Access Bank Tanzania Limited vs Commissioner General (TRA) (Civil Appeal No. 314 of 2017) [2018] TZCA 385 (30 July 2018)

IN THE COURT OF APPEAL OF TANZANIA AT DODOMA (CORAM: JUMA. C.J., MWARIJA, J.A. AND MZIRAY, J.A.! CIVIL APPEAL NO. 314 OF 2017 ACCESS BANK TANZANIA LIMITED...............................APPELLANT VERSUS COMMISSIONER GENERAL (TRA) .................................. RESPONDENT (Appeal from the judgment of Tax Revenue Appeals Tribunal at Dar es Salaam) (G.J.K. Miemmas. Chairperson.! dated the 29th day of June, 2017 in Tax Appeal No. 25 of 2015 JUDGMENT OF THE COURT 3rd & 30th July, 2018 MZIRAY, J.A.: This is an appeal that was filed herein on 22n d day of December, 2017 by Access Bank Limited in respect of the Judgment of the Tax Revenue Appeals Tribunal at Dar es salaam dated 29th day of June 2017 in Tax Appeal Case No. 25 of 2015. The brief background of the appeal is that the appellant, a limited liability company incorporated in Tanzania dealing with banking services in the United Republic of Tanzania received from the respondent a final tax assessment for the year 2009. The respondent disallowed an impairment loss on loans and specific provision amounting to Tshs. 355,709,641 in arriving at the taxable income for the year 2009 notwithstanding that the amount was allegedly approved by the BoT on the basis that the amount was not realized and therefore not incurred wholly and exclusively in the production of income from business. The respondent also adjusted the income before tax by 240,420,330 being part of 355,709,641 approved by the BOT as an impairment loss on loans which the appellant claims it was charged to the reserve. Additionally, the respondent disallowed the written off operating assets amounting to Tshs 58,071,547, borrowing costs amounting to Tshs. 53,356,112 and costs relating to bank officer's tax provision amounting to Tshs. 216,892,787 on the basis that they were allegedly not incurred wholly and exclusively in the production of income of the appellant for the year of income 2009. Further to that, the appellant alleges that the respondent did not take into consideration the loss brought forward in the year 2008 in the amount of Tshs. 1,383,626,613 to the year 2009. 2 The appellant objected to the assessment and consequently filed an Appeal before the Tax Revenue Appeals Board (the Board) at Dar es salaam oa J J 1 1 1March, 2014. The Board rendered its decision on 26th August, 2015, in favour of the respondent. The appellant was aggrieved and thus appealed to the Tax Revenue Appeals Tribunal (the Tribunal). The appellant was unsuccessful as the appeal was dismissed. Aggrieved further, the appellant lodged the instant appeal herein on the following grounds: 1 . That the Honourable Tax Revunue Appeals Tribunal erred in fact in finding that the m aking o f the provision fo r im pairm ent o f doubtful debts are not allow able deductions under the law. 2. That the Honourable Tax Revenue Appeals Tribunal erred in law in its finding that the m aking o f the provision fo r reserves are not allow able deductions under the law. 3 . That the Honourable Tax Revenue Appeals Tribunal erred in law in its finding that the facts and issues in appeal No. 3 o f 2011 between Com m issioner General (TRA) and Barclays Bank Lim ited and Appeal No. 19 o f 2013 between Com m issioner General (TRA) and N ational 3 M icrofinance Bank PLC are substantially the sam e fo r doctrine o f stare decis to apply; 4 . That the Honourable Tax Revenue Appeals Tribunal erred in law in its finding that the m aking o f the provisions o f section 25(5) (b) as amended by the Finance A ct o f 2014 applies to the appellant's tax affairs fo r the year o f incom e 2009; and 5 . That the Honourable Tax Revenue Appeals Tribunal erred in law in its finding that the losses claim ed by the appellant in the year o f incom e 2009 are not deductable in accordance with section 11(2) o f the Incom e Tax Act, 2004. At the hearing of the appeal, on 3/7/2018, Ms. Hadija Kinyaka and Dr. Erasmo Nyika, learned Counsel represented the appellant and Mr. Primi Manyaga, learned Counsel represented the respondent. The first issue to discuss in this appeal is on the fin ality o f assessm ent which was raised by the respondent in the Board as a preliminary objection and which the respondent has raised it in its written submission before this Court. It was the respondent's contention that, during determination of the objection to an 4 assessment by the Commissioner General in accordance with section 13, the appellant did not respond to the letter dated 25th November, 2013 pursuant io .section 13(4) and therefore appeal could not lie against an assessment issued under sub-section 6 of section 13 as it was a final assessment as prescribed under section 15 of The Tax Appeal Act (Cap 408). Ms. Kinyaka for the appellant was of the view that, non-filing of a reply under section 13(4) of Cap 408 does not lead to a final assessment. Circumstances of finality of assessment are provided for under section 15 of Cap 408, she submitted. Making reference to pages 23 and 55 of the record of appeal, Ms. Kinyaka submitted further that, the respondent abandoned his preliminary objection at the level of the Board and therefore cannot raise it at this stage. Section 13 of Cap 408 deals with general powers of the Commissioner General on receipt of notice of objection. It provides: "13.