Wakilii

Sai Office Supplies Limited v Uganda Revenue Authority [2025] UGTAT 20

Tribunal · 2025 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging tax assessment arising from interest restrictions under section 25 of the Income Tax Act
Decision
Application dismissed with costs to the Respondent

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal held that carry forward losses are allowable deductions for purposes of computing Tax EBITDA under section 25 of the Income Tax Act. Section 36 treats carry forward losses as allowable deductions in determining chargeable income. The determination of chargeable income requires that all allowable deductions, whether from the current year or otherwise, are deducted from gross income. The Legislature did not exclude carry forward losses from the definition of allowable deductions in section 25(5), and tax legislation must be strictly construed without adding or subtracting words.

Outcome

Application dismissed with costs to the Respondent

Facts

Sai Office Supplies Limited trades in office supplies, computers and stationery. In its 2019 income tax return, the Applicant claimed an interest deduction of Shs.1,099,803,000. In computing Tax EBITDA under section 25 of the Income Tax Act, the Applicant did not deduct carry forward losses, believing they were not allowable deductions for this purpose. Upon review, the Uganda Revenue Authority found that the Applicant's interest deduction was overstated because carry forward losses should have been included in allowable deductions offset against gross income when computing Tax EBITDA. This resulted in an additional tax liability of Shs.291,603,729. The Applicant objected, but the URA maintained the assessment. The Applicant then brought this application to the Tax Appeals Tribunal.

Issues

  1. Whether the applicant is liable to pay the tax assessed of Shs.291,603,729.
  2. Whether carry forward losses form part of allowable deductions for purposes of computing Tax EBITDA under section 25 of the Income Tax Act.

Orders

  • Application dismissed.
  • Costs awarded to the Respondent.

Rules and key headnotes

Income Tax — Interest Deductions — Tax EBITDA — Allowable Deductions — Carry Forward Losses
Carry forward losses are allowable deductions for purposes of computing Tax EBITDA under section 25 of the Income Tax Act. Section 36 treats carry forward losses as allowable deductions in determining chargeable income, and the determination of chargeable income for any year of income requires that all allowable deductions, whether from the current year or otherwise, are deducted from gross income.
Tax Statutes — Strict Construction — Cape Brandy Principle
Tax legislation must be strictly construed according to its precise language with nothing to be added or implied. If the Legislature intended for carry forward losses to be excluded from allowable deductions in computing Tax EBITDA, the provision would have been worded to that effect.
Income Tax — Allowable Deductions — Section 22 — Harmonious Interpretation
Allowable deductions are not limited to expenses incurred during the current year of income. Section 22(1), which contains the general rule regarding expenditures and losses incurred in the year of income, is subject to other provisions of the Act such as section 36, which treats carry forward losses as allowable deductions even though they were not incurred in the current year.
Income Tax — Tax EBITDA — Distinction from Accounting EBITDA
Tax EBITDA as defined in section 25 of the Income Tax Act differs from accounting EBITDA. Tax EBITDA includes tax depreciation computed in accordance with the Income Tax Act, which differs from accounting depreciation. Similarly, deductions for Tax EBITDA purposes cannot be limited to current year expenses as is the practice in accounting.
Income Tax — Interest Restrictions — Section 25 — Purpose and Context
The purpose of section 25 of the Income Tax Act is to restrict interest deductions claimed by taxpayers who are members of a group, aimed at preventing such taxpayers from using interest payments to suppress their chargeable income. The provision implements a fixed ratio rule that limits interest deductions to 30% of Tax EBITDA, aligning interest deductions with economic activity and taxable income.

Legislation cited (13)

Cases cited (6)

  • Uganda Revenue Authority v COWIA/S (Civil Appeal No. 34 of 2020)
  • Cape Brandy Syndicate v IRC (1921) KB 64
  • Nile Breweries Ltd v Uganda Revenue Authority (Civil Appeal No. 0113 of 2023)
  • Registered Trustees of Kampala Institute v Departed Asians Property Custodian Board (Supreme Court Civil Appeal No. 21 of 1993)
  • Platinum Credit v Uganda Revenue Authority (TAT No. 28 of 2018)
  • Rwenzori Bottling Co. Ltd v Uganda Revenue Authority (TAT No. 21 of 2021)

Full judgment

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

Sai Office Supplies Limited v Uganda Revenue Authority 2025 UGTAT 20 (20 August 2025)
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.