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PREFACE:
The Revenue Appeals Tribunal is established by the Revenue Tribunals Act. The Tribunal
was established to hear appeals under the Customs and Excise Act, the Income Tax and
Value Added Tax. The philosophy underlying the creation of the Tribunal is to provide a
specialized and speedy forum to resolve disputes between taxpayers and Zambia Revenue
Authority.
In order to encourage public awareness to the public’s right to fair and equitable assessment
of tax, the Tribunal is pleased to publish the first edition of the Revenue Appeals Tribunal
Law Reports. It is hoped that Lawyers, Accountants, the Zambia Revenue Authority and the
taxpayers as a whole, will find the Report as a useful guide to taxation.
J Jalasi REGISTRAR
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ACKNOWLEDGEMENTS
The Tribunal wishes to thank the Chairman of the Tribunal Mr, M. Mundashi, the Deputy
Chairman Dr. J. Mulwila and members, Mr. N.A. Lungu, Mr. T. Mushibwe, Mr. W.Z.
Mwanza, Mr. Chileshe and Mrs. H. Muyoyeta. Lastly, all members of staff at the Revenue
Appeals Tribunal.
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INDEX
1. Quantum Technology Africa Vs. ZRA
Determination of when a motor vehicle is exempt from
any claim deduction or credit under section 18 of the
Value Added Tax Act Statutory Instrument No. 78 of
1995 Regulation.
2. Konkola Deep Mining Project Vs. ZRA
Claim on input tax on hire of a motor vehicle whether
claimable or not under Statutory Instrument No. 78 of 1995 as
amended by Statutory Instrument No. 12 of 1998.
3. Mohammed Hussein Vs. ZRA
Whether money brought into the country for the purpose investment
should be treated as earned income.
4. Shaleetha Hahabeer / Jayesh Shah Vs. ZRA
Whether a non Zambian who is not resident in Zambia should
be charged tax from income received from a source within
Zambia.
5. Star Motors Ltd, Star Commercial Ltd, Commercial
Motors Ltd Vs. ZRA
Onus of proof of assessment is on the tax paper - deduction of
expense for the purpose of Income Tax pursuant to section 29(i)a of
the Income Tax Act.
Zamtel Vs. ZRA
Whether discount given to an importer should be taken into account for
purposes of assessing Customs and Excise duty. The burden of proof to
aduce evidence of a discount is on the taxpayer.
Galaun Holdings Limited Vs. ZRA
Determination of whether Value Added Tax is chargeable on services given
gratis by a registered supplier in his capacity as employer to his staff.
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PAGE
1-3
4-7
8-17
18-20
21-24
25-31
32-37

8. Raymond Kapansa Vs ZRA 38 - 39
Default proceedings - onus of proof on assessment is
on the tax payer.
9. Marasa Holdings Limited Vs ZRA 40 - 42
Whether withholding Tax is chargeable to the appellants in
respect of non resident contractors and consultants engaged by
the appellant,
10. Fisuma fileisa Company Ltd Vs ZRA 43 - 44
Effect of appeal lodged out of time.
11. Schreuder and Company Ltd Vs ZRA 45 - 47
Onus of proof assessment is the tax payer that the
assessment ought to be reduced or set aside.
12. Zambia Education Publishing House Vs ZRA 48 - 53
Whether a taxpayer is exempt from tax not withstanding the
provisions of the Income Tax Act.
13. Madison Insurance Company Ltd, Professional 54-61
Insurance Corporation (Z) Ltd Vs ZRA
When does a contract of Insurance come into force for
purpose of assessing Value Added Tax - procedure of
lodging appeal in the Revenue Appeals Tribunal.
14. Mumana Pleasure Resort Vs ZRA 62 - 65
Jurisdiction of the Revenue Appeals Tribunal in discretion
of the Tribunal to allow appeal out of time power of the
Tribunal to grant stay of execution of warrant if distress.
15. Zamcell (Celtel) Zambia Ltd Vs ZRA 66 - 74
Whether commitment and guarantee fees were expenses
on capital account of tax payer or not.
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16. Prime Pharmaceuticals Ltd Vs ZRA 75 - 77
Determination of whether goods are exempt from Value Added
Tax pursuant to the Value Added Tax Act paragraph 3 relating to
medical supplies.
17. Polythene Products Ltd Vs. ZRA 78 - 83
Whether ZRA can be estoped from reopening an assessment.
Whether a tax can be granted capital allowance to include
exchange losses.
18. Lusaka Water and Sewarage Co. Vs. ZRA 84 - 87
Whether there has been sufficient evidence presented to satisfy
the Commission General in his discretion that debts were bad
and doubtful.
19. Enviro - Floor Ltd Vs. ZRA 88 - 94
Classification of rose plants whether stock in trade or farm
improvements under section 29 and 33(i) of the Income Tax Act.
20. Pamodzi Hotel PLC Vs. ZRA 95 - 99
Whether exchange losses are allowable deduction for Income Tax
Purposes as long as they do not relate to capital items.
21. Sofram Zambia Ltd Vs. ZRA 100 - 103
Appeal against assessment of VAT on invoices issued before
enforcement of Value Added Tax Act.
22. O.J Kalunga and Camera Smith Vs. ZRA 104-111
Appeal against penalties and interest in relation to rental income derived
from letting of property pursuant to the Value Added Tax Act cap 33
section 3(i).
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23. Truck Africa Zambia Limited Vs. ZRA 112-116
Whether a service consisting of the lease, hire or loan of any goods from or
to Zambia can be regulated as supplied in Zambia for the purposes of the
Value Added Tax Act.
24. Central African Charters Vs. ZRA 117 -122
Whether an agent is liable for tax liability of the principal.
25. Phinda Auto Spares Ltd Vs. ZRA 123 - 130
Onus of proof of assessment is on the taxpayer by evidence given on oath or
affirmation or by unsworn evidence to demonstrate that the assessment ought to
be reduced or set aside.
26. TZI Vs.ZRA 131-134
Onus of proof of assessment is on the taxpayer.
27. Zambia Consolidated Copper Mines Vs. ZRA 135 -140
Whether mineral royalty paid to the Government of the republic of Zambia can be
claimed as a deduction under the Income Tax Act.
28. Hitech trading Ltd Vs. ZRA 141 -144
Whether tax assessment was unilateral or arbitrary.
29. Buildelect Zambia Ltd Vs. ZRA 145 - 147
Whether the taxpayer is liable to pay penalties under section 100 of the Income
Tax Act. Were the taxpayer negligently, wilfully or fraudently understates or
overstates any expenses in their return and submission or information.
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30. Spectra Oil Corporation Ltd Vs. ZRA 148 -157
Whether penalties were payable for late payment of provisional tax during
the 1996/97 tax year.
31. Philips Electrical (Z) Ltd Vs. ZRA 158-165
Whether the decision by the Commissioner General for
determination to impose penalties in relation to late submission of
tax returns under section 46(a) of the Income Tax Act cap 323 was
reasonable.
32. Nanga Farms Ltd Vs. ZRA 166-171
Whether interest from bank loans should be treated as arising
from a separate source in relation to the interest paid for income
tax.
33. Zimco Limited (In Liquidation) Vs. ZRA 172-174
Whether Withholding Tax wrongly withheld and paid to the Government
can be refunded to the taxpayer.
34. Barclays Bank (Z) Ltd vs. ZRA 175 -177
Whether or not expatriate emoluments are subject to Pay as You Earn
(PAYE).
35. Satwant Transport Ltd vs. ZRA 178-181
Whether penalty should be imposed on a taxpayer under section
100(l)(d)(i) of the income tax, in relation to a taxpayer understating
income and overstating expenses.
36. Jack Kanyanga vs. ZRA 182 -184
Whether tax concession can be given to a taxpayer on the terminal
benefits pursuant to section 21(5) of the Income Tax Act cap 323 of
the laws Zambia.
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37. Kaleya Small Holders Vs. ZRA 185 - 193
Disallowance of exchange losses on loans obtained in foreign currency in
relation to the devaluation of the Kwacha. Burden of proof is on the
taxpayer to prove that the income was used for capital expenditure.
38. Buchies Investment Limited Vs. ZRA 194-196
Power of the Revenue Appeals Tribunal to grant Stay of Execution of
warrant of Distress.
39. Twikatane Africa Art Co. Ltd Vs. ZRA 197 -201
Whether or not Hungarian Sausages are a taxable supply within
the ambit of the Value added Tax Act as amended by the first
schedule of goods liable to Value Added Tax.
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IN THE REVENUE APPEALS TRIBUNAL 1999RAT/122
HOLDEN AT LUSAKA
BETWEEN:
QUANTUM TECHNOLOGY AFRICA APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), N A Lungu and T Mushibwe 8 th March
and 15 th March, 2000
FOR THE APPELLANT: S Chibwe, Moore Rowland
FOR THE RESPOND ANT: L N Muuka, Legal Counsel and T Mulala, Acting
Assistant Commissioner.
RULING
This is an appeal by Quantum Technology Africa (hereinafter referred to as "the Appellant") against
Zambia Revenue Authority (hereinafter referred to as "the Respondent") in relation to the
Commissioner General's assessment.
The brief and uncontested facts are that the appellant bought two Maruti Tata Vans. The first van
registration number ACE 4484 was bought on 26 lh August, 1998 at
K 14,354,340.00 and the Value Added Tax on the same was K 2,512,518.00. The second vehicle
was bought on 31 st August, 1998 at K 14,364,340.00 and the Value Added Tax was similarly K
2,512,518.00. The total tax on the two vehicles was
K 5,025,036.00.
The appellant claimed the total input of K 5,025,036.00. The respondent disallowed the claim
and slapped interest of K 2,111,208.00 bringing the total assessment to K 7,136,244.00. The
respondents contend that the claim has been disallowed on the authority of Statutory Instrument no.
78 of 1995 which disallows input tax on motor cars. The Statutory Instrument regulation 7(1) defines a
"Motor Car" as follows:
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"Subject to this regulation, tax charged on the supply to or importation by a taxable supplier of
a motor car shall be excluded from any claim, deduction or credit under section eighteen of
the Act"
Sub regulation (2) goes on to provide;
“In this regulation, motor car means any motor vehicle of a kind normally used, on
public roads which has three or more wheels and which -
(a) is constructed or adapted wholly or mainly for carriage of
passengers; or
(b) has to the rear of the driver's seat roofed accommodation fitted with
side windows or is constructed or adapted for the fitting of side
windows, but does not include -
(i) A vehicle capable of accommodating only one
person or constructed or adapted for carrying twelve
or more persons
(ii) A vehicle of not less than three tons unladen weight
(iij) an ambulance; or
(iv) A vehicle constructed for special purpose other than
the carriage of persons and having no
accommodation for carrying persons other then such
as is incidental to that purpose.
The respondent argue that this motor vehicle is constructed for carrying passengers as it has roofed
accommodation behind the driver's seat which is fitted with side windows. They further argue that it
is capable of carrying 6 people and has a tonnage of 950 kg and that these specifications fall within the
ambit of Statutory Instrument no. 78.
We have carefully considered the issue before us. In our considered view, the Maruti Omni is not a
motor car in the context of regulation 7 of Statutory Instrument no. 78 of 1995. The appellants have
tendered evidence before the Tribunal to the effect that this vehicle had no seats either at time of
manufacture or afterwards. There are no seats fitted or adapted for carrying passengers. The fact
that three to six people can squat or stand at the back of the
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motor car does not mean that such a vehicle is adopted wholly or mainly for carriage of passengers. A
motor constructed or adopted wholly or mainly for carrying passengers will obviously have those features
that are ordinarily expected of a motor vehicle meant to carry passengers. There are none apart from a
roof. Paragraph (b) is equally inapplicable. Paragraph (b) refers to
" has to the rear of the driver's seat roofed accommodation fitted with side windows
or is constructed or adapted for the fitting of side windows".
The paragraph refers to "roofed accommodation". This in our considered view simply means that as a
result of the roof, the motor car must accommodate people. To be accommodated in a motor vehicle
means one has to sit. The appellant have adduced evidence which has not been controverted that
they bought the vehicles for purposes of carrying computer accessories. There has been no evidence
led to suggest that it was bought and adopted for carrying passengers. We will not dwell on the proviso
as for the purpose of this case regulation 7 (1) and (2) are exhaustive enough for us to decided whether
the Maruti Omni is a "Motor Car".
For the foregoing reasons we allow this appeal with costs and set aside the assessment of K 7,136,244.00.
11

IN THE REVENUE APPEALS TRIBUNAL 1999RAT/130
HOLDEN AT LUSAKA
BETWEEN:
KONKOLA DEEP MINING PROJECT APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), N A Lungu and T Mushibwe 8 th March,
15 th March and 29 th March, 2000
FOR THE APPELLANT: P C Luhanga, B&W Consulting Limited
FOR THE RESPONDENT: L N Muuka, Legal Counsel and T Mulala, Acting
Assistant Commissioner, Zambia Revenue Authority.
RULING
This is an appeal by Konkola Deep Mining project whom we shall hereafter refer to as "the appellant"
against an assessment of Zambia Revenue Authority hereafter referred to as "the Respondent".
According to documentary evidence before the tribunal, the appellant is registered for VAT effective
1 st November 1997. From the date that the appellant became registered, it was not making any taxable
supplies and as such was not declaring output VAT to the Respondent. However it was in a
repayment position claiming all the input tax incurred on its purchases. For the month of April 1999,
the Appellant paid for various services and goods purchased. The input tax amounted to K
25,047,852.02. Similarly, in the month of May 1999, the Appellant paid for various services and
goods purchased and the input tax amounted to K 9,927,416. The total input tax at issue therefore
amounted to K 34,975,268. The Appellant claimed this amount as input tax. The Respondent
disallowed this claim contending that Statutory Instrument no. 78 of 1995 as amended by Statutory
Instrument no. 12 of 1998 disallows input tax relating to the supply of a motorcar on "hire or lease".
The input tax relates to payments made by the Appellants for hire of cars from Air Masters,
Voyagers and Zungulila Zambia for use in the
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Appellants business. These are the undisputed facts. Both parties elected not to call "viva voce"
evidence. The issue that falls to be determined before the Tribunal is whether input tax on hire of
motor vehicle is claimable or not under Statutory Instrument no. 78 of 1995 as amended by Statutory
Instrument no 12 of 1998.
In order to resolve this issue, it becomes imperative to examine Statutory Instrument no. 78 of 1995
as it was before being amended by Statutory Instrument no. 12 of 1998. Regulation 7(1) provided;
"Subject to this regulation, tax charged on the supply to or importation by a
taxable supplier of a motor car shall be excluded from any claim, deduction or
Credit under section eighteen of the Act (2) In this regulation, "motor car"
means any motor vehicle of a kind normally used on public roads which has three or more
wheels and which: -
(a) is constructed or adapted wholly or mainly for the carriage of
passengers, or
(b) has to the rear of the driver's seat roofed accommodation fitted with
side windows, or is constructed or fitted for the fitting of side
windows; ............... "
Regulation 7 (1) and (2) subject to the proviso made it very clear that tax charged on the supply or
importation of a motor car could not be claimed as input tax. Sub regulation 3 of the same regulation
provided;
"This regulation shall not apply to a supply or importation of a motor car -
(a) by way of hire or rental
(b) for the purpose of resale by a car dealer or for use in the course of a bona fide
car hire or driving instruction business."
Regulation 3 makes it very clear that the provisions of Regulation 7 did not apply to a motorcar used
by way of hire or rental or for purposes of resale by a car dealer or for use in the course of car hire
or driving instruction business. It is therefore clear that before the passing of Statutory Instrument no.
12 of 1998 the Appellant could have claimed input tax without any problems. Car hire and rental
business was excluded from the provisions of regulation 7, which prohibited claims for input tax on
motorcars.
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The Respondent have argued that by virtue of statutory instrument no. 12 of 1998, claims for cars on hire
and rental were also included in the prohibition of input tax being allowed on motor cars. The Respondent
in effect are stating that regulation 7 (3) in Statutory Instrument no. 78 of 1995 has been removed. As we
stated in Spectra Oil Corporation Limited v Zambia Revenue Authority 1999/RAX/33 where we followed
Benion on interpretation of statutes 3 ld edition page 707,
“Parliament intends that an enactment shall remedy a particular mischief. It presumed
therefore that parliament intends the court in construing the enactment to endeavour to apply the
remedy".
Though this passage applies to statutes, we are the view that it equally applies to Statutory Instruments.
Sub regulation 3 of regulation 7 has not been deleted or amended. If the intention was to delete sub
regulation 3, then statutory instrument no 12 of 1998 would have clearly stated so. What statutory
instrument no 12 of 1998 has done is to amend regulation 7 (1) to read;
"Regulation 7 of the principal regulations is amended
(a) in sub regulation (1) by the insertion after the words "motor car" of the words "including a
supply of a motor car on hire or lease".
By virtue of this amendment, regulation 7 (1) of statutory instrument no 78 of 1995 now
Reads:
" Subject to this regulation, tax charged on the supply to or importation by a taxable supplier of a
motor car including the supply of a motor car on hire or lease shall be excluded from any claim,
deduction or credit under section eighteen of the Act".
In our considered opinion, this amendment did not remove sub regulation 3. It is intact. According to Mr.
Luhanga for the Appellant, the interpretation to be put on the amended regulation 7 (1) is that it refers to
disallowance of input tax on the acquiring of a motor vehicle as an asset through hire purchase or lease
agreement. He further argues that the amendment deals with capital acquisition of motor cars through
lease or hire purchase. If the intention was to disallow input tax on the commercial transactions of hiring a
motor vehicle, then regulation 7 (3) of statutory Instrument no. 78 of 1995 should have been amended or
repealed. We entirely agree with Mr. Luhanga's submission.
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If we were to hold otherwise, we would infact be imposing taxation where none exists. As we stated in
Sepectra Oil Corporation v Zambia Revenue Authority, ibid where we quoted with approval Bennion on
Interpretation of Statutes at page 637,
"It is a principle of legal policy that a person should not be penalised except under clear law.
The court, when considering in relation to the facts of the instant case, which of the opposing
construction of the enactment would give effect to the legislative intention, should presume
that the legislation intended to observe this principle. It should therefore strive to adopt a
construction which should not penalise a person where the intention to do so is doubtful or
penalises him or her in a way which is not made clear".
It is therefore abundantly clear that regulation 7 (I) of statutory instrument no 78 was clearly amended
barring claims for input tax on purchase of motor vehicles through lease or hire purchase. For the
foregoing reasons, we allow the appeal and set aside the assessment of K 34,975,268.
15

IN THE REVENUE APPEALS TRIBUNAL 1999RAT/13
HOLDEN AT LUSAKA
BETWEEN:
MOHAMMED HUSSEIN APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), N A Lungw and H M Muyoyeta
25 th April and 19 th May 2000
FOR THE APPELLANT: L P Mwanawasa, S C and D K Kasote - Levy
Mwanawasa and Company
FOR THE RESPOND ANT: L N Muuka, Legal Counsel - Zambia Revenue
Authority
RULING
The brief facts are that in an earlier ruling, the Tribunal quashed the assessment of the Respondent
and ordered refund of US $ 200,000 plus interest. The principal of US$ 200,000 had been paid by the
time of the hearing of this preliminary issue. The interest had not been paid. The appellant then
issued a Writ of Fieri Facias with a view to enforce the payment of the interest. The Registrar
refused to enforce and sign the Writ of Fieri Facias pointing out to the appellant that the Revenue
Appeals Tribunal has no jurisdiction to issue Writs of Fieri Facias by way of enforcing its orders. The
appellant insisted that the Tribunal has powers to issue Writs of Fieri Facias. The Registrar of the
Tribunal properly in our view referred the issue to the Chairman of the Revenue Appeals Tribunal.
These are the brief uncontested
In view of the importance of this issue, we invited both parties to address the Tribunal so that the
Tribunal could come up with a reasoned opinion to be used as a reference in future cases. We
are thankful to the parties for complying with our request. Both counsel have filed
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detailed submissions citing cases and authorities that are of relevance. We express our
unreserved gratitude to both counsel for their industry and assistance to the Tribunal. The
issue before the Tribunal is simply this:
Can the Revenue Appeals Tribunal issue a Writ of Fieri Facias as a means of enforcing its
orders'? The learned State Counsel Mr. Levy Mwanawasa assisted by Mr. Kasole submits
with force that this tribunal can issue a Writ of Fieri Facias. Mr. Mwanawasa concedes the
respondent's counsel's view that the powers and jurisdiction of the Tribunal are to be found in
the Revenue Appeals Tribunal Act no. 12 of 1998 and the Revenue Appeals Tribunal
Regulations (S. J. no. 143 of 1998). Section 3 of the Revenue Appeals Tribunal Act provide for
powers of the tribunal. The Revenue Appeals Tribunal Regulations. 1 998 provides for the
procedure to be followed by the Tribunal and parties to an appeal. The Rules provide for
powers to the Tribunal
i. to hear and determine appeals lodged before it;
ii. to summon any person to attend a hearing and testify
iii. to subpoena any person to produce documents as evidence in a matter before it
iv. to tine a person if found guilty, who being summoned to appear before the
Tribunal fails to do so, refuses to answer any question put across to the person or fails to
produce evidence so required
v. to award costs to the successful party
vi. to extend the time within which a party may lodge its appeal.
Mr. Mwanawasa points out that members of the Tribunal are appointed by the Minister of
Finance and Economic Development in much the same way as the president appoints judges of
the High Court and of the Supreme Court and for that matter magistrates and local court justices
who are appointed by the Judicial Service Commission. According to Mr. Mwanawasa,
Article 91(1) of the Republican Constitution defines judicature and it does not specifically refer to
the Revenue Appeals Tribunal or tax appeal courts. According to Mr. Mwanawasa the term
"courts" does not only refer to the judicature as defined under article 91 (1). Mr Mwanawasa
goes on to say that the word "courts" as used m article 16 (2) (c) of the constitution is not a
term of art the way judicature is understood because the latter is defined under article 91 ( 1 )
and for that mailer under section 2 of the judicature administration Act. The word "cowls"
must be given a dictionary meaning. In fact this is the intention when article 32 (1) which applies
to section 16 defines "court" as meaning "any court of law having jurisdiction in Zambia ,...".
According to Mr. Mwanawasa, if the word "court" was to mean judicature as defined under article 91, there
17

would have been no need to define that term under article 32 (1) instead of article 91. On the basis of this
limb of his argument, Mr. Mwanawasa argues that the tribunal is also a court with powers of enforcement
like other courts.
In his second ground, Mr. Mwanawasa points out that the Revenue Appeals Tribunal has been established
to consider appeals by any aggrieved person from the assessment of the Commissioner General and
other issues relating to tax and revenue. If an appeal against an assessment of income tax under the
income tax Act is decided in favour of the taxpayer, the respondent is obliged to make a refund of the tax
paid which should not have been paid. He poses a question as to what is supposed to happen where the
Respondent for any reason does not make a refund. In such a case, should the ruling of the Tribunal in
favour of the tax payer be regarded as useless and incapable of enforcement? Is a taxpayer to be at the
mercy of the respondent? Mr. Mwanawasa answers these questions in the negative. Mr. Mwanawasa
submits that when the provisions in the Income Tax Act and the Zambia Revenue Authority Act are
examined, it will be seen that there is no specific provision which expressly provides how and whether a
decision can be enforced. He however argues that it was not the intention of the legislature that decisions
of the tribunal should be unenforceable or should only be complied with at the pleasure of the respondent.
He submits with force that this was not the intention of parliament otherwise the tribunal would not have
been established. Counsel for the appellant stretches the argument by pointing out that the object of
statutory interpretation is firstly and mainly to find out what the intention of the legislation is. For this
proposition, Mr. Mwanawasa refers us to Halsbury's Laws of England, Volume 44 (I) 4 th edition
(paragraph 1327; Countess Rhonda's case [19221 2 A C 339 at 397. Mr. Mwanawasa goes on to submit
that courts in interpreting statutes sometimes use the informed "interpretation Rule" by which the court will
infer that the legislation when settling the wording of any provision intended it to be given a fully informed,
rather then a purely literal interpretation ( paragraph 1414 Halsbury's Laws of England). According to Mr.
Mwanawasa, the courts in interpreting statutes will also in appropriate cases, in identifying the mischief
intended to be suppressed and once that has been identified, everything should be held in favour of the
advancement of the suppression of that mischief (paragraph 1474 Halsburg's Laws of England, ibid.)
Counsel points out that in the instant case the mischief, which the establishment of the Revenue
Appeals Tribunal was meant to cure, was the determination of grievances against the decisions of the
Commissioner General of the respondent. Mr Mwanawasa wonders how that to mischief will be cured if the
decisions of the Tribunal cannot be enforced by coercion if necessary.
Counsel for the appellant's second ground is that section 25 of the Interpretations and General
Provisions Act Cap 2 of the laws of Zambia gives the answer to the question whether the Tribunal can
18

enforce its own decisions including by way of Writ of Fieri Facias or any other method of enforcement
which courts use. The said section provides
"where any written law confers a power on any person to do or enforce the doing of an act or
thing, all such powers shall be understood to be also given as are reasonably
necessary to enable the person to do or to enforce the doing of the act or thing".
According to Mr Mwanawasa, this section confers on the Tribunal power to issue enforcement
orders such as Writ of Fieri Facias so as to give effect to its decision. He refers us to paragraph 1830
Halsburry's Laws of England (ibid.) on the functions of an interpretation Act such as CAP 2. Mr
Mwanawasa points out and concedes that it is possible for this Tribunal to reject his argument on the
interpretation of section 25 of cap 2 for being in conflict with the constitution and therefore it is null and
void to the extent of the inconsistency. In that event, Mr Mwanawasa says he well submit that the
tribunal lacks jurisdiction to nullify a statutory provision. He submits that this section should remain valid
and enforceable until it is set aside by a court of competent jurisdiction.
Mr Muuka Counsel for the Respondent has filed written submissions to support the
Respondent's proposition that a ruling of the Tribunal cannot be enforced by way of a Writ of Fieri Facias.
Firstly, he submits that the power to enforce judgements, determinations and orders of a Tribunal are to
be read in the enabling statute. Where the statute does not expressly provide for these powers, they
cannot be inferred. He goes on to add that where there is legislation from which a different intention to
the usage of enforcement powers can be interpreted, then such power cannot be implied as being
available to the Tribunal.
In buttressing this ground, Mr Muuka argues that the power to enforce through legal process has
throughout the Zambian legislation been placed in the judiciary except where expressly provided for in
the constitution and legislation relating to the collection of taxes, rates and other sources of
government revenue. Mr Muuka submits that where a statute directs things to be done or. not to be
done whether the statute itself provides the means for its own enforcement, or parliament acts
upon the supposition that there are sufficient to enforce the rights and liabilities arising
thereunder. He cites the case of Weale v Middlesex Waterworks Co [1820] 1 Jac. v W 358 at
371 to back this proposition. According to Mr Muuka, the statutes administered by the Tribunal do
not provide an enforcement procedure for the judgements and orders other then referring to the
Commissioner General for execution of the decision or determination of the Tribunal. For instance,
section 113 of the Income Tax Act provide:
"on the determination of an objection or appeal against an assessment the Commissioner
General shall make all assessments and adjustments as are necessary to give effect to the
determination and the provisions of section eighty seven shall apply to any tax paid in excess as
19

a result of such determination ".
The second ground advanced by Mr Muuka is that no Tribunal can be given power to determine
legal questions except by Act of parliament. The power to constitute a Tribunal is vested in the
Minister of Finance and Economic Development pursuant to the Revenue Appeals Tribunal Act. Mr
Muuka agues that the provisions in the Revenue Appeals Tribunal Act are clear that the creation of
the Tribunal was simply that; and not a form of a lesser or subsidiary court. He points out that the
tribunal is an administrative rather than a judicial body more so that it is clearly implied in the
statute to be part of the Government of the Republic of Zambia's administrative scheme for
which the Ministry of Finance is responsible and accountable to parliament. He submits that the
power to levy execution has been placed in the Judiciary of Zambia. Counsel points out that there is
a protection given to the individual by article 16 of the constitution against seizure of property
excepting the instances provided for in the subordinate clauses of article 16. He quotes article 16 of
the constitution of Zambia which provides;
Except as provided in this article, property of any description shall not be compulsorily taken possession of,
and interest in or right over property of any description shall not be compulsorily acquired, unless by or
under the authority of an Act of parliament which provides for payment of adequate compensation for the
property or interest or right to be taken possession of or acquired.
(1) Nothing contained in or under the authority of any law shall be held to be inconsistent with or in
contravention of clause (1) to the extent that it is shown that such law provides for the taking
possession or acquisition or acquisition of any property or interest therein or right thereover -
(a) in satisfaction of any tax rate or due
(b) by way of penalty for breach of any law,
whether or after conviction of any offence
(c) in execution of judgements or orders of courts
Mr Muuka submits that the courts being referred to in article 16 (2) (c) refer to courts referred to in the
Judicature as established under article 91 of the constitution: He points out that the definition of judicature
does not in any instance include the Revenue Appeals Tribunal. According to him, the use of the term
"court" in the legislation refers to the court sitting in bane ie. a Judge or Judges in open court and also
includes a divisional court. He cites Re Davison [18991 2 O 8 103 and Cooke v Newcastle Co [18831
10 O B 332 for this proposition.
Counsel for the respondent points out that the High Court Act provides for the powers of the
High Court and through the High Court Rules committee, also makes procedures for the
enforcement of all judgements, orders and determinations by the High Court. He also draws
our attention to the following sections of the High Court Act:-
20

