Civil Reference No. 7 of 2004
Quality Group Ltd was partly unsuccessful before the Tax Revenue Appeals Tribunal in Tax Appeal No. 4 of 2007, which upheld the Tax Board's decision that certain capital investment costs, unsupported by proper accounting documents, could not qualify as allowable deductions for tax purposes. The applicant filed a notice of appeal against this decision on 17 October 2007. Notwithstanding the pending intended appeal, the Commissioner General of the Tanzania Revenue Authority issued Agency Notices under Section 117 of the Income Tax Act, 2004 to the applicant's bankers (CRDB, Barclays, NBC and Exim Bank), directing them to attach and remit Tsh. 800,182,061/= said to be due tax. The applicant, through its director Yusuf Manji, deposed that this recovery action was illegal as it interfered with the appellate process, and applied to the Court of Appeal for stay of execution and for an order vacating, varying, or raising the Agency Notices.
Whether there was ground for staying execution of the decree of the Tax Revenue Appeals Tribunal in Appeal No. 4 of 2007, and specifically whether the Court of Appeal could order the vacation, variation, or raising of the Agency Notices issued by the Commissioner General under Section 117 of the Income Tax Act, 2004 pending determination of the intended appeal.
For the applicant, counsel argued that a notice of appeal had been lodged, and pending its determination the respondent's issuance of Agency Notices to attach Tsh. 800,182,061/= from the applicant's bank accounts was illegal and interfered with the Tribunal's process and the appellate process. It was contended that the applicant would suffer substantial loss and great hardship because its business operations, dependent on the frozen bank accounts, would be frustrated, and that stay of execution was necessary to avoid rendering the intended appeal nugatory. Counsel relied on Tanzania Cotton Marketing Board v Cogecot Cotton Co. SA and Nicholas Nere Lekule v IPTL and Another, drawn from the respondent's own list of authorities. For the respondent, counsel argued that no decree had yet been issued by the Tribunal, so execution of the decision had not commenced, and thus the application for stay lacked merit. It was submitted that the applicant was effectively challenging the respondent's statutory power to recover due taxes under Section 117 of the Income Tax Act, 2004 through an inappropriate application for stay. Counsel also contended that the applicant's bank accounts were not liquid, so the applicant would not suffer financial embarrassment or irreparable hardship, and urged that on the balance of convenience the application should be dismissed.
The Court held that although there was a triable issue in the intended appeal (the applicant contesting the assessed tax of Tsh. 800,182,061/=) and the applicant would suffer hardship to its business liquidity if execution proceeded, the balance of convenience did not favour granting the stay. The Court found that the applicant, in seeking to vacate, vary or raise the Agency Notices, was in substance challenging the legality of the Commissioner General's exercise of statutory powers under Section 117 of the Income Tax Act, 2004, and that the Court of Appeal, on an application for stay of execution, was not the proper forum to determine the legality of that statutory provision or its exercise. As the Tribunal itself had not executed its decree, and the Court had no mandate to interfere with the Agency Notices in this application, the Court found no justification to order a stay of execution. The application was dismissed, with each party bearing its own costs. The Court also distinguished Nicholas Nere Lekule v IPTL, noting that the issue of compensation for loss (central to that case) did not arise here, and found Tanzania Cotton Marketing Board v Cogecot Cotton Co. SA inapplicable as it concerned enforcement of an arbitration award under a different statutory regime.
The ruling articulates and applies a three-part test for granting stay of execution pending appeal: (a) existence of a triable issue in the intended appeal; (b) the applicant would suffer greater hardship and irreparable loss than the respondent if stay is refused; and (c) the balance of convenience or commonsense justifies a stay. It clarifies that satisfying the first two conditions does not automatically entitle an applicant to a stay if the balance of convenience weighs against it. The case is also significant for confirming that an application for stay of execution before the Court of Appeal is not the appropriate forum to challenge the legality or exercise of a revenue authority's statutory recovery powers, such as those under Section 117 of the Income Tax Act, 2004, particularly where the tribunal below has not itself issued or executed a decree.
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