-(1) The Com m issioner General shall, upon adm ission o f an objection within section 12, determ ine the objection as filed, o r ca ll fo r any evidence as m ay appear necessary fo r the 5 determ ination o f the objection, and may, in that respect- (a) am end the assessm ent in accordance with the objection; (b) am end the assessm ent in the lig h t o f any further evidence that has been received; or (a) refuse to am end the assessm ent (2). .............. N/A (3) Where the Com m issioner General - (a) Proposes to am end the assessm ent in accordance with the objection and any further evidence; or (b) proposes to refuse to am end the objection ; he sh a ll serve the objector with a notice setting out the reasons fo r the proposal. (4) Upon receipt o f the notice pursuant to subsection (3), the objector shall, within thirty days make subm ission in w riting to the Com m issioner General on h is agreem ent or disagreem ent with the proposed amended assessm ent or the proposed refusal. (5) The Com m issioner General may, after the receipt o f the subm issions by the objector made pursuant to subsection (4) 6 (a) determ ine the objection in the lig h t o f the proposed am ended assessm ent or proposed refusal and any subm ission made by the objector; or (b) determ ine the objection p artially in accordance with the subm ission by the objector; o r (c) determ ine the objection in accordance with the proposed amendment or proposed refusal." 6) Where the objector has not responded to the Com m issioner General's proposal to am end the assessm ent o r proposal to refuse to am end the assessm ent served in accordance with subsection (3), the Com m issioner General sh a ll proceed to m ake the fin a l assessm ent o f tax and accordingly serve the objector with a notice thereof." The pertinent question at this stage is whether non-filing of the submission under section 13(4) of the Cap 408 is fatal leading to an issuance of a final assessment by the Commissioner (TRA) which is not subject to appeal. 7 Finality to an assessment is provided for under section 15 of Cap 408. It provides specifically that an assessment is final and conclusive if:- (a) No notice o f objection has been given; and (b) Where notice o f objection has been given: i. The assessm ent has been am ended under subsection (1) o f section 13; or / / ' A notice o f objection has been given and the assessm ent has been amended under section 13 in such a way that no appeal w ill be available against the amendment; Hi. An appeal has not been preferred against any determ ination o f an objection by the Com m issioner General; iv. The objection has been fin a lly determ ined on assessm ent o f tax on an appeal." It is clear from the above provision that non-filing of the written submission as per the provisions of s. 13 (4) of Cap 408 warrants the respondent to issue final assessment. The rationale to this is that, the initial correspondences between the Commissioner and a tax payer, after the admission of the notice of objection under section 13 of Cap 408, are jneant to facilitate a smooth and correct evaluation of the Tax payer's filed returns in establishing a tax payer's taxable income towards calculating the tax payable in respect of that income. Thus, as rightly submitted by counsel for the respondent, non- compliance with the provision of section 13(4), gives an inference that, the tax payer is essentially, in agreement with the adjusted tax assessment and therefore is precluded from complaining to the assessment of which she /he had time to offer explanation for or against. The assessment therefore issued under the provision of section 13(6) of Cap 408 are final in terms of section 15 (1) (b)(ii) of the same Act and cannot be appealed against as per the wording of that provision. In the case at hand, the records are to the effect that, the learned counsel for the respondent had raised this objection before the Board at page 32 and submitted on it in its written submission at pages 41 -42 of the record of appeal. He however, later on, prayed to withdraw it at page 55 lines 20-23, of the record of appeal, the prayer which was acceded to by the Board. 9 Respondent again, raised the same point before the Tribunal at page 164 of the record. The appellant responded to this query at page 173 and 234 of the record where she disputed to have been served with the said proposal for amendments under s. 13 (3) of Income Tax Act (ITA) as required by the law. In dismissing this complaint, the Tribunal had this to say at page 15 of its judgment: "W e have....on the face o f it the respondent's argum ent could dispose o f the appeal but we have noted that this issue was raised before the board...However that issue was not included in the fram ed issues and the Board d id not make any finding on it. The respondent d id not file a cross appeal so there is no way th is tribunal can decide the issue a t this stage. This com plaint is dism issed". We think this should not detain us, if respondent's counsel had a serious issue to argue on this point, he could have proceeded to argue this issue at the Board and /or could have filed a cross appeal in this Court after being dismissed by the Tribunal. We join hands with the Tribunal that, raising this point at this level is an afterthought and cannot be allowed. 