1. Section 9(1)
11 the court shall be a superior court of record, and in addition to any other jurisdiction
conferred by the constitution and by this Act or any other written law, shall within the time
limits and subject as in this act mentioned, posses and exercise all the jurisdiction
powers and authorities vested in the High Court of Justice in England". Section 44 (2) (b)
21

"which confers power to make rules. Arising from these two sections, Mr Muuka submits that these
sections and the rules thereof are not applicable for use under any other Act unless the particular Act or
the High Court Act or such other statute expressly states so. He goes on to add that the Regulations
made thereunder do not so provide for the. application of the High Court Rules to the tribunal".
Counsel for the respondent draws our attention to the fact that he has looked at the legislation of other
Tribunals to see if there are powers of enforcement in the legislation of those Tribunals. He cites
the Lands Act. He points out the jurisdiction section viz, 22 of that Act has no enforcement power.
Similarly, he has looked at the jurisdiction of the special and General Commissioners under the
Taxes Management Act 1970 of England. (The special and General Inland Revenue Commissioners
are the equivalent of the Revenue Appeals Tribunal in Zambia) According to Mr Muuka. there is no
power of enforcement in that statute.
Lastly and by way of summary. Mr Muuka submits that where the words of a statute are clear and
unambiguous, there is no need to look elsewhere to discover their intention or their meaning. He
cites London and North Western Rail Co v Evans 893| 1. ch. 16. Where the words of a statute are
ambiguous, then the intention of parliament must be sought first in the statute itself, then in other
legislation and contemporaneous circumstances and finally in the general rules. He further submits
that at all material times it is quite clear that the statutes relating to revenue appeals where not
intended to provide any Tribunal or appeal body with the power to enforce their determinations and
orders by the levying of execution through Writ of Fieri Facias, warrants of distress or otherwise.
In response to the appellants argument that if the Tribunal cannot enforce its decisions, tax
Payers will be helpless if the Commissioner General of Zambia Revenue Authority refuses to
comply with an order of a Tribunal, he points out that tax payers are free to apply for a grant
of mandamus. He submits that where a statute creates a public body and creates no special
remedy for its enforcement, the High Court may grant an order of mandamus to the end that
justice may be done c.f. Halsbury's Laws of England, volume 36 page 448.
He argues that in the case of Revenue Appeals Tribunal cases, the order for mandamus arises as a
result of the fact that the respective sections in the Revenue Appeals Tribunal Act. the
22
7.

Income Tax Act, Customs & Excise Act and the Value Added Tax Act by conferring a duty to put
into effect an order or determination of the Revenue Appeals Tribunal places a statutory public
duty on the Commissioner General to comply with these orders.
• The Tribunal has carefully considered the issue and the submissions of the parties. We agree with
Mr Mwanawasa that the Tribunal can easily be referred to as a court if one was to follow the
dictionary meaning. The Tribunal, like courts arbitrates over disputes. We however disagree with
Mr Mwanawasa that the tribunal like other courts have powers to enforce its orders through Writ of
Fieri Facias. In our considered view courts do not have powers "per se " because they are "courts
" but those powers of enforcement are derived from those very same statutes that create the
"courts ". In this respect we agree with Mr Muuka's first counter submission when he argues that
the power to enforce judgements and determinations of a court or Tribunal is to be found in the
enabling statute. Where the statute does not expressly provide for these powers, they cannot be
inferred. We also agree with Mr Muuka that where a statute directs things to be done or not to be
done, either the statute itself provides the means for its own enforcement, or parliament acts upon
the supposition that the existing laws of the realm are sufficient to enforce the rights and liabilities
arising thereunder. We were referred to the case of Weak v Middlesex Waterworks & Co (ibid).
We have looked at the case and agree with the principle in that case in so far the facts of the
present case are concerned. We have carefully looked at the provisions of the Income Tax on
appeals. Section 109 of the Income Tax act as read with section 3 of the Revenue Appeals
Tribunal Act no. 11 of 1998 is to the effect that any tax payer aggrieved with an assessment or
decision of the commissioner General of the respondent can appeal to the Revenue Appeals
Tribunal. What happens then if an appeal is successful? The answer is to be found in section 113
of the Act. If an appeal is successful, the Commissioner General is supposed to make all
assessments and adjustments as are necessary to give effect to the Tribunal's decision and the
provisions of Section 87 of the Income Tax Act shall apply in excess as a result of such
determination. Section 87 of the Act is the section that deals with refunds in general.
We approved this procedure to be followed when dealing with successful appeals under the Income
Tax Act in the case of Sepectra Oil Corporation Limited v Zambia Revenue Authority [19991
RAT/33. If there is any money due to a taxpayer, the Commissioner General is by law obliged to
give that refund or give a credit in the subsequent tax year. We
23

must point out that if it is indeed true that the Respondent is ignoring orders of the Tribunal, they are
setting a very dangerous precedent and underming the operations of the Tribunal and parliament
which passed the Income Tax Act. Unfortunately, we are forced to take the reluctant view that we
cannot coerce the Commissioner General to comply by way of a Writ of Fieri Facias. A Writ of Fieri
Facias as a means of execution and enforcement in the High Court Act is provided for in the High
Court Act itself. Section 44 of the High Court Act provides that the High Court headed by the Chief
Justice may make rules of court. It is pursuant to these rules that the Writ of Fieri Facias is to be
found including the standard form to be used. Similarly the power to execute by Fieri Facias and
standard form are to be found in the subordinate court and rules
Mr Mwanawasa has submitted that the object of statutory interpretation is to find out what the
intention of the Legislation was. He has referred us to Halsburry's Laws of England volume 44 (i) 4 th
edition paragraph 1327 (ibid) and Re Viscount Rhonda's Claim ibid. We entirely agree with this
principle on general interpretation of statutes. However, this principle is applicable where the
interpretation is ambiguous, vague and in doubt. In this case the issue is whether the Revenue
Appeals Tribunal has power to issue a Writ of Fieri Facias. In our view, the Act is clear. There is no
power conferred on the Tribunal. We cannot imply or infer an intention which was never there.
According to Mr Mwanawasa, the court's in interpreting statutes will also in appropriate cases
identity the mischief intended to be suppressed and once that has been identified, everything should
be held in favour of the advancement of the suppression of that mischief, paragraph 1474 Halsburry's
Laws of England ibid. He pointed out that in the instant case, the mischief intended to be cured by
the establishment of the Tribunal was determination of grievances against the decisions of the
Respondent. Whist we agree with the "mischief rule of statutory interpretation where appropriate,
we disagree that it is applicable here. If you look at the preamble of the Revenue Appeals Tribunal Act
and the daily parliamentary debates at 2 nd reading just before the Act was passed,
it will be noticed that the intention was to harmonise the appeals structure. The Act has merely
imported provisions that applied to the three previous separate Tribunals and fused those provisions
into the Revenue Appeals Tribunal. Nothing new has been added.
24

Mr Mwanawasa's last and forceful argument is that if a power to enforce judgement and orders of
the Tribunal cannot be inferred, then section 25 of the Interpretation and General Provisions Act is the
answer. Section 25 states;
''where any written law confers power on any person to do or enforce the doing of an act or
thing, all such powers shall be understood to be also given as are reasonably necessary to
enable the person to do or enforce the doing of the act or thing". (The underlining is ours for
emphasis)
We agree with Mr Mwanawasa entirely that this Tribunal has no powers to declare the provisions of
a statute null and void so as not to have effect and we will not purport to do so. We will however
disagree with Mr Mwanawasa on an entirely different ground. The statute namely section 25 refers to
powers to do or enforce. If a statute give a power to do or enforce than all such powers as are
reasonably incidental to the doing or enforcing shall be implied. It is correct to do certain things such
as those enumerated in the jurisdiction clause section 3 of the Revenue Appeals Tribunal Act. This is
power to adjudicate on disputes between a taxpayer and the Respondent. In our view we have
implied powers to do certain things to give effect to the Tribunal's adjudication function. We have no
power to enforce anything under the Act whereby we can imply power to issue a Writ of Fieri Facias.
As Mr Muuka has pointed out, if the Commissioner General refuses to comply with an order of the
Tribunal, taxpayers have the right to seek judicial review by way of "mandamus ". Where a statute
creates a public body and creates no special remedy for its enforcement, the High Court may grant an
order of "mandamus" to the end that justice may be done c.f. Halsburry's Laws of England volume
36 page 448. Mr Mwanawasa points out that this will only exacerbate costs. Whilst we agree with
this reasoning, our view is that that is the only way out.
Of course, successful litigants would recover their costs. Until the law is amended, this tribunal
cannot issue a Writ of Fieri Facias or indeed commit any one for contempt.
We would perhaps request the powers that be to consider amendments in the Act or rules to so as
to put in place measures that would ensure that the respondents promptly complies with Tribunal
orders. Of course, in those instances where the Commissioner General is dissatisfied with rulings of
the tribunal, he has the right to appeal.
For the foregoing reasons, the appellant is unsuccessful on this issue and the Tribunal will not issue a
Writ of Fieri Facias.
25

23/5/2000
/mv
IN THE REVENUE APPEALS TRIBUNAL HOLDEN
AT LUSAKA
BETWEEN:
SHALEE THA MAHABEER
26
1999RAT/14& 15
JAYESH SHAH APPELLANTS
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: J M Kasanga (Chair), N A Lungu and T Mushibwe on 23rd April
1999
FOR THE APPELLANT:
FOR THE RESPONDENT:
RULING
C K Banda, S C Chifumu Banda and Associates and C
Sampa, C Sampa and Company.
L N Muuka, Legal Counsel - Zambia Revenue
Authority
This is an appeal by the appellant in respect of assessments issued by the Respondent.
This ruling will also apply to the case of Shaleetha Mahabeer being case no. 1999/RAT/14.
The issues in the two cases are the same. The cases will be treated as consolidated.
In support of its appeal, the appellants have raised the following points:
1. withholding tax payment is the responsibility of the Bank acting as agents of the
Zambia Revenue Authority
2. the tax payer is not ordinarily resident in Zambia
3. Assessments were made unreasonably and maliciously in view of the fact that the
same were made before expiring of the charge year

4. Zambia Revenue Authority has failed to check with the Bank as their agents why they failed to remit
withholding tax to Zambia Revenue Authority even after debiting the tax payer's account.
The respondent in reply makes the following points:-
1. Though banks are charged with the responsibility of deducting withholding tax from
interest earned by their customers, those customers as tax payers are not absolved
from their responsibility of paying tax. They have relied on section 14 (1) (a) of the
Income Tax Act and Section 66 (2) of the same Act.
2. Section 14 (1) (a) of the Income Tax Act does not distinguish between a resident or
non resident regarding chargeability to tax of income received by every person from a
source within Zambia. According to the respondent Section 63 (1) (iv) of the Income
Tax Act was relied on to assess the appellant. The said section provides;
"subject to the provisions of sections seventy five and ninety three the
Commissioner General shall assess every person who is liable to lax under
-this Act .... and shall not include in any such assessment for any charge year
interest on royalties from which tax in respect of that charge year has been deducted under section eighty two ".
According to the respondent this section should be read together with paragraph 15 of part
111 of the same Act which provides that
" Subject to the provisions of any agreement made under section seventy four, the tax with
which a person shall be charged for a charge year on interest ... which the Commissioner
General is prohibited from including in an assessment under the provisions of section sixty
three shall be at the rate specified in the table appropriate to that charge year ".
According to the respondent the essence of the clause "which the Commissioner General is prohibited from including in
an assessment under the provisions of Section sixty three in paragraph 15 is that non residents can claim withholding
tax, where it has already been deducted as the final tax in interest paid to them by banks. In the case at
hand, the withholding tax and final tax (which unfortunately was not deducted) was charged at the rate of 15%.
27
1.

Having considered the submissions of the parties, it is our considered view that the appeal should be
dismissed.
the respondent has correctly pointed out, section 14 (1) (a) of the Income Tax Act does not absolve a
tax payer from his obligation to pay tax. The fact that the appellant is non Zambian or is not resident in
Zambia is of no consequence.
He was charged at 15% on withholding tax which is deemed to be final tax in respect of a non
Zambian. If the bank did not deduct withholding tax, reasons notwithstanding, the final tax at
applicable normal rates for residents and equivalent withholding tax for non residents is recoverable
from the beneficiary or recipient of interest income. Furthermore Section 66 (2) of the Income Tax
Acts strengthens the argument that the appellant is not absolved from paying tax. This section
provides that;
" no provisions concerning a tax paying agent shall relieve any other person of any
liability under this Act".
The costs of this appeal are awarded to the respondent.
28

30/5/2000
/mv
IN THE REVENUE APPEALS TRIBUNAL 1999RAT/111
HOLDEN AT LUSAKA
BETWEEN:
STAR MOTORS LIMITED l sr APPELLANT
STAR COMMERCIAL LIMITED 2 ND APPELLANT
COMMERCIAL MOTORS LIMITED 3 RD APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), N A Lungu and T Mushibwe on 17 th
January 2000, 8 th march 2000 and 22 nd May 2000.
FOR THE APPELLANT: Messrs Nkwazi Chambers.
FOR THE RESPONDENT: D Mulima, Senior Inspector - Zambia Revenue
Authority
RULING
This is an appeal by Star Motors Limited, Star Commercial Limited and Commercial Motors Limited
(hereafter referred to as the appellants). The first Appellant appeals against assessments for the
charge years 1993/94, 1994/95 and 1995/96. The second Appellant appeals against assessments
for 1993/94, 1994/95 and 1995/96. The third Appellant appeals against assessment for the charge
years 1994/95 and 1995/96. For the purposes of this appeal, we shall refer to the Zambia Revenue
Authority as the Respondents.
The Appellants are all subsidiaries of Lonrho Zambia Limited (herein after referred to as
"Lonrho"). According to the facts contained in the documents filed before us, Lonrho is
charged with the following responsibilities on behalf of its subsidiaries: -
i) The overall control of its subsidiaries
ii) The provision of legal and secretarial services
iii) The provision of a link between its subsidiaries, bankers and other Lonrho
29

offices established outside Zambia.
According to evidence before us, Lonrho charged the Appellants for services such as the ones mentioned
herein before. The Respondent then charged Lonrho for the income it received on the services and in turn
disallowed these expenses for the tax purposes in the Appellant subsidiaries' accounts. Though the
assessments relate to these Appellants' separately in different years, the issue is common viz., are the
Appellants entitled to get a deduction for the payments it made to Lonrho as expenses under section
29(I)(a) of the Income Tax Act?
Both parties elected not to call viva voca evidence and relied on documents filed before the Tribunal.
Both parties filed written submissions. According to the Appellants, section 29(l)(a) of the Income Tax Act
provides; (a) "In ascertaining business gains or profits in any charge year, there shall be deducted
the losses and expenditure other than that of a capital nature, incurred in that year
wholly and exclusively for the purpose of the business".
The Appellants submit that the expenses which were disallowed were in fact expended wholly and
exclusively for the purpose of business and fall within section 29(I)(a). What is expended wholly and
exclusively for the purpose of business is a matter of fact and can only be ascertained by applying
ordinary principles of commercial accounting. The Appellants submit that these principles are what they
applied. In support of this submission, they rely on Lothian Chemicals Company Limited Vs I R
Commissioner T.C. 508± They further rely on Morgan Vs Tate & Lvle 35 T.C. 400.
The Appellants further argue that the Respondent has raised issues regarding the method of payment,
which was payment from profit. According to the Appellants, how the money is raised or the source of
money for payment of tax cannot be the basis of disallowing the expense. In support of this contention,
the Appellants have drawn our attention to the case of British Sugar Manufacturers Vs Harris 21 T.C. 528.
The Respondent in turn point out that they had informed the Appellant that there was need to file
additional information to prove these expenses. According to the Respondent's letter dated 17 th March
1998 which we shall refer to as "P I" paragraph
22
30

5, the Respondent wrote in the following manner:
"In my letter dated 19 th February 1998 addressed to KPMG Tax Advisers Limited, agent for Star
Motors Limited, I did state kindly that secretarial and computer charges are only allowable
expenses for tax purposes if they are not of a capital nature and were incurred in
the year wholly and exclusively for the purposes of the business ................... I did state further in
the said letter that only the portion of expenses where you will show the following shall be allowed for
tax purposes, in this case, on Commercial Motors Limited:-
i) The nature of the services rendered was not capital
ii) The exact amount incurred indicating the methodology used to arrive at this amount
iii) The supporting vouchers, documentation, etc.
According to the Respondent, the Appellant did not provide the information requested for to enable
them determine whether the expenses fall within section 29(I)(a) of the Income Tax Act. The
Appellants in their written submission filed on the 10 th April 2000 state that the accuracy of the
accounts cannot be contested without proof that they are wrong. The Appellants contend that they
submitted to the Respondents accounts that reflect the actual gain and expenditure. The Appellants
state that the onus of proof is on the Respondents to show why the accounts are wrong. We would
like to disagree with this proposition stated by the Appellant. The correct position of the Law is as
stated in Halsburry's Law of England paragraph 1607 volume 23, 4 th edition;
"Upon an appeal to the General or special Commissioners against an assessment, the onus
of proof is upon the taxpayer by evidence given on oath or affirmation or by sworn
evidence to demonstrate that the assessment ought to be reduced or set aside." This
proposition of the Law was also followed in Moll Vs I.R.C. [1955] T.C. 384. "If the Appellant
fails to lead evidence before the Commissioners, he cannot have the assessment reduced or
displaced" C.f. R.A. Bird & Company Vs I.R.C. 11924] 12 T.C. 78. We followed these
principles in the case of Trans Zambezi Limited and Zambia revenue Authority
1998/RAT/02.
According to the Respondent, the Appellant did not adduce any evidence or documents to show
that the expenses were wholly and exclusively incurred for the purpose of the
31

usiness.The only evidence to show the expenses incurred were internal memoranda from
Lonrho's Group Financial Controller. These memoranda are number 1 - 20 in the plaintiffs
bundle of documents and we will refer to them as P2 - P21. These documents clearly show
that the basis of apportionment of subsidiary expenses were these memoranda from Head
Office. It is these expenses that the Appellants want to be allowed for tax purposes. The
Appellant has not submitted for each subsidiary company, for each year in question, a
separate return of certain amounts payable and charged in the accounts namely from ITF 17.
A lot of authorities have been referred to us by both sides on the interpretation of what is "wholly and
exclusively" for the business under section 29(I)(a). We agree that management fees, including computer
charges, legal fees, secretarial services are allowable, as long as they are not of a capital nature. The Tribunal
has not been shown any evidence to disclose that Lonrho received income from various subsidiaries
(Appellants) to show these charges paid to the holding company. The only evidence available are instructions
from Lonrho Head Office to its subsidiary Appellants. The onus rests with Lonrho and the Appellants to show
that Lonrho included receipts from the Appellants on which Lonrho suffered tax. It is not sufficient to apportion
these as mere year-end adjustments. For the forgoing reasons, this appeal is dismissed with costs
32

IN THE REVENUE APPEALS TRIBUNAL 1999RAT/131
HOLDEN AT LUSAKA
BETWEEN:
ZAMTEL LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), N A Lungu and M H Muyoyeta 29 th
March, 3rd May, 17 May and 26 th 2000.
FOR THE APPELLANT: Ms Chani, Legal Counsel - Zamtel Limited
FOR THE RESPONDENT: G G C Shapi, Legal Officer - Zambia Revenue
Authority
RULING
This is an appeal by Zamtel Limited (hereinafter called the Appellant) against Zambia Revenue
Authority's (hereinafter called the Respondent) decision to disallow a discount given to the
appellant by one of its suppliers in respect of equipment imported in Zambia. This resulted in
additional import duty of K 554,224,005.87 to be paid. The facts which give rise to this appeal are that
on 29 th February 1996. the appellant and Mitsui company, a company incorporated under the laws
of Japan entered into a contract. We shall refer to this Japanese company as "Mitsui". Under the said
contract, Mitsui was to manufacture, supply, deliver, install, commission and test one digital telephone
exchange at Chelstone and remote unit at International Airport. The contract price was one hundred
and thirty nine million, three hundred and ninety five thousand six hundred and eighteen
Japanese yen (139,395,618).Though the contract referred to specifically clause 2.1 did not state
that the price of yen 139,395,618 had been arrived at after a discount, the appellant claimed a
discount. The respondent disallowed this discount. In their letter to the appellant dated 21 st October
1999, the respondent gave the following reasons for disallowing the discount;
33

