In 2005 the tax authorities conducted an audit of Alliance One Tobacco T. Ltd and on that basis issued a notices of assessment for FY 2003 and 2004. In 2011 the tax authorities conducted another audit for the years of income 2009 and 2010 and issued an additional assessment.
In the assessments, the tax authorities disallowed several corporate tax items relating to capital expenditure, inventory costs, loss of input stock and bad debt written off. Moreover, a significant transfer pricing adjustment was made on the price from Alliance One Tobacco to its sister company Alliance One International AGA.
Judgement of the Court of Appeal
The court ruled in favour of the tax authorities. “...in view of the reasons we have stated above with respect to the sole ground of appeal, we have to conclude that this appeal is bound to fail.”
The court observed that:
“In the circumstances, if the intention of the appellant from the outset was to challenge the assessment of the respondent in respect of the disallowed direct sales costs based on the issue of non-compliance of the respondent with section 97 (c) of the ITA, she would have indicated so directly in her statement of appeal at the TRAB and later at the TRAT to enable them to deliberate and decide upon that legal question. As that was not done and the issue before the TRAB or TRAT remained that of whether there was evidence on actual costs incurred on direct sales, the appellant was duty bound to prove through cogent evidence (supporting invoices) that the disallowance of the said costs was erroneous. Otherwise, we think that the TRAB and the TRAT cannot be blamed as the question which they were called upon to adjudicate required sufficient proof and the burden lied on the appellant as provided under section 18 (b) of the TRAA.
In the event, we agree with the learned counsel for the respondent that the TRAT properly confirmed the decision of the TRAB on the issue of disallowance of the direct sales costs as no cogent evidence was tendered by the appellant to the contrary. We do not therefore, think, with respect, that the TRAT wrongly held against the appellant on this point as stated by her learned counsel.”
CIVIL APP. NO. 118 OF 2018 - ALLIANCE ONE TOBACCO TANZANIA LTD. VS. COMMISSIONER GENERAL (TRA)