Tax Appeal Tribunal, Lagos Zone has ordered Mobil Producing Nigeria Unlimited to pay the sum of $83.4 million dollars to the Federal Inland Revenue Service (FIRS) as education tax liability for the year 2008.
The five-man Tax Appeal tribunal presided over by Mr. Kayode Sofola (SAN) gave the order on Friday while delivering its judgment on an appeal filed by the oil exploration company against the FIRS.
Mobil had in its appeal filed on May 5, 2011 challenging the education tax assessment of 83.4 million dollars for the year 2008 issued by FIRS issued.
Mobil’s counsel, Mr. T. Emuwa, claimed that the assessment breached the Memorandum of Understanding (MoU) signed by the company with the Federal Government of Nigeria and the Nigerian National Petroleum Corporation (NNPC) in 2000.
According to Emuwa, the 2000 MoU allowed the company to while computing its education tax liability, deduct all amounts it incurred in paying taxes and levies to the Federal, State Governments and other agencies.
But FIRS through its counsel, Mrs. B.H. Oniyangi, in its argument claimed that the 2000 MoU was signed for a three-year term, adding that its validity expired on January 1, 2003.
She argued that the Federal Government of Nigeria through a letter issued by the Department of Petroleum Resources (DPR) on January 17, 2008 confirmed that the MoU had expired.
Further, Oniyangi explained that the said 2000 MoU had been replaced by the Petroleum Profits Tax Act (PPTA), which was used to prepare the disputed assessment.
In its judgment, the Tribunal agreed that the said MoU was only for a three-year term, noting that there was no evidence before the panel that it was renewed.
“The 2000 MoU thus expired at the end of 2002. The parties never did anything to keep it alive longer, as stated in clause 7.1. In effect, clause 7.1 contains an ‘option to renew’, exercisable at the joint instance of all the parties.
“This option was never exercised, an thus no renewal or extension was triggered.”
The tribunal held that the appellant was no longer entitled to make deductions allowed under the 2000 MoU, in calculating their education tax.
“The PPTA is the legislation in force and cannot be subordinated to the mere contemplations of the MoU. We uphold the respondent’s (FIRS) assessment of the appellant to education tax of 83,414,793 US dollars.
“We order the appellant to pay accordingly,” the tribunal chairman added.