10 We now draw our attention to the grounds of appeal as argued by Dr. Nyika, learned counsel. Grounds 1, 2 and 3 were argued together as they are interrelated. The main complaint was directed to the Tribunal's findings that supported the respondent's disallowance of impairment provisions and reserve provisions for not being allowable deductions under the ITA, 2004. It was Dr. Nyika contention that, the preparation of the tax payer's returns account is regulated by the General Accepted Accounting Principles (GAAP) as provided for under section 21(1) of the ITA. He stressed that, while section 25(4) of ITA deals with the deductibility of the written off debts, it does not provide for the modalities of accounting for bad debts. Section 21 authorizes such accounting to be done in accordance with the accepted accounting principles. Dr. Nyika went on submitting that, section 25(4) of ITA has a very restrictive application to Banking Institutions on a reason that banks do not normally write off debts. The reason behind this, said Dr Nyika, debts comprise a trading stock of the banks and therefore, writing off debts may affect the banks liquidity position and its nature as a going concern. This makes it necessary for the BOT to regulate all accounting procedures for bad debts under section 25(5) of ITA. What does section 25 provide in respect of the provision of impairment of doubtful debts? Section 25 of ITA before the 2014 amendments provided for a reversal of amounts including bad debts; it reads: "25.-(1) ........ N/A (2) ............. N/A (3) ............. N/A (4) Subject to provisions o f subsection (5), where in calculating incom e on an accrual basis a person includes an am ount to which the person is entitled and the person later- (a) disclaim s an entitlem ent to receive the amount; or (b) in the case where the am ount constitutes a debt claim o f the person , the person w rites o ff the debt as bad, the person may, a t the tim e o f disclaim er o r w riting off, deduct the am ount disclaim ed or written o ff in calculating the person's income. (5) A person m ay disclaim the entitlem ent to receive an am ount or write o ff as bad a debt claim o f the person- 12 (a) in the case o f a debt claim o f a financial institution, only after the debt claim has become a bad debt as determ ined in accordance with the relevant standards established by the Bank o f Tanzania / and (b) in any other case, only after the person has taken a ll reasonable steps in pursuing paym ent and the person reasonably believes that the entitlem ent o r debt claim w ill not be satisfied ." (Em phasis supplied). The way we construe sub-section 5 of section 25, which we think is the right way, it provides specifically that, a Financial Institution may disclaim the entitlement to receive an amount or write off as bad debt claim only after the debt claim has become a bad debt as determined in accordance with the relevant standards established by the BoT. Basically, the section deals with the time when the Financial Institution can actually account for the losses of that nature, this is understandably because the sections falls under Part III, Division I I Sub-division A of the ITA, which deals with Tax Accounting and Timing. 13 It was the appellant's protest that both the Board and the Tribunal wrongly, relied on the provision of section 18, 39(d) and 25 (5) in concluding that the provision for impairment for loans were not realized and thus not deductible. This is because, the question of proof or evidence was not at issue in the Board as the dispute was on issue of law. On this point Dr. Nyika elaborated that, impairments are provisions and not expenditure that qualify for deductions and that they are accounted for under the GAAP in which a prior approval of the respondent is not required. He went further illuminating that, appellant obtained approval of the BoT which was tendered before the Board and therefore he was in total compliance to s. 25 read together with s.21(l) of the ITA. He referred us to pages 6 and 81 of the record of appeal. On his part, Mr. Primi for the respondent opposed the complaint. His submission was that the Tribunal disallowed the sought provisions not because they are not deductible under the law, but because the appellant failed to prove existence of legal requirement referred to in s. 18 read together with s. 39 (d) of ITA. 14 On the point by the appellant that at the Board, the question of presentation of evidence to prove whether appellant's provisions for bad debt, and doubtful