Home » Business » N1.24b Halliburton Tax Case Rears Head Again
N1.24b Halliburton  Tax Case Rears Head Again
Court grants ex-boxer bail

N1.24b Halliburton Tax Case Rears Head Again

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.

But displeased with the FIRS decision, Halliburton filed a complaint at the defunct Body of Appeal Commissioner.

The Body upheld FIRS decision. Still 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 order of the High Court and the Appellant Court in the unanimous decision of three justices, it ruled 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 United States of America (USA) dollars.

FIRS taxed additional income, in US dollars, derived by Halliburton West African Limited, amounted to the tune of $6, 972. 248 million for the years 1996 – 1999.

The Body of Appeal Commissioners assented to FIRS additional assessment. A Federal High court however voided the assessment, compelling the FIRS to head for the Appeal Court.

Citing Section 26 of CITA (Companies Income Tax Act, NDIC v Okem Entreprises Ltd, Oskue v FCE Asaba (2010) 10 NWLR (pt 1201) Page 1, Kotoye V Saraki (1991$ 7-8 SCNJ 524 and other decided cases, Justice Joseph Shagbaor Ikyegh 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” Justice Ikyegh ruled that “What the appellant (FIRS) assessed to tax was the income omitted to be submitted or declared to the appellant (FIRS) by the respondent in the original assessment occasioned by the respondent (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 the appellant (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.”

On Halliburton West Africa’s claim that taxing its – (the parent company’s ) undeclared income after having taxed HESNL  – (the subsidiary)  amounted to double taxation, Justice Ikyegh did not agree.

Rather, the Appeal Court justice held that: “A company not registered in Nigeria but derives income from a transaction in Nigeria through its affiliates or subsidiary cannot, in my modest opinion, dispute assessment to tax on the profit or income it remits to the subsidiary as the subsidiary’s share of the income from the transaction.

“Because the foreign company, though not registered in Nigeria, is deemed to have generated income in Nigeria by the transaction done in Nigeria. The tax authority is thus concerned essentially with and targets only the income made or deemed to have been made on Nigerian soil from any transaction conducted within Nigeria, as was the case here.

The Appeal Court judge did not agree with Halliburton West Africa’s position that the additional assessment ranks as double taxation.

Leave a Reply

Your email address will not be published.

%d bloggers like this: