Total Uganda Limited v Uganda Revenue Authority (Civil Appeal No. 1 of 2002)

Court of Appeal · [2002] UGCA 2 · 2002 Appeal Dismissed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Second appeal from decisions of the Tax Appeals Tribunal and the High Court on the interpretation of a tax exemption provision

Decision

Appeal dismissed; the appellant not entitled to exemption from withholding tax on dividends paid to non-resident shareholders

The full judgment

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Holding

The Court of Appeal dismissed a second appeal concerning the scope of the exemption in section 168(21) of the Income Tax Act 1997. The court held that the word 'exemption' appears only in relation to corporate profits and withholding tax on dividends and interest paid to resident persons. The word 'and' between 'dividends' and 'interest' was used conjunctively and did not create a third exemption category. Accordingly, a holder of a Certificate of Incentives who elected to continue under section 168(21) is not entitled to exemption from withholding tax on dividends paid to non-resident shareholders. The appeal was dismissed with costs.

Facts

The Uganda Investment Authority issued a Certificate of Incentives to two non-resident shareholders for their investment of US$5,574,000 in Total (U) Ltd, exempting them from certain taxes including withholding tax on dividends to the extent of 50% for the period January 1996 to December 2000. Parliament enacted the Income Tax Act 1997, which repealed section 25 of the Investment Code but, under section 168(21), allowed valid certificate holders to elect to continue the incentives. The appellant elected to continue and the election was accepted on behalf of the respondent. When paying dividends of Shs.6,040,000,000 to its non-resident shareholders in 1999, the appellant withheld Shs.453,000,000 (50% of the rate). The Commissioner subsequently demanded a further Shs.453,000,000, contending that section 168(21) did not cover non-resident shareholders. The appellant objected, leading to proceedings before the Tax Appeals Tribunal and the High Court, both of which ruled against the appellant.

Issues

Whether section 168(21) of the Income Tax Act 1997 exempts from withholding tax dividends paid to both resident and non-resident shareholders, or only those paid to resident persons.

Orders

Appeal dismissed.
Costs of the appeal awarded to the respondent.

Key headnotes

Tax Law — Construction of Exemption Provisions — Effect of the Conjunction 'and'

In section 168(21) of the Income Tax Act 1997 the word 'and' between 'dividends' and 'interest' is used conjunctively to link the two taxes from which exemption is granted; it does not create a separate, free-standing category of exemption for withholding tax on dividends.

Tax Law — Investment Incentives — Scope of Withholding Tax Exemption under Income Tax Act s.168(21)

A holder of a Certificate of Incentives who elects to continue under section 168(21) of the Income Tax Act 1997 is entitled to exemption from withholding tax on dividends and interest only where paid to resident persons, and is not entitled to such exemption in respect of dividends paid to non-resident shareholders.

Civil Procedure — Appeals — Confinement of Appeal to Grounds Determined Below

On a second appeal, the appellate court should confine itself to the issue that was properly before the first appellate court and decline to entertain grounds raising matters that were not in issue at the lower level.

Legislation cited (9)

Income Tax Act 1997 s.168(21)
Income Tax Act 1997 s.167(1)
Income Tax Act 1997 s.167(2)
Income Tax Act 1997 s.84(1)
Income Tax Act 1997 s.121(1)
Investment Code 1991 s.25
Investment Code 1991 s.30(4)
Tax Appeals Tribunal Act 12 of 1997 s.15(1)
Finance Statute 9 of 1996

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