debts and reserves qualify for deduction was not at issue, Mr. Primi submitted that the issue in dispute had been all along, whether the provisions in question qualify to be recognized as bad debt, doubtful debts or reserves. Appellant failed to avail the proof before the Board and the Tribunal, he stressed. On the allegation that the appellant did comply with the BoT regulations and therefore fulfilled the requirements of the law, Mr. Primi was quick to reply that, appellant neither attempted to demonstrate how these laws and regulations were complied with nor exhibited any approval by the BoT. He concluded that, the Board and the Tribunal correctly decided in favour of the respondent for failure by the appellant to prove the existence of the said provisions and that losses were realized and therefore deductible. As stated earlier, in disallowing the provision for impairment, the respondent, Board and the Tribunal were of the conclusion that the provision for impairment for loans were not realised in accordance to s. 18 and 39 (d) ITA. Section 18 reads; 15 "For the purposes o f calculating a person's incom e fo r a year o f incom e from any business, there sh a ll be deducted any loss o f the person, as calculated under Division III o f this Part, from the realization during the year o f incom e of- (a) a business asset o f the business that is o r was em ployed wholly and exclusively in the production o f incom e from the business; (b) a debt obligation incurred in borrowing money, where the m oney is o r was em ployed o r an asset purchased with the m oney is o r was em ployed w holly and exclusively in the production o f incom e from the business; or (c) a lia b ility o f the business other than a debt obligation incurred in borrowing money, where the lia b ility was incurred w holly and exclusively in the production o f incom e from the business". Section 18 above falls under Part III, Division 1 sub division D of the Act which deals with Deductions. S. 18 gives explanation as to what qualifies for deduction in calculating person's income inthe year of income. It explains in clear terms that the amounts to be deductible losses should be shown as realised. This 16 requirement in our view requires a taxpayer to demonstrate evidentially to the respondent/tax collector how the same have been realised. . S.39 (d) gives clarification on what amount to a realization of an asset by a taxpayer. It says: " S. 39. A person who owns an asset sh a ll be treated as realizing the asset- (a) ...N/A (b) ...N/A (c) ...N/A (d) In the case o f an asset that is a debt claim owned by a financial institution, when the debt claim becom es a bad debt determ ined in accordance with the relevant standards established by the Bank o f Tanzania and the institution w rites the debt o f as bad;.. "(Em phasis supplied) The provision above talks of two important aspects of a debt in regarding a Financial Institution. One, is a debt claim and two, a bad debt. A debt claim is defined under s.3 of the ITA to mean an asset representing a right of one person to receive a payment from another person and includes a deposit with a Financial Institution, account receivable, note, bill of exchange or bond. A bad debt is 17 literally, a debt amounts that has been identified as not being collectible. Section 18 and 39 of ITA 2004 quoted above deal with the realization of assets. Section 39(d) is more specific on when a debt claim is considered realized. It prescribes two conditions namely; one that, the claim must be declared bad debt in accordance with BoT standards and second that, the debt must be written off from the books of accounts. These two conditions should go together; they should both be proved to have been satisfied before the claim becomes deductible. In his submissions, Dr. Nyika for the appellant emphatically, tried to distinguish between impairment provisions and bad debts. He said, impairments provisions are provisions and not expenditures that qualify for deductions under s. 18 of ITA 2004. Referring to the Black's Law dictionary, Dr. Nyika defined impairment as a diminishing in the value of an asset. To him, unlike the assets referred to under S. 18 that is assets used in the production of one's income, literally known as capital expenditure, impairment provisions 18 are not of capital in nature. They are part of the financial institutions' trading stock which are not p art o f the business assert as described under s. 3 o f ITA 2004 . He further submitted that, impairments involve an accounting of the diminution or accretion in the value of the debt and do not entail the writing off of a debt. They are evaluated in each reporting year and the amounts recovered are reversed and reported as income while the amount not recovered is adjusted under s. 13 of ITA 2004. It was Dr. Nyika's further submission that, when a doubtful debt is under impairment, it is yet to became a bad debt for income tax purposes and therefore not ripe for being written off. He faulted the Board and the Tribunal for upholding the respondent's disallowance of