Commissioner General TRA v Soft Tech Consultants Ltd - Civil Appeal No. 153 of 2025
1. Facts
Respondent, Soft Tech Consultants Ltd, is a Tanzanian company supplying computer hardware, software and IT project implementation.
TRA examined its affairs for years of income 2016, 2017, 2018 and found it had made payments to non-resident service providers based in India (M/S Soft Tech Consultants Pvt Ltd India) and South Africa without withholding income tax.
Respondent objected arguing:Payments were not taxable in Tanzania under Tanzania-India and Tanzania-South Africa Double Taxation Agreements (DTA).
TRA applied wrong rate - 15% instead of 10% for software licence payments to South Africa.
TRAB (Appeal No. 148 of 2022) - Found for TRA, withholding tax was applicable under Section 83(1)(c)(i) ITA, 2004.TRAT (Tax Appeal No. 41 of 2024 - Herbert - Vice Chairperson, 14 Feb 2025) - Reversed TRAB and held: Board erred, Tanzania-India DTA incorporated by Sec 128 ITA takes precedence over Sec 83(1)(c)(i), so assessment set aside.
Crucially, TRAT's two members Prof. Mkasiwa and Dr. Zuberi gave written opinions contrary to Vice Chairperson:
Payments are subject to withholding tax under Sec 83(1)(c)(i), as they fall under Article 20/21 of DTA rather than Article 7 business profits. Board did not err. Relying on Kilombero Sugar Co Ltd v CG TRA TZCA 213 - service fees by non-resident without PE are not business profits under Art 7 but Other Income under Art 21, thus taxable in Tanzania.[2021]Vice Chairperson disagreed and allowed the taxpayer's appeal, but did not record the members' opinions in the judgment and gave no reasons for disagreeing.TRA appealed on 2 grounds to Court of Appeal.
2. Issues
Procedural: Whether TRAT erred in law by delivering a judgment which differs from the opinion of Tribunal members without assigning reasons, contrary to Section 20 Tax Revenue Appeals Act, Cap 408 of 2019 (TRAA) - and whether such failure is fatal nullity.
Substantive: Whether payment of consultancy services to the Indian entity is subject to withholding tax in Tanzania under Sec 83(1)(c)(i) ITA, or exempt under Art 7 business profits of Tanzania-India DTA.
3. Holding
Appeal allowed on Ground 1 alone. Ground 2 not determined.
Court (Levira JA):Parties conceded Vice Chairperson did not comply with Sec 20.Sec 20.
Sec 20 TRAA wording is mandatory: "Chairman or Vice-Chairman shall not be bound by opinion of any member but, if he disagrees... he shall record the opinion of such member or members differing with him and reasons for his disagreement".
Non-compliance has two effects: makes members' work redundant and affects fairness of decision-making, impossible to gauge scope of deliberation.
Failure is fatal defect. Relied on Awiniel Mtui & Others v Stanley Kimambo TZCA 2066. Respondent's argument that Vodacom Tanzania PLC v CG TRA TZCA 1797 distinguished Awiniel Mtui rejected.[2016][2020]
Order: Judgment of TRAT quashed and set aside. Case file remitted back to Tribunal for recomposition of a proper judgment per law by same Vice Chairperson within 30 days from date of judgment. No order as to costs.
4. Legal Significance
Definitive interpretation of Sec 20 TRAA: Recording dissenting members' opinion and giving reasons for disagreement are mandatory dual requirements. Breach renders entire TRAT judgment inappropriate and liable to be quashed.
Due process in tax tribunals: Even though Chair/Vice-Chair is not bound by members, transparency and reasoned justice require explanation when departing.
Substantive withholding tax vs DTA question left open: By not deciding Ground 2, Court avoids ruling on whether consultancy fees are Art 7 vs Art 20/21. However record shows lower members considered themselves bound by Kilombero Sugar precedent that such service fees ARE subject to withholding tax under Sec 83(1)(b)/(c) despite no PE - signalling likely outcome on remittal.
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