoted above is more specific on what law is applicable when it comes to the orders as to costs by 8 the courts. It takes us to section 15 of the Government Proceedings Act (Cap 5 R.E i 2002 which says; I "S 15{1}The provision of any written law to the payment I I of interest where a decree is for payment of money and, to the payment of interest on costs shall apply to the case' of Government as they do in the case of a private persons." Indeed, the provision above falls under part VI I of The Government Proceedings Act (Cap 5 R.E 2002) which deals specifically with issues of . I I Judgments and execution. It unambiguously, provide that the paymei:1t of interest where a decree is for payment of money and to the payment of I I interest on costs shall apply to the case of Government as they do in the I case of a private persons. The section, in my view took into account the fact I that orders for costs and the like seeks to indemnify a successful party against expenses reasonably incurred in vindicating one's rights. . I I This being the position therefore, I am inc;lined to grant the applicant 18% as VAT of the granted 10 million instruction fees, I I the rest is taxed off. I am doing this while full aware of the position stated by Mr Beleko that VAT is paid by the Service Recipient, and ! 9 there is no doubt that Appellant in Civil Appeal no 8/2007 now ~'" Decree Holder received legal service from his counsel which subjected her to VAT. However it should be known that the Legal services refered to in this application is in respect of Civil appeal no 8/2007 of which without, the applicant (Decree Holder) would not have paid VAT. Item 2, cost for attending court for the hearing of the appeal is taxed at 60,000 the rest is taxed off. Costs for drawing the bill of cost under item 4 is taxed at 15,000 per item 11 of the scale of costs under the Court of appeal Rules 2009. Amount charged in items 3, 5, 6, 7 and 8 of the bill of cost a~e taxed as prayed. In its final analysis this bill of costs is taxed at 11,920,000 only, the rest is taxed off. It is so ordered. DATED at DAR ES SALAAM this 21st Day of May, 2013 / -~~:--------- . TAXING MASTER COURT OF APPEAL 10