GAPCO Tanzania Limited vs Commissioner General-TRA (Civil Appeal No. 165 of 2025) [2026] TZCA 382 (1 April 2026)

IN THE COURT OF APPEAL OF TANZANIA AT PAR ES SALAAM (CORAM: SEHEL. J.A., RUMANYIKA, 3.A. And ISMAIL, J.A.) CIVIL APPEAL NO. 165 OF 2025 GAPCO TANZANIA LIMITED.............................................................APPELLANT VERSUS COMMISSIONER GENERAL-TRA ................................................... RESPONDENT (Appeal from the decision of the Tax Revenue Appeals Tribunal at Dar es Salaam) f Noimilanaa. Vice Chairperson) dated the 8th day of November, 2024 in Tax Appeal No. 20 of 2024 JUDGMENT OF THE COURT 11th December, 2025 & 1st April, 2026 RUMANYIKA, J.A.: In 2021, the respondent audited the appellant's tax affairs for the 2020 year of income, covering a range of taxes, including Value Added Tax (VAT). In this exercise, the storage rate of USD 5/M3 per metric ton charged by the appellant to its associate, was not considered to be at arm's length. Instead, the respondent adjusted it, on the respective hospitality income to the rate of USD 7/M3 per metric ton, imposing VAT on it. In doing so, the respondent considered the managing and running of fuel filling stations similar with payable lease agreements, subjecting it to VAT. The appellant disputed the

said audit report, contending that, some related players, such as Total Tanzania Limited, who was also the appellant's associate, had been charged even less, at arm's length. That, on this one, the appellant and associates (CoDO partners) had no land lord and tenant relationship. According to the appellant, it was a mere business arrangement as, still she retained control of the respective filling stations. Despite those complaints, the respondent adamantly issued the impugned VAT assessment, imposing a tax liability of TZS. 487,371,133.00. It comprised principal tax of TZS. 465,581,798.00 and interest of TZS 21,789,335.00. Aggrieved, the appellant filed an objection to the respondent, reiterating its previous position, against the audit report and the respondent's finding. The respondent on his part, stressed that USD 5/M3 storage rate charged per metric ton did not conform to the arm's length- principle. That, the dealers' arrangement constituted both supply of service and financial lease, as is stipulated under the Value Added Tax Act, (the VATA). Subsequently, there was a disputed final determination report which confirmed the tax liability, amount and interest, as stated above. Still aggrieved, the appellant approached the Tax Revenue Appeals Board (the TRAB), again, she lost the battle. Moreover, her appeal to the Tax Revenue Appeals Tribunal (the TRAT) was not a success; hence the instant appeal. It constitutes three complaints which are paraphrased as follows; One, the 2

TRAT failed to evaluate the evidence, holding that, the storage charge rate was the fair market value, two the TRAT misinterpreted sections 18 and 2 of the VATA and three, improper computation of the chargeable interest on penalty on the delayed tax. At the scheduled hearing of the appeal, Messrs. Wilson Mukebezi and Norbert Mwaifwani, learned counsel, appealed for the appellant whereas the respondent had the services of Mr. Baraka Mwakyalabwe and Ms. Adelina Ngogi, both learned State Attorneys. Mr. Mwaifwani began by adopting the appellant's written submission filed on 11th August, 2025, as part of his oral submission. However, on set, the first ground of appeal was dropped. Therefore, we shall not address or deliberate on it anyhow. Then Mr. Mwafwani wondered why the respondent adjusted the storage charge rate from USD 5/M3to USD 7/M3 per metric ton, for being improper. It was asserted that, in fact the initial charge rate reflected the fair market value which ought to have been left untouched. Much as some dealers in the industry had been charging less the rate. Therefore, Mr. Mwaifwani attacked the imposed charge rate for being arbitrary, not specifically and scientifically established. He also questioned the act of the TRAB, which was upheld by the TRAT to ignore the invoices presented by the appellant at the audit stage. Those invoices, Mr. Mwaifwani argued, they showed the charge rate to be

USD 5/M3. Much as, at times TIPPER and Camel Oil, in the same industry charged less, such as USD 3.25/M3 and USD 0.6/M3 per metric ton, respectively. Therefore, Mr. Mwaifwani asserted, the TRAT's finding that the appellant failed to present any documents to substantiate her claims is against the evidence on record. That, actually the invoices presented reflected its fair market value, which the respondent should not have adjusted, in the first place. Further, it was contended that the charged rate complied with section 2 of the VATA. Being prompted by the Court on the failure of the appellant to prove the case on the required standard, Mr. Mwaifwani was generous enough. Quickly, he asserted that, despite the invoices presented at the audit stage, the appellant did not present any copies of the respective lease agreements, at the TRAB to establish that indeed, the agreed storage charge rate was USD 5/M3 per metric ton and not otherwise. The learned counsel prayed for the appeal to be allowed for being merited. Replying to Mr. Mwaifwani's submission, Ms. Ngogi adopted the respondent's written submission filed on 11th September, 2025, as part of her oral submission. She highlighted by contending that, the dispute hinges on the interpretation of sections 2 and 18 of the VATA, with regard to what constituted the fair market value.

