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Lugeya & Anor v Uganda Revenue Authority (Civil Appeal No. 115 of 2012)

Court of Appeal · [2019] UGCA 53 · 2019 Appeal Dismissed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Civil appeal from High Court dismissal of a representative suit for recovery of allegedly unlawfully deducted PAYE on terminal benefits
Decision
Appeal dismissed; High Court finding that PAYE on terminal benefits was lawfully deducted upheld

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Holding

The Court of Appeal dismissed an appeal challenging the High Court's finding that PAYE deducted from former Uganda Commercial Bank employees' terminal benefits was lawful. Bound by the Supreme Court decision in Uganda Revenue Authority v Siraje Hassan Kajura, the Court held that terminal and retrenchment benefits fall within employment income under section 19(1)(a) of the Income Tax Act and are taxable, save for expressly exempted portions. The argument that the Privatisation Unit was not the employer and could not withhold tax was rejected, since income tax can still be assessed and paid even where not withheld by an employer. No order as to costs was made.

Facts

The appellants sued in a representative capacity on their own behalf and on behalf of 903 former employees of Uganda Commercial Bank whose services were terminated in 1993 and 1994. On termination they were paid terminal benefits, from which Uganda Revenue Authority taxed off Uganda shillings 416,754,238 as PAYE. The appellants claimed this deduction was unlawful and illegal and sued for recovery of the sum together with interest and costs. They contended that the Privatisation Unit of the Ministry of Finance and Economic Planning, which made the payment, was not their employer and so could not withhold PAYE under section 116 of the Income Tax Act, and that there was no proof the payment was made under an arrangement with Uganda Commercial Bank as required by section 19(6). The High Court dismissed the suit with no order as to costs, holding the taxation lawful. The appellants appealed.

Issues

  1. Whether the deduction of Pay As You Earn (PAYE) from the appellants' terminal benefits was lawful.
  2. Whether terminal/retrenchment benefits are taxable employment income under section 19 of the Income Tax Act.
  3. Whether the Privatisation Unit, not being the appellants' employer, could lawfully withhold PAYE.

Orders

  • Appeal dismissed.
  • No order as to costs.

Key headnotes

Income Tax — Employment Income — Taxability of Terminal and Retrenchment Benefits
Terminal and retrenchment benefits derived from employment fall within the definition of employment income under section 19(1)(a) of the Income Tax Act and are taxable, except for those portions expressly exempted by statute.
Income Tax Act — Meaning of 'Income Derived from Employment' — Section 19(1)(a)
The phrase 'any income derived by any employee from any employment' in section 19(1)(a) of the Income Tax Act is general enough to include any earnings, by whatever name called, so long as they arise or originate from the employment.
Income Tax — Withholding by Non-Employer — Assessment Despite Non-Withholding
The withholding of tax is merely a method of collecting income tax from employment income; the income tax may still be assessed and paid even where it was not withheld by the employer, and payments made from the divestiture account by the Government on behalf of a divested company are not third-party payments.
Precedent — Binding Effect of Supreme Court Decisions on the Court of Appeal
The Court of Appeal is bound by decisions of the Supreme Court, and where the Supreme Court has overturned an earlier Court of Appeal decision on a point of law, that earlier decision is no longer good law and the Court of Appeal must apply the Supreme Court's ruling.

Legislation cited (5)

  • Income Tax Act s.19
  • Income Tax Act s.19(1)(a)
  • Income Tax Act s.19(6)
  • Income Tax Act s.21
  • Income Tax Act s.116

Cases cited (3)

  • Uganda Revenue Authority v Siraje Hassan Kajura (Civil Appeal No. 9 of 2015)
  • Katureebe Eridad and Wanzala Ivan v Uganda Revenue Authority (Civil Appeal No. 55 of 2012)
  • Uganda Revenue Authority v Siraje Hassan Kajura (Civil Appeal No. 26 of 2013)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.