Tanzania Tea Packers Limited vs Commissioner of Income Tax & Another (Commercial Case No. 5 of 1999) [2000] TZHC 467 (1 September 2000)

,, ......,,_ ; \ IN THEHIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM COMMERCIAL CASE NO. 5 OF 1999 . TANZANIA TEA PACKERS LlMITED--PLAINTIFF VERSUS

1. COMMISSIONER OF INCOME TAX] 1 ST DEFENDANT
2. TANZANIA REVENUE AUTHORITY ] 2ND DEFENDANT JUDGMENT NSEKELA,J. The plaintiff in this suit, Tanzania Tea Packers Limited (hereinafter called "the company) is ·a liniited liability company. The 1 st defendant is the Commissioner of Income Tax under the Income Tax Act,_ 1973 and the 2 nd defendant is a body corporate ' charged with the general administration of revenue la\1' 1 S in the country including the Income Tax Act, 1973. With the enactment of the National Investment (Promotion and Protection Act, 1990 (hereinafter called "NIPP A"), the company was incorporated sometime in 1994 to carry out, inter alia, the business of blending, packaging tea in Dar- Es-Salaam and Mafinga and the marketing of tea in general in Tanzania. In order to carry out its activities, the Investment Promotion Centre (hereinafter called "the Centre" established under NIPPA, issued a Certificate of Approval to the company under section 14 of NIPP A. This Certificate of Approval is c~ntral to this suit and will be analysed in the course of this judgment. Among other matters that were specified in the Certificate of Approval exhibit A, was the investment in the project of US$ 751,898; that the operative date was June, 1996; that the period of tax holiday, June 1996 - May 200 I. Apparently in the course of the implementation of the project, the company did not obtain the foreign loan from the East African Development Bank and this necessitated the company ·to seek from the Centre an amendment of the Certificate of Approval. exhibit A, by lowering the investment from US$ 751.898 to US$ 500.000. The amendment sou12,ht was 1!rant.ed on • ~ - i.,.; the 9.11.98 purportedly under Act No.26 of 1997 and exhibit B was then issued. It is the case for the company that exhibit B was validly issued under Act No.26 of 1997 and that

. ' . . . , .. -fiW:-'J~-~ •.'~•,j..,.F•-'.;t '<: . the investment ievel was reduced to US$. 500,000. As the minimum investment under NIPPA as amended was achieved, the company claimed to be entitled to enjoy the benefits under the said Act. Under the circumstances the 1 st defendant should not have demanded from the company to pay tax according to exhibits E and F. The defendants, case is perhaps best summarized in paragraph 4 of the written statement of defence. It reads in part as follows - " 4. ...... The defendants states that the certificate of approval is governed by the terms and conditions attached thereto. It is.further averred that condition 5,6 and 8 of the certificate of approval are necessary for the attainment of the investment level which is the ,..----. legal requirement for the plaintiff to enjoy post implementation tax incentives. The mere possession of the Certificate of Approval and attainment of implementation period do not confer to the plaintiff ( post implementation tax incentives. " The thrust of the defendant's case is basically that the company is not entitled to .. enjoy the benefits under NIPP A since the investment level of US$ 751,898 as indicated in exhibit A had not been attained on the operative date. On the 22.12.99 the court, after consultation with the learned advocates for the parties, framed the following five issues, namely - i) Did the plaintiff fulfil the investment condilions as stipulated in the Certificates of Approval? ii) Is the plaint((/ entitled to investment incentives on COl])Oration taxfrom l s ' .June 1996 lo Jr' May 2001? iii) Whether or not the reduction in the level of investment was properly done; i,) Whether or not the tax assessment made by the / st defendant was erroneous; ,:) To what reliefs are the parties entitled to. At the hearing of the suit the company was represented by Dr. H. Sinare and Mr. L. Mwandambo, learned advocates. and the defendants were represented by Mr. H. Songoro, learned advocate. Five (5) witnesses in all gave evidence. three for the ~ . ~~· .... ·. ~-'' •' .,.J • ....... I

