The Court of Appeal has set aside the Tax Revenue Appeals Tribunal’s decision that had been favourable to Soft Tech, but it did so on a procedural point rather than on the merits of the withholding tax dispute. The Court held that the Tribunal’s Vice Chairperson delivered a judgment that departed from the opinions of the Tribunal members without recording those opinions and without giving reasons for the disagreement, contrary to the mandatory requirements of section 20 of the Tax Revenue Appeals Act, Cap. 408.
Background:
TRA examined Soft Tech’s tax affairs for years of income 2016–2018 and issued findings alleging that Soft Tech made payments to non-resident service providers in India and South Africa without withholding income tax. Soft Tech’s position was that the payments were not taxable in Tanzania under the relevant DTAs, and it also challenged TRA’s application of a 15% withholding rate (instead of 10%) on certain software licence payments to South African suppliers.
The Tax Revenue Appeals Board upheld TRA’s position, but the Tribunal reversed the Board and found for Soft Tech, leading to TRA’s appeal to the Court of Appeal.
Issues before the Court:
TRA advanced two grounds: (i) the Vice Chairperson’s failure to comply with section 20 of the Tax Revenue Appeals Act when disagreeing with members’ opinions; and (ii) alleged error on the merits in holding that payments for consultancy services to the Indian entity were not subject to withholding tax under section 83(1)(c)(i) of the Income Tax Act, 2004.
The Court’s decision:
The Court determined the appeal on the first (procedural) ground alone. The Court held that section 20 is couched in mandatory terms: while the Chairperson/Vice Chairperson is not bound by members’ opinions, if he disagrees, he must record the differing opinion(s) and state reasons for the disagreement.
The Court found that non-compliance was a fatal defect because it undermines fairness and makes it impossible to assess the scope of deliberations and the rationale for the decision that prevailed.
Orders made. The Court allowed the first ground, quashed the Tribunal judgment and set aside the Tribunal order. It remitted the file back to the Tribunal for “re-composition of a proper judgment” by the same Vice Chairperson within 30 days.
Practical implications for taxpayers
This decision is significant for two reasons. First, it confirms that procedural compliance under section 20 of the Tax Revenue Appeals Act is not a formality; failure to record members’ opinions and reasons for disagreement may render a TRAT decision vulnerable to being set aside on appeal. Second, the decision underscores that procedural outcomes can reset substantive wins and losses. In this case, Soft Tech’s earlier success at TRAT was nullified, and the dispute returns to TRAT for a fresh, procedurally compliant determination. Because the Court did not decide the merits, the substantive questions particularly the correct tax characterisation of the payments and the operation of the DTAs remain open to be determined by the Tribunal on remittal.
Key takeaway
Where a Tribunal Chairperson/Vice Chairperson disagrees with members, the decision must transparently record the members’ opinions and the reasons for disagreement. Parties in tax disputes should pay close attention not only to the merits of a TRAT decision, but also to whether the decision has been prepared in strict compliance with the procedure prescribed by law.