The dispute arose from amended corporate tax assessments issued by the Commissioner General of TRA against SAMAX Resources Limited for the 2010 and 2011 years of income. TRA disallowed a number of deductions claimed by SAMAX and also alleged that the company had understated income arising from termination of a contract with Shell.
The principal disputed items included:
Foreign exchange losses of USD 1,711,167 (2010) and USD 1,931,067 (2011);
Interest expenses of USD 2,202,104 (2010) and USD 2,163,797 (2011);
Expenditure on obsolete stock;
Capital deductions;
Community-project expenditure;
Exploration expenditure outside the mining licence area; and
Expenditure relating to earthmoving equipment brought by the branch.
TRA also alleged that SAMAX had underestimated income from Shell contract termination, stated at USD 546,600.
Following its objections, TRA determined additional corporate tax liability of approximately TZS 18.329 billion for 2011, while adjusting the company's chargeable income for 2010 to a loss of approximately TZS 61.723 billion. SAMAX challenged the assessments before the Tax Revenue Appeals Board.
The Board largely upheld TRA's position, although it allowed deductions for earthmoving equipment and borehole-development expenditure. The Tax Revenue Appeals Tribunal subsequently varied the Board's decision by setting aside the disallowance of obsolete-stock expenditure and development-capital expenditure, while upholding the other findings.
SAMAX then appealed to the Court of Appeal on three principal grounds.
The Court essentially considered three issues:
Whether the Tribunal erred in holding that paragraph 18 of Part III of the Second Schedule to the Income Tax Act required additional capital allowance to be calculated on a simple basis rather than a compound basis.
Whether the Tribunal erred in law in upholding the disallowance of, particularly:
foreign exchange losses;
interest expenses; and
exploration expenses incurred outside the mining lease area.
The argument principally concerned the interpretation and application of section 16(1) and section 16(3)(a) of the Income Tax Act.
Whether the Tribunal failed to properly re-evaluate the evidence and consequently wrongly upheld TRA's finding that SAMAX had underestimated income arising from termination of the Shell contract. SAMAX Resources Limited vs Comm…
The Court dismissed SAMAX's challenge.
The Board and Tribunal had followed the Court's earlier decision in Bulyanhulu Gold Mine Limited v Commissioner General, [2015] TZCA 571, which had held that the relevant additional capital expenditure allowance was to be calculated on a simple basis, not a compound basis.
SAMAX asked the Court to depart from Bulyanhulu, arguing that the earlier decision was erroneous.
The Court rejected that invitation, holding that decisions of the Court of Appeal bind lower courts and tribunals under the doctrine of precedent. More importantly, a three-Justice panel of the Court of Appeal cannot simply depart from an earlier decision of the Court. The appropriate procedure is under section 4A of the Appellate Jurisdiction Act, which allows the Chief Justice to constitute a full bench where departure from an earlier decision is warranted.
Holding: The complaint was baseless and dismissed.
The Court similarly declined SAMAX's attempt to reopen the treatment of foreign exchange losses.
The issue had already been dealt with in Bulyanhulu Gold Mine Ltd, and the Court emphasized that a lower tribunal was bound by the existing Court of Appeal precedent. SAMAX could not use an ordinary three-Justice appeal to obtain a departure from that precedent. SAMAX Resources Limited vs Comm… SAMAX Resources Limited vs Comm…
Holding: The complaint concerning foreign exchange losses was dismissed.
This was an important aspect of the judgment.
SAMAX argued that the interest expenses qualified for deduction under section 16(1) because the borrowing was used wholly and exclusively in producing its income. It argued that section 16(1) should prevail over section 16(3)(a). SAMAX Resources Limited vs Comm…
TRA, however, pointed out that the loans were from related foreign entities, principally AngloGold Ashanti Holdings PLC, and that there was inadequate evidence concerning the loans, including their duration, repayment arrangements and actual payment of interest. SAMAX Resources Limited vs Comm…
The Court found that resolving the issue would necessarily require examination of evidence to establish:
the relationship between SAMAX and the associated companies;
whether the interest had actually been paid; and
whether the transactions represented genuine loans or potentially a tax-avoidance arrangement.