• ••,• •(}t;;.-f••••,'.~~~';,, .. ' <";:-:~ •. •; L {"" "'.. >'.:> ·, >t> ··.... .. ·: t: '} : . ... i:'.1tf',;"eh;,'. ,, .. " ·. " r i .,. . .;,. · • · ''-·,.., , · .• ... - ' " .• · ;, f.-, · .. ,• •• .t :,:. •::-'\ .. jk .··1-,'·,•>1.<•.: .•· '.- .. ,. •' . company and. two for the deferidan .. th. pltlJif. fu'es were Gefaldina Asumwisye (PWl); George C. Theobold (PW2) and Emmanuel Masanja (PW3). PWI was the Financial Controller cum Company Secretary of the company responsible for the keeping of financial records 'of the company since 1996. She tendered in evidence exhibit A, a Certificate of approval No. 041368 dated 24.3.95 exhibit B - Certificate of Approval which was issued under authority of the Tanzania Investment Act, 1997 dated 9.11.98 including other exhibits which will be discussed in the course of this judgment. The essence of her evidence was to the effect that the company had been issued with exhibit A but in the course of implementing the project expected sources of funds from the East African Development Bank were not in place when needed for the project as a result of which the company sought from the Centre an amendment to exhibit A. This was done and exhibit B was then issued, which among other matters reduced the investment of the company to US$ 500,000. She also testified that the company did not obtain tax benefits under NIPPA and the 1 st defendant issued notices of assessment, exhibits E and F. PW2 is the Managing· Director of the company. He testified that on obtaining a Certificate of Approval, the implementation of the project commenced and that the company was fully operational by May, 1996. He added that the project was to

• . be in-two-phases, the Dar 5 Es-Salaam project and the Mafinga project as ·mentioned in exhibit A. Due to problems in securing a loan from East African Development Bank, the Mafinga phase of the project was delayed and the company sought an amendment to the Certificate of Approval, and by May 1996 over US$ 500,000 had been spent. During cross•examination by Mr. Songoro, PW2 admitted that the figure mentioned in exhibit A had not been altainea but the compan-y had b-y then, i.e. June 1996, inv~sted approximately US$ 520,000, and by December 1996 the figure in exhibit A had been achieved. It ,-vas his view that the crux of the dispute is based on the law. The . Commissioner does not recognize the amended Certificate of Approval, that is, exhibit B. PW3 was one Emmanuel Massanja, Director of Investment Services with the Centre. He ,-vas the author of exhibit G. He testified that the company approached the Centre with a request to amend exhibit A since at the time they had not received a foreign loan of about US$ 200,000 for the Mafinga project. He testified further that the Centre was satisfied that the minimum investment required under NIPPA had been ··.' . ~ . f. ·•, ~ •.

C0IP:pany was entitled to a tax remission. The defendants called two witnesses DWl Dafroza Tairo, then Regional Revenue Officer, Bala and DW2, one Nicholas Kalinga a Tax Assessor. DWl testified that when the company's records were examined, it was found that in terms of exhibit A, the level of investment was expected to be US$ 751,898 to be achieved by June 1996, but the company had not reached this level of investment and therefore did not qualify for benefits stipulated under NIPP A. DW2 also testified that after checking the company's records it was discovered that the level of investment in the Certificate of Approval had not been attained. He added that the revenue authorities did not recognize the amended Certificate since NIPP A had been repealed and consequently had ceased to have any effect. As a result the 1 st defendant did not remit any tax but he did admit during his examination in chief that by June 1996 the company had commenced production but ·had not attained the level of investment stipulated in the Certificate of Approval - exhibit A. It is against this background of the oral evidence of the witnesses taken together with the exhibits tendered in evidence that I proceed to consider and determine the issues framea: I must-hasten to add thaH have found.thatall the witnesses ere stedy with somewhat fixed viewpoints on the interpretation of the law from their respective perspectives. It should be remembered however that this being a civil case, generally speaking, the burden of proof is on the company to establish the case on a balance of probabilities. I propose tel° start with the third issue. This one concerned the reduction

in the level of investment from US$-TST-;-898 as ccmtained-in-the-Gef1.-i-fie-ate-of-Appro_vaL _____ _ dated the 24.3.95 (exhibit A) to US$ 500,000 the latter figure being the one contained in Certificate of Approval issued on the 9.1.98 (exhibit B). Mr. Songoro submitted that section 16(c) of NIPP A barred the variation of capital in any case where investment of foreign capital was involved. He added that - " the aim o_( section 31 (1) of the Tanzania Investment Act is to maintain stcillls quo by safe-guarding the terms and conditions o_( Cert~ficate o_( approval on which they were issued and nothing more.

