Civil Reference No. 7 of 2004
During a 2012 audit of National Bank of Commerce Ltd (NBCL), the Tanzania Revenue Authority (TRA) discovered payments made by NBCL to non-resident entities for services and rentals under various lease agreements. TRA imposed withholding tax on these payments, prompting NBCL to appeal to the Tax Revenue Appeals Board (Income Tax Appeal No. 91 of 2013). Four issues were framed before the Board, including whether payments for services performed outside Tanzania by non-residents were subject to withholding tax, and whether TRA had accounted for withholding tax remittances on rentals. The Board partly ruled in TRA's favour and ordered the parties to reconcile accounts on remittances, but it failed to make a specific finding on the first issue due to confusion over the applicable tax base. NBCL appealed to the Tax Revenue Appeals Tribunal, which found that the Board had not properly determined two issues. Relying on precedent allowing a first appellate body to step into the shoes of the lower tribunal, the Tribunal itself decided the undetermined issue—holding, based on section 69(1)(i) of the Income Tax Act 2004 and the Tullow Tanzania BV case, that payments made by a Tanzanian resident for services utilized in Tanzania are subject to withholding tax irrespective of where the services were performed. The Tribunal dismissed NBCL's appeal. NBCL then appealed to the Court of Appeal, abandoning all grounds except one: that the Tribunal erred by suo motu determining the withholding tax issue without affording the parties an opportunity to be heard, contrary to Article 13(6)(a) of the Constitution.
Whether the Tax Revenue Appeals Tribunal, in stepping into the shoes of the Tax Revenue Appeals Board to determine the issue of withholding tax on payments made to offshore non-resident service providers, introduced this issue suo motu and decided it without affording the parties the right to be heard, in violation of Article 13(6)(a) of the Constitution of the United Republic of Tanzania, 1977.
The appellant (NBCL), through Mr. Mukebezi, argued that the Board had failed to properly determine the first issue due to confusion over the correct tax base, and that when the Tribunal stepped into the Board's shoes to decide the matter, it did so without recalling the parties to make submissions specifically on the withholding tax issue, thereby denying them the right to be heard under Article 13(6)(a) of the Constitution. Counsel contended the real dispute before the Board concerned the place where services were rendered (in Tanzania or offshore), not whether withholding tax applied to services rendered outside Tanzania, and that the Tribunal wrongly relied on the Tullow case to resolve a matter not properly argued. The appellant did not dispute the Tribunal's authority to step into the Board's shoes generally, only the manner in which it exercised that power without further hearing the parties. The appellant also challenged the Tribunal's treatment of documents proving remittances as inadmissible under Rule 15(4) of the Tax Revenue Appeals Board Rules.
The respondent (Commissioner General, TRA), through Mr. Gugami, countered that the withholding tax issue was not introduced suo motu but had been one of the four issues expressly framed and argued before the Board, as evidenced by the record. The respondent argued that the parties had already fully addressed this issue in written submissions before the Board, and that when the Tribunal stepped into the Board's shoes upon finding the issue undetermined, it merely evaluated the existing evidence and submissions rather than raising or deciding a new matter. Thus, there was no need to recall the parties, and no violation of the right to be heard occurred. The respondent relied on Hassan Mzee Mfaume v. Republic and The Registered Trustees of Joy in the Harvest v. Hamza K. Sungura to support the proposition that a first appellate tribunal may itself evaluate evidence on record without necessarily recalling the parties.
The Court of Appeal dismissed the appeal with costs, holding that the issue of withholding tax on payments to offshore non-resident service providers was not raised suo motu by the Tribunal but had been one of the four issues properly framed and fully argued by the parties before the Board. The Board had failed to resolve this issue due to confusion over the tax base, and the Tribunal, sitting as a first appellate body, correctly stepped into the Board's shoes to determine it based on the existing record, evidence, and submissions already before the Board — a course the appellant itself had invited by asserting before the Tribunal that the Board erred in failing to properly determine the issues before it. The Court found that the parties had already been afforded an adequate opportunity to be heard on this issue at the Board level, and that dissatisfaction with the outcome, or a desire for further clarification, does not equate to a denial of the right to be heard. The appellant's claim was found to be an afterthought, as its own counsel ultimately conceded that the parties had been heard but merely wished the Tribunal had sought further clarification. Accordingly, there was no violation of Article 13(6)(a) of the Constitution.
The judgment reaffirms the principle that a first appellate tribunal, upon finding that a lower tribunal or board failed to determine an issue properly framed and argued before it, may itself step into the shoes of that body and decide the issue based on the existing evidentiary record without necessarily recalling the parties for fresh submissions, provided the issue was already before the parties and adequately argued. It clarifies that the constitutional right to a fair hearing under Article 13(6)(a) is satisfied where parties have had a genuine opportunity to address an issue at an earlier stage, and that mere dissatisfaction with a tribunal's ultimate determination, or a preference for additional clarification, does not constitute a denial of that right. The case also illustrates the application of precedent (Hassan Mzee Mfaume v. Republic) permitting appellate bodies to independently evaluate evidence on record to resolve undetermined issues from below.
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