The Tax Appeal Tribunal, Lagos Zone has declared as illegal, null and void the decision of Ecobank Nigeria Limited to pay N5.54bn as dividend to its shareholders in a year the bank claimed it made no taxable profit and declared losses from its banking operation.
The tribunal reached this decision in its judgement dated February 20, 2020, which it delivered in Appeal No. TAT/LZ/CIT/024/2018.
Consequentially, it said Ecobank must pay at least N1.66bn to the Federal Inland Revenue Service as Company Income Tax for the 2016 financial year that was in dispute.
Ecobank had dragged the FIRS to court over the insistence of the service that the bank must pay in full its excess dividend tax liability of N2.07bn, inclusive of interest and penalty for the 2016 year of assessment.
A statement from the FIRS on Wednesday said Ecobank argued that the dividend it paid out was tax exempt as N4.37bn out of the total sum was “profit from bonds and treasury bills.”
This, the bank, argued was not taxable based on the provisions of the Company Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011.
While admitting to only making N1.17bn trading profits from other business sources, the statement said Ecobank decided that it would only pay N351.82m as tax to the FIRS.
The amount, the statement signed by the FIRS Director, Communications and Liaison Department, Abdullahi Ahmad, said was paid to the service after some months of delay.
However, the FIRS said it demanded for the immediate payment of the outstanding excess dividend tax liability of N1.31bn from the bank, which led to the suit before the tax tribunal.
In its argument before the court, Ecobank presented three issues for determination.
They are whether the FIRS was correct to assess the Appellant to tax under Section 19 of CITA when the income earned was from Bonds, Treasury Bills and other Government Securities; whether the FIRS misdirected itself by failing to take account the CIT paid by the appellant; and whether by the rules of Interpretation of Statutes, the Respondent has erred in law in its application of Section 19 of CITA.