..;; . l -·•-:.""'::,•:..· •✓ ,-.·-•; ';. :·:f:{t',~i-,;~~~~.j~•;·:,/~~~~t·;:,:,.:/;i,~ .. ~ 5 On their part the learned advocates for the company, Dr. H. Sinare and Mr. L. Mwandambo, submitted that the same section 31 (1) clothed the Centre with the authority to reduce the figure by amending the Certificate of Approval, exhibit A. They vigorously disputed the testimony of DWI Dafroza Tairo, and DW2 Nicholas Kalinga who had testified to the effect that the Centre had no authority under the new Act to issue Certificates of Approval. The learned advocates invited the court to accept the testimony of PW3 who tendered in evidence exhibit H. Both DWI and DW2 were of the firm view that this reduction in the level of investment was not mandated by law since when exhibit B was issued on 9.11.98. NIPPA had already been repealed. In fact on the 12.10.98, the 1 st defendant wrote a letter to the company (exhibit D) which in part provides as under - " Re: NONE ELIGIBILITY TO TAX CONCESSIONS UNDER TANZANIA INVESTMENT CENTRE Reference is made ro the above subject. A thorough tour in the documents submitted/or audit and a study through NIPPA 1990 and TIC 1997 have compelled us to come with the following decision: I. The amended Certificate of Approval issued after the repeal of NJPPA, 1990 in September, 1997 have no force of law and they should not be used to grant tax remission under section 130 (JA) of the Income Tax Act, 1973. 2. Certificate of Approval issued on 2l" March, 1995 is the valid one and tax remission will be granted on allainment of the approved conditions. Meanwhile the enterprise is being recognised as under implementation. " The response to exhibit D was a letter from the Centre. exhibit G, written by PW3 who testified that the Centre was requested in writing by the company to amend the level of investment in the Certificate of Approval, exhibit A, from US$ 751,898 to US$ 500,000 since the expected foreign component loan for the Mafinga Project had not materialized at the time. PW3 added that the Centre was satisfied with the reasons advanced by the company and an amended Certificate of Approval, exhibit B was accordingly issued. It is not in dispute that Certificate of Approval No.041368 dated the 24.3.95 (exhibit A) was validly issued under NIPPA, now repealed by the Tanzania Investment Act No.26 of

, " -,;:. . ,'. ~ ,· ._:,: . ;.,,,-_ ... ..:/'"•- ,.,..!""'.:: ,.i:---...,__~ '-,-.-~ ' - '";-,.···-•,::. -· - ...... ·,•-·:,;,_ ':., ,,, . ·. (~~ ·::f- .. ··:·1.:: .:',;/ :·;,p/:.::.::;·<i·.' - . -· ·tjf-·~ ::::t•.....r,·· . . .' 1997. 'io stiite'tlie 6bvi6us once ah Act of Parliament has beeri repealed, the repealed Act' ceases to have any statutory effect. Act No.26 of 1997 came into effect on the 10.9.97 vide GN No.691 dated 10.10.97. It is common knowledge that exhibit B was issued on the 9.11.98. The question to be resolved is whether or not exhibit B is a valid Certificate of Approval. It is my considered view that the answer to this question lies on a proper construction of section 31 (l) and (4) of Act 26 of 1997. It provides as follows - " 31 (]). Notwithstanding the repeal of the National Investment (Promotion and Protection) Act, 1990. on the coming into operation of this Act, a certificate of approval issued by the Investment Promotion Centre and which immediately before the commencement of this Act is still in force, shall on the commencement of this Act, continue to be valid on the terms and conditions on which it was issued as if it were a certificate of incentives issued under this Act, and shall be so valid - a) until the expiration of the term under which its holder was entitled to enjoy any benefit, incentives or protection; or b) ................ . 4) Any application pending before the Tanzania Investment Promotion Centre established under the National Investment (Promotion and Protection) Act, 1990 shall be deemed to be pending before the Centre established under this Act. " There is no controversy on the fact that Certificate of Approval, exhibit A, was still in force on 10.9.97, the date on which the Tanzania Investment, Act, I 997 came into effect. There is no evidence on the record that exhibit A had been cancelled or suspended under section 17 of NlPPA. Thus, under section 31 (I) above, exhibit A continued to be valid on the terms and conditions on which it was issued. The sticking point however is exhibit B which v, 1 as issued on the 9.11.98. PW3, Emmanuel Masanja, Director of Investment Services at the Centre tendered in evidence exhibit H. which is a letter from the company to the Centre. The author of this letter was PW I . Geraldina Asumwisye and it is dated 5.11.98. It reads in part as follows - " We are enclosing the original Certificate No.0./1368 for amendment oft he Certificate of appro!OI." This letter was submitted to the Centre on the 5.11.98 slightly over a year since the coming into force of Act 26 of 1997. In order for such an application to be covered

