Katureebe and Another v Uganda Revenue Authority (Civil Appeal No 55 of 2012)

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court of Appeal dismissed the appeal, holding that the terminal benefits paid to the appellants on termination of their employment with British American Tobacco (Uganda) Ltd were taxable income under section 19 of the Income Tax Act. Following the binding Supreme Court decision in URA v Hassan Kajura, the court held that payments resulting from any employment relationship, whether subsisting or terminated, are taxable employment income. The benefits were not a pension and so were not exempt under section 21(1)(n) of the Income Tax Act or section 8 of the Pensions Act, as the appellants did not hold a pensionable office or serve in the public service. The payment came from the divestiture account, not a third party.

Outcome

Appeal dismissed; High Court decision that the appellants' terminal benefits were lawfully taxed upheld

Facts

The appellants were among 68 former employees of British American Tobacco (Uganda) Ltd whose services were terminated on 30 April 2006. British American Tobacco (Uganda) Ltd was a public enterprise (Class III of the First Schedule to the PERD Act) which the State was required to fully divest. On termination the appellants received terminal benefits comprising items such as basic salary, travel allowance, transport allowance and leave allowance. The Privatisation Unit of the Ministry of Finance, Planning and Economic Development paid these benefits from the divestiture account, and the respondent recovered Pay As You Earn (PAYE) income tax totalling UGX 291,887,311 from the payments. The appellants sued in the High Court for a declaration that the taxation was unlawful and for a refund. The High Court dismissed the suit, holding the benefits were taxable and not pension. The appellants appealed, arguing the benefits were exempt and that they had been paid by a third party not authorised to withhold tax.

Issues

1. Whether the terminal benefits paid to the appellants on termination of their employment were taxable income under section 19 of the Income Tax Act.
2. Whether the terminal benefits were exempt from tax as a pension under section 21(1)(n) of the Income Tax Act or under section 8 of the Pensions Act.
3. Whether the appellants could introduce in written submissions new facts not pleaded or raised at trial.

Orders

• The preliminary objection of the respondent is overruled.
• The appeal is dismissed with costs.

Rules and key headnotes

Legislation cited (17)

• Income Tax Act Cap 340 s.19
• Income Tax Act Cap 340 s.19(1)(a)
• Income Tax Act Cap 340 s.19(1)(d)
• Income Tax Act Cap 340 s.19(6)
• Income Tax Act Cap 340 s.21
• Income Tax Act Cap 340 s.21(1)(n)
• Income Tax Act Cap 340 s.21(1)(o)
• Income Tax Act Cap 340 s.116
• Pensions Act Cap 286 s.1(c)
• Pensions Act Cap 286 s.1(g)
• Pensions Act Cap 286 s.1(j)
• Pensions Act Cap 286 s.8
• Public Enterprise Reform and Divestiture Act Cap 98 s.22
• Public Enterprise Reform and Divestiture Act Cap 98 s.26
• Evidence Act Cap 6 s.56(1)(b)
• Judicature (Court of Appeal Rules) Directions rule 30
• Pensions (Amendment) Statute No. 4 of 1994 s.6

Cases cited (5)

• Uganda Revenue Authority v Siraje Hassan Kajura (Civil Appeal No. 9 of 2015)
• Uganda Revenue Authority v Siraje Hassan Kajura (Civil Appeal No. 26 of 2013)
• Kyamundu Aggrey v Nanwanga Mary (Civil Appeal No. 21 of 2010)
• Nkote Charles v Uganda Revenue Authority (HCCS No. 107 of 2009)
• Priamit Enterprises Ltd v Attorney General (Civil Appeal No. 43 of 1995)

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