The Tax Appeal Tribunal (TAT), Abuja Zone, has fixed the Companies Income Tax (CIT) and Tertiary Education Tax (TET) payable by the Cement Technology Institute of Nigeria (CITN) at N2.03 billion after resolving a dispute between the institute and the Nigeria Revenue Service (NRS) over the treatment of its investment income.
The five-member panel, chaired by Chief Moremi Soyinka-Onijala, determined CTIN’s Companies Income Tax liability at N1,835,484,959.69 and its Tertiary Education Tax (TET) at N190,158,410.44, bringing the combined assessment to N2,025,643,370.13.
The decision was delivered in appeal No. TAT/ABJ/332/2023, filed by CTIN against the tax authority.
Other members of the panel were Anthony Amoman, Dr Chukwudi Ezeudeka, Dr Gbenga Falana and Amina Ibrahim.
CTIN had approached the tribunal in September 2023 to challenge additional assessment and demand notices covering Companies Income Tax, Education Tax and Withholding Tax for the relevant years of assessment.
At the heart of the dispute was the institute’s income from Treasury Bills, bonds and fixed-deposit placements.
CTIN maintained that the Companies Income Tax (CIT) and Education Tax imposed on those interest earnings were unlawful. It also contested the Withholding Tax assessment connected to management fees it paid to the Bank of Industry.
The tribunal examined several questions, including whether CTIN’s activities amounted to a trade or business, how income should be distinguished from taxable profit, and whether the Companies Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011 applied to portions of the institute’s investment income.
The panel also considered the treatment of Education Tax and Withholding Tax in arriving at the final liability.
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In its judgment, the tribunal rejected most of CTIN’s challenge but made specific adjustments to the tax computation.
It held that the management fees paid by the institute to the Bank of Industry should qualify as a deductible expense. The amount was therefore to be deducted from the relevant interest income when determining the revised assessable and total profits.
The tribunal also held that the Bank of Industry was required to deduct Withholding Tax at the applicable 10 per cent rate from the relevant interest income at source and remit the money to the tax authority.
Credit was subsequently given for the Withholding Tax already deducted when CTIN’s final Companies Income Tax liability was calculated.
The panel, however, directed the Nigeria Revenue Service to revisit the assessment within 30 days.
That instruction is significant because the tribunal ordered the tax authority to give effect to the exemption covering interest income specifically traceable to Federal Government Treasury Bills and Bonds under the 2011 exemption order.
In practical terms, the tribunal’s decision did not treat every naira earned by CTIN from its investments as taxable without distinction. It upheld the tax liability after its own computation, while requiring the revenue authority to remove interest income that qualifies for the statutory exemption.
The tribunal consequently dismissed CTIN’s appeal except to the limited extent allowed by the judgment.
The dispute illustrates the tax questions that can arise when institutions earn investment income alongside their core activities. The classification of income, allowable deductions and statutory exemptions can materially alter the amount eventually payable.
For CTIN, the immediate outcome is a tax assessment exceeding N2 billion, subject to the recomputation ordered by the tribunal.
The revenue authority now has 30 days to carry out the adjustment and reflect the exemption recognised by the panel.
The case also places emphasis on the distinction between an initial tax assessment issued by the revenue authority and the final liability determined after an appeal.
In this instance, the tribunal did not simply endorse the original figures. It examined the disputed income and expenses, allowed a deduction for the Bank of Industry management fees and directed a further adjustment for qualifying government securities.
The resulting figure of N2.025 billion therefore represents the tribunal’s determined Companies Income Tax and Tertiary Education Tax liabilities, with the revenue service required to give effect to the specific exemption identified in the judgment.