·,. :.--·.-: :_.:,. :<-- _;.--i~~~i.i.~-!' ·.- •· ::;_..-~~~ ·:-. ... . - • I under sectiil 31 (4), ft must have ben pending at the Centre on the 10.9.97! this to my mind means that the application for amending exhibit A could not be acted upon under Act 26 of 1997 since it had not been submitted to the Centre before l O. 9. 97. According to section 2 of NIPP A, an application means - " an application/or a Certificate of Approval or amendment thereof" In the final analysis, as rightly contended by Mr. Songoro, it is Certificate of Approval dated 24.3.95 which is the valid one. The purported amendment was illegal and consequently does not have the force of law. It is null and void. The first issued was framed in the form of a question ... Did the plaintiff fulfil the investment conditions as stipulated in the Certificate of Approval? At the time of framing this issue, it was not known which was the valid Certificate of Approval, the one dated 24.3.95 or 9.11.98. As it is apparent from my finding on the third issue discussed above, it is Certificate of Approval, exhibit A, which is the subject matter of this judgment. In the written submissions, the learned advocates for the company, this issue was phrased as follows - "Did the plaintiff.fulfil the investment conditions for enjoyment of the lax incentives as provided for in the Certificate of approval?" This formulation of the first issue is certainly not correct. The question of the enjoyment of tax incentives was a subject matter of the second issue which will be dealt with in the course of this judgment. The learned advocates for the parties have submitted at considerable length on this issue. It is certainly not out of disrespect to their erudite submissions on this issue, as in others, that I shall not deal with every aspect they have covered. The thrust of the defendants' submissions can be gleaned from paragraphs 2.1 and 2.2 of the written submissions. I reproduce them hereunder - " 2.1. The defendants submits that the plaint[lf did not fulfil investment conditions as stipulated in the Certificate <~( Approval no. 041368 issued on 24 th March 1995 by the Investment Promotion Centre. The relevant certificate of approval was tendered by the plaintiff and admiued by the court as exhibit "A ··. 2. 2. The conditions which the defendants contest were not fulfilled are statlllory requirements to every holder of certificate of apprornl including

the pl~'intiff and were issuedpursuant to section 14 of ihe 'National Investment (Promotion and Protection) Act No. IO of 1990 which was repealed and replaced by Tanzania .Investment Act No.26 of 1997. These conditions which were not complied with are no.2,5,8,11 and 12 which are attached to exhibit A and it is the defendants submission that the plaintiff is bound by these statutory requirements. " In a nutshell, it is the contention of the defendants that the matters specified in section 14 of NIPP A were not complied with by the company. I have already decided that the amendment of exhibit A was not according to law. This means that the conditions which are the subject matter of this issue are those contained in exhibit A. Both PW 1 and PW2 were candid enough to admit that some of the matters specified in exhibit A had not been attained by June 1996 including the expected investment of US$ 751,898; the Mafinga phase of the project was not operational at that time. There was evidence to the same effect from OW 1, Dafroza Tairo. At this point,, I have a brief comment to make on exhibit A. The sanctions for non-compliance with the terms and conditions of a Certificate of Approval are vested, in the Centre under section 17 (1) ofNIPPA which provides as under:- " 17 (]). The centre may suspend or cancel a Certificate of Approval where the holder of the Certificate: a) obtained such certificate on the basis of fraud, or deliberate or negligent submission of false or misleading/acts or statements: h) ............. .. c) fails without reasonable cause stated in writing to establish the approved enterprise within the time stipulated in the cert(ficate or any extension thereof; d) fails without reasonable cause stated in writing to comply with the terms of the Certificate, or the provisions of the Act and Regulations or request of the Centre made thereunder within such reasonable period as may be stipulated by the Centre in a notice to the holder ofthe CerrUicare specifying the failure to comply." The Centre was the focal point in the implementation of NIPP A and from the evidence of PW3, the Centre was aware that by June 1996, US$ 751,898 had not been invested in the project and that is why the company sought a reduction of the same: the Centre was avvare that at that time again the Mafinga plant was not operational. It

