By Innocent Anaba
The Court of Appeal sitting in Lagos has upheld an additional $6,972,248 (about N1.24 billion) tax assessment against the Halliburton Energy Services Nigeria Limited, HESNL. The Federal Inland Revenue Service, FIRS, had raised an additional tax assessment against HESNL for year 1996 to 1999. Displeased with the FIRS decision, Halliburton filed a complaint at the defunct Body of Appeal Commissioner.
The body upheld FIRS decision. Dissatisfied with the outcome at the Body, HESNL approached the Federal High Court, which quashed the body’s decision and ordered FIRS to refund the said amount to Halliburton.
FIRS headed to the Court of Appeal to challenge the decision of the High Court, but the appellant court in its unanimous decision, held that the Service was empowered by the law to assess the income not disclosed earlier.
The additional assessment arose from contract transactions between Halliburton, West African Limited—a foreign/non-resident company incorporated in Cayman Islands- and its affiliate operating in Nigeria, under the entity called Halliburton Energy Services Nigeria Limited, HESNL. The two companies agreed that Halliburton would obtain contracts from third parties in Nigeria for execution by HESNL, with billing for contracts made in USA dollars.
FIRS taxed additional income-in US dollars- derived by Halliburton West African Limited, to the tune of $6, 972. 248 million, for the years 1996-1999.
Justice Joseph Ikyegh of the appellate court noted that a holistic construction of Section 26 of CITA entitles the appellant (FIRS) “to assess to tax, the income of the respondent (Haliburton West Africa), by way of additional assessment to tax of a taxpayer.
“By making additional assessment to tax of the declared income of the respondent, (Halliburton West Africa Limited), subsequently found out by the appellant ( FIRS), the appellant cannot be accused of revisiting or taxing over again, the initial income that was earlier taxed as to amount to double taxation.
“In other words, what the appellant assessed to tax was the income omitted to be submitted or declared to the appellant by the respondent in the original assessment occasioned by Halliburton’s non-disclosure at the material time of the original assessment to tax.
“Put in another way, it was the undeclared income subsequently discovered by FIRS through tax audit that was taxed which is covered by the supervening Section 26 (3) of CITA. It was not a case of taxing twice the same income or asset or a situation tax was levied on an income that had already been taxed.”