1. The Brussels definition of value system, only recognises discounts that are freely
available to all purchasers trading at the same level
2. For the discount given to be accepted, it should be declared to customs, which was not
done in this case
3. The discounts are expected to be specific
4. The rate of discount appeared too high to be allowable.
At the hearing of the appeal, the appellant indicated that it would not call any evidence and would rely
on the documents submitted before the Tribunal. This meant that even the facts alluded to in the
appellant's letter of 21 st October 1991 were accepted and there has been no attempt to controvert
those facts. This appeal therefore proceeded on the basis of the following facts which remain
undisputed:-
1. The contract price was yen 139,395,618 and there was no mention of discount in the
contract
2. The discount given was not given to customs on importation and it was only made
known upon arrival of the last part of the equipment ordered
3. There was no specification of the discount given
Both parties elected not only to dispense with "viva voce" evidence, but also oral
submissions. The appellant's counsel advanced the following grounds to support her appeal:-
1. The appellant bought the equipment from the supplier under the contract dated 29 th
February 1996 and was given a discount on the hard portion of the equipment and
paid the sum of K804,225,065.23 on receipt of the first consignment from the
supplier. The respondent levied an extra K 554,224.005.87 on receipt of the last
consignment after refusing to allow the discount on the ground that the discount was
not allowable in purchases of this nature
2. The said discount was specific as it related to the specific project under the contract
and as such should have been allowed
3. The said discount was given freely in the normal course of business and the
Respondent had no reason whatsoever to believe that the same was not available to
other purchasers doing business with the supplier
34

discount was only labelled "specific" and nothing more was explained.
7. According to the respondent, any rate or percentage of a discount may be allowed so long as
the discount is made specific and available to all buyers.
When an assessment for tax has been made the onus of proof is on the taxpayer to disprove that
assessment. C.f. Halsburry's Laws of England paragraph 1607 volume 23, 4 th edition and Moll V I. R.
C. U9551 T. C. 38
"upon an appeal to the General or special Commissioners against an assessment the onus of
proof is upon the tax payer by evidence given on oath or affirmation or by unsworn evidence
to demonstrate that the assessment ought to be reduced".
We followed this principle in Trans Zambezi Industries Limited and Zambia Revenue Authority
1998/RAT/02. The appellants have to produce evidence before the Tribunal to demonstrate that they
had a discount, which the respondent ought to have taken into account. If the Tribunal takes into
account that discount then the additional import duty and tax will have to be set aside.
On the 3 rd and 17 th May 2000 when this matter came up the appellant was not represented. The
appellant's advocate was not in attendance to give oral submissions to amplify on the documents
and written submissions. Similarly, the appellant's advocate did not indicate whether it intended to
adduce "viva voce" evidence and the Tribunal proceeded on the basis that the appellant would not
adduce any evidence. It also should be placed on record that when this matter came up on 3 ld and
17 th May 2000, there was no explanation from the appellants as to why their advocate was not in
attendance.
We have carefully looked at the appellant's submissions and documents. Apart from the written
submission filed by the appellant on 27 th December 1999 no evidence has been adduced before the
Tribunal to show this discount being referred to. It is not just a matter of merely stating before the
Tribunal that there was a discount. Evidence must be adduced to prove that discount. The contract
which was produced before the Tribunal is equally silent. The other documents, which were filed
before us in a very untidy manner we must say, are equally unhelpful. There is no mention of any
discount. We have stated in the past and we reiterate that documents should be filed in the form of a
bundle and properly indexed. The
35

espondent has rightly pointed out that no documents or evidence has been led to prove this discount.
The respondent proceeded to calculate the import duty and value added tay, on the basis of
documents that were made available which did not show any discount. In our view, they were correct.
According to Section 85 of the Customs and Excise Act Chapter 322 of the Laws of Zambia, the
position on duty is as follows;
"for the purpose of assessing the amount of any Customs Duty or surtax payable ad valorem
on any goods imported into Zambia, the sum of the cost price and other costs, charges
and expenses, as calculated in accordance with subsection (2) and (3) respectively, shall be
accepted as the value of such goods at the time when the duty or surtax become payable"
Sub section (2) goes on;
(2) In respect of the cost price of any goods -
(a) the Commissioner General shall accept the price declared by the importer if he
is satisfied that it represents a bonafide sale in the open market between a
buyer or seller acting independently of each other; and may accept a
reasonable price in any case where he is satisfied that the goods are of a kind,
type or design substantially different from those sold in the open market in the
country of exportation; or
(b) In any case other than those provided for in paragraph (a), the cost price shall
be the price which such goods, or similar goods, would, in the opinion of the
Commissioner General, fetch, at the time of their exportation into Zambia, in
the country of exportation, on a sale in the open market between a buyer and
seller acting independently of each other, the buyer being a person trading at
the same level of trade in that country as that of the importer in Zambia..."
We have deliberately quoted at length provisions of section 85 of the Act, as it is the relevant law r in
determining the issue at hand. For strange reasons we cannot fathom, none of the parties have
addressed us on any relevant law. The appellant in particular, apart from failing to adduce any
evidence had not cited any provision of the law to back up their submission.
The effect of section 85 is simply that when goods are imported into Zambia, the sum of the cost price
plus other charges referred to in subsection (3) will be taken as the value for duty
36

purposes. Intact under subsection (2), the Commissioner General of the respondent will accept the
price declared by the importer if he is satisfied that it represents a bonafide sale in the open market. If
for instance there was a discount as alleged, the appellant should have declared the price taking into
account the discount. The Commissioner General can take into account that discount if he is satisfied
that the price declared (with discount) represents a "bonafide" sale in the open market between a
buyer and seller acting independently of each other.
Subsection 4 goes on to explain what "open market" means. (3)
"For the purpose of this section -
(a) a sale in the open market between a buyer and a seller independent of each
other presupposes -(i) that the price is the sole consideration; (ii) that
the price includes the value of the right, if any. to use the
patent....
(iii) That the price is not influenced by any commercial, financial or other
relationship, whether by contract or otherwise, between the seller or
any person associated in business with him, other than the
relationship created by the sale of goods in question..."
As the respondent has pointed out, the appellant did not declare any discount on first importation.
A mere value was declared and in the absence of any explanation and evidence, the value taken for
duty purposes was that declared. 1'here is also unchallenged evidence that the appellant was
requested to explain what the discount was. There is also evidence, which
is unchallenged that the appellant failed to provide answers c.f. the letter dated 13 th April and filed into
court on 16 th May 2000 see also the letter dated 21 s1 October 1999 and filed into court on 12 th April,
2000.
In our considered view, the appellant has not adduced any evidence to show that the appellant in
arriving at the price for determining the value for duty purposes did not follow the law as laid down in
section 85 of the Customs and Excise Act. The evidence before us is that documents were
presented for clearing purpose, which declared a value without any mention
37

of a discount. Later on, after the last shipment arrived there was mention of a discount. The
respondent requested for details of the alleged discount. None were provided.
As will be seen from the provisions of section 85, the respondent takes into account a price arrived at
in accordance with that section. There is no provision in the act to the effect that once an importer
mentions a discount, the same should be automatically taken into account. This is not what section 85
of the Act states. For this reason the appeal fails and the other grounds advanced are irrelevant.
Having found that this appeal is not successful on the basis that no legal authorities or evidence
has been presented to support the appellant's case, there is equally no need to comment on
grounds 3, 4 and 5 of the respondents submissions as they flow from the first two submissions.
Counsel for the respondent referred us to a document known as "Divisional Guideline". Counsel
informed us that these divisional guidelines are made pursuant to section 194 of the Customs and
Excise Act. We have looked at section 194 of the Customs and Excise Act. Infact this section refers
to customs fees and has no relevance whatsoever to divisional guidelines referred to by Counsel for
the respondent. We advise Counsel who appear before this Tribunal in future to research on the Law
in issue and properly submit authorities that they wish to rely on. For the foregoing reasons, this
appeal is dismissed with costs. Either party has the right to appeal.
38

IN THE REVENUE APPEALS TRIBUNAL 2000/RAT/06
HOLDEN AT LUSAKA
BETWEEN:
GALAUN HOLDINGS LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), N A Lungu and T Mushibwe
8 th March, 3rd May, 4 th October, 13 th October and 19 th October 2000.
FOR THE APPELLANT: G F Patel, Messrs. Musa Dudhia & Company
FOR THE RESPONDENT: T Mulala, Senior Inspector VAT - Zambia Revenue
Authority
RULING
This is an appeal in respect of an assessment dated 27 fl April, 1999. The appeal has been lodged by
Galaun Holdings Limited whom we shall hereafter refer to as " the appellant". We shall refer to
Zambia Revenue Authority as " the Respondent". The ruling represents a unanimous opinion of the
Tribunal.
The brief facts of the case are that on 27 th April 1999, the Respondent made an assessment of K
35,563,213 inclusive of interest in respect of free meals given by the appellant to staff. The facts
are not in dispute. Both parties elected not to call "viva voce" evidence and relied on documents and
correspondence filed before the Tribunal. Both parties made both written and oral submissions.
The issue therefore that falls to be determined is simply this; is value added tax chargeable on meals
given "gratis" by a registered supplier in his capacity as employer to his staff?
behalf of the appellant has advanced two grounds in support of the appeal. Firstly, he argues that the
Respondent cannot raise an assessment on his clients given that in 1995, the respondents officers
had carried out an inspection on the appellants during which they had not insisted that tax should be
charged on meals given to staff free of charge. According to Mr Patel, the respondent had created the
impression that tax was not collectable under the circumstances. Apparently, the assessments raised
covered meals given as far back as 1995. According to Mr Patel the respondent could not backdate the
assessment to 1995 the period when the respondents had created the impression that tax was not
39

collectable on free meals.
Though Mr Patel has not expressly stated so, his argument raises the issue of estoppel. Are the
respondents estopped from charging tax from 1995 in view of the fact that during an earlier inspection
in 1995. they had not insisted on tax being collected on free meals? They had given the impression the
appellant was in order not to charge tax on free meals. The question that flows from this issue is this: is a
public authority or officer estopped from collecting tax or performing his duties on account of the fact that
he had earlier not collected the tax or given the impression that the tax is not collectible? The simple
answer is to be found in the now well settled principle of law that estoppel cannot be set up to prevent
a public officer from exercising his functions. It is immaterial that the tax was not collected when it was
due. Similarly, the respondent may have created the impression that the tax was not collectible. However,
they cannot now be estopped from collecting the tax on the basis that they had earlier given the
impression that the tax was not collectible. This ground of argument does not succeed.
The second ground advanced by Mr Patel is based on regulation 3 of Statutory Instrument no. 78 of 1995.
This regulation provides;
The supply of goods by any person in the course of a business
conducted by him shall not constitute a supply of goods for the
purpose of the Act, if—
(a) The goods are supplied as samples or for
promotional or publicity purposes;
(b) The goods are supplied without consideration:
and
(c) Each item of the goods so supplied has an open
40

market value of not more than ten thousand kwacha.
The marginal notes refer to this regulation as "supplies of promotional, etc. material". Mr Mulala on
behalf of the Respondent has with force pointed out that this regulation does not apply to the facts or
issue before the Tribunal. He submits that this regulation applies to supplies of promotional
materials samples etc. We agree with Mr Mulala that regulation 3 does not apply to the facts at
hand. In fact paragraph (e) refers to " each of the item of the goods so supplied". Obviously
paragraph (c) is referring to goods supplied pursuant to paragraphs (a) and (b) of regulation 3 of
Statutory Instrument no. 8.
The respondent has agreed that the assessment is not based on regulation 3 but regulation 5.
Regulation 5 (i) provides-
"In this regulation, "services of the business" in relation to a
business carried on by a taxable supplier, means services
provided in connection with the carrying on of that business,
whether or not they are services of the kind provided in the
course of that business. "
By relying on this regulation, the respondents are infact stating that the giving of free meals to staff
is not a supply of goods but supply of a service. Is this service therefore taxable? The
respondents argue that by virtue of sub regulation (2) the service is taxable. Sub regulation 2
provides -
"where a taxable supplier causes any services of the business
to be provided, with or without consideration -
(a) for his own benefit
(b) for the benefit of himself and others
(c) for the benefit of his business;
the supply of such services shall be a taxable supply".
According to the respondent, regulation 5 in its entirely covers the case at hand. It should be noted
that the law being relied on to tax the appellant is in the form of subsidiary legislation. This subsidiary
legislation can only be up held as valid if it is consistent with the principal Act.
41

The starting point therefore is section 8 of the Value Added Tax Act chapter 333 of the laws of Zambia.
The heading of the section states "imposition and scope of tax". This section 8 (i) (a) of the Act provides
-
"A tax, to be known as value added tax, shall be charged, levied,
collected and paid in respect of-
(a) every taxable supply of goods or services in Zambia,
other than a zero rated supply. "
This means that every taxable supply of a service will attract value added tax. What than is "supply of a
service". The definition of supply of service is to be found in the definition Section 2 (i) which states -
"supply of a service " includes -
(a) the provision of goods on lease, hire or loan
(b) treatment of any goods
(c) any other activity which the Minister, by regular.ion
declares to be the supply of a service for the purposes
of this Act
but does not include -
(i) the provision of any service without consideration except in so
far as the Minister, by regulation or
otherwise determines ........ "
"Section 8 (i) (a) as read with the definition section 2 (i) clearly states that any supply of a service for nil
consideration is not supply of a service and as such is not taxable unless the Minister by statutory
Instrument declares that it should be taxable. There must be a statutory instrument in place which clearly
states or shows that canteen meals provided by an employer to employees must be treated as a supply
of services and therefore taxed. In other words there must be clear intention in the Act and the
regulations to tax the free meals. As was stated in the case of Vestey v I. R.C. (1980) STC at page 18 by
Lord Wilberforce,
"A citizen is not to be taxed unless he is designated in char
terms by the taxing Act as a taxpayer and the amount of his
liability is clearly defined.. ".
The learned author Benion on interpretation of statutes 3 rd edition page 637 has this to say on clear intention
of a taxing statute
42

"It is a principal of legal policy that a per son should not be penalised
under a law that is not clear.
The court, when considering in relation to the facts of the instant case,
which of the opposing constructions of the enactment would give effect to
the legislative intention, should presume that the legislation intended to
observe the principle. It should therefore strive to adopting a construction
which should not penalise a person where the intention to do so is
doubtful or penalises him or her in a way which is not made clear ".
The respondents point to regulation 5 as the legislation that taxes free meals provided by an employer to
an employee. We totally disagree.
According to our interpretation, if a taxable supplier provides services which are not ordinarily
provided in the course of a business but are connected to the carrying on of that business then that ancillary
service should be treated as a service of the business. This can be construed to mean that if a supplier
provides some service to the public which is ancillary or connected to the main business, that ancillary
supply will be considered as a supply of the business. This other service which is not endinarily provided
by the business must be connected to the service of the business, which is a taxable supply. If it is not
connected with the carrying on that business, it cannot be a taxable supply. We will give a simple example
to illustrate our interpretation of the regulation. A law firm for instance can be a taxable supplier and the
services of the business are legal services. A law firm can receive instructions to sell a property on behalf
of a client. The law firm will arrange for valuation of the property, advertise in a newspaper and find a
buyer at a price agreed to by its client. This service is infact real estate work, which a law firm does not
ordinarily provide in the course of its business. According to regulation 5 that ancillary service provided by
the law firm will be treated as a service of the business. According to sub regulation (2) paragraph (c) this
service will be treated as a taxable supply even if provided free. This is a service that can be provided
to any one and not only to employees.
On the facts of this case, there has been no evidence as to establish what the "services of the business"
are that the appellant provides.
43

For the provision of canteen meals free of charge to be part of the services of the business. there
must be evidence led to show that the provision of canteen meals is connected with the carrying on of
that business i.e. the main business of Galaun Holdings.
Is this canteen service extended to other members of the public and incidental to the service of the
business? There is no evidence to support this conclusion. Infact, on the evidence before us, this
facility is exclusively for employees. We cannot find any clear intention in regulation 5 of statutory
instrument no 78 as read with section 2 (i) and 8 (i) (a) of the principal Act to make vateable free
meals provided by an employer. For the foregoing reasons we allow the appeal with costs. The
assessment both principal and interest are set aside. Either party has the right of appeal. Costs are
awarded to the appellant.
44

REVENUE APPEALS TRIBUNAL 1999/RAT/52
HOLDEN AT LUSAKA
BETWEEN:
RAYMOND KAPANSA APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), T Mushibwe and N A Lungu 2 nd
FOR THE
APPELLANT:
FOR THE
RESPONDENT:
RULING
March, 2001
Absent
This is a unanimous decision of the Tribunal.
D Mulima and A Mvwende, Zambia Revenue Authority
The brief facts of this appeal which are not in dispute are that on 31 st August 1997 the respondent
issued assessment no. 96/1/1535. This was an estimated assessment in the absence of returns
pursuant to section 64 of the Income Tax Act.
The appellant at the hearing did not appear or send any representatives. The Tribunal has therefore
proceeded to consider the appeal on the basis of documents before it. The appellant firstly claims that
he did not respond to the notice of assessment as it was sent to the wrong address. Secondly, he
claims that his business has been adversely affected by the dermise of parastatal companies. In our
considered view, these arguments are immaterial to the issue at hand. The respondent raised an
estimated assessment pursuant to Section 64 of the Income Tax Act which provides that
45

"An assessment may be made by the Commissioner General in any
amount according to the best of his judgement in respect of any person
who has not delivered a return as required by the Act"
once an assessment has been raised, the onus of proof to discharge that assessment is on the tax payer,
see our comments in Trans Zambezi Industries Limited and Zambia Revenue Authority 1998/RAT/02 at
page 3.
Upon having received the assessment for the 1995/96 Tax year, the appellant should have submitted
returns and accounts to demonstrate that the assessment is not correct. This was not done. Similarly,
the Tribunal has not received any evidence on which it can disturb or set aside the assessment issued by
the Commissioner General. It is not enough for the appellant to take a simplistic approach and say that
parastatal companies wherefrom he used to earn income have collapsed. He should have filed accounts to
demonstrate non receipt of income or the diminution of such income in the relevant charge year. This
appeal is accordingly dismissed and the Commissioner General's assessment stands.
46

IN THE REVENUE APPEALS TRIBUNAL
HOLDEN AT LUSAKA
BETWEEN:
CORAM:
47
2000/RAT/49
MARASA HOLDINGS LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
M M Mundashi (Chairman), N A Lungu and W Z Mwanza
(4
October, 2000 and 28 m th
,th
iMarch, 2001)
FOR THE
APPELLANT: J Napawu, Manager and A Sakala Tax Advisor, Grant
Thornton
FOR THE
RESPONDENT: D Mulima, Senior Inspector and A Mvwende, Legal Officer -
Zambia Revenue Authority
RULING
This is a unanimous opinion of the Tribunal. This is an appeal in respect of withholding tax charged to the
appellants in respect of non-resident contractors and consultants engaged by the appellant. Both
parties elected not to call viva voce evidence and relied on their respective documents that were
submitted to the Tribunal. The brief facts, which are not in dispute, are as follows.

On 12 th March 1999, the appellants who are owners of Inter-Continental Hotel Lusaka appointed
Messrs H Hamman & Associates of South Africa as fire protection engineers for the protection
design during the refurbishment of the Hotel Inter-Continental.
The letter of appointment is dated 12 th March, 1999 and for purpose of identification we will refer to it as
document "no. 1". The said letter of appointment "'inter alia" provided in clause 8.2.1 as follows;
"In addition to the above fee, the client will bear the cost of
travel at cost plus accommodation and food at the
Inter — Continental Hotel. All other disbursements are
Included in the above fixed fee. "
This is the clause that brings about this dispute. The appellants contend that withholding tax on
these disbursements is not payable. They contend that it is only payable on normal contract fees.
The respondent on the other hand argue that withholding tax on these disbursements is payable.
In support of their argument, they rely on section 81A of Act no 9 of 1998 (Income Tax Amendment
Act) which provides that
"Every person or partnership on making any payment on or after 1 st April,
1998 to or on behalf of non resident contractor or haulage operations,
irrespective of whether such payments are made outside the Republic or
not, shall before making any other deductions whatsoever, deduct tax
from such payment at the rate specified in annexure h of the charging
schedule. "
The respondents further argue that the said Act no 9 of 1998 intended to subject withholding tax at
that rate of 15% gross payments made to non resident contractors engaged in construction and
haulage before any other deductions whatsoever.
48

The disbursements in issue were not paid directly to the contractors. These disbursements related to
air tickets, hotel bills and accommodation. The consultants would have paid these bills themselves
and charge it to the appellants as part of the invoice. However, the
appellants paid these bills on behalf of the contractors.
2.
The relevant section 81A of Act no 9 of 1998 refers to .. "any payment on or after 1 st April 1998 to or
on behalf of a non resident contractor...." In our considered view, the disbursements were made
on behalf of a non-resident contractor.
During the presentation of oral arguments on 4 th October 2000, we invited both parties to make
further submissions to include authorities on the point. For instance we wanted to see authorities on
whether a disbursement should not be considered as "part of payment" due for services rendered.
The reason for that inquiry is obvious. If a disbursement is not part of a payment made to a person
rendering a bill, then it cannot be the subject of withholding tax. If it is, then it is subject to withholding
tax. Both parties did not file any farmer submission. The Tribunal therefore decided to ascertain the
true meaning of Act no. 9 of 1998. In ascertaining the intention, we have borne in mind Lord
Wilberforce's observations in Vestey vI.R.C. (1980)STC18,
" A citizen is not to be taxed unless he is designated in clear terms
by the taxing Act as a taxpayer and the amount of his liability is
clearly defined"
In our considered view, Act no. 9 of 1998 in so far as it amends section 81A is clearly unambiguous.
It refers to any payment made on or on behalf of a non-resident contractor. Clearly these
disbursements were made by the appellant on behalf of the foreign contractor and for the benefit of
the contractor. We have not been given any evidence or authority to persuade us to the contrary. For
the foregoing reason, we dismiss this appeal with costs. Either party has the right to appeal to the
High Court within 30 days.
49

IN THE REVENUE APPEALS TRIBUNAL 1999/R AT/75
HOLDEN AT LUSAKA
BETWEEN:
CORAM:
FOR THE
APPELLANT:
FOR THE
RESPONDENT:
RULING
FISUMA FILEISA COMPANY LIMITED
AND ZAMBIA
REVENUE AUTHORITY
50
APPELLANT
RESPONDENT
C H J Chileshe (Member), N A Lungu (Member) and H M
Muyoyeta (Member)
Un represented
Commissioner - Zambia Revenue Authority
This is an appeal by the appellant in respect of assessment for Value Added Tax for the period
July 1995 to April, 1996. Further, the appellant appeals against an imposition of a penalty for K
5,040,000. This penalty was in respect of late lodgement of returns. The principal tax assessed
was K 3,758,548 bringing the total liability to K 8,775,548. Both parties sent written submissions
and did not make any request for oral evidence. We have proceeded to look at the written
submissions. Though we have looked at both submissions on the merit, the Tribunal has
considered this appeal in the context of the procedural requirements of the Value Added Tax Act
and the regulations made there under.
The assessments complained of are for the period July 1995 to April, 1996. According to regulation 6
(2) of the then Value Added Tax (Appeals Tribunal) Regulations S.I. No 169 of 1995, this appeal
should have been lodged within 30 days of the receipt of the assessment.

The last assessment was issued in June 1996 and the penalty assessment was also for the same
period. This appeal should therefore have been lodged in July 1996. We are mindful of the fact that under
regulation 12,
the Tribunal has power to extend the time limit for lodging an appeal upon an appropriate application being
made by the appellant. We have observed that there was no application to extend the period within which
to extend to lodge the appeal. The appeal was lodged nearly two years later, on 20 th May, 1998. The
Tribunal cannot proceed to hear this appeal on this ground alone.
Secondly, we have noticed that there was also no compliance with section 31 (2) of the Value Added Tax
Act Chapter 331 of the Laws of Zambia, subsection 2 paragraph of section 31 provides;
" No appeal shall be heard unless where the appeal is against an assessment of
the Commissioner General or otherwise involves a dispute over an amount of tax
or interest allegedly due and unpaid by the appellant) the amount in dispute is
lodged with the Tribunal"
We agree with the Commissioner VAT's contention that this requirement was not complied with just like
regulation 6 (2). We agree with the Commissioner VAT on that submission as well. We are mindful of the
fact that we have the powers to waive the provisions of section 31(2) (b) on an appropriate application on
such as security as we may consider acceptable if it is shown to us that strict compliance with that section
would bring about hardship. No such application has been made before us. Without going into the merits
of the ground advanced by the appellant, we dismiss the appeal.
51

IN THE REVENUE APPEALS TRIBUNAL 2000/RAT/50
HOLDEN AT LUSAKA
BETWEEN:
SCHREUDER AND COMPANY LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), N A Lungu and T Mushibwe
(Members). (22 nd March and l sl June, 2001)
FOR THE
APPELLANT: J Njapawu, Tax Manager - Grant Thornton
FOR THE
RESPONDENT: D Mulima, Senior Inspector Oilier Taxes - Zambia Revenue
Authority
RULING
This is a unanimous opinion of the Tribunal in respect of an appeal brought by Schreuder and Company
Limited whom we shall hereafter refer to as "the Appellant". We shall refer to the Zambia Revenue
Authority as " the Respondent".
The brief and undisputed facts are that the appellant submitted a return for the 1996/97
charge year in which they included an amount of K 17.444,818 as losses brought forward
from earlier years as follows:
i) 1994/95 K 9,424,415
ii) 1995/96 K 6,876,096
The combined losses of K 17,444,818 were included in the 1996/97 tax returns. The losses
were as indicated in the accounts of the appellant. The respondent did not disallow the two
losses. However they made 50% mark up adjustment on the expenses, which had the effect
of swallowing up the losses. In the 1994/95 year, the mark up adjustment was K 19,799,778
and in 1995/96 the same was K 9,283,558.
52

According to the appellant, the two mark ups were arbitrary and effectively wiped out the total loss of K
17,444,818 claimed by the appellant and gave rise to the tax liabilities. The only ground of appeal advanced
by the appellant is that in raising the assessment for the year 1996/97, the respondent did not take account
of the loss of K 17,444,818 to arrive at the appellant's chargeable income. During the hearing of this appeal,
it was pointed out to Mr Njapawu that infact the returns for 1994/95 and 1995/96 indicated that the
respondent had allowed those losses. We will refer to the said returns as exhibits "A" and "B" respectively
which are on record. When this fact was brought to Mr Njapawu's attention, he subsequently filed additional
submissions, which had the effect of amending the earlier ground of appeal, which was centred on the
allegation that the loss of K 17,444,818 had not been taken into account. According to the new
submission, the appellant argues that the respondent's marks up adjustments are arbitrary and they
wiped out the losses.
The appellant referred the Tribunal to section 30(i) of the Income Tax Act, which provides
that;
"subject to the other provisions of this section, any loss incurred in a charge year on a
source by a person, shall be deducted only from the income of the person from the same
source as that in which the loss was incurred."
They further referred us to subsection 2 of the said section 30 which provides; "subject to the
other provisions of this section, where a loss referred to in subsection (i) exceeds the
income of a person for the charge year in which the loss was incurred, the excess shall
as far as possible, be deducted from the income of the person from the same source as
that in which the loss was incurred for the following year until the loss is extinguished,"
We will respeat the principle that we have often cited in our previous decisions: "upon an appeal
46
to the General or special Commissioners against an assessment the onus of proof is
upon the taxpayer by evidence given on oath or affirmation or by unsworn evidence to
demonstrate that the assessment ought to be reduced or set aside,"
53

