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Lugeya Samuel and Another v Uganda Revenue Authority (Civil Appeal No 115 of 2012)

Court of Appeal · [2019] UGCA 2122 · 2019 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
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 decision that PAYE on terminal benefits was lawfully deducted upheld

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 terminal and retrenchment benefits are taxable employment income within section 19(1)(a) of the Income Tax Act, following the binding Supreme Court decision in URA v Siraje Hassan Kajura and the Court of Appeal's own decision in Katureebe Eridad and Wanzala Ivan v URA. The court further held that the payment came from the Government of Uganda through the divestiture account, not a third party, and that the withholding mechanism in section 19(6)/116 does not affect liability to tax, since income tax can be assessed and paid even where not withheld by an employer. No order as to costs was made.

Outcome

Appeal dismissed; High Court decision that PAYE on terminal benefits was lawfully deducted upheld

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. They were paid terminal benefits, from which the respondent deducted approximately UGX 416 million as Pay As You Earn (PAYE). The appellants claimed this tax was unlawfully and illegally levied and sued for its recovery. They argued that the Privatisation Unit of the Ministry of Finance, which made the payments, was not their employer and therefore 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, holding the deduction lawful, and the appellants appealed.

Issues

  1. Whether the deduction of PAYE from the appellants' terminal (retrenchment) benefits was lawful under the Income Tax Act.
  2. Whether the Privatisation Unit of the Ministry of Finance was an employer of the appellants capable of withholding PAYE under section 116 of the Income Tax Act.

Orders

  • Appeal dismissed.
  • No order as to costs.

Rules and key headnotes

Income Tax — Employment Income — Taxability of Terminal and Retrenchment Benefits
Terminal and retrenchment benefits received by an employee fall within the definition of employment income under section 19(1)(a) of the Income Tax Act and are taxable, save for the portion expressly exempted.
Income Tax — Withholding Tax — Effect of Non-Withholding on Tax Liability
Withholding of tax is merely a method of collecting income tax from employment income; income tax can still be assessed and paid even where it was not withheld by the employer, so the absence of a proper withholding arrangement does not defeat liability.
Income Tax — Source of Payment — Divestiture Proceeds Not a Third Party
Where costs of terminating employment are met by the Government of Uganda from the divestiture account managed by the Privatisation Unit on behalf of a divested employer, the payment is not made by a third party for the purposes of section 19(6) of the Income Tax Act.
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 overturns an earlier Court of Appeal decision, that earlier decision is no longer good law and must not be followed.

Legislation cited (5)

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)

Full judgment

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

Lugeya Samuel and Another v Uganda Revenue Authority (Civil Appeal No 115 of 2012) [2019] UGCA 2122 (7 May 2019)
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.