The Court held that such examination of evidence was outside its jurisdiction because its appellate jurisdiction in tax matters is restricted to questions of law. SAMAX Resources Limited vs Comm…
Holding: The challenge to the disallowance of interest expenses was dismissed.
SAMAX challenged the disallowance of exploration expenditure incurred outside its mining lease.
The Court declined to reconsider the matter because doing so would require it to re-examine the evidence, which was beyond the Court's jurisdiction under the Tax Revenue Appeals Act.
The complaint was therefore dismissed without the Court undertaking a factual re-evaluation.
SAMAX argued that the Tribunal had wrongly concluded that it had understated income from the termination of the Shell contract.
The parties agreed that SAMAX had received income from the Shell arrangement; the dispute was whether the income had been understated. SAMAX asked the Court either to re-evaluate the evidence itself or direct the Tribunal to undertake a fresh evaluation. SAMAX Resources Limited vs Comm…
The Court rejected this argument.
It relied on section 25(2) of the Tax Revenue Appeals Act, emphasizing that an appeal to the Court of Appeal in tax matters is confined to questions of law. Questions of fact are matters for the Board and Tribunal and must ordinarily end there. SAMAX Resources Limited vs Comm…
The Court further held that even directing the Tribunal to reconsider the evidence would necessarily involve an examination of the evidence by the Court, which it had no jurisdiction to undertake.
Holding: The third ground was dismissed.
The Court of Appeal upheld the decision of the Tax Revenue Appeals Tribunal in Appeal No. 7 of 2020 and dismissed SAMAX's appeal with costs.
The case strongly reinforces stare decisis within Tanzania's appellate structure. A lower court or tribunal cannot depart from an applicable Court of Appeal decision simply because it considers that decision wrong.
More importantly, the case clarifies that even a three-Justice panel of the Court of Appeal cannot ordinarily overrule an earlier decision of the Court. A proper mechanism under section 4A of the Appellate Jurisdiction Act must be invoked to place the matter before a full bench.
Perhaps the most significant practical point is the Court's repeated affirmation that its jurisdiction in tax appeals is restricted to questions of law.
The Court relied on section 25(2) of the Tax Revenue Appeals Act and its earlier decision in Bank of Africa (T) Ltd v Commissioner General, TRA [2025] TZCA 1320. SAMAX Resources Limited vs Comm…
This means that a taxpayer cannot ordinarily use an appeal to the Court of Appeal as a second opportunity to have evidence reconsidered.
The decision has substantial practical significance for taxpayers.
Where the dispute concerns whether an expense was actually incurred, whether interest was actually paid, whether a transaction was genuine, or whether income was understated, the taxpayer must establish its factual case before the Board and Tribunal.
The Court of Appeal will generally not rescue a party by undertaking a fresh factual assessment.
The treatment of the interest claim is commercially important.
Where loans originate from related or associated companies, taxpayers should maintain convincing evidence of the commercial substance of the financing arrangement, including documentation concerning the loan, repayment arrangements, duration and actual payment of interest. The judgment demonstrates the risk that inadequately documented related-party financing may result in deductions being challenged.
The Court did not finally determine that SAMAX's arrangement was a tax-avoidance scheme. Rather, it noted that resolving that allegation would require examination of evidence, which was outside its jurisdiction. This distinction is important: the Court's refusal was jurisdictional, not an affirmative finding that tax avoidance had occurred.
For mining taxpayers, the case illustrates the importance of distinguishing between expenditure that qualifies under the specific mining capital-allowance provisions and expenditure that falls outside the statutory parameters, particularly exploration outside the relevant mining lease/licence area. The earlier Board findings on earthmoving equipment and borehole expenditure also demonstrate that the statutory classification of mining expenditure can materially affect deductibility.
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