In the recently decided case of Theodak Nigeria Limited (Theodak) v. Federal Inland Revenue Service, the Federal High Court held that the Federal Inland Revenue Service (FIRS) acted ultravires the powers granted to it by the Companies Income Tax (CIT) Act by imposing a turnover assessment on Theodak relying on the value of its property. FIRS argued that Section 65 of CITA vested it with powers to exercise Best of Judgment (BOJ) assessment and its move to subject 20% of the value of Theodak Plaza was a “Best of Judgment Assessment” since Theodak failed to file returns for 2015. FIRS also argued that the action before the court was incompetent as Theodak failed to object to the assessment within 30 days, making the assessment final and conclusive.
The Federal High Court held that the FIRS lacks the powers to impose turnover assessments on the properties of taxpayers even when such taxpayers have failed to file their Annual returns except such company is in the business of selling property and fails to file its annual returns. The Federal High Court sitting at Abuja also held that the wording of Section 69(1) CITA “If anybody disputes the assessment, it may apply to the board by notice of objection in writing…” is to the effect that application to the Board is not mandatory but discretionary.
It is quite interesting that the word “may” has been held to be the equivalent of “shall” in some tax cases. We expect that a superior court would shed more light on the obligation of the taxpayer to dispute an assessment within 30 days. Ultimately, taxpayers that have been served with assessment based on the value of their property should contact their tax practitioners so the propriety or otherwise of such assessments can be deciphered.
Omolola Ahmed – email@example.com