impairment provisions on the basis of section 39(d) of ITA 2004. When responding on this point Mr. Primi for the respondent was of the view that, trading stocks and business assets are synonymous. For the loss to be deductible, the tax payer is required to prove the stated loss by evidence. Appellant in this matter, submitted Mr. Primi, failed to discharge that duty. 19 In ascertaining an applicable section under which the impairment provisions are to be subjected to for income tax purposes, we are made to go through the provision cited by the learned counsel for the parties. Reading sections 3, 13, 18 and 39 all of the ITA, it is clear that impairment provisions are allowable deductions for income tax purposes. Section 3 defines trading stock as; "assets owned by a person that are sold or intended to be sold in the ordinary course o f business o f the person ; work in progress on such assets and inventories o f m aterials to be incorporated into such assets and includes, in the case o f a person carrying on a banking business, loans made in the ordinary course o f that business." Going by the definition above, it is obvious that impairment provisions are trading stocks and therefore deduction principle applicable is under s. 13 of Part I I I division 1 subdivision D of the ITA. The section provides: 20 "S. 13:- (1) For the purposes o f calculating a person's incom e fo r a year o f incom e from any business, there sh a ll be deducted in respect o f the trading stock o f the business the allowance determ ined under subsection (2). (2) The allow ance sh all be calculated as:- (a) the opening value o f trading stock o f the business fo r the year o f incom e; plus (b) Expenditure incurred by the person during the year o f incom e that is included in the cost o f trading stock o f the business; less (c) the dosing value o f trading stock o f the business fo r the year o f incom e (3) The opening value o f trading stock o f a business for a year o f incom e sh all be the dosing value o f trading stock o f the business a t the end o f the previous year o f income. (4) The dosing value o f trading stock o f a business fo r a year o f incom e sh all be the low er o f- (a) the cost o f the trading stock o f the business a t the end o f the year o f incom e; or (b) the m arket value o f the trading stock o f the business a t the end o f the year o f income. 21 (5) Where the dosing value o f trading stock is determ ined in accordance with subsection (4) (b), the cost o f the trading stock sh a ll be reset to that value." (Em phasis supplied). Impairment provisions are allowable deductions under s. 13 of the Act and not s. 18 and 39(d) as rightly submitted by Dr Nyika. We say so because while s. 18 of ITA deals with the losses on realization o f business assets and liabilities, the definition of the Business assets under S. 3 explicitly excludes trading stocks. The section defines' business assets' to mean an asset to the extent to which it is employed in a business and includes a membership interest of a partner in a partnership but 1 excludes (a) a trading stock o r a depreciable asset'. Going by the International Accounting Standard, impairment provisions/doubtful debts are an accounting of the diminution in the value of the debt. It happens when there is a decrease in the fair value of an asset below its carrying amount. Thus, under the GAAP, the Financial Institution are required to set aside that amount upon evaluation of the risk and subsequently release the said amount upon diminishing of the risk. 22 It is clear therefore that, when a doubtful debt is under impairment, it is yet to become a bad debt for income tax purposes and therefore not ready for baua£«w£i£ten off. Being a trading stock, impairment provisions do not form part of the business assets deductible under the provisions of s. 18 and 39 (d) of the rTA. It was therefore wrong on this aspect, for the Board and Tribunal to uphold the respondent disallowances of impairment losses on loan relying on that s. 18 and 39 (d) of ITA. The item under scrutiny should have been evaluated in line with s. 13 of ITA and not otherwise. This ground succeed to that extent. The above conclusion notwithstanding, we do not buy Dr. Nyika assertion that proof on how the allowable /deductible amount in the areas explained above is arrived at is not required. If it is taken that the issues of approval on what is allowable/deductible amount under the ITA are left with the BoT after a tax payer has complied with the GAAP, this, in our view, would be preventing the respondent (TRA) who is responsible for Tax Administration, from making 23 considerations of the justification behind the declared losses and the actual chargeable income of the taxpayer. It is worth to note here that, the BoT is a regulatory authority of the Financial Institutions affairs, the function which cannot be extended to the duty of the Commissioner General of inspecting, examining and scrutinizing a taxpayer's books of account in view of ascertaining a chargeable amount under the ITA. These are distinct functions falling