It was stressed that, the appellant may have some varying business arrangements in place with its associate and non-associate players, charging different rates. But the variety of terms and conditions apart, Ms. Ngogi argued, the appellant was obliged to establish the respective agreed written terms between her and the said connected players, in this, case that, it is USD 5/M3 per metric ton, which she failed to establish. Upon taking over from where Ms. Ngogi had ended, Mr. Mwakyalabwe began by defining what is "the fair market value" under section 18(2) (a) of the VATA. He contended that, in the present case the appellant did not demonstrate that only USD 5/M3 per metric ton was of the fair market value, under the circumstances. That, the appellant produced no copy of the alleged business arrangement/lease agreement upon which the tribunals below would resolve the allegations. Prompted by the Court, Ms. Ngogi argued that, the rate of USD 7/M3 per metric ton would only be the fair market value for the fuel sold in Tanzania, as it was the case. That, it was common ground, of the day that, in any case the rates ranged from 5-7/M3 per metric ton. Much as, in some cases, the appellant had charged USD 8.00/M3 per metric ton. Therefore, the Court was urged to dismiss the appeal with costs. Rejoining, Mr. Mwaifwani asked the Court to give guidance on the scope and applicability of section 18 of the VATA, on what the supply fair market value does entail. He also asked the Court to disregard the failure of the

appellant, in this regard to produce copies of the corresponding lease agreements, as the issue was not raised before the Board. The second and third grounds of appeal are interrelated, touching on the interpretation of sections 2 and 18 of the VATA, For which the Court is asked to resolve. Therefore, in order to determine the said intertwined complaints, it is apposite to reproduce the said provisions of the law. It is all about the fair market value of the supply, scope of the law and when it comes into play. On that account, therefore, we shal! deliberate on the two grounds together. For ease of reference, section 18 of the VATA reads: " Where a taxable person makes taxable supply for a connected personand the supply is made for no consideration, or for a consideration that is iower than the fair market value o f the supply, the value o f the supply shall be the fair market o f value of the supply reduced by the tax fraction o f that fair market values" (Emphasis added) Our reading of the law cited above takes us to a conclusion that, in order to alter the charge rate which is considered to be of the fair market value, irrespective of its subjective nature, at least it has to pass two tests; one, the respective supply is made to a connected person, pursuant to section 2 of the Act and two, the consideration paid is below what independent and unconnected entities would pay in any open and uncontrolled market.

Worth noting in the instant case, is the respondent's contention that the storage rate that previously was charged by the appellant to her connected entities did not reflect any fair market value, in terms of section 2 of the Act, read together with section 18 of the Act. At least, the present appellant admitted to have charged USD 5/M3 per metric ton for the supplies made. The respondent, in his adjusted assessment raised, it to USD 7/M3 which he considered to be the fair market value, as alluded to before. As such, the parties contended adversely on what constitutes the fair or unfair market value. Nonetheless, to justify the impugned adjusted USD 7/M3 per metric ton, which we consider to be discretional in the first place, the respondent stated that, the appellant's case was not exceptional in the circumstances, as she charged the same rate against some other connected persons, previously. As such, we note that, it was not seriously disputed that in some cases some players had paid higher rates, up to USD 7/M3 per metric ton. With all fairness, therefore, the appellant's claim that USD 5/M3 reflected the fair market value cannot be correct in the circumstances of the case. In fact, what is and what is not fair is always a relative term, the fact remains that fairness may not necessarily mean equality. However, it was expected, in the present case that for the purposes of sections 2 and 18 of the VATA the appellant ought to have treated all her associates alike. It follows, therefore,

that unless there were some peculiar circumstances, which was not exhibited here, the respondent was justified in arriving at the impugned adjusted assessment. Before we embark on the propriety or other wise of the impugned charge rate, we first of all note, with a great concern that the appellant's allegations bore some material contradictions. At first, it was alleged to be gratuitous business arrangement than being lease agreement between the appellant and the said entities. On this one, the respondent held a different view. With respect, we are unable to agree with the appellant's assertions for one main reason; Ordinarily; "lease" is defined as a bilaterally binding agreement which usually attracts rental charges, in turn, whilst a mere "business arrangement" would entail a non-binding pact/accord between the parties. It is undeniable fact, in the present appeal that, at times, the appellant charged storage rate of USD 5/M3 per metric ton, before the respondent adjusted it to a little bit higher rate. It is therefore clear to us that the appellant and its associates carried out a lease agreement and not a gratuitous business arrangement, as alleged. Put in other words, there seemingly existed such quite money- generating agreements on the fuel filling stations between the appellant and the said players. Therefore, the follow up issue would be whether either USD 5/M3 or USD 7/M3 per metric ton, as the case may be, was the fair market value and

