Nyabiryo & 1,117 Others v Uganda Revenue Authority (Civil Appeal 24 of 2022; Civil Application 7 of 2024)

Supreme Court · [2024] UGSC 32 · 2024 Appeal Dismissed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Second appeal from a majority decision of the Court of Appeal, heard together with an application to extend time and validate the late-filed appeal.

Decision

Appeal dismissed; the Court of Appeal's holding that the appellants' terminal benefits were lawfully taxed upheld, with each party bearing its own costs.

The full judgment

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Holding

The Court validated the appeal under Rule 5, finding sufficient reason in the appellants' vigilance, the absence of prejudice to the respondent, and the public importance of the dispute. It overruled the respondent's preliminary objection, holding that Rule 81(1) does not require substituting a deceased appellant who was merely one of many co-appellants with a common interest. On the merits, the Court dismissed the appeal, holding that retrenchment packages and terminal benefits paid on termination of employment constitute compensation for termination and are taxable employment income under Section 19(1)(d) of the Income Tax Act, applying the literal rule of tax-statute interpretation and following Uganda Revenue Authority v Siraje Hassan Kajura. Each party was ordered to bear its own costs.

Facts

The appellants were former employees of the defunct Uganda Electricity Board (UEB) whose employment was terminated between 1998 and 2001 under a government restructuring programme. On termination each received a payment described as a retrenchment package or terminal benefits, on which Uganda Revenue Authority separately charged tax by way of PAYE. The appellants sued in the High Court to recover the tax, alleging the payments were not taxable; the total tax was pleaded as UGX 979,083,019, though the respondent disputed the figure. The trial judge held the payments were a gratuitous post-employment payment not amounting to compensation under Section 19(1)(d) of the Income Tax Act and ordered a refund with interest plus general damages. On the respondent's appeal, a majority of the Court of Appeal reversed that decision, holding the packages taxable under Section 19(1)(d), relying on Uganda Revenue Authority v Siraje Hassan Kajura; Kiryabwire, JA dissented. The appellants appealed to the Supreme Court on the sole ground that the payments were not taxable.

Issues

Whether the time within which to file the appeal should be extended and the late-filed appeal validated under Rule 5 of the Rules of the Supreme Court.
Whether the appeal was incompetent under Rule 81(1) of the Rules of the Supreme Court because the named appellant had died without a legal representative being substituted.
Whether the retrenchment packages/terminal benefits paid to the appellants on termination of their employment constituted taxable employment income under Section 19(1)(a) or (d) of the Income Tax Act.

Orders

Civil Application No. 07 of 2024 granted; time to file the appeal extended and the appeal validated.
Respondent's preliminary objection overruled.
Appeal dismissed for having no merit.
Each party to bear its own costs in the Supreme Court and in the two courts below.

Key headnotes

Tax Law — Income Tax — Employment Income — Compensation for Termination of Employment

Any amount derived as compensation for the termination of a contract of employment, including a retrenchment package or terminal benefits, constitutes taxable employment income under Section 19(1)(d) of the Income Tax Act, irrespective of whether the termination was voluntary or involuntary or arose from a government restructuring programme.

Statutory Interpretation — Taxing Statutes — Literal Rule

A taxing statute must be construed according to the literal meaning of the words used; there is no equity about a tax and no presumption, nothing is to be read in or implied, and a court may only look fairly at the language used.

Tax Law — Precedent — Ratio Decidendi of a Non-Unanimous Decision

Where a decision of the Supreme Court is not unanimous, the views of the majority constitute the court's decision; accordingly the holding in Uganda Revenue Authority v Siraje Hassan Kajura that terminal benefits are taxable under Section 19(1)(d) is unambiguous and provides no basis for departure.

Civil Procedure — Extension of Time — Sufficient Reason for Late Filing of Appeal

Under Rule 5 of the Rules of the Supreme Court, time to file an appeal may be extended for sufficient reason where the late filing was occasioned by the default of previous counsel, the appellants were vigilant in pursuing the appeal, and no prejudice was occasioned to the respondent.

Civil Procedure — Death of Party to Appeal — Rule 81(1)

Rule 81(1) of the Rules of the Supreme Court does not render an appeal incompetent where a deceased appellant was merely one of many representatives sharing a common interest; the appeal may be prosecuted by any of the surviving co-appellants without substituting the deceased's legal representative.

Legislation cited (12)

Income Tax Act Cap. 340 s.4(1)
Income Tax Act Cap. 340 s.19(1)
Income Tax Act Cap. 340 s.19(1)(a)
Income Tax Act Cap. 340 s.19(1)(d)
Income Tax Act Cap. 340 s.116
Constitution of Uganda 1995 Article 254(2)
Constitution of Uganda 1995 Article 268
Constitution of Uganda 1995 Article 132(4)
Rules of the Supreme Court Rule 5
Rules of the Supreme Court Rule 79
Rules of the Supreme Court Rule 81(1)
Public Enterprises Reform and Divestiture Act

Cases cited (5)

Uganda Revenue Authority v Siraje Hassan Kajura (Civil Appeal No. 9 of 2015)
Samuel Lubega and 2 Others v Stanbic Bank Ltd (Civil Appeal No. 24 of 2010)
Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 1 KB 64
Mangin v Inland Revenue Commissioner [1971] 1 All ER 179
Commissioner General URA v Airtel (U) Ltd (Civil Appeal No. 32 of 2020)

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