Wakilii

Chestnut Uganda Limited v Uganda Revenue Authority (Application No TAT 94 of 2019)

Tribunal · [2021] UGTAT 8 · 2021 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to Tax Appeals Tribunal challenging URA's disallowance of input VAT claim
Decision
Applicant's claim for input VAT of Shs. 4,388,802,707 allowed; respondent's disallowance set aside

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that a taxable person registered for VAT is entitled to claim input VAT credit for all taxable supplies made to it during the tax period if the supply is for use in its business, regardless of whether the taxable person has itself made taxable supplies during that period. The VAT Act does not require a taxpayer to restrict input tax credit to only one business activity. The applicant, engaged in property development and leasing land for advertisement, was entitled to input VAT incurred on construction of Arena Mall as part of its broader business of property development and management.

Outcome

Applicant's claim for input VAT of Shs. 4,388,802,707 allowed; respondent's disallowance set aside

Facts

Chestnut Uganda Limited, a property development and real estate company, claimed input VAT of Shs. 4,388,802,707 on 31 December 2018. The claim related to VAT incurred on construction of Arena Mall, which was still under construction. URA rejected the claim on the ground that the applicant was not making taxable supplies and the construction was not a business activity but preparation for future taxable supplies. The applicant was registered for VAT and was leasing land space for advertisement to Outdoor Atom Limited. URA conducted a VAT offset verification for June 2016 to February 2019 and disallowed the input VAT. URA had attempted to cancel the applicant's VAT registration on 5 February 2019 but did not proceed as the applicant was making a taxable supply through the advertisement space rental.

Issues

  1. Whether the applicant is entitled to the input tax claimed of Shs. 4,388,802,707.
  2. What remedies are available to the parties.

Orders

  • Application allowed.
  • Costs awarded to the applicant.
  • VAT assessment of Shs. 307,625,525 on imported services does not stand.

Rules and key headnotes

Value Added Tax — Input Tax Credit — Entitlement — Requirement to Make Taxable Supplies
A taxable person registered for VAT is entitled to claim input VAT credit for all taxable supplies made to it during the tax period if the supply is for use in its business. Section 28 of the VAT Act does not require that the taxable person must have made taxable supplies during the tax period as a condition for claiming input tax credit.
Value Added Tax — Taxable Person — Definition and Effect of Registration
A taxable person is defined under section 6 of the VAT Act as a person registered under section 7 from the time registration takes effect. The effective date of registration is determined by reference to the date set out in the certificate of registration. Once registered and while registration remains in effect, a person is deemed to be a taxable person.
Value Added Tax — Input Tax Credit — Business Use — Multiple Business Activities
There is nothing in the VAT Act that requires a taxpayer to restrict input tax credit to only one business activity. Where a taxpayer's memorandum of association permits multiple business activities including property development, leasing, and management, input VAT incurred on construction of a commercial property is claimable as part of the taxpayer's broader business, even where the taxpayer is simultaneously engaged in other commercial activities such as leasing land for advertisement.
Value Added Tax — Business — Distinction from Commercial Activity
The term 'business' in the VAT Act context is not restricted to a single commercial activity. While construction of a commercial property may be a commercial activity, the business of a taxpayer may encompass property development, leasing, hiring, and management of property. Hiring space on land for advertisement is part of property development, leasing, hiring, and management of property, and constitutes part of the taxpayer's business.
Taxation Statutes — Literal Interpretation — Plain Meaning Rule
In taxation matters, one must look simply at what is clearly said in the statute. There is no room for intendment, no equity about a tax, and no presumption as to a tax. One reads nothing in, implies nothing, but looks fairly at what is said clearly, and that is the tax.

Legislation cited (13)

Cases cited (7)

  • Enviroserv (U) Limited v Uganda Revenue Authority (TAT Application No. 24 of 2017)
  • Post Bank (U) Limited v Uganda Revenue Authority (TAT Application No. 18 of 2008)
  • East African Property Holdings (U) Ltd v Uganda Revenue Authority (HCCS No. 247 of 2013)
  • Uganda Revenue Authority v Siraje Hassan Kajura (Civil Appeal No. 26 of 2013)
  • Cape Brandy Syndicate v IRC (1921) KB
  • Crane Bank v Uganda Revenue Authority (Civil Appeal No. 18 of 2010)
  • Warid Telecom Uganda Limited v Uganda Revenue Authority (Civil Appeal No. 24 of 2011)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Chestnut Uganda Limited v Uganda Revenue Authority (Application No TAT 94 of 2019) 2021 UGTAT 8 (31 March 2021)
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.