L (

apart, is what consequences should f?llow from non-compliance of the matters specified in exhibit A. 1 have briefly touched on them but hopefully will be amplified in the second issue, to which I now direct my attention. The second issue is whether or not the company 1s entitled to benefits on corporation tax from 1 st June 1996 to 31 st May, 2001. PW2, George C.Theobald, Managing Director of the company and one of the founder shareholders together with one J. Mungai testified that as originally conceived, the project was to be in two phases, at Dar-Es-Salaam and at Mafinga, when Certificate of Approval, exhibit A was issued by the Centre in March 1995. But then, the process of obtaining the anticipated loan from the East African Development Bank did not materialize at the expected time an this prompted the company to seek from the Centre an amendment of the Certificate of Approval, exhibit A. When cross examined by Mr. Songoro, PW2 admitted that the level of investment stipulated in exhibit A of US$ 751,898 had not been reached but stated that by June 1996, approximately US$ 520,000 had been invested in the project. PWI, Geraldina Asumwisye, Financial Controller of the company on her part testified that by June 1996, the company had invested more than US$ 549,000 and that the Mafinga project was not in operation at that time because or-- the failure to firm up the expected loan from the East African Development Bank. It was thus the contention of the learned advocates for the company that approved enterprises which have invested the statutory minimum investment of US$ 500,000 and have started production and/or providing services that qualify to enjoy benefits under NIPPA. The defendants however, submitted that the right of the company to enjoy benefits under NIPPA was dependent upon fulfilling the tem1s and conditions specified in exhibit A. Mr. Songoro, in his written submissions continued - " The test of enjoying co11Joration tax is not \vhether or not the company was in production by June 1996 as the plaintiff put it blll whether the approved project both at Plot No. 7171 P11g11 Road Dar- Es-Salaam.and.Majinga "A" asper _exhibit "A·· vre inproduction by June 1996. " Mr. Songoro strenuously contended that the tem,s and conditions specified in the Certificate of Approval granted to the company must be complied with before the

. . . ·:. . . . . ' .' approved entq,nse could qualify for th beriefits under NIPPA. · It will be recalled that this was the position taken by DWI and DW2 in their testimony before this court. I must admit that there is considerable force in this argument and to answer it, I first trace the historical background of NIPP A before subsequent amendments in 1992 and 1994. Section 20(1) ofNIPPA as it originally existed in 1990 read as under- " 20 (1). An approved enterprise shall be entitled to the benefits herein specified" And section 2 of NIPP A defined an approved enterprise as - " an enterprise, whether a new enterprise or the rehabilitation or expansion of an existing enterprise, in respect of which a Certificate of Approval is granted by the Centre." Jn the same section there is the definition of Certificate of Approval - " a certificate granted by the centre pursuant to this Act;" Certificate" means a €ertificate of Approval granted by the Centre ·· pursuant to this Act, " A Certificate of Approval 1s one issued pursuant to section 14 of NIPP A specifying a number of matters that are to be included in the Certificate. Since Mr. Songoro' s powerful submissions on this issue revolve around section 14, I take the liberty to reproduce it in extenso at the risk of unnecessarily prolonging this judgment. It provides as follows - .. 14. In the event that an application is approved by the Centre, the centre shall_grant _a Cer1_ij)cate pf App_roval specifying:- a) the name, nationality and other particulars of the investor and in the case of a company, the nationality and number of shareholders; b) the name. description and location of the enterprises: c) the approved enterprise and, where appropriate, the size and approved capacity of the enterprise,· d) the amount and source of capital including the relevant foreign currency; e) in the case of a foreign national. the form of assets other than foreign currency ro be invested and the value of such assets as approved by the Centre;

11 j) the proportion of foreign capital invested or to be invested to the total assets of the enterprise and whether the investment consists of the acquisition of shares or stock in body corporate, the number or amount, and description thereof; g) particulars of any technology agreement, its duration and payments to be made thereunder; h) any loan with respect to the enterprise and the currency in which repayments are to be made; i) the period within which the investment is to be made and the date of issue and expiry of the certificate ; J) such other matters as may be necessary or desirable having regard to the provisions of the Act." Ifl understood Mr. Songoro's spirited submission on this issue correctly, in order for the company to enjoy the benefits under section 21, all the matters specified in exhibit A must be complied with. That may well have been the position before the change brought about the Finance Act (No.2) of 1994. Section 20 (1) now reads - " 20 (1) The benefits i-v}lich may be granted under this Act shall only be co,~ferred - a) in relation to a new enterprise to be established - i) by a foreign investor, if the value of the investment is not less than US$ 500,000. It is obvious that before the amendment in 1994, there was no reference at all to ''if the value of the investment is not less than US$ 500,000. Before this amendment to NIPPA, no minimum amount of investment was stipulated in order for an investor to enjoy benefits under NIPP A. Again, it should not escape attention that in section 20(1) as amended, there is no reference to " approved enterprise" as it was in the old section. These changes in my view are not cosmetic. The emphasis is on the value of investment in the project and not what would appear to me to be administrative matters under section 14. The old section 20( 1) was deleted and a new section 20( I) \vas substituted in the manner explained above. What is required now, I repeat. is the value of investment of not less than US$ 500,000 and not to compliance with the matters specified in section 14 of NIPPA. In my judgment, section 20 (1) of NIPPA as amended is a specific section in the scheme of the Act which provides for the conditions that an investor has to fulfil before such an investor qualifies for benefits