under different laws governing different bodies altogether. Though, the ITA recognizes the provisions of the Banking and Financial Institution Act and Regulations, there is no even a single provision of the law that bars the Commissioner General, respondent in this case, to question procedures or action taken towards obtaining the BoT approval. It is our firm view therefore that, absence of evidential proof as to how the amount for losses/allowable deductions and or impairment provisions were arrived at for them to be eligible for deduction under the rTA, as clearly observed by the Board and Tribunal, entitled the respondent to disallow the claimed deductions/allowances. Furthermore, the appellant is complaining against the decision of the Tribunal in disallowing the provision for reserves. According to Dr Nyika, regulatory reserves are legal prescribed reserves and provided for in accordance with the GAAP applicable to Banking and Financial Institutions under the regulatory laws recognized under s.21 (1) of ITA. The amount is not available for distribution and therefore allowable deduction. He elaborated that, both the Board and the Tribunal had grossly mixed the provision for reserves with the claims for deductible expenditure. Mr. Primi counsel for the Respondent was brief on this aspect. He supported the Tribunal's finding on the ground of the appellant's failure to provide proof to justify the amounts itemized as reserves for deduction purposes under the law. Mr. Primi observed that, having found that no evidence adduced before the Commissioner General at the time of determination of the objection and before the Board at the hearing of the appeal to justify the appealed reserve provisions, the Tribunal was justified to support 25 the respondent's acts of inclusion of the amount as a taxable amount. Our perusal of the records reveals that, in upholding the Boards decision the Tribunal said; " We think this ground should not detain us. This is essentially so because the Board made it dear that the appellant d id not produce docum entary evidence to support h is argum ent....we therefore dism iss this ground." From the quoted part of the Tribunal's decision above, it is our strong view that, the reserves provisions were not disallowed because of any other reason other than the appellant's own failure to adduce evidence to justify the said amounts. We are convinced therefore that, the Tribunal properly so decided and we find no reason to fault both the Board and the Tribunal. Yet again, the appellant is faulting the Tribunal for relying on its previous decision between the Commissioner General Vs M/s Barclays Banks Limited, Income Tax appeals no 3 of 2011. In His submission, counsel for the appellant suggests that in that decision, 26 nothing was discussed on how allowances for provisional doubtful debts and bad debts are to be treated. In trying to differentiate the issues which wpre.b^forp the Tribunal in Barclay's case and the present matter, Dr. Nyika said, in our case, the Board and Tribunal was invited to look into whether respondent was justified in disallowing the appellant's provisions for impairment (doubtful debt) and regulatory reserves which are permissible under the law and that i no claim for deductibility of the said provisions were brought for determination. It is the appellants view that, the Board and the Tribunal were wrong in holding that the Barclay's decision is binding upon the present case. On his part, Mr. Primi learned counsel for the respondent opposed the ground of appeal on the reasons that both cases dealt with similar facts relating to provisions for tax deductions on bad, doubtful debts and reserves. He, generally, supported the decision by the Tribunal. The Board and the Tribunal in the Barclay's case (supra) were essentially invited to look into the proper accounting treatment for provisions of doubtful debts and bad debts and whether they are allowable deductions under the ITA. In arriving at their decisions, 27 the Board and the Tribunal relied on s.25 of the ITA. However, while agreeing that the provisions of doubtful debts and bad debts are allowable deductions under the Act, the Tribunal analyzed the conditions given under s 25 (5) and observed that, deduction under ITA cannot be allowed unless a debt claim, in case of Financial Institution has become bad debt in accordance with the relevant standards established by the BoT and has been written off. The Tribunal extended this line of reasoning in the case at hand. When dealing with the provisions of a debt claim under s. 18 and 39 (d) read together with s.25 in the case at hand, the Tribunal quoted part of the decision in Barclay's case at pages 17 - 19 of its judgment: "... Section 25(5)(a) o f the Incom e Tax A ct ,2004 is not a section fo r tax deductions,.... "it m ostly deals with how the deducted am ount should be accounted o r written in books o f accounts and not how the same should be deducted by the respondent..." After quoting sections 18 and 39 (d) of the Income Tax Act, the Tribunal went on to say; 28 "In our