Halsburv's Laws of England 1607 vol. 23 4ur edn. see also Moll v I. R. C. [19551 T. C. 384. "if the
appellant fails to lead evidence before the Commissioners, he cannot have the assessment
reduced or displaced".
c.f. R. A. Bird and Company v I. R. C. [19241 12 T.C. 78 what then is the evidence that has been led
before the Tribunal to show that there was a loss incurred in a charge year on a source by the
appellant from the income of the appellant from the same source as that in which the loss was incurred?
We can only answer in the negative. In fact exhibits "A" and "B" the tax returns for 1994/95 and 1995/96
years respectively show that the respondent allowed those losses. Section 30(i) referred to by the
appellants is of no consequence in this case. It would have been material if the respondents had
disallowed the loss. We do not see how that could be an issue. The respondents have not disputed that
the appellant was entitled to those losses. When this point was brought to the attention of the appellant Mr
Njapawu valiantly tried to save the case by submitting that this case was against the mark up
adjustments. As we have stated, the onus of proof is on the appellant to discharge the assessment. No
iota of evidence either documentary or oral has been presented before the Tribunal to show that the mark
up adjustments were wrong. A mere assertion to that effect is not enough. The respondent in its defence
had relied on section 64 of the Income Tax Act. This section is irrelevant to the case at hand. There has
never been any suggestion that the appellants did not file returns. For the reasons already stated, we will
dismiss the appellants appeal with costs. Either party has the right of appeal within 30 days of the date
of this ruling.
54

IN THE REVENUE APPEALS TRIBUNAL 1999/RAT/41
HOLDEN AT LUSAKA
BETWEEN:
ZAMBIA EDUCATION PUBLISHING HOUSE APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: C H J Chileshe (Member), W Z Mwanza (Member) and J
Kasanga (Member).
FOR THE
APPELLANT: F M Chilomo, Board Secretary - Zambia Education Publishing
House
FOR THE
RESPONDENT: C Shapi, Legal Officer - Zambia Revenue Authority
RULING
This is an appeal by Zambia Education Publishing House ("The Appellant") in respect of an assessment for
the year 1994/95 issued by Zambia Revenue Authority ("The Respondent").
The uncontested facts are that the respondent issued estimated tax assessments on the
appellant pursuant to section 64 of the Income Tax Act chapter 331. The appellant had not
been submitting tax returns. The appellant objected to the estimated assessment citing
section 8 of the Zambia Education Publishing House Act chapter 145 of the
Laws of Zambia. The said section provides;
"Notwithstanding anything to the contrary contained in this Act or any
other law, the income of the Zambia Education
55

Publishing House from whatever source shall be exempted from any tax
payable under any written law for the time being in force relating to taxes
on income and profits".
The appellant submits with force that giving the words in section 8 their literal and ordinary everyday
meaning one is left in no doubt that the intention of the legislature was to exempt the appellant from
paying tax.
The respondent on the other hand argue that firstly, there is no conflict of laws between the Income Tax Act
and the Zambia Education Publishing House Act. They rely on sections 14 and 15 of the Income tax Act
as read with the second schedule of the Act. Section 14 (i) of the Act provides;
"Subject to the provisions of this Act, tax shall be charged at the rates set out
in part 111 of the charging schedule". Section 15 (i) provides;
"There shall be exempt from tax the persons, funds, charities and income
declared to be exempt in the second schedule to the extent specified therein
".
According to the respondent an institution can only be exempt from tax if it falls under the second
schedule if specified as such under section 15(i). This section should be read together with section 15(2) of
the Act which provides;
"The minister may, by statutory order approve, for the purpose of exemption
from tax, any person, agency, organisation or foundation which may be so
approved by him by order in the gazette pursuant to the second schedule, and
may by like order, exempt from tax the income of or emoluments of any person*
agency. Organisation or foundation which may be so exempted by him by order
in the gazette pursuant to the said schedule, and may, at any time, by like order
revoke any such order".
The respondent's argument taken to its logical conclusion is that for any organisation to be exempted from
tax. it must obtain an order for such exemption and be included in the second schedule as such exempt
organisation pursuant to section 15(1) of the Act. The respondent argues that the onus of proof is on the
appellant to show such exemption as envisaged by
56

section 15(2) of the Act. According to the respondents, the appellants have not produced such
an exemption.
The single issue therefore that falls to be determined before the Tribunal is whether the appellant is
exempted from tax not withstanding the provisions of the Income Tax Act. In our considered view, the
appellant has quite rightly observed that the Zambia Publishing House Act is at par with the Income
Tax Act. The latter cannot claim superiority over the former. As the appellants have further submitted,
only the Republican Constitution has superiority over other acts of parliament. The situation in
Zambia should be contrasted with the position in England where there is no written constitution. In
England, Finance Acts and other acts dealing with taxation and the public revenue form a distinct class
emphasising the dominant role of the House of Commons in Financial matters. It is of
constitutional importance that taxes should be collected, levied fairly..." c.f. Benion, statutory
interpretation of statutes third edition page 127. In England therefore, management Acts and other
similar provisions do provide in some instances that where there is a conflict in the interpretation of a
taxing statute with a non fiscal statute, the interpretation in the taxing statute will prevail to the extent
of such inconsistency. Having disposed of the misconception that my arise that the Income Tax Act
can override the provisions of the Zambia Publishing House Act, we have to ascertain whether section
8 of that Act standing on its own can give the appellant relief without calling in aid the provisions of
section 15(2) of the Income Tax Act as read with the second schedule of the said Act. The
appellant has disingenuously argued that before 1992, the appellant and all statutory boards were
exempt from tax because the second schedule then, as it existed granted exemption to statutory
organisations under paragraph 5(i) (i) which provided
"The Income is exempt from tax of any -
(1) statutory corporation, other than the Cold Storage Board of
Zambia, the Development Bank of Zambia, the Agricultural Marketing
Board and the Diary Produce Board."
According to the respondent, the Income Tax Act was amended in 1992 by Act no 11 of 1992 which
removed the exemption enjoyed by statutory organisations. The second schedule was amended. This
is not in dispute. In order to ascertain whether the exemptions of statutory
57

odies before 1992 was dependent on the second schedule, we will examine selected statutes that
created some statutory boards including the appellant before 1992.
Firstly, we have looked at the Zambezi River Authority Act Chapter 467 which came into force in
1987. This statute does not have a section similar to the Zambia Publishing House Act. It is correct
that the tax exemption of this organisation was, prior to 1992 founded on the second schedule of
the Income Tax Act before being amended by Act no 11 of 1992.
Secondly, we have examined the Zambia Centre for Accountancy studies Act chapter 391 of the
Laws of Zambia. Like the company referred to above, there is no section in the Act conferring this
organisation tax exempt status. It is correct that for this organisation, its exemption was equally
dependent on the second schedule of the Income Tax Act before its amendment in 1992.
Thirdly, we have examined the Zambia Law Development Commission Act chapter 32 of the Laws of
Zambia which was assented to on 1 st April, 1966. This Act has no section exempting the
commission from taxes. We can safely conclude that the tax exempt status of the commission before
1992 was to be found in the second schedule of the Income Tax Act before its amendment.
Fourthly, we have looked at the Zambia National Provident Fund Act (now called National Pensions
Scheme Authority Act NAPS A). The Zambia National Provident Fund Act as it then existed before
its repeal in 1996 had no provision exempting it from tax. The Act had been in existence for 30 years
and up to 1992, its tax exempt status was based on the second schedule to the Income Tax Act.
What is common in the statutes governing the organisations we have referred to is this; none of them
had a specific section exempting them from tax. Their exemption was dependent on the second
schedule of the Income Tax Act before its amendment. After 1992, these organisations could
specifically and individually get an exemption order from the Minister of Finance under section 15(2) of
the Income Tax Act. This is the position as at now. To this extent only, the Tribunal agrees with the
respondent. We however, with the greatest respect to counsel for the respondents disagree that
Zambia Publishing House Company was in a
58

similar position to the statutory organisation we have referred to. The Zambia Publishing House Act
(formerly Kenneth Kaunda Foundation) was enacted and assented to on 2 nd April, 1971. This Act
unlike the statutes we have referred to had section 8 which specifically provided that;
"Notwithstanding anything to the contrary contained in this
Act or any other law —
(a) no customs or excise duty shall be charged, levied,
collected or paid in respect of any goods imported
into, or manufactured or produced within Zambia
by or in the name of or on behalf of the publishing
house;
(b) the Income of the Publishing House from whatever
source shall be exempt from any tax payable under
any written law for the time in force relating to taxes
on income and profits."
The plain and literal meaning was that the organisation was exempt from both direct and indirect
taxation. This remained the position until 1998 when, by virtue of Act no 5 of 1998, the exemption on
indirect taxation was removed by the deletion of paragraph (a) from section
As the learned author Benion on interpretation of statutes states
"It is the principle that any person or body charged with the function of
applying and therefore interpreting any enactment is under a duty to arrive at
a legal meaning . . . . " Page 14.
The wording of section 8 of cap 145 is straight forward and unambiguous. In Attorney
General and the Movement for Multiparty Democracy v Lewanika and 4 others [1993 -
19941 Z.R. 164 S.C. The Supreme Court held, inter alia, that;
".......... Acts of Parliament ought to be construed according
to the intention expressed in the Acts themselves. If the words
of the statute are precise and unambiguous, then no more
can be necessary then to expand those words in their
ordinary and natural sense. Whenever a strict interpretation of a
statute gives rise to an absurdity and unjust situation, the judges
should and can use their good sense to remedy it.................."
59

In our considered view, there is no need to imply or infer anything in section 8 of Cap 145. Section 8 is clear
and unambiguous. If the Tribunal was to accept the respondents argument that the second schedule to
the Income Tax Act does not confer exemption on the appellant, this would lead to a startling and strange
result namely that the provisions of the schedule in the Income Tax Act over rides section 8 of Cap 45. As
we have explained earlier there is no legal authority in this jurisdiction to the effect that if there is an
inconsistency between the provisions of the Income Tax Act and another statute, the Income Tax Act
should prevail. If that was the intention, the legislation would have stated so as it did in the Banking and
Financial Services Act Chapter 387 of the Laws of Zambia. Section 85 of that Act provided;
" In the event of a conflict between the provisions of this chapter and those of any
other law in Zambia, the provisions of this chapter will apply to the extent of the
inconsistency".
The said provision was infact held to be valid by obiter, by Chaila J (unanimous decision) in Mwila Lumbwe,
Bank of Zambia Attorney General v Remmy K. Mushota SCZ Appeal no 72 of 1998. For the reasons we
have stated, we allow this appeal with costs to the appellant and set aside all the assessments issued
by the respondent in the appellant. Either party is at liberty to appeal.
60

IN THE REVENUE APPEALS TRIBUNAL
HOLDEN AT LUSAKA
BETWEEN:
CORAM:
MADISON INSURANCE COMPANY LIMITED
PROFESSIONAL INSURANCE CORP (Z) LTD
GOLDMAN INSURANCE COMPANY LIMITED
FOR THE
APPELLANT:
FOR THE
RESPONDENT:
RULING
REVENUE AUTHORITY
AND ZAMBIA
61
1999/RAT/46
APPELLANT
RESPONDENT
C II J Chileshe (Member), N A Lungu (Member) and H M
Muyoyeta (Member).
M Mulenga - M Mulenga & Company
L Muuka, Legal Counsel - Zambia Revenue Authority
20 th May, 1999 and 1 st June 1999
This is an appeal by the above mentioned insurance companies referred to collectively as ("the
Appellant"). The appeal is against Zambia Revenue Authority hereafter (referred to as "the
Respondent"). It should be noted for the record that both parties proceeded by way of written
submissions which were filed. The appellant also filed a bundle of documents. Both parties dispersed
with viva voce evidence and relied on the submissions. In its submissions, the respondent raised two
preliminary issues which we will proceed to deal with before considering the appeal on its merits.
Firstly, the respondent argues c.f. letter of 26 th June 1998 which will we mark as exhibit "PI" that the
appellant has not complied with the provisions of the Revenue Appeals Tribunal Act and cannot be
said to have lodged an appeal. The respondent has however surprisingly not

pointed to the provisions of Act No 11 of 1998 which have not been complied with. We have on record
a memorandum of appeal marked exhibit "P2" which sufficiently sets out the grounds of appeal. In
the absence of submission from the respondent as to which provisions have not been complied with,
we dismiss the first preliminary point.
Secondly, the respondent argues that there is no provision in the Act for joint appeal and each of the
three insurance companies should have launched separate appeals. The answer to this is simply
section 4 (3) of the interpretation and General Provision Act chapter 2 of the Laws of Zambia which
provides;
"words and expressions in a written law in the singular include the plural and
words and expressions in the plural include the singular".
The fact that the Act refers to a person or appellant does not exclude "persons" or "appellants"
from commencing proceedings. This preliminary objection is equally dismissed. We will now deal with
the appeal on its merits. The brief and undisputed facts are that prior to 1 st February 1997, insurance
services did not attract value added tax popularly known as VAT. By virtue of S.I. No 16 of 1997, the
value added tax (exemptions) (amendment) order 1997 was put in place and removed the tax
exempt status that insurance services hitherto had enjoyed. Insurance Services became taxable.
What has brought about the current dispute is that the appellants had provided insurance services to
some clients prior to 1 st February 1997 for which payment was received after l sl February 1997. At
the time when such services were provided, the appellants did not charge VAT as by then VAT was
not payable, when payment was received, VAT was in place and the respondent assessed the
appellants as follows;
1. Professional Insurance Corporation Limited K 343,828,439
2. Madison Insurance Corporation Limited K 107,292,299
3. Goldman Insurance Limited K 115,652,655
The respondents have argued that the point of supply should be considered as when premiums
were received by the appellants from their clients. They contend that if premiums were received after
1 st February 1997, then tax was due in accordance with section 47 of the Value Added Tax Act. They
further contend that it is immaterial that the contracts may have
55
62

een entered into before 1 st February 1997.
The appellant's position is that they have credit facilities with some of their clients who they give insurance
cover on credit. They point out that under such circumstances, VAT cannot be paid on premiums collected
after 1 st February, 1997 though cover was granted before l sl February, 1997.
The issue that falls to be determined is at what point does a contract of insurance come into force? Is it
at the time of entering into the contract before payment of the premium or after payment of the premium?
The answer to this question will then resolve the corollary issue of what is the tax point of an insurance
service provided on credit. The appellant has argued that an insurance service contract is deemed to have
been entered into at the time it so agreed and the service provided. The appellant has pointed out to the
practice of issuing cover notes in the insurance industry as an example of an insurance company
providing interim cover on which it will be bound even before a formal policy documents is issued and
payment made. The appellant has drawn the Tribunal's attention to the English case of Julian Pract et
cie, S/A v H. G. Poland Limited f 1960] Llodys rep. 420 where Pearson J held that; "even in the United
Kingdom there has to be a familiar system of the cover note which is issued at once on receipt of a
proposal, and covers the assured and puts the underwriters on risk for the period while the proposal is
being considered and until a policy is either granted or refused."
The appellant further cited Mackie v European Assurance Company H869I It 102 which stated;
"The cover note is in it self a contract of insurance governing the rights and
liabilities of the third parties in the event of a loss taking place during its
currency".
This position was accepted at the beginning of the twentieth century in Re Coleman's Depositors
Limited v Life and Health Assurance Association [1907] 2 KB 798. The
appellant has also submitted that some cover notes may provide that the usual terms and conditions of an
underwriter's policy will be deemed to have been incorporated and as such, there is in fact in existence a
policy even before payment of premium.
63

The appellants have reinforced their argument by contending that a policy "prima facie" comes into
force as soon as it is issued. The period of insurance thereupon begins and the insurers become
liable irrespective of whether the premium is paid or not. The appellants on the other hand admit that
some policies may also state that the policy will only come into full force upon fulfilment of a certain
condition i.e. payment of a certain premium.
The respondent in answer has in the main advanced two grounds. Firstly, they argue that VAT is
payable on contracts entered into before 1 st February 1997 for which payment was made after 1 st
February 1997. They rely on section 47 of the Act for the imposition of the tax. Section 47 of the
said Act provides;
"where, after the making of a contract for the supply of goods
or services and before the goods or services are supplied:-
a. there is a change in the tax charged on the supply; or
b. tax chargeable on the supply is introduced or abolished;
then unless the contract otherwise provides, there shall be
added to or deducted from the consideration for the supply an
amount equal to the tax adjustment."
The thrust of the respondent's argument is simply this; before premium is paid, there is no insurance
and an underwriter is not on risk. If an underwriter entered into a contract on say 20 th January, 1997
and no premium was paid, then there was no supply of the insurance service. The insurance service
will be deemed to have been provided after payment of the premium. If, say, the premium is paid on
2 nd February, 1997 then the service will be deemed to have been provided on that day and VAT will
be due notwithstanding the fact that at the time of entering into the contract VAT was not due.
The second argument of the respondent which is an extension to the first is that in order to determine
the tax point for insurance services, recourse should be had to section 13 of the Act. Section 13 of
the Act reads -
" This section shall have effect for determining for taxation
purposes, the time at which goods or services are supplied".
64

Subsection 5 of section 13 provides;
"subject to the preceeding provisions of this section, the time of supply
of services shall be whichever is the earliest of the following times;
(a) the time when payment for the supply is received;
(b) the time when a tax invoice is issued or
(c) the time when they are actually rendered or performed".
The respondent has interpreted the above provisions as follows:-
58
i) The payment for the supply of insurance is the premium that
is payable under the policy and in as far as the policy has not been
effected, no premium has been received in relation to that policy.
ii) The time when the tax invoice is issued - In the absence of an insurance
policy and the payment of premiums, there can be no tax invoice issued
by the insurer.
This submission is on the basis of paragraph (b) of subsections of section 13 "the time when
a tax invoice is issued" With due respect to the respondent's counsel this aspect is irrelevant
to the appeal. This appeal is in respect insurances allegedly entered into before 1 st February,
1997. Before 1 st February. 1997 insurance services were not vateable and insurance
companies were not required to issue tax invoices for purposes of the Act. Discussing this
aspect of subsection 5 i.e. to see when tax invoices were issued by the appellants is an
academic exercise.
Hi) The time when they are actually rendered or performed -
Insurance contracts require to have all the pre-requisites before they can
be deemed to be valid. The contract of insurance, like any other contract,
is created where there has been an unqualified acceptance by one party to
the offer made by the other party. The insurance of a cover note is an
interim measure and is not the insurance policy.
65

The Tribunal has carefully considered the arguments and submissions of both parties. As to whether
there is in existence a contract of insurance or not, this is a question of fact. As the learned author
Malcom A Clarke, "The law of Insurance contracts" 1999 edition at Page 1 - 1 "The English Courts know an
elephant when they see one,
so too a contract of insurance .,,."
The respondent, through taking a very simplistic approach on the basics of offer, acceptance and
consideration have argued that before premium is paid, there is no contract of insurance. Infact, they have
been even bold enough to go further and say that "a cover note" is not a contract of insurance. We
respectfully disagree. As the appellant correctly stated the position of the law with reference to the
decided case of Julian Pract et cie, S/A v H.G. Poland Limited ibid, even in the United Kingdom .... the
cover note which is issued at once on receipt of a proposal, and covers the assured and puts the
underwriters on risk for the period while the proposal is being considered ...." The cover note is in itself a
contract of insurance governing the rights and liabilities of the parties in the event of a loss taking place
during its currency. As the appellant has further rightly pointed out, some cover notes infact stipulate that the
usual terms and conditions of an insurance company will be deemed to be incorporated into the cover note.
When a cover note is issued pending the finalisation of the policy document, the cover note will be the
interim contract governing the parties and once a policy document is issued it applies retrospectively to the
date of the cover note. During the period that an insured is on a cover note, there are rights and
obligations attaching to the parties. The learned author Malcom A Clark p. 12 - 1 ibid has this to say on
cover notes;
"The purpose of interim insurance, called a binder in the
United States and often recorded as a cover note in England,
is to give the insurer time to assess the risk and to decide
whether to commit himself over a longer period through a
policy while offering interim cover to the propose -
especially when his need for cover is pressing ................... interim
insurance is beneficial to the insured, who has immediate cover
in order for example, to use the car he has just bought. . . "
The respondent's argue that insurance services can only be provided after the premium has been paid.
We respectfully disagree. It is correct that the consideration must be agreed i.e. the premium. It is not a
must or essential that the premium must be paid before the service
66

can be supplied or a contract of insurance to be deemed to be in effect. The respondents appear not
to be aware that insurance transactions are subject to credit agreements or arrangements. It is quite
common for the parties to agree for payment of premium at some future point in time or in instalments.
This does not mean that the underwriter is not on risk. As the learned author Malcom A Clarke points
states at page 13-1;
"It is not in the nature of an insurance contract that
premium should be payable at any particular point in time
in relation to the period of cover ..."
c.f. also the authors reference to Holliday v Western Australian Insurance Company Limited [19361 54
Lloyds report 373.
The authorities clearly show that payment is not a condition "sine qua non" to provision of an insurance
contract. This depends on the agreement in the contract. As the author Malcom A Clarke points out at
page 13-8
"premium must be paid at the time stipulated in the contract of insurance. If no
time has been stipulated, the premium must be paid within a reasonable time".
The appellants have contended that the policies which are the subject matter of these appeals were
effected before 1 st February, 1997 when services were provided. The respondent has not provided any
evidence to the contrary apart from merely stating that the services could not have been provided
because premiums had not been paid.
The respondent's interpretation of when an insurance policy is in place can, if taken to its logical
conclusion, lead to absurdity. We will demonstrate this point. An insurance contract is usually for specific
periods say 1 st April, 1996 to 31 bt March. 1997. The underwriter will agree to be on cover whilst waiting for
payment.
It does happen in practice that during the whole duration, the underwriter does not receive payment. What
happens in practice is that the insurance companies sue for the premium which should have been paid
between 1 st April, 1996 to 31 st March. 1997. Why is it so? The answer is simple. The underwriter was on
cover. There was a contract. Infact insurance
67

companies do sue or so for premiums and recover for amounts that were due on an insurance which has
expired. If the respondent's argument is accepted, it means that insurance companies could not
recover for the insured public could simply plead that there was no contract. This is not the position in
law.
For the reasons that we have advanced we allow this appeal and quash all the assessments issued in
respect of the three appellants.
68

IN
THE REVENUE APPEALS TRIBUNAL 1999/RAT/24
HOLDEN AT LUSAKA
BETWEEN:
MUMANA PLEASURE RESORT APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: C H J Chileshe (Chairman). N A Limgu(Member) and H M
Muyoyeta (Member).
FOR THE
APPELLANT: M F Sikatana - Veritas Chambers
FOR THE
RESPONDENT: L Muuka, Legal Counsel - Zambia Revenue Authority
RULING
14 th July, 1999 and 5 th September, 2001
This is an appeal by Mumana Pleasure Resort (hereafter referred to as "the Appellant")
against the decision of the Revenue Authority (hereafter referred to as "the Respondent") dated 12 th
September, 1996. The appeal is in respect of the following heads :-
i) penalty for late submission of returns
ii) penalty for late payment
iii) seizure of appellant's property
Both parties filed documents and written submissions. Both parties did not call any oral evidence.
The appellant in support of its appeal, has conceded that it submitted returns late and made
69

payments late. According to the appellant's advocates, this was not deliberate but due to the fact that
the appellant had not acquired the knowledge of processing VAT Returns and had not been aware
of consequences of default.
The appellant has further requested the Tribunal to consider the effect of the seizure of its goods by
the Respondent. According to the appellant, the Respondent seized some goods at the appellant's
business premises on 24 th June, 1997 as a means of satisfying the late payment penalty assessment.
According to the appellant the proceeds of sale of the seized items have not been accounted for. The
appellant submits that the Tribunal should take that factor into account in determining this appeal.
Lastly, the appellant has submitted that there are mitigating circumstances which the Tribunal
should take into account. According to the appellant's advocates, Government
Departments owe the appellant substantial sums of money. The default of these Government
Departments has impeded the appellant's ability to meet its own obligations including Value Added
Tax.
The Respondent in response had advanced three grounds. Firstly, it argues that the appeal is in
respect of a non-appellable matter. Secondly, they submit the appeal was out of time. Thirdly, the
respondent has argued that the Tribunal has no legal powers to grant any order staying execution of
any warrant of distress although when an appellable mater is before the Tribunal, the Respondent can
hold on to the intended sale of seized goods.
In determining this appeal, we will first consider the Respondent's arguments as they touch on the
jurisdiction of the Tribunal. If it is found that the Respondent's submissions are correct, then there
will be no need to consider the merits of the appellant's appeal.
The jurisdiction of the Tribunal in respect of VAT appeals is to be found in section 3 (b) of the
Revenue Appeals Tribunal Act no. 11 of 1998 which provides:-
"To hear appeals under the Value Added Tax in respect of any of the following
matters:
(i) the registration, or the cancellation, of registration of a supplier;
70

