The Tax Appeal Tribunal sitting in Abuja has ordered the Cement Technology Institute of Nigeria (CTIN) to pay more than ₦2.02 billion in Companies Income Tax and Tertiary Education Tax to the Nigeria Revenue Service (NRS), following the dismissal of the institute’s appeal against additional tax assessments.
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The five-member tribunal reached the decision in Appeal No. TAT/ABJ/332/2023, filed by CTIN against tax assessments covering Companies Income Tax, Tertiary Education Tax and Withholding Tax for the relevant assessment periods.
The panel was chaired by Chief Moremi Soyinka-Onijala, with Anthony Amoman, Dr Chukwudi Ezeudeka, Dr Gbenga Falana and Amina Ibrahim as members.
CTIN had filed the appeal on September 7, 2023, challenging notices of additional assessment and demand notices issued in respect of Companies Income Tax, Education Tax and Withholding Tax for the 2018 to 2020 years of assessment, corresponding to the 2017 to 2019 accounting years.
The institute also challenged a notice of refusal to amend the assessments issued in September 2023.
At the centre of the dispute was CTIN’s contention that the tax authority acted unlawfully by assessing Companies Income Tax and Education Tax on interest earned from its investments in Treasury Bills, bonds and fixed-deposit placements.
The institute argued that the assessments on those investment returns were inconsistent with applicable tax laws and should therefore be set aside.
It also challenged the Withholding Tax treatment of management fees paid to the Bank of Industry, contending that the assessment was unlawful.
In determining the appeal, the tribunal considered issues including whether CTIN’s activities amounted to trade or business, the distinction between income and taxable profit, the application of the Companies Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011, as well as questions relating to Tertiary Education Tax and Withholding Tax.
Delivering the judgment, Soyinka-Onijala said the tribunal had considered the statutory obligations of the parties and proceeded to recompute the Companies Income Tax and Tertiary Education Tax payable by CTIN.
Importantly, the tribunal did not simply uphold every component of the tax authority’s original assessment.
It accepted that management fees paid by CTIN to the Bank of Industry qualified as deductible expenses and directed that the amount be deducted from the relevant interest income in arriving at the institute’s revised assessable and total profits.
The tribunal also examined the applicable Withholding Tax treatment.
It held that under the Companies Income Tax Act, the Bank of Industry was required to deduct Withholding Tax at the applicable rate of 10 per cent from relevant interest income at source and remit it to the tax authority.
Accordingly, the tribunal said credit should be given for Withholding Tax already deducted in determining CTIN’s final Companies Income Tax liability.
Following the recomputation, the tribunal fixed CTIN’s Companies Income Tax liability at ₦1,835,484,959.69, while its Tertiary Education Tax liability was put at ₦190,158,410.44.
The two figures amount to ₦2,025,643,370.13, or approximately ₦2.03 billion.
The tribunal consequently dismissed CTIN’s appeal substantially, although it granted the institute limited relief in relation to qualifying Federal Government securities.
It ordered the NRS to, within 30 days, recompute the tax assessment to recognise the exemption applicable to interest income that can be specifically traced to Federal Government Treasury Bills and Bonds under the Companies Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011.
The effect is that while CTIN remains liable for the substantial Companies Income Tax and Tertiary Education Tax determined by the tribunal, the final assessment must reflect the statutory exemption for qualifying interest derived from the specified Federal Government securities.
The tribunal therefore stated that the appeal failed and was dismissed, except to the limited extent of the adjustments and exemptions it expressly recognised.
The dispute arose from the tax authority’s treatment of income generated from CTIN’s financial investments, particularly funds placed with the Bank of Industry, commercial banks and in government securities.
A more detailed account of the proceedings indicates that CTIN, which was incorporated as a company limited by guarantee, had argued that its institutional structure and the purpose for which its funds were held affected their tax treatment.
The tribunal, however, distinguished between the institute’s institutional objectives and the tax consequences arising from income generated through its investments, while still granting statutory deductions and exemptions where the law permitted them.
The judgment consequently reinforces the distinction between gross investment income and the amount ultimately liable to tax after recognised deductions, tax credits and statutory exemptions have been applied.
At the same time, the tribunal’s direction that the NRS carry out a further recomputation means the approximately ₦2.03 billion figure remains subject to the specific adjustment ordered for interest that CTIN can establish was derived from exempt Federal Government Treasury Bills and Bonds.
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