thus, charged at arm's length. In the light of the discussion above, the respondent cannot be faulted for imposing the said adjusted charge rate, based on what the appellant had charged the other players, previously. Of interest, not only the purported charged rate did not reflect anywhere, but also, no single invoice was presented at the audit stage. However, unlike, for instance, in any lease agreement where the rights and obligations of the parties are clearly stipulated, if presented invoices would have set out applicable conditions. Put in other words, it was incumbent upon the appellant, at the hearing of the tax dispute before the TRAB to produce copies of the respective lease agreements or "business arrangements" as the case may be, which she did not. It is through lease agreements, therefore, that the appellant would have shown things, inter alia, the binding charge rate(s), establishing its fairness and market value, in accordance with the law. Unfortunately, this was not done. Therefore, in the absence of proof by the appellant that the agreed charged rate was USD 5/M3 per metric ton, it cannot be said with certainty that her allegations were, pursuant to section 110 of the Evidence Act, proved. This provision has been tested by the Court on different occasions, such as in Insignia Ltd v. The Commissioner General Tanzania Revenue Authority (Civil Appeal No. 14 of 2007) [2011] TZCA 246.

Applying the legal principle referred above to the present appeal, therefore, it can only be safely said that the appellant demonstrated a plain deviation from open markets, Much as also, the pricing of USD 7/M3 per metric ton was reasonably established by the respondent, in its own discretion in our considered opinion. With respect, we do not agree with Mr. Mwaifwani, on a contention that the respondent did not show how he arrived at the adjusted charged rate. According to the evidence on record, the impugned rate of 7/M3 per metric ton was arrived at after noting that, at times, the appellant charged USD 8.00M3 per metric ton. Besides, the appellant has an obligation to demonstrate on how she arrived at the alleged charge rate of USD 5/M3 per metric ton. It is so, because, equally, it did not bother the appellant to demonstrate on how she arrived at the alleged charge rate of USD 5/M3 per metric ton, as a tax payer. She had such a duty of proof, having commenced the impugned proceedings. With this uncertainty on the part of the appellant, it is clear to us that she underrated the charge rate only by design. We wish to stress that, any attempt by any person to avoid or evade tax is more or less strict liability, whose allegations cannot be refuted casually. Generally, every imposed charge rate is there for compliance, if objected, the adverse allegations require a relatively higher degree of proof. With all intents and purposes, therefore, the TRAT acted within the ambit of sections 2 and 10

18 of the VATA. This a foregoing discussion, in our settled minds, is good enough to dispose of the 2n d ground of appeal, in favor of the respondent. It is also recalled, that the third ground of appeal concerns the interest of TZS. 21,789,335.00 accrued, as penalty on the delayed payment of VAT. Its determination will be an easy task on our part. Now that the appellant did not prove her case to the required standard, under Section 76 of the Tax Administration Act, imposition of the interest on the unjustified delayed payment of tax automatically becomes chargeable. In other words, the interest charged was well founded; It follows, that, the means justified the end under section 18 of the VATA. Therefore, the follow up question is no longer whether or not the charge rate was of the fair market value. All the same, it be noted that what constitutes a fair market value has to be determined on case- to-case basis. Before we pen off, we also note that, the beauty of section 18 of the VATA is three-fold; One, it presumes that a tax payer has all the relevant information and adequate records with him for self-reporting, should any dispute arise on compliance with the tax law, two, a tax prayer has monopoly of the business transactions and the related evidence for settlement of a tax liability, as it all lies within his knowledge and competence and; three, the provision of law cited intends to prevent tax avoidance or its manipulation through non-arm's length transactions amongst the connected entities. li

Therefore, unless there is cogent evidence that the respective transaction was between the connected persons or was structured to distort taxable value, as is seemingly to be the case before us, any imposed charge rate has to be accepted as reflecting the fair market value. The 3rd ground of appeal is also devoid of merit. In the premises, we find no merit in the entire appeal, and it is hereby dismissed with costs. DATED at DODOMA this 31s t day of March, 2026. Judgment delivered this 1st day of April, 2026, virtually in the presence of Mr. Mahmoud Mwangia, learned counsel for the appellant, Ms. Halima Wingo, learned State Attorney for the respondent and Mr. Issa Issa, Court Clerk; is hereby certified as a true copy of the original. B. M. A. SEHEL JUSTICE OF APPEAL S. M. RUMANYIKA JUSTICE OF APPEAL M. K. ISMAIL JUSTICE OF APPEAL