(ii) the refusal to register a supplier;
(iii) the tax assessed to be payable on any supply of goods or services or on the
importation of any goods;
(iv) the amount of any input tax that may be credited to any taxable supplier; (v) the
application of any administrative rule providing for the apportionment or
disallowance of input tax
(vi) any notice under section twenty five of the Value Added Tax Act (vii) the
requirement of the Commissioner General for the provision of security."
"Prima facie", late submission or late payment penalty appears not to be covered as an appellable
matter under section 3 (b) of Act no. 11 of 1998. However, in our considered view, penalty for late
submission of returns or payment do not stand on their own. They flow from the fact that there are
transactions relating to a supply of goods or services. Our reasoning is buttressed by the definition
of "tax" in the definition section 2 (1) of the Value Added tax Act Chapter 331. "Tax is defined as
Section 17 (i) provides;
"means Value Added Tax imposed by section eight or
additional tax payable under section seventeen, and
"taxation" shall be construed accordingly"
"A taxable supplier who fails to lodge a return within the time
allowed or under this Act shall pay additional tax consisting of....
"
Late submission of return penalty is in fact additional tax and shall be construed as such. Therefore,
Section 3 (b) (iii) of Act No 11 of 19 { )8 as read with section 2 (i) and section 17 (i) of the Value Added
Tax Act Chapter 331 in our view is authority for the position we have taken that late lodgement of
returns is an appellable matter
Secondly, the Respondent has argued that the appeal is out of time. This is correct. However, the
Tribunal had decided to consider the appeal as having been filed out of time pursuant to the
provisions of Regulation 12 of Statutory Instrument No 143 of 1998 (Revenue Appeals Tribunal
Regulations)
71

Thirdly, the respondent has argued that the Tribunal has no powers to order a Stay of Execution
on a Warrant of Distress. The Respondent's argument is very simplistic. The Tribunal can, pursuant
to the provisions of section 31 (2) (b) and 31 (3) of the Value Added Tax Act as read with section 3 (b)
(vii) of the Revenue Appeals Tribunal Act No. 11 of 1998, stop enforcement. The Revenue Appeals
Tribunal Act No 11 of 1998 empowers the Tribunal to stop the enforcement or collection of tax
pending the outcome of an appeal. Of course, this is upon an appropriate application by an
appellant. The effect of an order made by the Tribunal under the aforementioned sections is in fact a
Stay of Execution. However, for the purpose of this appeal, the issue of the enforcement of the tax
has been overtaken by events. At the time that this appeal was being heard, the Warrant of
Distress had already been enforced. In any event, there was no formal application before us to waive
the requirement to lodge the tax in dispute.
Having concluded that this appeal was properly before the Tribunal, we now turn to consider whether
there is merit in the appellant's appeal. The appellant have not disputed the assessments. Their
contention is that they were not aware of the requirements to file returns. As the old saying goes,
"ignorance of the law is no defence". This argument cannot be used to challenge the assessment.
Equally, the argument that non-payment by Government Institutions to the appellant has impeded its
own ability to meet its obligations is not a tenable legal argument to use in interfering with the
assessments. There is evidence on record, which has not been challenged, that some items
belonging to the appellant were sold by the Respondent and unaccounted for. We will dismiss the
appeal with costs subject to the Respondent taking into account the value of the Tax nesty and the
items sold in arriving at the amount due from the appellant after this appeal. Either party has the right
to appeal to the High Court.
72

IN THE REVENUE APPEALS TRIBUNAL 2000/RAT/78
HOLDEN AT LUSAKA
BETWEEN:
ZAMCELL LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), T Mushibwe (Member) and N A
Lungu(Member).
FOR THE
APPELLANT: K Pulu - Pricewaterhouse Coopers
FOR THE
RESPONDENT: D Mulima and A Muvwende - Zambia Revenue Authority
RULING
3"' March, 22 nd March, 4* April and 1 1 th September, 2001
This is an appeal by Zamcell Limited who we shall hereafter refer to as "the Appellant" in respect of
assessments for the 1997/98 and 1998/99 charge years. The assessments were issued by Zambia
Revenue Authority whom we shall refer to as "the Respondent" for the purpose of this appeal.
The brief and uncontested facts are as follows. The company is incorporated in Zambia and is
licensed to carry on business as a provider of cellular phones. On 18 n March, 1998 the company
entered into two agreements whereunder it obtained foreign currency denominated loans from the
International Finance Company (IFC) and the Development Bank of South Africa (DBSA). The said
funds of US $4.5 million from each of the lenders was to be used for the purchase and installation of
machinery and equipment for the purposes of its cellular radio telecommunication business. We shall
refer to the IFC loan agreement as exhibit "PI"
73

and the common terms agreement between DBSA and IFC as exhibit "P2". Exhibit "PI" under article 2.03
at page 5 provided for interest at the rate mentioned. Clause 2.07 at page 8 of the said agreement
provided for payment of commitment fees and guarantee fees. Exhibit "P2" had similar provisions.
In the accounts for the period ended 31 st December 1998 which formed the basis of assessments for
the 1997/98, 1998/99 charge years the company charged and claimed as a deduction for tax purposes the
fees and guarantee commissions amounting to K 291,508,000 and K 8,610,000 respectively. The
respondent has disallowed these expenses claiming they are of a capital nature and hence not allowable
under section 29 (i) (a) of the Income Tax Act.
Both parties have not called oral evidence and have relied on their written submissions and documents
filed before the Tribunal. The sole issue that falls to be determined by the Tribunal is whether the
commitment and guarantee fees were expenses on capital account of the appellant or not. The appellant
has in the main advanced two grounds of appeal. Firstly, the appellant argues that the fees and guarantee
commission are calculated on the basis of the provisions, which are stipulated in the loan agreements. The
fees and commission are normal annual financial revenue costs such as interest payments for the use of
the loans and are neither a part nor a component of the loans involved. Secondly, the appellant has argued
that the United Kingdom cases of Beachamp v Woolworth Pic T C 542 and Ascot Gas Water Heaters
Limited v Duff 24 T C 171 referred to by the Respondent are based on UK Legislation and are not
applicable to Zambia. According to the appellant, at the time the Ascot case was decided and even at
present the UK tax legislation had, and still has a peculiar underlying principle relating to the deductibility for
tax purposes of charges and expenses in respect of loans or similar financial obligations. According to
the appellant it is as a consequence of this peculiar principle under the UK tax legislation that even interest
on any loan raised for the purpose of providing capital to be used in the tax payer's business was treated
as a capital expense and so not deductible for tax purposes.
The appellants have further submitted that the underlying principle in the UK which influenced the
decision in the Ascot case is not applicable to the Zambian tax
74

legislation, thus any interest payment on any loans used for business purposes whether for the purchase or
acquisition of non-fixed assets such as equipment or business premises are permissible as a deduction
for tax purpose. The Respondent in its response has asked the Tribunal to consider two issues: firstly
whether the loans were on capital account and secondly whether the incidental expenses including
commitment/guarantee and other fees are also on capital account. The respondents have referred the
Tribunal to the English decide case of Beauchamp v Woolworths Pic 61 T C 542 as a guide to
determine whether the loans in issue where of a capital nature. According to the respondent, the
appellant had access to the loans starting from the year 1998 and the repayment period extends up to
the year 2006 a period of more than five years. The respondents, in reliance on the ratio in the Beachamp
case have pointed out the there are two tests to be adopted in ascertaining whether a borrowing is on
capital account.
Firstly, the terms may themselves be sufficient to show that they constitute capital additions and if so it
does not matter whether they were intended to be used in making payments of a capital or revenue nature.
The respondent has pointed out that the preamble to exhibit "P2" is indicative of a long term borrowing and
it reads;
"In order to operate the license and meet all its obligations Under the
license agreement, the company requires long term financing".
Secondly, the respondent submits that in a doubtful case, the use made by a company of moneys
borrowed, whether the moneys are embarked in the trade in the acquisition of current assets or otherwise,
on the one hand, or are retained on deposit or invested or used in the acquisition of fixed assets, on the
other hand, may throw some light on the character of the borrowing. Thus, borrowings are likely to be of a
capital nature if the funds are retained on deposit or invested, or used in the acquisition of fixed assets. The
Respondent finally submits that having shown that the borrowings in connection with the
commitment/guarantee and other fees were incurred on capital account, it follows that these incidental
costs were also on capital account. The respondent points out that the company's first set of accounts
shows that it incurred commitment fee of K 233 million whereas no account loan is indicated in the balance
sheet for
75

that year. According to the appellant this shows that the fee was actually incurred before the loan was
obtained. The fee therefore was used to secure the loan and the latter was reported in the subsequent
year's accounts.
If it is found that the expenditure incurred by the appellant was revenue in nature, then it has to be
allowable. If the expense is capital in nature, then it cannot be allowed. Section 44 ( c ) of the Income Tax
Act specifically also prohibits deduction of any capital expenditure.
We have carefully considered the submissions made by both parties. It is not in dispute that the loans
obtained by the appellant were capital in nature. The respondent has relied on the case of Ascot Gas
Heaters v Duff for the proposition that the commitment fee and guarantee charges are not deductible. The
appellant points out that this is peculiar to UK legislation. They argue that in Zambia, any interest
payments on any loans used for business purposes whether for the purchase or acquisition of non-fixed or
fixed assets such as equipment or business premises are permissible as deduction for tax purposes. The
appellants have not pointed to any legal authority or decided case to buttress this argument. Equally,
they have not advanced any helpful authority for the proposition that the case of Ascot Gas Heaters v Duff
was decided on the basis of UK tax legislation, which prohibits the deduction of any form of interest as
an expense. It would have been helpful if the appellants had made reference to the relevant portions
of the UK tax legislation. We have carefully examined the Income Tax Act Chapter 323 of the Laws of
Zambia. There is no provision in the Act that specifically provides mat interest (irrespective of whether of a
capital or revenue nature is deductible).
The starting point in resolving this issue is section 29 (i) of the Income Tax Act, which provides;
"Subject to the provisions of this part: -
(a) In ascertaining business gains or profits in any charge
year, there shall be deducted losses and expenditure other than of a
capital nature incurred in that year wholly and
exclusively for the purpose of the business ..............."
If it is demonstrated that the interest was an expense of a capital nature, then it is non
76

deductible. If it is demonstrated that it was of a revenue nature, then it is deductible and relief will be
granted under section 29 (i) (a) of the Act. In order to determine whether the interest incurred was of a
capital or revenue nature, it would be useful to try to draw a distinction between capital and revenue
expenditure.
A South African jurist, Watermeyer, CJ in the case of Newstate Areas Limited v C.I.R.
1946,14 S.A.T.C. at page 155 had this to say;
."........In a literal sense expenditure and losses do not produce
income. Save in the case of the leasing or the loan of capital in some form or other,
income is produced by work or service or activities or operations and as a rule
expenditure is attendant upon the performance of such operations sometimes
necessarily, sometimes not. Expenditure may also occur in the acquisition by the tax
payer of the means of production, ie. The property, plant, tools, etc which he uses in
the performance of his income earning operations and not only for their acquisition
but for their expansion and improvement. Both these forms of expenditure can be
described as expenditure in the production of the income but the former, is as a rule,
current or revenue expenditure, and the latter is as a rule expenditure of a capital
nature. As to the latter the distinction must be remembered between floating or
circulating or fixed capital. When the capital employed in a business is frequently
changing its form from money to goods and vice-verse (e.g. The purchase and sale
of stock by a merchant or the purchase of raw material by a manufacturer for the
proper conversion to a manufactured article) and this is done for the purpose of
making a profit, then the capital so employed is floating capital. The expenditure of
a capital nature, the deduction of which is prohibited under section 11 (2) [South
African Income Tax Act], is expenditure of a fixed nature, not expenditure of a floating
capital nature, because expenditure which constitutes the use of floating capital for
the purposes of earning a profit such as the purchase price of stock infrade, must
necessarily be deducted from the proceeds of the sale of the stock in trade in order
to arrive at the taxable income derived by
77

the tax payers from that trade. The problem which arises when deductions are claimed
is therefore usually whether the expenditure in question should properly be regarded as
part of the cost of performing the income-earning operations or as part of the cost of
establishing or improving or adding to the income — earning plant or machinery
......the true nature of each transaction must be inquired into in
order to determine whether the expenditure attached to it is capital or revenue
expenditure. Its true nature is a matter of fact and the purpose of the expenditure is an
important factor; if it is incurred for the purpose of acquiring a capital asset for the
business it is capital expenditure even if it is paid in annual instalments; if, on the other
hand, it is in truth no more than part of the cost incidental to the performance of the
income producing operations, as distinguished from the equipment of the income
producing machine, then it is a revenue expenditure even if it is paid in a lump sum "
This dictum has also been quoted by the author of Koonstams Income Tax 12 th edition authors on page
119. The author also refers to the opinion of Innes C.J. in the case of C.I.R.v George Forrest Timber Co.
Limited;
"money spent in creating or acquiring an income- producing concern must be
capital expenditure. It was invested to yield future profit and while the outlay
did not recur, the income did. There was great difference between money
spent in creating or acquiring a source of profit and money spent in working.
The one was capital expenditure, the other was not.................the reason
was plain; in one case it was spent to enable the concern to yield profits in the future; in
the other it was spent in working the concern for the present production of profit"
The learned author of Koonstam's Income Tax give examples of capital expenditure
whether paid in a lump sum or in annual instalments;
i) money spent in acquiring fixed capital assets for use in a business eg. Factory
78

ii) premises and plant and machinery and patent rights. This would include all
expenditure connected with or attached to the acquisition of capital assets, eg.
Transfer duty on factory premises acquired, railage paid on plant acquired for use
in a business, installation costs, cost of registration, patent rights, etc. iii) Expenditure
designed to extend the scope of a business or to secure an enduring
advantage or benefit for the trade carried on iv) Money spent in order to create a
source of income, e.g. The purchase price of the
goodwill of the business, the purchase price of a lease of premises in which to
conduct trading or in respect of which income is receivable v) The cost of obtaining
share capital in the case of a limited liability company e.g.
Underwriting commission paid, advertising and legal costs in connection with an
offer of shares.
The passages that we have referred to are with respect to the South African Income Tax Act.
However this approach is not unique to South Africa but other jurisdictions in the commonwealth
such as the United Kingdom itself. The authorities suggest that if a transaction is capital in
nature, then other associated or incidental expenses associated will also be treated as that of a
capital nature. The House of Lords in Beauchamp v F.W. Woolworth Pic vol. 61 Tax Cases at 542
in considering section 130 (f) of the Income and Corporation Taxes Act of 1970 held that a loan
was only a revenue transaction if it was temporary and fluctuating and incurred in meeting the
ordinary running expenses of the tax payer's trade. In that case, the exchange losses, which were
incidental and associated with the borrowing, were held to be capital. By parity of reasoning,
interest is an expense necessarily incidental to the borrowing. The appellant's contention that UK
legislation is different from Zambia on the treatment of interest is not correct. In fact section 130 (f)
of the Income and Corporation Taxes Act of 1970, which was under consideration, also prohibits
the deduction of capital expenditure just like section 29 (a) of the current Zambian Income tax
Act chapter 323 in so far as it prohibits expenses of a capital nature from being deducted. The
position taken by the House of Lords in the case of Beauchamp is no way different from that
of the South African Courts.
79

The respondents in further support of their position have referred us to Ascot Gas Water Heater
Limited v Duff (H. M Inspector of Taxes) at 171 on an appeal from the special commissioners,
Lawrence J in the Kings Bench Division of the High Court of England had this to say;
" ....... nowhere it seems to me that the principle may be stated in
this way; If you get a company dealing with money, buying or selling stocks or
shares, treasury bills, bonds, all sorts of things, and if you get that company
getting as such companies constantly do get, temporary loans from their bank —
accommodation, I suppose, for sometimes twenty four hours, or even less,
sometimes for a good deal longer — if you get that sort of thing, then the interest
on that money, the hire, so to speak; paid for that money, may properly be
regarded as an expenditure of the business, an outgoing to earn profits. On the
other hand, if the truth of the ting is that by the payment of the interest the
company does not obtain mere temporary accommodation, day to day
accommodation of that sort, but does, in truth, add to its capital and get sums
which are used as capital and nothing else, then I think that in that case all the
authorities show that the deduction cannot properly be made "
The decision in the Ascot Gas Heaters Case was passed in 1942 and the Beauchamp v
Woolworth case was decided in June 1989. There was a time difference of over fort)' years.
The position at English has never changed. It is simply this: if a loan is obtained to acquire
capital assets, the associated expense such as interest, commission or the cost of that borrowing
will not be deductible as it will be treated as a capital expense. The appellants have valiantly
submitted that the position in Zambia is different as interest of whatever nature is deductible. They
have however not supplied as with any statutory authority for this proposition. The position in
Zambia is not different from the position elsewhere in jurisdictions such as South Africa or the
United Kingdom. The position we have taken may appear harsh and inequitable. However, we
have to bear in mind that our duty is confined to making our interpretation of what the law is. As
Rowlatt J said in the oft cited dicta;
73
80

"In a taxing Act one has to look merely at what is clearly said. There is no
equity about a tax. There is no presumption as to tax Cape Brandy
Syndicate v I.R.C [192111KB 64 at 71.
It is quite clear to us that the loans that were obtained were capital in nature. The interest and the
commission which were necessarily incidental to the loan should be treated as capital expense and
therefore not deductible. For the foregoing reasons, we will dismiss this appeal with costs. Either party
has the right of appeal within 30 days.
81

IN THE REVENUE APPEALS TRIBUNAL 1999/RAT/54
HOLDEN AT LUSAKA
BETWEEN:
PRIME PHARMACEUTICALS LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: C H J Chileshe (Member), J Kasanga(Member) and H M
Muyoyeta (Member).
FOR THE
APPELLANT: A D Adam, A D Adam & Company
FOR THE
RESPONDENT: L Muuka, Legal Counsel - Zambia Revenue Authority
RULING
27 th April, 1999
This is an appeal by Prime Pharmaceuticals Limited hereafter referred to as "the Appellant". The
appeal is in respect of an assessment made by Zambia Revenue Authority ("'the Respondent") for
the period l sl July to 1996 to February, 1997.
During this period the appellant sold surgical and examination gloves for which it did not charge
Value Added Tax on the understanding that surgical gloves were health supplies and therefore exempt
supplies in accordance with paragraph 3 of the first schedule to the Value Added Tax Act chapter 331
of the Laws of Zambia. The Respondent took the view that they were not exempt and assessed tax
and interest amounting to K 15, 870, 419.00.
i) The single issue that falls to be determined is whether surgical gloves can be in the
category of medical supplies
82

According to the appellant, the classification by the respondent of gloves as non-medical supply is a
misunderstanding of the term. According to the appellant, the dictionary definition of "surgical"
is of "surgical or surgeon" and a fortior's 'surgical gloves' are a sheath type glove used in all
surgical practice by doctors, surgeon, consultants in all process involving the diagnoses and
treatment of the physical state and in restoring, correcting or modifying organic or physical functions in
man and animal. The gloves are skin tight, sheath like, disposable after a single use and of no
possible use outside the medical or veterinary profession. The appellants further contend that
'surgical gloves' fall clearly within the parameter of subparagraph (i) and (ii) in the vat liability
guide pertaining to "medical supplies" . The appellants have also submitted an opinion from the
pharmaceutical society of Zambia dated 17 th November 1997 and have requested us to consider it
while delivering our ruling. The same is marked 'A' for identification purposes.
The respondent on the other hand has argued that surgical gloves do not qualify as medical supplies.
They have equally tendered an opinion dated 19 th November 1997 from the Registrar of the
Pharmacy, Medicines and Poisons Board. The same is marked 'B' for identification purposes.
Both parties have not called any evidence and have relied on the submissions filed. The English
dictionary defines a glove as a 'covering for the hand, usually with separate divisions for each finger
and the thumb and surgery is defined as the treatment of injuries and disorders and disease by
cutting or manipulation of the affected parts. The word surgical is an adjective of the former and
surgical gloves simply describes the gloves worn by surgeons in surgery. According to the opinion of
the Pharmacy, Medicines and Poisons Board, Medical or Pharmaceutical Product is defined as
"Drug, Medicine or Pharmaceutical product and means any substance or article, not being an
instrument, apparatus or appliance which is manufactured sold, supplied, imported or exported for
use wholly or mainly for any of the following ways:-
(a) by being administered to a human being or animal for a medical purpose;
83

(b) as an ingredient in the preparation of a substance or article which is to be
administered to a human being or animal for a medical purpose
(c) medical purposes means any of the following purposes:-
a. Treating or preventing disease
b. Diagnosing disease or ascertaining the existence, degree or extent of
physiological condition
c. Contraception
d. Inducing anaesthesia
e. In any way preventing or interfering with the normal operation of a
physiological function whether permanently or temporarily. According to the
said Pharmacy, Medicines and Poisons Board, this is the official definition
taken. According to the Registrar of the said Board, surgical gloves do not
meet the above product and are not even registered in Zambia, as the existing
regulations do not provide for their registration. He points out that S.I. No. 47
of 3 993 requires all medicines to be registered in Zambia and gloves are not so
registered.
We have also looked at the opinion of the Pharmaceutical Society, which in our view is
not as categoric as that of the Pharmacy and Poisons Board, a statutory organisation
charged with the responsibility of regulating the supply of drugs and medicines.
It is the Tribunal's considered view therefore that surgical gloves are not medical
supplies and the appeal is therefore dismissed.
84

IN THE REVENUE APPEALS TRIBUNAL 2000/RAT/20
HOLDEN AT LUSAKA
BETWEEN:
POLYTHENE PRODUCTS LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), T Mushibwe (Member) and N A
Lungu(Member).
FOR THE
APPELLANT: E G Mulope & K B Michelo, Grant Thornton
FOR THE
RESPONDENT: D Mulima and A Muvwende - Zambia Revenue Authority
RULING
23rd March, and 15lh September, 2001
This is an appeal by Polythene Products (Zambia) Limited who we shall hereafter refer to as the
appellant. The grounds of appeal though not systematically presented in accordance with regulation 6
(i) of Statutory Instrument No. 143 of 1998 appears to be as follows:
1. that the exchange loss of K 873,157,770 should not be added back as the amount had
already been disallowed previously. This is as evidenced by the Notice of Objection dated
12 th August, 1999 and on confirmation of the assessment, this ground was repeated in a
letter of appeal to the Tribunal on 11 th February, 2000.
2. that capital allowance ought to be granted as exchange losses were incurred on
capital expenditure.
85

During the hearing of the appeal both the appellant and the Respondent elected not to call any
evidence and decided to rely on written submissions. We must point out that this a classic
case where an appeal has been launched without following the appeals procedure provided for in
the Revenue Appeals Tribunal Regulations, Statutory Instrument No. 143 of 1998 in particular
regulation 6 (i). We would like to remind practitioners who represent tax payers before the tribunal that
it is in their interests to be familiar with the practice and procedure of the Tribunal so that they can
effectively articulate their clients interests.
The first ground of appeal that was advanced was to the effect that in previous years the respondent
had disallowed exchange losses in previous computations but in the 1997/98 year the losses
previously allowed were disallowed. According to the Respondent, the exchange losses were allowed
in error. The exchange losses arose on a foreign currency denominated loan obtained from
Development Bank of Zambia to purchase machinery and refurbish plant. The Respondents have
argued that as the foreign exchange losses were incurred on a loan used to purchase capital items,
those losses were capital in nature and hence not allowable under section 29 A of the Income Tax
Act Chapter 323. In our considered view, this case is on all fours with this Tribunal's decisions in the
cases of Kaleya Small Holders v Zambia Revenue Authority and Zamcell Limited v Zambia
Revenue Authority. In any event, the appellants have not argued the point. They seem to have
conceded that the expense was capital in nature. Their only argument was that the Respondent had
previously allowed these expenses and it was therefore not open to the Respondent to revisit the
issue. This raises the issue of estoppel. Is the Respondent, a public body estopped from reneging or
revisiting its earlier decision? There appears to be no direct authority by a Zambia Court on the point.
In England, the courts have held that the Crown put itself in a position where it is prevented from
performing its public duty, and cannot, by entering into an agreement or arrangement to estop itself
from exercising in the future a power or discretion which it is its duty to exercise, but officers of the
Crown (for instance officials of the Inland Revenue) are amenable to Judicial review R v Inland
Revenue Commissioners ex parte Preston [19851 2 ALL E. R. 327. The House of Lords held inter
alia that;
" ............. Counsel for the tax payer submitted that if,
as Lord Scarman announced in the Self Employed Case, the
Commissioners owe a duty of fairness to the general body
86

of taxpayers the Commissioners must equally owe a duty of fairness to each
individual taxpayer. I agree, but a taxpayer cannot complain of unfairness merely
because the Commissioners
decided to perform their statutory duties......................... and to enforce
a liability to tax. The Commissioners may decide to abstain from exercising their
powers and performing their duties on grounds of
unfairness, but the commissioners themselves must bear in mind that their primary
duty is to collect, not to forgive, taxes. And, if the Commissioners decide to
proceed, the court cannot in the absence of exceptional circumstances to decide to
be unfair that which the Commissioners by taking action against the tax
payer have determined to be fair ......................The Court can only
intervene by judicial review to direct the Commissioners to abstain from performing
their statutory duties or from exercising their statutory duties or from exercising their
statutory powers if the Court is satisfied that the unfairness of which the applicant
Complains of renders the insistence by the Commissioners on performing their
duties or exercising their powers an abuse of power by the Commissioners."
This is the only authority we can find on the point. The Crown (state in Zambia) or public officer cannot be
estopped from performing their statutory functions. In this particular case, the statutory function is
collecting tax. In our considered view, the respondents are in order to reopen the assessment. Apart from
merely stating that an amount totalling K 873,157,770 had been allowed in previous years and should not
be disallowed, no further arguments or evidence has been led before the Tribunal to prove that point. As
the House of Lords pointed out in R v Inland Revenue Commissioners, Ex parte Preston, a Court can
stop public officers from performing their statutory function if allowing them to do so would be unjust and
fair. The Court would probably grant judicial review. This Tribunal has no powers to grant an order for
judicial review. If the appellant is convinced that it has facts to fall within the exception to the rule of no
estoppel against the state (Crown) then they could appropriately take up the matter by way of judicial
review in the High Court. We therefore decline to grant any relief on this point.
87