view the Board was correct in its holding that fo r a bad debt to be deductible two legal requirem ents m ust be met. A debt claim m ust become a bad debt as determ ined in accordance relevant standards established by the Bank o f Tanzania and the institution write the debt o ff as bad. That is the position which was taken by this Tribunal in Appeal No 3 o f 2011 between Com m issioner General and M /S Barclays Bank Tanzania Ltd [Unreported]. The tribunal stated- "it is our respectful opinion that indeed, in the case o f debt claim o f a financial Institution, only after the debt claim has become a bad debt as determ ined in accordance with the relevant standards established by the BoT that it becomes eligible fo r w riting o ff as a bad debt and thereafter the bank can law ful claim a deduction...." The sam e position was taken by this Tribunal in Com m issioner General (TRA) Vs N ational M icrofinance Bank PLC. Appeal No. 19 o f 2013 [Unreported]." With due respect to the submission by the appellant's counsel on this matter, our examination of the complained cases reveals 29 that, both cases dealt with the same issue particularly on the treatment of a debt claim before the deductions are allowable under the ITA. And the principle in Barclay's case was only applied in a later case on the issue concerning debt claim and not more. We do not see any mischief on this aspect. It is wrong therefore to say that the principle in the Barclay's case was wrongly applied in the present case. On the fourth ground of appeal the appellant is faulting the Tribunal in finding that the provision of s.25 (5) (b) as amended by Finance Act of 2014 applies to the appellant's tax affairs for the year of income 2009. The grievances between the parties herein is on the disputed income tax assessment for the year 2009 raised on 22n d January, 2014. The law applicable would therefore be the law in existence at the time of filing the final return which is, the Income Tax Act 2004 before the amendment made by the Finance Act No. 2 of 2014. The question to clarify is did the Tribunal rely on the provision ofS.25(5) (b) as amended by the Finance A ct No. 2 o f ,2014 ? As correctly submitted by the respondent counsel, Mr. Primi, the Tribunal did not rely on s. S. 25(5) (b) as amended by the 30 Finance Act, 2014. It only emphasized on the procedure applicable for any loss to be deductible, that is, a need to present to the Commissioner G&a&al evidentiary proof on existence of any loss for it to be deductible under the ITA 2004. This ground is baseless. On the fifth ground of appeal, appellant faults the Tribunal's finding that the losses claimed by the appellant in the year of income 2009 are not deductible in accordance with section 11(2) of the ITA. Appellant's counsel submitted that the Tribunal erred in confirming the respondent's decision to disallow written off operating assets costs on two reasons that: 1) they are normally recoverable through insurance and that 2) appellant failed to adduce evidence of indemnification contrary to the tests set forth under the provision of s. 11(2) ITA. The respondent disputes this ground. He is of the view that the Tribunal had properly determined this issue. Making reference to page 21 of the Tribunals' Judgment where the Tribunal quoted with approval the decision of the Board, Mr. Primi for the respondent elaborated that the decision of the Tribunal was based on the ground that the appellant failed to prove that the claimed loss was really incurred in the course of production of income. The Tribunal after quoting part of the decision of the Board had this to say at page 22 of the judgment; "... we think the Board's decision is proper and in addition to that the appellant did not produce evidence to prove that the am ount was written o ff operating asset incurred in the production o f business incom e as subm itted by the respondent's counsel. This ground has no m erit and it is dism issed." Indeed, the record is clear that the Tribunal confirmed the disallowances of Operating assets, Borrowing costs, Officers tax Provisions and disallowance of losses brought forward from the year 2008 on the reason that the appellant did not provide evidence to substantiate how the appellant arrived at the alleged claim. (See pages 22-24 of the Judgment of the Tribunal). This ground also lacks merit. In conclusion, We are satisfied that tax assessment made by the respondent for the year of income 2009 on appellant's provisions 32 for losses due to loans amounting to Tshs. 95,289, 310/57, for bad and doubtful debts of Shs.8,962,267/92 and for officers tax of Tshs.216,892,786/65 were correctly disallowed and lawfully included in the appellants-income for tax computation in the year in question. We therefore uphold the decision of the Tribunal and dismiss with costs this appeal in its entirety. DATED at DODOMA this 24th day of July, 2018 I. H. JUMA CHIEF JUSTICE A. G. MWARD A JUSTICE OF APPEAL R. E. S. MZIRAY JUSTICE OF APPEAL I certify that this is a true copy of the original. S. J. KAINDA ^ DEPUTY REGISTRAR COURT OF APPEAL 33