12 · under NJPPA. Section s· of the· Inteipretatio~ of Laws and General Clauses Act provides- " 8. Every section of an Act shall take effect as a substantive enactment without introductory words. " It may be of interest to note, though I attach no particular significance to this, that section 14 is in Part III under the heading "Application for Approval of Enterprises and Areas of Investment, " whereas section 20 is in Part IV under the heading "Investment Incentives. " The two sections under examination are not in the same Part and deal with different issues. To conclude on this point, I am of the settled view that section 20 (1) of NIPPA admits of no ambiguity, and effect must be given to the amendment. If there were loopholes and ambiguities in NIPP A, hopefully the new Tanzania Investment Act, 1997 has taken appropriate remedial measures. This however, is not the end of the matter. The next question to be considered and determined is, did the plaintiff company invest not less than US$ 500,000 in order to qualify for the benefits under the Act. Sadly, there was an apparent " tug of war" between the Centre and the defendants. PW3 one Emmanuel Masanja, Director of Investment Services with the Centre was of the settled view that it was the responsibility of the Centre to verify whether or not the company was entitled to the benefits under the Act. On the other hand DW l and DW2 emphatically stated that it was the responsibility of the 1st defendant to make this verification and to remit tax if so satisfied. A resolution of this issue necessitates an examination of the Tanzania Revenue Authority Act No.11 of 1995; the Income Tax Act, 1973 and NIPPA as amended before its repeal in 1997. Section 5 (1) of the Tanzania Revenue Authority Act, 1995 provides as follows - " 5 (1). The functions of the authority are - a) to administer and give effect to the laws or the specified provisions of the laws set out in the .First Schedule to this Act. and for this purpose, to assess. collect and account for all revenue to which those laws apply; b) to monitor, oversee. coordinate acti\·ities and ensure the fair, efficient and ejfectfre administration of revenue laws by revenue departments in the jurisdiction of the Union government. "

13 Item no.I of the First Schedule is the Income Tax Act, 1973 and therefore the administration of this Act is under the l st defendant. NIPP A as amended is not one of the laws in the First Schedule, but can it fall under item no. 25 - " any other law which may come into force to mobilize and collect revenue."' NIPP A, had nothing to do with the mobilization and collection of revenue and thus the administration ofNlPPA was not under the defendants. On the other hand Section 5 (l) ofNIPPA reads- " 5(1) The Centre shall be the focal point/or the implementation of the national Investment Policy and in particular it shall be responsible for the promotion coordination, regulation and monitoring of local and foreign investments in Tanzania. " 2) Without prejudice to the generality of subsection (1) thefimctions of the Centre shall be - g) to grant cert{ficates of approval for investment in enterprises in accordance with the provisions of this Act; m) to monitor the performance o(enterprises approved by it and to enforce compliance with the terms o(approvals and the provisions of this Act and regulations made thereunder:-" It is therefore apparent that under the repealed NIPP A, the Centre had the statutory mandate to enforce compliance with the terms of approvals and the provisions of NIPP A. If there was a breach of any of the terms of approvals, this was the concern of the Centre to take appropriate sanctions under the Act. Coming to the issue at hand the Company had to satisfy the Centre that it had complied with the provisions of section 20( I) of NIPP A in order to be entitled to the benefits . .. . . . . . . . . . . .As I have stated above, this function of enforcing due compliance with the tern1s of approvals and provisions of NIPPA was entrusted by Parliament to the Centre and the defendants had no concurrent jurisdiction to do so. If the defendants were of the view that the company did not observe the provisions of the Act, one would have expected that the Centre would be infom1ed accordingly and take appropriate action under section I 7 of NIPP A. It \vould appear to me that the only \.'ay an approved enterprise could cease to enjoy the benefits under NIPPA is either