The second ground of appeal as articulated in the further submissions (undated) but presumably filed
between February and March 2001 is that the appellant should be granted a capital allowance to include the
exchange losses. The appellants argue that the exchange loss arose as a result of the fall in the
Dollar/Kwacha exchange rate to the extent that the Kwacha cost to the appellant of paying off the loan
exceeded the amount the company would have paid if the rate had not changed. The appellants position
is that they should be given capital allowance to include the exchange losses. In support of their
argument, they have relied on the case of Van Arkadi v Sterling Coated Materials Limited 56 T. C. 479.
The facts brief of that case were this. On 21 st March 1973, Sterling Coated Materials Limited (SCM) agreed
to buy machinery from a Swiss Manufacturer (B&M) for 4.4 million Swiss Francs. Twenty percent of the price
was payable on the date of the contract, and 10 percent between that date and the date of dispatch of the
bulk of the machinery. The balance of 70 percent was payable by 10 half yearly bills of exchange, each
carrying interest, and the first payment to be made six months after delivery. The contract was to be
governed by English Law. B&M could not afford to wait for the instalments to become payable, and
approached Union Bank of Switzerland (UBS) for assistance.
On 20 th September UBS signed a loan agreement to be governed by Swiss Law under which it agreed to
finance about 70% of the price by payment of 2,700,000 Swiss Francs to B&M on 1 st February 1974 and
the balance of the credit of 300,000 Francs on confirmation of completion of delivery, which occurred in
October; SCM was to repay the credit amount of 300,000 Francs by equal half yearly payments of Swiss
300,000 Francs each, beginning on 1 st April, 1974. SCM paid five instalments with interest on l sl October
and 1 st December 1976. During this period, the pound depreciated against the Swiss Francs increasing
the cost in sterling to SCM of meeting the instalments.
88

Though the case hinged on the interpretation of Section 50 (4) of the Finance Act of 1971 of England,
the case is relevant to this case in so far as it considered whether the exchange loss could be
considered for purpose of giving a yearly capital allowance.
The editor's summary of the law report on the issues at stake reads;
"It was common ground that if the loan agreement had not been concluded
and the payments had been made by SCM to B&M
under the original agreement, the sterling cost of meeting the instalments
would have been treated under Section 50 (4) of the Finance Act as
expenditure incurred in the year when the instalments were paid for the
purpose of the first year allowance."
The chancery division held (1) the question was not whether the expenditure was on the provision
of machinery or plant but when the expenditure was incurred i.e. when did the sums in question
become payable (2) since SCM did not become liable or indeed entitled to pay 3 million Swiss Francs
to B&M or to UBS otherwise than by instalments over five years with interest at the agreed rate, it was
impossible to say that the whole of this sum became payable by SCM in 1974 for the purposes of
section 50 (4) of the Finance Act 1971 so as to exclude the extra cost of paying the instalment
subsequently incurred from qualifying for a first year allowance.
The respondent in response has relied on the fifth schedule, part II paragraph 10 (4) of the Income
Tax Act for the argument that under that provision, capital allowance can only be claimed on the
original cost of the implement and that you cannot bring exchange losses and capitalise them to add
on the value of the asset concerned.
For the avoidance of doubt, we will reproduce the relevant provision of the Act referred to by Mr
Mulima -10(1) reads-
89

"where a person has used any implements, machinery or
(4) reads -
plant belonging to him for the purposes of his business a
deduction (called a wear and tear allowance) shall be
allowed in ascertaining the profits of the business for each
year". Paragraph 10
"The wear and tear allowance for any charge year shall be
calculated on a straight line basis of the original cost of the
implements, machinery and plant".
The loan was obtained in foreign exchange and used to buy the machinery. The value of the loan in
foreign exchange had not changed. It had been constant.
The equipment was bought in Kwacha converted at the rate then ruling. The value in foreign exchange has
not changed. It is the Kwacha value, which has changed due to the change in the exchange rate. We are
persuaded to accept the appellant's argument that the case of Van Arkadi v Sterling Coated Materials is
authority that capital allowance can be claimed notwithstanding the exchange losses. To this extent, we will
allow the appeal. The capital allowances will be allowed. As the appeal has only partially succeeded, we
will make no orders as to costs.
90

IN THE REVENUE APPEALS TRIBUNAL
HOLDEN AT LUSAKA
BETWEEN:
LUSAKA WATER AND SEWERAGE COMPANY
AUTHORITY
AND ZAMBIA REVENUE
91
1999/RAT/36
APPELLANT
RESPONDENT
CORAM: CHJ Chileshe (Chairman), H M Muyoyeta (Member) and N A Lungu
FOR THE
APPELLANT:
FOR THE
RESPONDENT:
RULING
(Member).
B N Nachilongo, Tax Advisor - KPMG Peat Marwick
T N Mulako, Senior Inspector - Zambia Revenue Authority 15 th
March, and 14 th July, 1999
This is a unanimous opinion of the Tribunal. We will refer to Lusaka Water and Sewerage Company
Limited as "the appellant" and Zambia Revenue Authority as the "the respondent" . At the hearing both
parties indicated that the facts are not in dispute and that they would be relying on the documents and
submissions filed before the Tribunal. No oral evidence was called.
The appeal is with respect to the 1991/92 and 1992/93 charge years. In the 1991/92 charge year the
appellants wrote off the sum of K 20,160,000 in their accounts and returns as bad
debts. The respondent only allowed half of the bad debts. K 10,160,000 was disallowed. In

the 1992/93 charge year the appellant proposed to write off K 342,076,000
as bad debt. Similarly half (K 171,038,000) was disallowed. The appellants want the bad
debts to be allowed in lull for the two years.
The Respondent argues that the decision to disallow a portion of the bad debts was justified. The
Respondent drew our attention to the provisions of section 43A of the Income Tax Act, Chapter 323.
According to the Respondent, section 43 A has conditions precedent that must be met before bad
debts can be allowed. The two conditions referred to by the respondents are:
i) the debt can only be allowed to the extent that they have been included in the
income of the person claiming the deduction ii) the debts must be proved to the
satisfaction of the Commissioner General to be
bad or likely to become bad.
According to the Respondent the appellant's claim for a deduction for bad debt has not been
allowed in full because the Commissioner General was not satisfied that all the debts were
irrecoverable or likely to so and no proof had been offered by the appellants in support of their
contention. The Respondents further argues that the appellant's debtor institutions arc reputable
and financially sound organisations which should be able to discharge their obligations to the
appellant given the right type of debt management. The respondent's argue that the writing off of
only half the bad debts is a discretionary decision by the Commissioner General considered by
the Respondent to be just and fair. because it is intended, in the absence of contradicting evidence
from the appellants, to accommodate any genuine cases of totally unrecoverable debts from
untraceable customers or those who have died and insolvent customers. The customers of
the appellant who have not settled the debts are Zambia Airforce, Zambia Army, Zambia National
Service University Teaching Hospital, Zambia Police and Ministry of Education. According to the
evidence available, which has not been challenged, the debts of these government institutions
were outstanding for over a year at the time the appeal was lodged.
92

The appellants have argued that when a debt remains unpaid for over twelve months, then it is likely to
become bad and consequently a provision must be made in anticipation of it becoming bad. They
argue that is the intent of section 43 A of the Income Tax Act. Section 43A of the Income Tax Act
Chapter 323 of the Laws of Zambia provides;
" A deduction shall be allowed in as certaining the income from any
source for debts to the extent that the debts have been included in the
income from that source and to the extent that they are approved to the
satisfaction of the Commissioner General to be bad or likely to become
bad and -where there is no income from that source for the charge year for
which such deduction is due that deduction shall be deemed to be a loss
under section thirty "
This section gives the Commissioner General the discretion to determine whether the tax payer has
discharged the onus of proof of showing that the debt is bad or likely to become bad. As the respondent
has rightly pointed out, the appellants claim for a deduction for bad debts have not been allowed in
full because the Commissioner General was not satisfied that the debts were irrecoverable or likely
to be so. The Respondents claim that no evidence both orally or documentary has been presented to
prove this allegation. We tend to agree with the Respondent's point on the issue. Apart from giving
a list of government institutions that owe money and informing us that the government is a bad payer,
no evidence has been led to prove that these are bad and doubtful.
In practice, most tax payers are able to satisfy the Commissioner General that the debt is bad or likely
to be bad in cases of insolvency, death, untraceable or unrecovered over a period of time and that the
debts have been included in the income from that source. Whereas it is easy to prove the source of
the income from the profit and loss account, section 43A does not stipulate what means should be
used to satisfy the Commissioner General's discretion. Section 114 of the Income Tax Act provides
specifically how to deal with the Commissioner General's discretion in the Act. It provides;
93

when it is provided by this act that any matter is subject or
according to
(a) The Commissioner General's discretion,
such discretion shall not be questioned in any
proceedings. "
Prima facie, this provision precludes the Tribunal from making an inquiry into how the Commissioner
General exercised his discretion. However, if there is proof that the Commissioner General has
exercised his discretion unreasonably and in a capricious manner that would be sufficient ground for
the High Court to exercise its inherent jurisdiction of judicial review. The jurisdiction of the Tribunal is
to be found in section 3 of Act 11 of 1998. Judicial review is not a matter that can be entertained by the
Tribunal in so far as the enabling statute is concerned. If there had been sufficient grounds to show
unreasonableness, we would have probably advised that the matter be referred to the High Court for
judicial review.
The appellants have referred us to the decided cases of Briston v Dickinson (William) and Co Limited
27 T.C. 15 and Inland Revenue v Kempton Furnitures (Pty) Ltd (SATCO). The cases are immaterial.
The issue is whether there has been sufficient evidence presented to satisfy the Commissioner
General in his discretion that the debts are bad and doubtful. For the reasons stated, we will dismiss
the appeal with costs. Either party has the right of appeal to the High Court within 30 days.
94

IN THE REVENUE APPEALS TRIBUNAL 2001/RAT/13
HOLDEN AT LUSAKA
BETWEEN:
ENVIRO-FLOR LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), T Mushibwe (Member) and N A
Lungu(Member).
FOR THE
APPELLANT: W B Kuwenda, B&W Consulting Limited
FOR THE
RESPONDENT: D Mulima, Senior Inspector - Other Taxes, Zambia Revenue
Authority
RULING
15 th June, 31 st July and 28 th September, 2001
This is an appeal by Enviro-Flor Limited hereinafter referred to as "the appellant" in respect . of
assessments for the charge years 1994/95, 1995/96, 1996/97, 1997/98 and 1998/99 issued by the
Zambia Revenue Authority hereinafter referred to as "the respondent".
The parties agreed that the facts were not in dispute and elected not to cal "viva voce'' evidence.
They both elected to rely on documents filed before the Tribunal. The initial grounds of appeal as
filed by the appellant on 12 th January 2001 were as follows:-
1. The appellant is a fully fledged farming operation producing roses and as such
should be entitled to capital allowances and not development allowance.
2. The Inspector of Taxes has treated roses as if they were citrus fruits or trees
thereby giving development allowance as opposed to capital allowance.
95

3. The treatment of roses for capital allowances purposes by Zambia Revenue Authority
is not consistent. It depends on the Inspector of Taxes handling the assessment.
In some cases Zambia Revenue Authority has given 100 percent allowances and in
another case a taxpayer to us advised to write off roses in the year acquisition. In the
case of their client, the Inspector of Taxes has refused to give 100 percent allowance and
instead only allowed a development allowance. The appellant feels that the treatment is
inconsistent and discriminatory.
During oral arguments and submissions, the respondent abandoned ground three after the Tribunal
pointed out that oral evidence to show discrimination would be required to prove that point.
In response to the said grounds, the respondent advanced for grounds firstly, the respondent argues
that the Income Tax Act provides for capital allowance to plant and machinery. According to the
respondent rose bushes do not fall within the meaning of "plant and machinery" as envisaged by
section 33 of the Income Tax Act chapter 323 of the Laws of Zambia. Secondly, the respondent
argued that rose plants are classified as stock in trade and was rightly granted development
allowance. Thirdly the respondent points out that for any expenditure incurred in a charge year on
farm improvements, a deduction called farm improvement allowance is allowed in determining the
profits of a farming business in that charge year. The respondent pointed out that the Act defines farm
improvement as "means of permanent work including a farm dwelling and fencing appropriate to
farming and any building constructed for and used for the welfare of, employees. According to
the respondent, rose plants do not fall under the definition of farm improvement and therefore the farm
improvement allowance cannot be given to rose plants. Lastly, the respondent argued that it has
never granted 100% deduction on rose plants to some farmers.
96

As mentioned, the appellant indicated that it would not pursue the issue of discrimination in the application
of 100% allowance.
During the presentation of oral arguments on 31 st July 2001, we requested the parties to
address us further on the following issues
i) whether rose plants can be classified as stock in trade
ii) whether rose plants can be classified as farm improvements
We then received further written submission on the issues raised by ourselves.
For the appellant, it has been strenuously argued that Rose plants can be classified as stock in trade. The
appellant argue that a rose plant is a flower, which will keep on producing flowers for up to seven years.
According to the appellant the plant is usually planted in a greenhouse whether on the ground or other
growing media such as coco fibre. They argue that to grow a rose plant on a commercial basis, the
following are required:
i) Land
ii) Greenhouse
iii) Irrigation systems
iv) The plant itself
v) Good water supply
vi) Electricity
vii) Pesticides and fertilisers
viii) Labour
According to the appellant, the cost of the above form part of the basic requirements for growing a
commercial rose plant. What is sold from the rose plant are the flower stems, which are cut and
exported for sale. The plant itself is not sold, only the cut stems of flowers are sold. For the foregoing, the
appellant takes the view that the plants are stock in trade.
97

As mentioned, the appellant indicated that it would not pursue the issue of discrimination in the
application of 100% allowance.
During the presentation of oral arguments on 31 sl July 2001, we requested the parties to
address us further on the following issues
i) whether rose plants can be classified as stock in trade
ii) whether rose plants can be classified as farm improvements
We then received further written submission on the issues raised by ourselves.
For the appellant, it has been strenuously argued that Rose plants can be classified as stock in trade.
The appellant argue that a rose plant is a flower, which will keep on producing flowers for up to seven
years. According to the appellant the plant is usually planted in a greenhouse whether on the ground or
other growing media such as coco fibre. They argue that to grow a rose plant on a commercial basis,
the following are required:
i) Land
ii) Greenhouse
iii) Irrigation systems
iv) The plant itself
v) Good water supply
vi) Electricity
vii) Pesticides and fertilisers
viii) Labour
According to the appellant, the cost of the above form part of the basic requirements for growing a
commercial rose plant. What is sold from the rose plant are the flower stems, which are cut and
exported for sale. The plant itself is not sold, only the cut stems of flowers are sold. For the foregoing,
the appellant takes the view that the plants are stock in trade.
98

On the issue of whether rose plants can be treated as farm improvements, the appellant argues that they
are. The appellants points out that a rose plant is grown in a greenhouse. They add that the cost of the
rose plant can therefore be classified as a component of the total cost of the greenhouse. They point
out that a greenhouse is a structure of a permanent nature constructed on farmland appropriate to
farming. The components of the greenhouse, such as the frame plastics, irrigation pipes, drip lines, electric
pumps, motors and rose plants should therefore qualify as farm improvements.
In response to the appellant's further submissions, the respondent has firstly submitted that rose plants
cannot be stock in trade. Mr Mulima on behalf of the respondent points out that the accounting definition of
stock in trade is as follows; "stock in trade consists of all goods owned and held for sale in the regular
course of business ".
According to the respondent, roses cannot be considered as stock in trade for the following reasons;
i) Rose plants cannot be classified as stock in trade because rose plants are not sold.
What are sold are flowers
ii) The life span of a rose plant is more than six years
iii) The appellant listed eight requirements that are necessary for growing roses. Some of
those relate to expenses of a revenue nature, which on their own are allowable.
Secondly, the respondent argues that roses cannot be classified as farm improvements. According
to the respondent farm improvements relate to physical structures and not plants.
99

On the issue of whether rose plants can be treated as farm improvements, the appellant argues that they
are. The appellants points out that a rose plant is grown in a greenhouse. They add that the cost of the
rose plant can therefore be classified as a component of the total cost of the greenhouse. They point
out that a greenhouse is a structure of a permanent nature constructed on farmland appropriate to
fanning. The components of the greenhouse, such as the frame plastics, irrigation pipes, drip lines, electric
pumps, motors and rose plants should therefore qualify as farm improvements.
In response to the appellant's further submissions, the respondent has firstly submitted that rose plants
cannot be stock in trade. Mr Mulima on behalf of the respondent
points out that the accounting definition of stock in trade is as follows; "stock in
trade consists of all goods owned and he Id for sale in the regular
course of business ".
According to the respondent, roses cannot be considered as stock in trade for the following reasons;
i) Rose plants cannot be classified as stock in trade because rose plants are not sold.
What are sold are flowers
ii) The life span of a rose plant is more than six years
iii) The appellant listed eight requirements that are necessary for growing roses. Some of
those relate to expenses of a revenue nature, which on their own are allowable.
Secondly, the respondent argues that roses cannot be classified as farm improvements. According
to the respondent farm improvements relate to physical structures and not plants.
100

On the issue of whether rose plants can be treated as farm improvements, the appellant argues that they
are. The appellants points out that a rose plant is grown in a greenhouse. They add that the cost of the
rose plant can therefore be classified as a component of the total cost of the greenhouse. They point
out that a greenhouse is a structure of a permanent nature constructed on farmland appropriate to
farming. The components of the greenhouse, such as the frame plastics, irrigation pipes, drip lines, electric
pumps, motors and rose plants should therefore qualify as farm improvements.
In response to the appellant's further submissions, the respondent has firstly submitted that rose plants
cannot be stock in trade. Mr Mulima on behalf of the respondent
points out that the accounting definition of stock in trade is as follows; "stock in
trade consists of all goods owned and held for sale in the regular course
of business ".
According to the respondent, roses cannot be considered as stock in trade for the following reasons;
i) Rose plants cannot be classified as stock in trade because rose plants are not sold.
What are sold are flowers
ii) The life span of a rose plant is more than six years
iii) The appellant listed eight requirements that are necessary for growing roses. Some of
those relate to expenses of a revenue nature, which on their own are allowable.
Secondly, the respondent argues that roses cannot be classified as farm improvements. According
to the respondent farm improvements relate to physical structures and not plants.
101

On the issue of whether rose plants can be treated as farm improvements, the appellant argues that they
are. The appellants points out that a rose plant is grown in a greenhouse. They add that the cost of the
rose plant can therefore be classified as a component of the total cost of the greenhouse. They point
out that a greenhouse is a structure of a permanent nature constructed on farmland appropriate to
farming. The components of the greenhouse, such as the frame plastics, irrigation pipes, drip lines, electric
pumps, motors and rose plants should therefore qualify as farm improvements.
In response to the appellant's further submissions, the respondent has firstly submitted that rose plants
cannot be stock in trade. Mr Mulima on behalf of the respondent
points out that the accounting definition of stock in trade is as follows; "stock in
trade consists of all goods owned and held for sale in the regular course
of business ".
According to the respondent, roses cannot be considered as stock in trade for the following reasons;
i) Rose plants cannot be classified as stock in trade because rose plants are not sold.
What are sold are flowers
ii) The life span of a rose plant is more than six years
iii) The appellant listed eight requirements that are necessary for growing roses. Some of
those relate to expenses of a revenue nature, which on their own are allowable.
Secondly, the respondent argues that roses cannot be classified as farm improvements. According
to the respondent farm improvements relate to physical structures and not plants.
102

There are three issues that fall to be determined. Firstly, can rose bushes be classified as stock in
trade so that expenditure in respect thereof can be allowed under section 29 of the Income Tax Act? We
agree with Mr Mulima that rose bushes cannot be stock in trade. They are not. If the rose plants were
being sold by the appellants, then they would have qualified , as stock in trade. According to the
evidence that was placed before us, the rose plants are kept for more than six years. It is the flowers that
are sold.
The second issue to be considered is whether rose plants can be considered for capital allowance
in accordance with section 33 a of the Income Tax Act which provides;
"capital allowances are deducted in ascertaining the
gains or profits of a business and (he emoluments of any
employment or office for each charge year -for buildings,
implements, machinery and plant, and premiums, according
to the provisions of parts 1 to V inclusive of the fifth schedule ".
Mr Mulima has referred us to the decided case of Yormouth v France 19 Q. B. D. 64
Where Lindley L. J. had this to say on plant;
"there is no definition of plant in the Act: but in its-ordinary sense, it
includes whatever apparatus is used by a business man for
carrying on his business not his stock in trade, which he buys or
makes for sale, but all his goods and chalets, fixed or moveable,
live or dead which he keeps for permanent employment in his
business ".
We agree with the submissions of the Respondent. We would be doing violence to the language of the
statute if indeed we were to agree with the appellant that rose plants can be classified as "plant and
machinery" as envisaged by section 33 (a) of the Act. The appeal must fail on this point.
103

There are three issues that fall to be determined. Firstly, can rose bushes be classified as stock in
trade so that expenditure in respect thereof can be allowed under section 29 of the Income Tax Act?
We agree with Mr Mulima that rose bushes cannot be stock in trade. They are not. If the rose plants
were being sold by the appellants, then they would have qualified . as stock in trade. According to
the evidence that was placed before us, the rose plants are kept for more than six years. It is the
flowers that are sold.
The second issue to be considered is whether rose plants can be considered for capital
allowance in accordance with section 33 a of the Income Tax Act which provides;
"capital allowances are deducted in ascertaining the
gains or profits of a business and the emoluments of any
employment or office for each charge year -for buildings,
implements, machinery and plant, and premiums, according
to the provisions of parts I to V inclusive of the fifth schedule ".
Mr Mulima has referred us to the decided case of Yarmouth v France 19 Q. B. D. 64
Where Lindley L. J. had this to say on plant;
"there is no definition of plant in the Act: but in its ordinary
sense, it includes whatever apparatus is used by a business
man for carrying on his business not his stock in trade, which, he
buys or makes for sale, but all his goods and chalets, fixed or
moveable, live or dead which he keeps for permanent
employment in his business ".
We agree with the submissions of the Respondent. We would be doing violence to the language of
the statute if Indeed we were to agree with the appellant that rose plants can be classified as "plant
and machinery" as envisaged by section 33 (a) of the Act. The appeal must fail on this point.
104

There are three issues that fall to be determined. Firstly, can rose bushes be classified as stock in trade
so that expenditure in respect thereof can be allowed under section 29 of the Income Tax Act? We agree
with Mr Mulima that rose bushes cannot be stock in trade. They are not. If the rose plants were being sold
by the appellants, then they would have qualified , as stock in trade. According to the evidence that was
placed before us, the rose plants are kept for more than six years. It is the flowers that are sold.
The second issue to be considered is whether rose plants can be considered for capital allowance
in accordance with section 33 a of the Income Tax Act which provides;
"capital allowances are deducted in ascertaining the
gains or profits of a business and the emoluments of any
employment or office for each charge year -for buildings,
implements, machinery and plant, and premiums, according
to the provisions of parts 1 to V inclusive of the fifth schedule ".
Mr Mulima has referred us to the decided case of Yormouth v France 19 Q, B. D. 64
Where Lindley L. J. had this to say on plant;
"there is no definition of plant in the Act: but in its ordinary sense, it
includes whatever apparatus is used by a business man for
carrying on his business not his stock in trade, which he buys or
makes for sale, but all his goods and chalets, fixed or moveable,
live or dead •which he keeps for permanent employment in his
business ".
We agree with the submissions of the Respondent. We would be doing violence to the language of the
statute if indeed we were to agree with the appellant that rose plants can be classified as "plant and
machinery" as envisaged by section 33 (a) of the Act. The appeal must fail on this point.
105

The third and last issue to be determined is whether rose plants can be classified as farm
improvements. Section 33 ( c ) of the Income Tax Act provides; "capital allowances are deducted in
ascertaining the gains or profits of a business and the emoluments of any employment or offence for each
charge year, for farm improvements and works according to the provisions of the sixth schedule. The
sixth schedule defines "farm dwelling " as;
"means a permanent building, used as a
dwelling (the original cost of which is
taken for the purpose of this part as not in
excess of one million kwacha) which is not
used by the farmer claiming the allowance
under this part as homestead of himself and
his family ".
From the very definition of "farm dwelling" rose plants are excluded. However, section 33 ( c ) also
extends to farm improvements, farm improvement is defined us
"any permanent work including a farm dwelling and
fencing appropriate to farming and any building constructed
for and used for the welfare of employees and in relation
to farming land owned or occupied by the former claiming
the allowance under this pact for ascertainment of his profit".
The appellant argues that a greenhouse is a structure of a permanent nature constructed on farmland
appropriate to farming. They correctly point out in our view that a greenhouse is a farm improvement. They
pointed that a greenhouse is a farm improvement. They point out that a greenhouse has various
components such as frame plastics, irrigation pipes, drip lines, electric pumps and motors and rose plants
which should qualify as farm improvements.
106

The respondent's response to this argument is that the definition is confined to physical structures
and not plants. This argument is simplistic, on the available facts, rose plants are a component of a
greenhouse. They are trees that last up to seven years. Roses are cut from these plants. They are
the very basis of a greenhouse. Admittedly, the roses that are cut from the plants for resale are not
structures, The plants wherefrom roses are cut are physical. They have a lifespan of up to seven
years. We will allow this appeal on the basis that the rose plants are farm improvements within the
meaning of section 33 ( c ) as read with the sixth schedule of the Income Tax Act. Costs for the
appellant. Either party has the right of appeal.
107

IN THE REVENUE APPEALS TRIBUNAL 2001/RAT/06
HOLDEN AT LUSAKA
BETWEEN:
PAMODZI HOTEL PLC APPELLANT
AND ZAMBIA REVENUE AUTHORITY RESPONDENT
Coram: M. M. Mundashi (Chairman), T. Mushibwe (Member)
and N. A. Lungu (Member)
For the Appellant: B. Nachilongo Tax Advisor, KPMG
For the Respondent: D. Mulima, Senior Inspector Other Taxes
RULING
This is a unanimous opinion of the Tribunal.
Zambia Revenue Authority
15 th June 2001, 31 st July 2001, 17 lh August 2001, 5 th September 2001
This is an appeal brought by Pamodzi Hotel Pic (hereinafter referred to as "the Appellant"). We shall
refer to the Zambia Revenue Authority as "the Respondent".
The brief and uncontested facts presented before the Tribunal through documents are that the
appellants submitted the returns for the 1998/1999 tax year. In the said return and accounts, the
appellant proposed to be taxed at the concessional rate of ] 5% on that portion of its business on
which it earned foreign exchange from what it called tourist activities.
108

