TROPEX LTD AND ANOTHER v COMMISSIONER OF INCOME TAX AND OTHERS 1996 TLR 390 (HC)

TROPEX LTD AND ANOTHER v COMMISSIONER OF INCOME TAX AND OTHERS 1996 TLR 390 (HC)

Court High Court of Tanzania - Dar es Salaam

Judge Mapigano J

B

MISC CIVIL CAUSE NO 21 OF 1996

1 October 1996

Flynote

Income tax - Withholding tax - Objection to - Jurisdiction of court - Remedies

provided by C sections 91 and 93 of Income Tax Act not appropriate for disputed

application of s 34(2B)

-Headnote

The applicants, aggrieved by the imposition of withholding tax on them by the first

D respondent in terms of section 34(2B) of the Income Tax Act, sought certain orders

in the High Court against the respondents. The third respondent raised an objection

to the proceedings, contending that the matter went beyond the cognizance of the

court. It was contended that the High Court would not entertain such an application

if an adequate remedy was otherwise available and that such other remedy was

available in the form of E the mechanism provided by sections 91 and 93 of the

Income Tax Act for addressing and determining such disputes. The applicant argued

that this rule fettering the jurisdiction did not apply where, as in the present case, a

party had come to the Court with the contention that the imposition of the tax was

wholly without the authority of the law and/or the alternative remedy was of an

onerous and burdensome character. F

Held:

(i) A deduction made pursuant to section 34(2B) was not predicated upon

an assessment of income tax by the Commissioner and was therefore not the kind of

assessment envisaged by sections 91 and 93 and the applicants' G complaints were

not amenable to the provisions of the Income Tax Act. The intended application was

perfectly justiciable in the High Court.

Case Information

Leave granted to continue.

Cases referred to: H

1. R v Paddington Valuation Officer ex p Peache Property Corp Ltd

[1965] 2 All ER 836

2. Hammatlas Harilal Mehts v State of Nadhya Predesh and others AIR 15

SC 403 I

Dr Kapinga for the applicants.

Songoro for the respondents.

1996 TLR p391

[zJDz]Judgment

Mapigano, J: A

The applicants are aggrieved by the decision of the first respondent, the

Commissioner of Income Tax, contained in the two letters annexed to their

statement, to impose withholding tax on them under the provision of s 34(2B) of the

Income Tax Act, 1973 in respect of the auction sales of their coffee beans conducted

by the second respondent, B the Tanzania Coffee Board, and to require the latter to

deduct or collect the amounts and remit the same to him. They have come to this

court to seek the prerogative orders of certiorari, mandamus and prohibition.

The third respondent, the Attorney-General who is joined in the proceeding by virtue

of C the provision of the law has raised an objection, which is that the matter goes

beyond the cognizance of this court. The point is urged upon the principle that the

High Court will not entertain such application if an adequate remedy is otherwise

available. On behalf of D the Attorney-General Mr Songoro, State Attorney has

pointed out that there is a mechanism provided by the Income Tax Act, vide ss 91 and

93 for addressing and determining such disputes. Mr Songoro has accordingly

submitted that the remedy provided by that Act is the proper remedy which ought to

be resorted to by the applicant, and that therefore, leave to seek the prerogative

orders should be refused. E

Dr Kapinga, counsel for the applicants sees things differently. His proposition is that

the principle that the jurisdiction of the High Court would be fettered by the

availability of an alternative remedy does not apply here, as in this case, a party has

come to the court F with a contention that the imposition of the tax is wholly

without the authority of the law and/or where, like in the instant case, the special or

alternative remedy is of an onerous and burdensome character. Dr Kapinga has drawn

on two authorities to bolster up his opinion, ie R v Paddington Valuation Officer

Hammatlas Harilal Mehts v State of Nadhya G Predesh and Others (2). Counsel has

also referred this court to the provision of s 93(5) of the Income Tax Act which makes

the lodging of an appeal against the decision of the Commissioner conditional to the

assessee's depositing half of the whole amount of tax assessed together with any

interest due under s 101. H

Section 34(2B) of the Income Tax Act provides as follows:

`Every person shall upon payment of any amount to any person in respect of

any fee, charge or like I consideration for goods supplied or services rendered, which

is chargeable to tax, deduct from that amount ax at a rate of two per cent of the gross

amount payable.'

1996 TLR p392

MAPIGANO J

It is elucidated under ss (2C) that the requirement prescribed above only applies to A

payments made by the Government agency, local government authority, parastatal

organisation and companies.

The point urged by the applicants is essentially that the section was misconstrued and

misapplied by the Commissioner, because no payments have been made by the B

second respondent in respect of the subject matters of the impeached intended

deductions. This is a troublesome and momentous point, and that probably explains

why the Annexures seem to evince a state of uncertainty on the part of the

Commissioner demonstrated by his approbation and disapprobation. I am satisfied

that the applicants C have a good arguable case against the decision and directive of

the Commissioner which deserves serious consideration, and it is relevant to observe

that the Attorney-General appears to hold the same view.

The decisions cited by Dr Kapinga strongly support the proposition that where the

whole D basis of a decision or action of a public body or official is impugned, and

where the alternative remedy provided by a statute is not convenient, beneficial and

effectual as the prerogative remedies, the High Court can entertain an application to

review the impugned decision or action and upon the merits of the particular case

make or refuse E to make the prerogative orders. The two decisions are highly

persuasive authorities, and no one can deny that they are entitled to the highest

respect, considering the ranks of the courts which pronounced them, ie the Court of

Appeal of England and the Supreme Court of India. I respectfully adopt the views

expressed therein as correct. F

Dr Kapinga would have me find that the present case comes four square within the

principle restated in those two cases. But Mr Songoro thinks otherwise, and the

question I have to decide is whether there is really a machinery given by the Income

Tax Act for G questioning the decision and directive of the Commissioner impugned

in this application. As shown, Mr Songoro has relied on the provisions of ss 91 and 93

of the Act.

Those provisions relate to objections to assessment of income tax made by the

commissioner in terms of part XIV of the Act, and to the rights of appeal to the

Appeals H Board and Tribunal in that connection. The vital question is whether

there has been any such assessment here. In fine, the applicants contend, by para 16

of their statement which appears at p 12 but which should be renumbered para 17,

that a deduction made under s 34(2B) is not an assessment of income tax, and that

there is nothing in the Act I which provides for any remedy against an erroneous

deduction of tax made under the section.

1996 TLR p393

MAPIGANO J

That is an attractive point, and it is interesting, gratifying and significant that in one

of the A annexures, ie the letter dated 6 February 1996, the Commissioner has more

or less expressed the same view. This is what he states in para 7:

`Let me mention in passing that withholding tax from payments in respect of

goods or services is B merely a mechanism of payment of advance tax which is

ultimately set off from he final income tax liability chargeable on the assessee in the

respective year of income. In case any such assessee ... is aggrieved on the tax assessed

when served with a final notice of assessment, the assessee is at C liberty to dispute

the assessment pursuant to s 91 and 93 of the Income Tax Act, 1973.'

I understand this to imply that it is premature for the applicants to seek the remedy

given by ss 91 and 93. If that is the case, then in my judgment it underscores the idea

that a D deduction made pursuant to s 34(2B) is not predicated upon an assessment

of income tax by the Commissioner, and is thus not the kind of assessment which is

envisaged by ss 91 and 93.

I accept the idea that the applicants' complaints are not amenable to the provisions of

the Income Tax Act. E

I hold, therefore, that the intended application is perfectly justifiable in this court.

Leave is accordingly granted.

1996 TLR p394

A