14 by suspension or cancellation under a prescribed procedure. I have briefly made reference to section 17 (}) ofNIPPA. I now quote section 17 (5) and (6), " 17 (5) where a Certificate of Approval is suspended the holder thereof shall cease to be entitled to the rights and benefits conferred under this Act for the period of suspension 6) ·where a Certificate of Approval is cancelled: i) the holder thereof shall cease to be entitled to the benefits conferred under this Act as from the date of such cancellation and shall return the Certificate to the Centre. Section 17 clearly shows that the Centre was the authority that had powers to suspend or cancel Certificates of Approval where its holder failed to meet the terms and conditions of the Certificate or the provisions of the Act under a prescribed procedure. The only evidence from the Centre is that of PW3 that section 20( 1) of NIPP A was complied with. ? W3 was the Director of Investment Services with the Centre, a very senior official who no doubt knew what NIPP A was all about and had access to infom,ation regarding investments in the country in general. I have no material before me to doubt his credibility. He stated that by June 1996 the company had reached the minimum investment required which formed the basis for "amending" the Certificate of Approval. As discussed earlier the basis of my finding is based on the fact that the company had complied with section 20( 1)(a)(i) without the purported amendment. In the result, I answer the second issue in the affirmative. The company is entitled to the benefits of corporation tax under NIPPA. As regards the fourth issue, namely whether or not the tax assessment made by the pt defendant was erroneous, the gist of the company's learned advocates submissions was to the powers of the Commissioner to make an assessment on a tax payer in terms of section 85 (I) of the Income tax Act. 1973 were not being questioned. lt , .. ,as the manner in which this assessment was done by ignoring the provisions ofNIPPA. The company was saying that it was entitled to tax benefits. In other words, the company was not liable to pay tax at all for the stipulated time and so the question of appealing against the tax assessment did not arise at all. It \·as the contention of the learned advocates for the company that the evidence of PW l and

• 15 DW 1 showed that the company was submitting annual income tax returns together with audited accounts on the due dates. Their evidence was to be taken together with exhibit D. Mr. Songoro on his part submitted that the defendants were not barred in terms of sections 79 (2) and 85 (1) of the Income Tax Act and it was in compliance with the said provisions that the assessments were made for the years 1997 and 1998 whose due dates were the 30.9.98 and the 30.10.99 respectively. As for the exemption of paying taxes, Mr. Songoro had this to say- "Jn respect of taxpayers who are exempted from paying taxes the statutory duty of the first defendant is to grant remission to these taxes as provided in section 21(1) of Act No.JO of 1990. The first defendant have to be satisfied as per section 21 and 2 2 of Act No. 10 of 1990 that the enterprise attains operative and complied with the conditions attached to the Certificate of Approval before remitting the said taxes. " I believe that earlier on, I have sufficiently discussed the terms and conditions specified in the Certificate of Approval, and I shall not repeat what I have already stated. I am fully conscious of the fact that revenue collection is essential to running the affairs of the United Republic and that the courts are enjoined to aid its collection according to law. Sections 79(1 ); 85(1) and 129( 1) of the Income Tax Act give powers to the Commissioner to assess and collect income tax. On the other hand, section 21 (l) of NIPP A grants benefits to investors who comply with the prescribed conditions. It is therefore important to strike a balance between these two pieces of legislation. Indeed section 41 of NIPP A recognized this fact. It provides as follows - " 41. The following enactments: a) ........................ . h) ... ..................... . c) the/ncomeTaxAct. 1973 d) ....................... . e) j) and any other enactments relating to thefimction of the Cenlre as pro,·ided under this Act shall hm·e ejfecr with such modificarions as may be necessary to gh·e effect to rhis Acl. ··