IN THE REVENUE APPEALS TRIBUNAL 2001/RAT/06
HOLDEN AT LUSAKA
BETWEEN:
PAMODZI HOTEL PLC APPELLANT
AND ZAMBIA REVENUE AUTHORITY RESPONDENT
Coram: M. M. Mundashi (Chairman), T. Mushibwe (Member)
and N. A. Lungu (Member)
For the Appellant: B. Nachilongo Tax Advisor, KPMG
For the Respondent: D. Mulima, Senior Inspector Other Taxes
RULING
This is a unanimous opinion of the Tribunal,
Zambia Revenue Authority
15 th June 2001, 31 st My 2001, 17 th August 2001, 5 th September 2001
This is an appeal brought by Pamodzi Hotel Pic (hereinafter referred to as "the Appellant"). We shall
refer to the Zambia Revenue Authority as "the Respondent".
The brief and uncontested facts presented before the Tribunal through documents are that the
appellants submitted the returns for the 1998/1999 tax year. In the said return and accounts, the
appellant proposed to be taxed at the concessional rate of 15% on that portion of its business on
which it earned foreign exchange from what it called tourist activities.
109

Secondly, the appellant claimed foreign exchange losses incurred on a loan agreement between the
appellant and Tata Zambia Limited. We will refer to the said loan agreements a exhibit 'A'. The loan
agreement is dated 14 lh November 1997. The recital of the said document on page 1 provides as
follows:
("Whereas the borrower intends to carry out certain renovation expenses and for this
purpose has approached the lender who has agreed to provide the borrower with a tern
loan (the "loan " which expression where the context so admits means the outstanding
amount thereof at the time being of US$850,000 ".)
The said loan was to be for a period of four years. The respondent turned down the request to tax the
foreign exchange earnings at the concessional rate of tax of 15% contending that the foreign earnings
were not as a result of export of services. Equally, the Respondent disallowed the claim for exchange
losses contending that was an expense of a capital nature. Both parties elected not to call viva voce
evidence.
From the foregoing, it is evident that there arc two issues that should be determined by the Tribunal. Firstly,
did the appellant export its services to those tourists who visited the hotel and paid for services in foreign
currency so that it could be taxed at the rate of 15% on that portion of the business? Secondly, were the
exchange losses incurred on the loan of a revenue nature so that the same could be allowed?
In support of the first ground, the appellant has argued that the services it provided fell within the definition
of non traditional products. Section 2(i), definition section of the Income Tax Act Chapter 323 of the Laws
of Zambia defines "non-traditional product" ass "anything other than minerals and electricity, produced or
manufactured in the Republic". Under part iii paragraph 10(i) (iii) of the Income Tax Act charging schedule
the maximum rate of tax on the portion of income which is determined by the Commissioner General as
originating from the export of non traditional products shall be fifteen percentum'".
110

The appellants argue that the intention of introducing a concessional rate of tax was to encourage
businesses to go into foreign exchange earning ventures. Mr. Mulima in response has submitted that
the appellants have misdirected themselves by assuming the if they are engaged in the provision of
non-traditional services, their income will automatically be charged at the rate of 15%. We agree
with Mr. Mulima on this point. For the concessional rate of tax to apply, the non traditional product
must be exported. The language of the statute is clear and unambiguous. The non traditional product
must be exported. The only evidence available before us is that the appellant received foreign
currency from tourists. This cannot be an export. The services were provided locally to foreign
tourists. If the services were provided outside the Jurisdiction, then it would logically follow that the
services were exported. The appellant has led no evidence either oral or documentary to prove this
point. As we have pointed out in previous cases:
"upon an appeal to the Commissioners against an assessment, the onus of
proof is upon the tax payer by evidence given on oath or affirmation or by
other unsworn evidence to demonstrate that the assessment ought to be
reduced or set aside cf TZI Limited vs. Zambia Revenue Authority
1998/RAT/02
In this case, the appellants have merely stated that they earned foreign currency from tourists who
visited the hotel. They have not led any evidence to show that they exported the service. We will
therefore, dismiss the appeal on this ground.
Secondly, the appellant has argued that they incurred exchange losses in repaying the loans. The
respondent has not disputed the losses but has argued that they were of a capital nature.
111

Mr. Mulima on behalf of the respondent points out that if a loan is obtained for revenue purposes, but the
duration of repayment is for a long time, then the loan forms the capital base of the company and it will
be treated as a capital expenditure. For this proposition, he relies on Beauchamp vs. F. W, Woolworth Pic
(1987) 5 T.C 549. Our interpretation of the decision in this case is that on the basis of the evidence
available before that Court, the loans obtained were held to be of a capital in nature. In our view, that
case did not lay down a universal principle that the nature and purpose of a loan should be ignored and
that courts should, only look at the duration of the loan repayment in order to determine whether a loan is
revenue or capital in nature. The decision in Beachamp vs. F.W. Woolworth was a minority opinion of
the house of Lords, three to two. On reading to the report, there were differences of opinions from the
Inland Revenue Commissioners of the High Court, Court of Appeal up to the House of Lords. Section 29 A
of the Zambian Income Tax Act is very clear and it provides;
"Notwithstanding the provisions of section twenty-nine or any other provisions
of this Act, any foreign currency exchange gains or losses,
other than those of a capital nature shall be assessable or deductible as the
case may be, in the charge year which the person or partnership concerned is
required to pay the additional Kwacha or is allowed a rebate or a reduction, as
the case may be in settlement of a foreign debt or liability "
112

The language is clear and unambiguous. As long as the exchange loss does not relate to capital
items, then it is allowable. Exhibit 'A' very clear. The loan was obtained for renovations
refurbishment etc. It was revenue in nature. We decline to adopt Mr, Mulima's position that we should
only look at the duration of the repayment of the loan to determine whether it was of a capital or
revenue nature. We will allow the appeal on this point. We will make no orders as to costs in
view of the fact that the appeal has only partially succeeded. Either party has the liberty of
appealing to the High Court.
113

IN THE REVENUE APPEALS TRIBUNAL HOLDEN AT
LUSAKA
BETWEEN:
114
1999/R AT/03
SOFRAM ZAMBIA LIMITED Appellant
and
ZAMBIA REVENUE AUTHORITY Respondent
CORAM J.M. MULWILA (Vice-Chairman), T. MUSHIBWE
and N.A. LUNGU on 28"' May and I 5 lh October and !
7 th November, 1999.
FOR THE
APPELLANT: J.CHASHI of Messrs Muponda Chashi and Company
FOR THE
RESPONDENT: T. MULALA of Zambia Revenue Authority
RULING
The Appellant has appealed to the Tribunal against the assessment of K254,450,548 value added
tax in arrears, interest and penalties made by the Respondent. The gist of the appeal is that the
assessment was unilateral and totally wrong for the following reasons, namely:-
(a) Certain invoices were raised long before Value Added Tax was introduced and as such
Value Added Tax should not be applicable at the time of payment;
(b) When Value Added Tax was introduced the Appellant did not have a proper system in
place as such the same book was used to raise invoices and quotations which led to
duplication.
The Respondent has contended that its officers made credibility visits to the Appellant's
premises and had discovered that the Appellant had zero-rated all their, sales for the month of August,
1995 contrary to the procedure laid down in Statutory Instrument No. 104 of 1995. As a result, the
Appellant did not declare an amount of K11,538,811-00 which was due as value added tax from the
sales of that month. In addition, there was also due from the

Appellant an amount of K400,000-00 as penalty for submitting the returns on 25 th September, 1995
instead of 21 st September, 1995
The Credibility Section also made assessments covering the period from September, 1995 to July,
1997 totalling K48,062,216-00 but these were adjusted downwards to K12,612,369-00 by the VAT
Investigations Unit (VIU) after the Appellant had disputed The summary of the Credibility Section
assessment was as follows:-
(i) August, 1995 amount due to zero-rated stocks Kl 1,538,811-00
(ii) August, 1995 late submission penalty K 400,000-00
(iii) Balance on assessment reduced by VIU K 12,612,365-00
115
K24,551,180-00
The total assessments the Credibility Section made up to July, 1997 were K254,450,548-00 These,
as already stated, were disputed by the Appellant prompting the Respondent to make further
investigations by the VAT Investigations Unit (VIU) which subsequently reduced the figure to K
186,213,423-00. A Notice of Adjustment dated 20 th April, 1998 was consequently given to the Appellant.
The new assessment was broken down as follows:-
(i) VIU assessment from September, 1995 to February, 1996 K ! 39,302,660-00
(ii) VIU assessment from March, 1996 to July, 1997 51.561.027-00
190,863,696-00
Less: Overpayment for October, 1996
January 1997 and June 1997 972,805-00
189,890,891-00
Less: Payments made towards previous assessments 3,677,468-00
After the VIU's review, the assessments to be paid by the Appellant to the Respondent are:
186,213,423-00
VIU assessment K186,213,423-00
Credibility Section assessment 24,55 1,180-00
101
K210,764,603-00

The Respondent then submitted that the Appellant's claim that certain invoices were raised long
before Value Added Tax had been introduced had no merit because the invoices in issue are 701 to
750 which covered the period 15* September, and 22" d September, 1995 - that is after Value Added
Tax had been introduced on 1 l July, 1995 The second claim that the Appellant did not have proper
accounting system is an offence under section 43 of the Value Added Tax Act and could only work
against the Appellant. The third claim that the Respondent has failed to reverse the duplication
occasioned by the same book which was used for raising invoices and quotations is false in view of VfLTs
review of the assessments made by the Credibility Section The Respondent finally submitted that the
revised assessment should be upheld.
Due consideration has been given to the evidence before us and the submissions made on behalf of
the parties. We have found as a fact that on 30 th June, 1995 the Minister of Finance signed Statutory
Instrument No. 104 of 1995 otherwise known as the Value Added Tax (Zero- Ratings) Order, 1995.
This order exempted from value added tax any taxable goods on which sales tax had been in stock at
close of business on 30 th June, 1995 provided stock was taken on 30 th June, 1995, and stock sheets
were presented to the Zambia Revenue Authority within ten days of the taking of stock. The Appellant
has not adduced any evidence to show that they complied with the Order and have not rebutted the
Respondent's allegation that the sales for August, 1995 were erroneously zero-rated. We must add
that the Appellant has pleaded ignorance of the existence of the Order but unfortunately for them,
ignorance of the law is not a defence, so says the old adage. We have accordingly found that the
Appellant did not comply with this Order and therefore, they were not entitled to zero-rate all their sales
for the month of August, 1995.
We have also found as a fact that the assessment of K254,450,548-00 which was made by the
Respondent's Credibility Section has been reviewed downwards after the Appellant disputed the
figures. The new assessment was made by the VIU and has been notified to the Appellant in the sum
of K210,764,603-00.
The Appellant has insisted that it is a small company which can not afford to pay the amounts assessed.
It has, however, failed to put up a spirited defence to the assessment. The
116

Respondent, on the other hand, has shown the taxable sales on which value added tax and interest
have been computed.
We have no basis on which to upset the assessment made by the Respondent. Accordingly the
appeal is dismissed with costs for the Respondent.
Parties are free to appeal to the High Court if aggrieved by this Ruling.
Dated the 17th day of November, 1999.
Member
JNGU
J.M. MULWILA (DR)
Vice-Chairman
117
SHIBWE
ember

IN THE REVENUE APPEALS TRIBUNAL 1999/RAT/56
HOLDEN AT LUSAKA
BETWEEN:
O J KALUNGA PRACTISING AS KALUNGA Appellant
AND CAMERON SMITH
and
ZAMBIA REVENUE AUTHORITY Respondent
CORAM: C H J CHILESHE (CHAIRMAN), T MUSHIBWE AND M M
MUNDASHI on 27th April and 12th May 1999
FOR THE APPELLANT: MR I S M SIMBELEKO (KANGWA & ASSOCIATES)
FOR THE'RESPONDENT: MR T MULALA - Senior Inspector VAT Policy
MS N HAMANYANGA - Legal Department ZRA
118
RULING
This is an appeal against the Zambia Revenue Authorities assessment of Value Added Tax
penalties and interest thereon issued against the Appellant in relation to rental incomes derived
from the letting of portion of Stand No. 1194 Ndola for the period August 1995 to June 1997
pursuant to The Value Added Tax Act Cap 331 (the "Act") Section 3(1).
The brief facts of this matter as disclosed by the documents before the Tribunal arc this.
On 24th November 1987 one Osman Chisenga Kalunga and Hamish Ninian Donald Cameron
Smith registered a business under the Registration of Business Names Act (then Chapter 687 of
the Laws of Zambia). This is evidenced by the certificate of Registration which is before the
Tribunal. The business registered was that of architects and the two then carried on business as
architects in partnership under the name and style of Kalunga and Cameron-Smith. In or around
1992 , the two partners bought a property known as Africa House and situate on Plot 1194
Buteko Avenue, Ndola. On I6th December 1992, the two executed an agreement which inter alia
provided:
1. That the two partners have purchased Plot Number 1194 Buteko Avenue. Ndola to
be registered in their two names;

2. That the shares in the building would be 50% each until O C Kalunga pays
H N Cameron-Smith the amount of K.650,000.00;
3. That a separate account in the name of II N Cameron-Smith/ O C Kalunga
be opened for the collection of rentals and for maintenance.
Subsequently, on 9lh February 1993 title deeds were issued in the name of Hamish Ninian
Donald Cameron Smith and Osman Chisenga Kalunga. The agreement and the certificate of title
have been submitted before the Tribunal albeit in an untidy fashion.
We would like to take this opportunity to remind parties who wish to file documents they wish to
rely on to follow the provisions of regulation 10 of the Revenue Appeals Tribunal Regulations S.I.
No. 143 of 1998. For case of reference, it is advisable to submit these documents in the form of
a bundle with an index and the documents numbered in chronological sequence.
From the end of December 1993, Hamish Ninian Donald Cameron-Smith retired from the
partnership. This is evidenced by the letter dated 15th July 1994 written by Cameron-Smith
to the accountants of the partnership. According to the said letter, the partnership would
still remain the same.
On a date which cannot be ascertained, but presumably on 5th April 1995 as evidenced by
written note at the front of page 2 of the VAT form 1 submitted before the Tribunal, the appellant
applied as a partnership to be registered as a taxable supplier under the Value Added Tax Act
Chapter 331 of the Laws of Zambia. On the 8th September 1995, a certificate of Value Added
Tax registration was issued in the name of Osman Kaluuga. The said certificate has been
tendered before the Tribunal. On 24lh November 1995, Mr Osman Kalunga wrote to the
respondent reminding them that the application had been done in the name of the partnership
and therefore the certificate of registration should be in the name of Kalunga and Cameron-
Smith, the partnership name. On 30th May 1996, a certificate was issued in accordance with
the appellant's wish. The said document has been tendered before the Tribunal. On 16th April
1998, the respondent raised an assessment of K16,112,458.35 in respect of rental income from
Plot No. 1194 Ndola.
These are the undisputed facts before the Tribunal. Both parties elected not to adduce oral
evidence and relied on written submissions and documents submitted before the Tribunal.
In our considered view, the issue before the Tribunal is whether Plot No. 1994 is the property of
the partnership known as Kaluuga Cameron Smith and rental income thereof should be subject
to Value Added Tax. The appellants contend that Kalunga and
119

Cameron Smith arc a separate entity and Plot No. 1 194 Ndola is not part of the partnership
known as Kalunga and Cameron Smith. As this Tribunal has stated in line with the General
principles of taxation law, the onus of proof is on a tax payer to discharge a tax assessment
failure to which sucli an assessment will stand valid sec Trans Zambezi Industries Limited v
Zambia Revenue Authority. Has the appellant therefore proved that Plot No. 1 194 is not part
of the partnership property and therefore not subject to tax under Ihc partnership?
In order to ascertain the legal position we must have recourse to both the applicable statute law
and any binding or persuasive precedents and authorities.
The Respondent contends, inter alia, that Section 3( I ) of the Act states that:
"Where a firm consisting of two or more individuals in partnership is a registered supplier the
firm shall be taken for the purposes of the Act to be the supplier of any good or service
supplied in he course of the business of the firm." The respondent also contends that this can
be "interpreted to mean that any business activity engaged in by a person in that person's
capacity as a member of the partnership is treated as a business activity of the partnership."
We agree with this interpretation.
It naturally begs the question as to how is any business activity engaged in by a person,
outside that person's capacity as a member of the partnership is to be treated? The
converse must be true. That, the latter ought to be treated as a business activity of the
individual member and not of the partnership.
It is well established law that:
"A citizen is not to be taxed unless he is designated in clear terms by the taxing Act as
a tax payer and the amount of his liability is clearly defined..." per Lord Wilberforce in
VESTEY Vs IRC (1980) STC 10 at 18
This principle of strict construction was well stated by Rowlatt J in CAPE BRANDY
SYNDICATE v IRC (1921) 1 KB 64 at 71 – 12 TC 358 at 366
"In a taxing Act one has to look merely at what is clearly said. There is no
equity about tax. There is no presumption as to tax. Nothing is to be read
in, nothing is to be implied. One can only look fairly at the language used...."
The principle gives rise to two consequences. Firstly, it is for the ZRA to establish that
120

a subject falls within the charge to be taxed. But this does not open the door for the subject to
have the "benefit of any argument that ingenuity can suggest." But only in the event that after
careful and balanced examination the judicial mind still entertains reasonable doubt. If there is no
ambiguity the words must take their natural meaning: Per Kindersley V-C in WILCOX v SMITH
(1857) 4 Drew 40,
Secondly, the consequence of strict interpretation apply equally to the taxpayer as much as to the
Revenue. So whether or not the literal interpretation produces a construction whereby hardship
falls on innocent beneficiaries.... that interpretation must be adhered to. Per Viscount Simonds
in A – G v PRINCE ERNEST AUGUST OF HANNOVER (1957) AC 436 at 464.
Further, the Act must be read as a whole. Where there is an ambiguity the scheme of the Act
may dissolve per Lord Halsbury in IRC v PRIESTLEY ( 1 90 1 ) AC 2208 at 213. The words of the
legislature must be consumed in their context. Until a person has read the whole document or
statute he is not entitled to say that it, or any part of it is clear and unambiguous.
Per A-G v PRINCE ERNEST AUGUSTUS OF HANNOVER op at 463
The appellant contends that:
(a) Mr O J Kahinga practising as Kalunga and Cameron Smith is a sole proprietor
and liable to VAT on the architectural services income only;
(b) The partnership of II N Cameron-Smith and O C Kalunga is a different entity
and will file its own application for VAT registration when the annual income
equals the statutory threshold, and
(c) The assessment be amended to exclude the rental income.
The issue that falls for determination by the Tribunal is whether or not, the appellant is clearly
designated by the Act as a taxpayer and therefore must be taxed as assessed by the
respondent
The Act came into force on 15th April 1995. At which time II N D Cameron Smith it is agreed had
retired on 3 1st December 1993 from the architectural practice of Kahinga and Cameron- Smith
(the "Practice"). The appellant, O J Kalunga was carrying on practicing a sole proprietor of the
firm under the old name of the Practice as Kalunga and Cameron Smith with effect from 1st
January 1994. The Practice had obtained registration as a registered supplier under Part V of
the Act as soon as it came into force. All indications are that there was no irregularity with
regard to VAT payable on the income from architectural services supplied.
121

At the same time, the appellant contends that he had a partnership since for the purchase and
lease of Plot No. 1 194 Ndola (the "Premises") since the property was bought in or around 16th
December 1992 pursuant to" the said written agreement and registered in their joint names on 9th
February 1993. This business activity in relation to Plot No. 11 94 Ndola we shall call "the
Partnership Property" so as to distinguish it from the Practice. This is the distinction that the
appellant has sought to bring to the attention of the Tribunal in support of his cause.
This , necessarily entails answering the questions, firstly, is the income fro the Partnership
Property the income of the Practice in terms of the provisions of the Act? If the answer is in the
affirmative, (hen, the Respondent's assessment is correct and the appeal fails. Secondly, if the
answer is negative, then, it must be determined whether the income falls within the charge
imposed upon "Taxable Supplies" pursuant to Sections 7 and 8 of the Act. This as read with
Section 2 definitions of "Registered ", "Supplier" and "Supply of Goods or Services." Thirdly, it is
mutually agreed that the Partnership Property was jointly owned between the appellant and f I N
I) Cameron-Smith. Therefore it must be determined whether the income of such partnership falls
within the ambit of Scction3 of the Act.
Section 3( 1) of the Act applies to a firm consisting of two or more individuals in partnership
in partnership is a registered supplier of any good s and services supplied in. the course of the
business of the firm and 3 (3) states that for the purpose of (he Act no account is to be taken off
any change in partnership: 3(4) In the event of a change of partnership, the partners are
deemed to be continuing partners for the purposes of the Act the person who has ceased to be a
partner shall be deemed to be a continuing partner until the date of notification of such change to
the Commissioner-General. Particularly for the purposes of any liability to tax or interest thereon,
and:
Section3(5):
"Where a person ceases, for the purposes of this Act, to be a member of a
partnership, any notice of assessment or other notice given to the partnership
under this Act that relates to any matter -
(a) arising within or in connection with the prescribed accounting period
during which he so ceased to be a member of the partnership; or
(b) arising within or in connection with any earlier prescribed accounting
period during which, or during any part of which, he was for the purposes
this Act a member of the partnership;
shall be deemed to have been served on him."
122

From the evidence before the Tribunal the Registered Supplier, namely (he Practice of
Kalunga and Cameron-Smith was at the enactment of (he Act a sole proprietorship.
Therefore it is not "a firm consisting of two or more individuals" within the ordinary meaning of
Section 3( I) of (lie Act.
The "course of (lie business of (he linn" is the provision of iiichitcclural services lo the public.
Messrs O C Challenge and Messrs M N D Cameron Smith embarked upon a distinct and
separate business of developer and landlord For that purpose they acquired a commercial
premises Plot No. I 194 Nodal to lei II is significant to note from the records before the
Tribunal that they did not vest this property for Alhcrstonc Holdings Limited in the name of the
Practice of Challenge and Cameron-Smith, and thereby intermingle it with the remaining assets
of the firm, rather the title jointly is vested in their individual names as tenants in common,
i.e., I famish Ninian Donald Cameron-Smith and Osman Chiscnga Kalunga.
Moreover the opening of separate banking facilities (or the Partnership Property proceeds and
maintenance account for the building is a deliberate act \\hich on the balance is persuasive
as lu'inii indicative ofnn overt intention on the purl of (he Partners that the Partnership was n
separate undertaking from the architectural Practice, albeit by the same two individuals The
situation would be analogous to the same parties buying an aeroplane or a minibus for
commercial hire. In either case the principle of strict interpretation would preclude the
construction that either the purchase of prime commercial property for development and
letting, or the aeroplane or minibus for charter party and hire would be "stock in .trade"
acquired in the ordinary "course of the business of (he firm" of architects.
It is also evident fro the records before the Tribunal that Ihe title deeds relating to Plot No.
I 194 Ndola were registered into the names of (he individual Partners on 9th February 199".
Shortly thcrcaficr on3 1st December 1993. one of them Mr II N D Cameron-Smith elected to
retire from the Practice. From the notification of his retirement dated 15th July 1994 we
observe that he cites, inter alia, ill health, advanced age and insufficient income from the
Practice as the rca ;on.s for his retirement. It is evident that Mr Cameron-Smith did not elect
to sell his 50°i> shares of (he Partnership Property as part of his transfer of his interests in
the Practice to Mr () .1 Kalunga. The taxpayer contends plausibly that the rental income from
Plot 1 194 was a separate taxable source from the Practice income. Similar circumstances
arose in CAPtLBlVVNDY SYNDICATE v IRC..(1222) 2 KO 403 12 TC 368 where South
African Brandy was acquired for blending and resale in Fnglattd by three persons who
happened to be members of certain firms engaged in the wine trade. In these cases the
taxpayer was held assessable on the profits of the adventure in the nature of trade but the
profits formed part, not of his general trading activities, but rather a distinct taxable source.
Sec Til.FY: Revenue I nw 3rd Edition - Buttcrwonhs
123

It is important to distinguish the purchase of trading stock from the purchase of an income
yielding asset, For instance in IRC v PILCIIFR (1949) 2 ALL FR 1097 a fruit grower was
not allowed to deduct the cost of purchasing a cherry orchard. Not even the value of the
part that represented the nearly ripe crop. The contract had expressly included "this
year's crop", but meant only that the vendor was not entitled to pick the crop ripening
between the contract and completion. The grower was held to have purchased an income
earning asset therefore a capital expenditure.
Similarly, in TAX COMMISSIONERS vs NCNANGA CONSOLIDATED COPPER. MINES (1961)
ALLER 208 the purchase of a mine for extraction purposes was held not to be trading stock
even of a company engaged in the metals trade.
Notwithstanding the foregoing it is incontrovertible that rental income derived from the
Partnership premises constitutes "taxable supply" of services within the meaning of
Section 7 of Act upon which Value Added Tax is imposed by virtue of Section 8 of the Act.
The provisions of Section 27 and 28 of the Act determine whether or not the taxable
supply relating to the rental income derived from the Partnership premises must be
registered in accordance with the Act. It is contended by the appellant that it is not until
such income has exceeded the maximum annual turnover prescribed from lime to time by
the Commissioner-General in terms of Section 28( t) of the Act. Which at the material lime is
K30 Million.
It is apposite at this stage to examine the legal position of the Partnership premises viz a
viz the partners inter se. It is not disputed that the Partnership of which the principal
asset and stock in trade comprised Plot 1 194 Ndola continued after retirement from the
Practice of HND Cameron-Smith. In trying to ascertain the legal position, we must have
recourse to the Partnership Act of 1890. Regrettably both parties have not been of
assistance to the Tribunal in so far as they have not advanced any legal arguments as far
as this issue is concerned. Section 20( 1) of the 1890 Act provides that all property
originally brought into the partnership stock or acquired, whether by purchase or
otherwise on account of the firm or for the purposes or in the course of the partnership
business is partnership property and must be held and applied by the partners exclusively
for the purposes of the partnership and in accordance with the agreement.
The general proposition is that even if one partner leaves or dies the partnership is
dissolved. Upon dissolution of a partnership, land like all other assets of the firm
may be sold or assigned in the ordinary' way. This would depend on whether
dissolution relates to dissolution of the partnership as between a partner and other
partner(s) who will continue with the business or the winding up of the business
124