16 The Commissioner was and is enjoined to recognise the existence and role assigned to NIPPA and the Centre. The Commissioner could not just ignore decisions of the Centre as if it was not in the statute books. This will engender disrespect for the law and send wrong signals to investors whom the country is assiduously courting to inject foreign direct investment in order to stimulate economic development. I recall what Biron, J said in the case of Kagera Saw Mills Ltd v Commissioner General o{Jncome Tax [1972] HCD 124- "It is trite to observe that the Income Tax Acts are enacted/or the purpose of raising revenue. At the same time the legislature makes allowances for capital expenditure in order, I venture to say, to encourage economic development. Therefore in construing an enactment dealing with allowances, one should I think, strike a balance between these two objects ... .... " To conclude on this issue, there is no doubt that the Commissioner has powers under the Income Tax Act, 1973, to assess, collect and recover taxes, but in view of the fact that the company had complied with section 20( 1)(a)(i) of NIPP A as confirmed by PW3 from the Centre, the company is, in my judgment, entitled to enjoy benefits thereunder. The last issue to be considered and determined is the reliefs, if any, to which the parties are entitled to. The learned advocates for the company contended that it was under no liability to pay corporation tax commencing from l st June 1996 to 31 st May 200 l the period they claimed the company was entitled to enjoy benefits under NIPPA. Mr. Songoro reiterated earlier submissions that the company did not comply with section 21 (I )(a) of NIPP A and the fulfilment of conditions attached to exhibit A. He added that the company should complete the project and submit a report for verification and on that basis the 1 st defendant may proceed to grant tax remission. The power given to the Commissioner of Income Tax to remit ta'< was under section l30(1A) of the Income Tax Act, 1973. This section was introduced by the Schedule to the National Investment (Promotion and Protection) (Amendment) Act No. 10 of 1992. It is in the follo\ving terms -

• .. 17 "130 (lA). Where, by virtue of the operation of section 21 of the National Investment (Promotion and Protection) Act, 1990 any tax is emitted, the Commissioner shall refrain from recovering the tax in question." On the 12.10.99 and the 20.10.99 he Commissioner issued exhibits "E and F" respectively which were Notices for Assessment for the years 1997 and 1998. My examination of the 1998 edition of the Income Tax Act, l 973 which incorporates all amendments to the Act up to and including the 31.12.97, section 130(1A) had been omitted under section 11(1) (a) of the Revised Laws and Annual Revision Ordinance, Cap.356. It is therefore apparent that section 130 (IA) is no longer part of the Income Tax Act, 1973. The legal basis for granting a declaratory judgment is to be found in section 7 (2) of the Civil Procedure Code, 1966 which provides as follows: " 7(2) No suit shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the court may make binding declarations of right whether or not any consequential relief is or could be claimed. " In the case of The Registrar o(Buildings v E.P.Mwasha [1982] TLR 242 Lugakingira, J (as he then was) had occasion to examine this provision and lamented the paucity of local authorities. He sought guidance from the English Rules of Supreme Court Order 15 rule 17 (now Order 15 rule 16 in the 1991 edition) which is in pari materia with section 7(2) above. A number of English cases were examined including Guaranty Trust Co. o[New York v Hannay & Co. [1915] 2K B536 wherein Bankes, L.J stated as follows at page 572 - " It is the person, therefore, who is seeking relief. or in whom a right to relief alleged to exist, whose application to the court is nol to be defeated because he applied merely for a declaratory judgment or order, and whose application for a declaration of rights, is not lo he refused merely because he cannot establish a legal cause of action. It is essential, however, that a person who seeks to lake advantage of the rule must be claiming relief .............. There is however, one limitation which must always be atlached to ii, that is to say, lhe relief claimed must be something which it would not be unlm1fz1! or unconstitutional or inequitable for the court to granl or contrary to accepted principles upon which the courl exercises ifs jurisdiction." (See also: Russian Commercial and Industrial Bank and British Bank (or Foreign Trade Limited [1921] 2AC ./38 at page -/.18: Pi·x Granite Co. Ltd v Ministrv o(Ho11sing & Local Go,·ernment[J958} /QB 55./ at page 571).

.. 18 Applying the principles pronounced in these cases, is this suit a justiciable one or an academic one? The 1 st defendant has already issued provisional assessments of income tax (See exhibits E and F) and that the company should pay the said tax. The company on the other hand, is contending that it is not liable to pay tax during the whole period of the tax holiday. In my view, the company could only cease to enjoy the tax benefits upon the Centre suspending or cancelling the Certificate of Approval. This has not been done as yet and the Centre through PW3 stated in evidence that the value of the investment was not less than US$ 500,000 by June 1996. In the result, I do hereby make a declaration that the company is entitled to the benefits for the whole period stipulated in the Certificate of Approval, exhibit A. make no order as to costs. It is accordingly ordered. 1.9.2000 H.R. NSEKELA, JUDGE Judgment delivered in the presence of Mr.Mwandambo; Dr. H.Sinare, and Mr. Songoro, learned advocates for the parties. H.R.Nsckcla, .JUDGE l.9.2000