Section 42 of the 1890 Act provides that where any member of a firm has died
or ceased to be a partner and the surviving or continuing partners carry on with
the business of the firm with its capital or assets without any final settlement of
the accounts as between the firm and the outgoing partner or his estate then in the
absence of any agreement to the contrary the outgoing partner or his estate is
entitled to a share of the profits made. *
Li THOMPSON'S TRUSTEES IN BANKRUPTCY v HEATON AND OTHERS
1974 1 ALL ER 1239:
"T and H acquired a leasehold interest in a farm as partners in 1942. The
partnership was dissolved in 1952 by usual consent. Following the dissolution T and H
made no effective new arrangements with respect to the leasehold interest. Thus the
leasehold interest remained an undistributed asset of the former partnership. He died
in 1966 the court held that after the dissolution of the partnership between T and H the
leasehold interest in the firm remained an undistributed asset of the former partnership.
Accordingly the plaintiff was entitled to a share of the profits.
On the basis of the foregoing we find and hold that the (inn principally engaged in the provision of
architectural services to the public is a registered supplier pursuant to the provisions of Sections
27 an 28 of the Act. We find that in relation to Plot No. 1194 Ndola there is a manifest
intention that this should not form part of the assets of the O J Kalunga the successor in title to
the architectural practice trading under the name and style of Kalunga and Cameron-Smith.
Conversely, that these premises form part of the underlying income earning asset of the ongoing
partnership between Hamish Ninian Donald Cameron-Smith and Oswald Chisenga Kalunga.
It must be emphasised that in the present appeal in its deliberations the Tribunal has been asked
to confine itself to the Value Added Tax implications. Accordingly, for the purposes of the Act
we hold that the rental income derived from Plot 1194 Ndola ought not to be aggregated to the
taxable turnover of the architectural practice of Kalunga and Cameron-Smith in terms of
Section3(l)of the Act. The assessment to that end is therefore an error. The appeal is allowed
with costs to the appellant
DATED this 28th day igust 1999
C II J CHILESHE: M MUND
T MUSHIBWE:
V
125

IN THE REVENUE APPEALS TRIBUNAL
AT LUSAKA
BETWEEN:
TRUCK AFRICA ZAMBIA LIMITED
AND
ZAMBIA REVENUE AUTHORITY
126
1999/RAT/26
APPELLANT
RESPONDENT
CORAM: M M Mundashi - Chairman, N A Lungu and W Mwanza on 12 th
FORTHE
APPELLANT:
FOR THE
RESPONDENT:
RULING
March, 19 th March and 26'" March 1999.
D Mwape,
Chilupe and Company
L N Muuka,
Legal Counsel, Zambia Revenue Authority
This is an appeal by Truck Africa Zambia Limited, whom we shall hereinafter refer to as "the
appellant" against an assessment issued by Zambia Revenue Authority whom we shall
hereinafter refer to as "the Respondent".
The appeal is in respect of an assessment dated 10 th February 1997. Though the actual
assessment has not been produced before the Tribunal by any of the parties, there is no
dispute that the assessment was issued on 10 th February 1997. We will in the course of the
ruling make comments on how it is important to properly file and bring all relevant
documents before the Tribunal. The amount assessed is K 108,469,463. According to the
respondent, the amount is in respect of hire or lease of the trucks to a company in South
Africa. These are the undisputed facts. Payment is made to the appellant by the South
African hirer.

Both parties elected not to call any evidence. They informed the Tribunal that they would
rely on written submissions and documents filed before the Tribunal. In its written
submissions, the respondent raised three preliminary issues urging the Tribunal not to hear the
appeal on the merits.
Firstly, the respondent argues that section 31(1) of the Value Added Tax Act chapter 331
limits matters in which an appeal can be made. The respondent argues that interest does
not fall under (b) or any other subsection and as such the appeal is ultra vires.
We have carefully considered this issue. There is no evidence before the Tribunal which
suggests or shows that the assessment being challenged is in respect of interest. The only
evidence before the Tribunal is the immediate demand letter produced by the appellant which
is stamped 20 th March 1998 and it talks of "assessment after inspection". All the
correspondence before the Tribunal alludes to "assessment".
We will take this opportunity to advise parties that for them to prove their cases on facts, they
must comply with the regulations set out in Statutory Instrument no 143 of 1998. Regulation
10 (1) for instance provides
" A party to an appeal shall within thirty days, lodge with the Tribunal a list of all
documents the party proposes to produce at the hearing."
We would have expected the respondent to produce documents to show that the assessment
is in respect of interest. Without necessarily commenting on the issue of whether interest
assessment is appellable or not., we find that there is no evidence to show that this is an
appeal in respect of interest. The evidence before us suggests that this was an assessment
arrived at after an inspection. We therefore dismiss the first preliminary point.
The second point raised is that the appellant has not lodged the amount allegedly due with the
Tribunal before the appeal can be heard. We have considered this point. We have gone
through the documents before us. This appeal was lodged before the then Value Added Tax
Appeals Tribunal in 1998 and it appears the Tribunal at that time did not address its mind to
the issue.
When the actual appeal came up for hearing on 19 th April 1999, the respondent was not in
attendance at the appointed time. We had made an order that we would proceed to deliver the
ruling on the basis of submissions and evidence before us.
127

At that point in time, these preliminary issues had not been raised directly before us. After the
Tribunal rose, the respondent availed us with copies of submissions made before the then Value
Added Tax Appeals Tribunal in which these preliminary issues were raised. We therefore
decided to exercise our discretion in accordance with section 31 (3) and waive the requirement to
pay the tax. In any event, this is an issue that was brought to our attention vide written submissions
after we had adjourned with a view of delivering a ruling on the basis of written submissions.
The third preliminary point raised is that the appeal is time barred. The respondent argues that
under regulation 6 (2) of the VAT Tribunal Regulations 1995 an appeal must be lodged within 30
days from the date of decision or determination by the Commissioner General. Again this issue
was brought to our attention through written submissions after we had ordered an adjournment
for delivery of ruling. Both counsels therefore did not address the Tribunal the issue.
It is not in dispute that the determination was made on 10 th February 1997. It is also not in
dispute that on 7 th March 1997 Messrs Deloitte and Touche\ Accountants acting on behalf of the
appellant wrote to the respondent. The second paragraph of that letter reads "please can you
accept this letter as an appeal against the assessment."
The respondent has not adduced any evidence or addressed us on why the letter by Deloitte
and Touche dated 7 th March 1997 cannot be an appeal. Infact, the respondent through its letter
dated 7 lh April 1997 acknowledged receipt of the letter. This letter is in the plaintiffs bundle of
documents. We would like to take this opportunity to advise future litigants that documents being
produced before the Tribunal should be properly numbered and indexed for easier reference. All
the documents produced by the appellant in the form of a bundle have not been numbered.
On the basis of the information and documents before us, we hold that the appeal was
submitted within the 30 days period and is therefore not time barred.
We now turn to the appeal on the merits. According to the appellants the company's activity is
the hire of trucks and trailers to a South African company. The appellants are relying on section
12 (2) which provides
"where a service consisting of the lease, hire or loan of any goods does not involve the
removal of the goods from or to Zambia, the service shall be regarded as supplied in
Zambia".
128

In order to fully appreciate the issue at hand, it is important to look at the definition of supply
of a service. Section 2 alludes to supply of a service -
"supply of a service includes -
(a) the provision of goods on lease, hire or loan ........ "
This means that the hire or lease of goods on lease or hire is a service. Section 8 (1) (a) of the
Act imposes tax on every taxable supply of goods or services in Zambia ..." According to this
section, every supply that takes place in Zambia is taxable. For the purpose of determing
where a supply takes place, one has to have recourse to subsection (2) of section 12 which
provides
"where a service consisting of the lease, hire or loan of any goods does not involve
the removal of goods from or to Zambia, the service shall be regarded as supplied in
Zambia."
The respondent has countered by stating that subsection 2 is not applicable. The respondent
argues that subsection 4 (a) is what is applicable which provides that services shall be
regarded as supplied in Zambia if the supplier of a service has a place of business in Zambia
and no place of business elsewhere. There is an apparent conflict if subsection 2 of section 12
is juxtaposed with subsection 4 of the said section 12. According to subsection 2, if the goods
which consist of the service involve the removal of the goods from or to Zambia, then there is
no tax imposed in terms of section 8 (1) (a) of the Value Added Tax Act. If on the other hand
the supplier of the service has a place of business in Zambia and no place of business
elsewhere, then services shall be regarded as supplied in Zambia and hence attract tax in
accordance with section 8 (1) (a). What then is the position? As Lord Cairnus stated in
Partington v The Attorney General [18691 L. R. 4 H. L. 100
" I am not at all sure that in a case of this kind, a fiscal case - form is not amply
sufficient; because as I understand the principal of all fiscal legislation, it is this; if the
person sought to be taxed comes within the letter of the Law, he must be taxed,
however great the hardship may appear to the judicial mind to be, on the other hand if
the crown, seeking to recover the tax, cannot bring the subject within the letter of the
Law, the subject is free. However apparently within the spirit of the Law the case
mighty otherwise appear to be."
We cannot infer any clear intention to impose a tax under the facts and circumstances of this
case as presented before the Tribunal. Counsel for the appellant has referred us to the
provisions of subsection 5 of the Act which powers the Commissioner-General to make
provision by administrative rule so as to clarify the place of supply of goods.
129

We have not been referred to any such rule and subsection 5 is irrelevant in determining the
issue before the Tribunal.
Assuming that we are wrong in this finding that by virtue of section 12 (2), there is no tax imposed,
the appellant is still entitled to relief by virtue of paragraph 6 of the second schedule to the Act
which provides that if a supply is rendered outside Zambia, then that supply is zero rated. The
respondent argues that the place of supply mostly connected is that of Zambia. It would have been
more helpful if the respondent had adduced evidence before the Tribunal to prove that the service
was not rendered outside Zambia or that it fell within section 12 (4) (c) of the Act. What we have
had before the Tribunal are merely statements of the Law without corresponding evidence either
documentary, affidavit or oral to convince the Tribunal that the Law is consistent with the facts as
perceived by the respondent. In view of what we have said, we allow this appeal with costs.
Dated the 26 th day of March, 1999.
N A LUNGU
CHAIRMAN
M M
MUNDAHSI
MEMBER MEMBER
130
W Z MWANZA

Earlier on 11 th May 1996 Magjoe had appointed the appellant as its agent in Zambia to
operate those of Magjoe aviation aircraft, which may from time to time be based in Zambia. The
appellants where required to raise invoices and collect monies on behalf of Magjoe aviation
after settlement of all local expenses. Under this arrangement, the appellant administered the
lease between Magjoe and Zambian Express. It raised invoices and collected the lease
charges. For reasons that have not been clearly explained, the appellant as agent for Magjoe
did not charge and collect Value Added Tax.
On one of its inspections, the Respondents discovered invoices which the appellant had
raised against Zambian Express for which no tax had been charged. The Respondent
then assessed tax for the relevant invoices amounting to K95,564,117.00. Interest was
assessed at K14,468,223.54 bringing the total due to K.111,032,401.00. The Appellant
appealed against this assessment. The Appellant has advanced the following grounds in
support of its appeal.
1. The Respondent arrived at the assessment without taking into consideration the
fact that the Aircraft lease agreement was between Magjoe whose registered office
is at Olivedale, South Africa and Zambian Express. And that it was a mere agent
and had nothing to do with the aircraft.
2. Magjoe is a foreign-based company which has no place of business in Zambia but
simply appointed agents and hence section 12 (4) of the VAT Act is inapplicable.
They further argue that if any VAT is to be claimed and paid, it is to be paid by
Zambian Express who according to section 15 of the VAT Act as read with the
first schedule are exempt.
3. The appellant simply issued invoices to Zambian Express as an agent. They
therefore did not include VAT. They contend that since they were simply
invoicing on behalf of Magjoe as an agent, no VAT was cither claimed from
Zambian Express or included in their invoices between August 1996 to September
1997.
131

i
The Respondent in reply has advanced the following grounds:-
1. By virtue of the VAT General Amendment Rules contained in the Gazette notice
No. 196 of 1997 the supply of services shall be regarded as the place where the
service is performed, undertaken or utilised.
2. The provision of goods on lease, hire or loan is taxable under section 2 of the act.
Therefore, the appellant being an agent is involved in making two supplies as
follows
(a) The supplies made between Magjoe and Zambian Express.
This is service being supplied by Magjoe to Zambian Express i.e.
leasing of an aircraft.
(b) The supply of the agents own services to the principal for
which the appellant as agent charges a fee or commission. The
Respondents further argue that normal VAT rules apply to two the
activities requiring the Appellant to account for VAT.
3. Zambian express is not exempt from VAT but rather the transportation of persons
by air on scheduled flights. Zambian Express was not exempt from VAT on
leasing of the aircraft.
At the hearing of the appeal, both parties elected not to call oral evidence and informed
the Tribunal that they would rely on documents filed before the Tribunal.
In the Tribunal's opinion, there are, three issues that fall to be determined. Firstly, is the
appellant as agent of Magjoe liable for the tax of its principal Magjoe? Secondly, is Magjoe
liable to collect and account for tax in Zambia in view of it being a South African registered
company with no place of business in Zambia. Thirdly, is tax collectable from Zambian
Express in view of the exemption it enjoyed in the provision of services as passenger
carrier. We propose to deal with these issues in that order.
In determining whether an agent is liable for the tax liability of the principal, it is imperative to
look at the legal nature of the law of agency in the context of this case.
132

The Respondent in reply has advanced the following grounds:-
1. By virtue of the VAT General Amendment Rules contained in the Gazette notice
No. 196 of 1997 the supply of services shall be regarded as the place where the
service is performed, undertaken or utilised.
2. The provision of goods on lease, hire or loan is taxable under section 2 of the act.
Therefore, the appellant being an agent is involved in making two supplies as
follows-
(a) The supplies made between Magjoe and Zambian Express.
This is service being supplied by Magjoe to Zambian Express i.e.
leasing of an aircraft.
(b) The supply of the agents own services to the principal for
which the appellant as agent charges a fee or commission. The
Respondents further argue that normal VAT rules apply to two the
activities requiring the Appellant to account for VAT.
3. Zambian express is not exempt from VAT but rather the transportation of persons
by air on scheduled flights. Zambian Express was not exempt from VAT on
leasing of the aircraft.
At the hearing of the appeal, both parties elected not to call oral evidence and informed
the Tribunal that they would rely on documents filed before the Tribunal.
In the Tribunal's opinion, there are, three issues that fall to be determined. Firstly, is the
appellant as agent of Magjoe liable for the tax of its principal Magjoe? Secondly, is Magjoe
liable to collect and account for tax in Zambia in view of it being a South African registered
company with no place of business in Zambia. Thirdly, is tax collectable from Zambian
Express in view of the exemption it enjoyed in the provision of services as passenger
carrier. We propose to deal with these issues in that order.
In determining whether an agent is liable for the tax liability of the principal, it is imperative to
look at the legal nature of the law of agency in the context of this case.
133

Agency is the relationship which exists between two persons, one of whom expressly or impliedly
consents that the other should represent him or act on his behalf and the other of whom similarly
consents to represent the former or so to act c.f. Bowstead on Agency, 15 1h Edn. Page 1. The
undisputed facts before the Tribunal disclose that the Appellant was an agent of Magjoe.
Regulationl2 (1) of the Value Added Tax general regulation S.I. No. 78 of 1995 provides:
"Where a taxable supplier does not have a business establishment in Zambia or in case
of an individual or partnership in Zambia, the Commissioner General may request the
taxable supplier to appoint another person resident in Zambia (in this regulation referred to
as the "tax agent") to act on his behalf in matters relating to lax."
In this particular case, there was no need for the Commissioner General to make an express
appointment. The appellant had been appointed as agent by Magjoe. According to the letter
of appointment dated 11"' May 1996, Magjoe requested the appellant to raise invoices and collect
monies on behalf of Magjoe. The appellant was given the responsibility of raising invoices in
respect of supply of leasing services. The provisions of goods on lease, hire on loan is included in
the definition of section 2 (i) "supply of service". Having found that the appellant was responsible
as agent of Magjoe, the Tribunal finds that under regulation 12 (2) of S. I. Number 78 of 1995,
the appellant was obliged to account for the tax on the lease of the aircraft as a taxable supply.
The second issue is related to the first question. If Magjoe was liable for tax, then its agent was
equally liable. Section 2 (2) (b) defines a "taxable supplier" as a person who is required to be
registered under the Value Added Tax Act Chapter 331 of the laws of Zambia. Section 8 (i)
provides for the imposition and scope of the tax.
"A tax to be known as Value Added Tax shall be charged, levied, collected and paid in
respect of every taxable supply of goods or services in Zambia."
134

As pointed out. lease or hire of aircraft is a taxable supply in accordance with section 2. The
Appellants have argued that this supply did not lake place in Zambia and as Magjoe is a
South African company, it was not liable to collect and account for tax. With due respect to
the Appellants argument, registration in Zambia is not material for the determination of
whether the Appellant is required to account for tax. Equally, the fact that it has no place of
business in Zambia does not make it exempt from its obligation to account for tax. Section 12
(2) of the VAT Act provides
" Where a service consisting of the lease, hire or loan of any goods does not involve
the removal of the goods from or to Zambia the service shall be regarded as
supplied in Zambia".
The agreement itself between the parties suggests that the contract was performed in Zambia
and the place of supply was in Zambia. It is contended that tax in issue has not been
collected. This is immaterial. A trader cannot escape the requirement to account for or pay
tax merely because he has failed to tax his customer c.f. de_voi on Value Added Tax,
Butterworths page A 14.01,
Having found that Magjoe made a taxable supply for which it was liable for tax, its agent the
appellant who was charged with the responsibility of raising invoices is equally liable.
We now turn to the third issue. The appellant contend that by Virtue of the VAT exemptions
order 1996 made pursuant to section 15 of the Act, Transportation of persons by air on
scheduled flight is exempt from tax. With due respect to the appellant, though this position
of the law is correct, it is immaterial to this case. The Respondent is not seeking to tax
invoices raised to passengers. The Respondent is seeking to tax invoices in respect of lease
charges which is not exempt. Leasing of aircraft is a taxable service.
For the foregoing reasons, the appeal is dismissed with costs. The Tribunal is however
of the view that this is a proper case where the Commissioner General should not charge
interest in accordance with section 4 of act no. 1 of 1999 which amends section 20 of the
VAT Act Cap 331.
135

The tax was not paid purely out of ignorance.
There was no intent to avoid or evade tax. We accordingly order that the whole of the interest
should be waived.
Dated the.................................... dav of.?'..:'?... 1999
TMUSHIBWE
(MEMBER)
MMMUNDASHI
(CHAIRMAN)
136
II MUYOYETA
(MEMBER)

IN THE REVENUE APPEALS TRIBUNAL 1998/RAT/01
AT LUSAKA
BETWEEN:
PHINDA AUTO SPARES LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi - Chairman, N A Lungu and T Mushibwe - 4 (h
November, 1998, .11 th November, 1998, 25 th November, 1998, 28 th
December, 1998, 11 th January, 1999, 1 st February, 1999 and 22""
February, 1999.
FOR THE
APPELLANT: H S Silweya, Silweya and Company
FOR THE
RESPONDANT: T N Mulako, Senior Inspector of Taxes, Zambia Revenue
Authority
RULING
This is an appeal against two assessments raised by the Commissioner General. The first
assessment is for the charge year 1995/96, dated 31 s1 December, 1997. The assessment
was raised against the appellant Phinda Auto Spares Limited. The second assessment is also
for the charge year 1995/96, dated 31 st December, 1997 and is against one Mr Allen
Fakeye. The second assessment was served on the appellant as agent for the said Allen
Fakeye.
In the first assessment namely for the charge 1995/96, the respondents regressed what it
called loans to Directors amounting to K92,307,692.00 on the basis that the appellant had
approved a loan for the Directors amounting to K 100,000,000.00. The second assessment
was raised against Allen Fakeye in the absence of filing a return. As evidence had been
disclosed that the appellants were in possession of a sum of money amounting to
K76,562,411.00 belonging to the said Allen Fakeye the respondents served on the
appellants, a notice under section 84 of the Income Tax Act.
137

The appellant led its evidence by calling two witnesses namely Mr Simon Phiri and Mr
Edward Banda who were Directors in the appellant company at the material time. According to
Simon Phiri; who shall hereafter be referred to as PW1, the appellant company passed a
resolution on 10 (h April, 1995. The said resolution is marked as document "no 9" in the
bundles of documents and later marked as "ID2". The said
document reads ......
"That the Directors of Phinda Auto Spares Limited be given house loans to enable
them build their residential houses, the sum of money not to exceed K100,000,000.00
in total."
According to PW1, each Director was to draw up to K 50 million each. According to PW1, he
only drew K14,693,750.00 and his co-Director drew K11,599,290.00. According to this
witness the total amounts drawn by the two Directors and expended on constructing their
respective houses came to K26,293,040.00 in total.
In cross examination, PW1 stated that he and his fellow Director had held various discussions
with the Respondent's officers before the assessment was issued. According to this
witness he and his colleagues showed the respondents officials documents such as analysis
books where they had been recording the details of drawings in respect of expenditure
incurred by the Directors when constructing the houses. According to PW1, the respondents
officials ignored the documents they had produced. This witness complained that the
respondent assessed them on the sum of K92,307,692.00 which the respondent termed as
"regressed loans to Directors" According to this witness, the assessment should have been
based on the sum of K26,293,040.00 and not K92,307,692.00.
The witness further testified that the company did some business with an alien who at the time
lived in Zambia. According to this witness, the appellant did business with the said Allen
Fakeye amounting to K76,562,41 LOO. According to PW1, this amount represented the
value of goods brought in the country by the said Allen Fakeye. The Tribunal was informed
that the said Allen Fakeye was subsequently deported by the immigration department.
138

The witness referred the Tribunal to the documents marked 7 and 8 attached to "ID2". This
was purported demonstration of the fact that the appellants had written to Immigration
department requesting for a multiple entry visa for their business partner Allen Fakeye. The
said application was rejected by the department of immigration. According to the witness the
Directors decided to treat the sum of K76,562,411.00 as capital and transferred it to the
company and treated same as a loan from the Directors. The witness conceded that the
company sold Fakeye"s stocks and kept the money which was due to Allen Fakeye, awaiting
his return to Zambia so that they could give it back to him.
The witness further conceeded that the K76,562,411.00 belonged to Allen Fakeye and that his
company would be obliged to pay back the said sum to Fakeye should he return to Zambia
and claim it back.
PW2 was Edward Banda. His testimony was not much different from PW1. According
to this witness, his co-Director had started building the house even before they started
drawing funds from the business. His colleague had started construction with funds from
other sources. This witness confirmed that the respondent's officials refused to accept the
documents that the appellant submitted to the respondent. These are the facts that were
adduced to support the appellant's case.
The Respondent called one witness, Sundano Sundano, a Senior Inspector of Taxes.
According to this witness, he sought to interview the two Directors of Phinda Auto Spares in
1997. According to him the two had disclosed that they were business partners. He
demanded from both of them personal and business records. According to him he
ascertained that Simon Phiri stayed in his own house which had been constructed during
the charge year 1995/96 at a cost of K30 million. He stated that the money for construction
came from Phinda Auto Spares. He subsequently held another meeting with the other
Director Edward Banda who stated that this house had cost K25 million.
139

According to Mr Sundano, he requested for a second opinion from the projects department
of the respondent with regard to the values of the houses. According to Mr Sundano, the
value of Edward Banda's house was put at K41,050,000.00 and Simon Phiri's at
K39,650,000.00. According to Mr Sundano, he did not pick these figures as the basis of the
assessment. He based the assessment on the figures actually disclosed by the Directors
themselves. According to Mi- Sundano, Simon Phiri had informed him that his house had cost
K30,000,000.00 and Edward Banda on the other hand had told him that his house had cost
K25,000,000.00. This witness informed the Tribunal that during the meetings he had held
with the Directors of Phinda Auto Spares Limited in 1997 he had been accompanied by
another official one Michael Phiri: This witness was not called to testify.
The Tribunal subsequently recalled Mr Simon Phiri to shed light on the analysis books and
summaries in which the appellant had been recording drawings made by each Director. The
summaries were marked "IDF'and the analysis books marked "IDS". According to Mr Phiri,
he showed Mr Sundano the books but Mr Sundano rejected them. Mr Sundano found them
unacceptable because in some cases, there were some cancellation with Tipex. The
Tribunal on its own motion made an observation with the sequence of reference numbers
in the appellant's books. There was no consistency in the numbering of reference numbers.
Mr Phiri explained that these were errors that were made by the then Accountant. According to
Mr Phiri, the respondent's officials did not query that inconsistency in numbering. The only
query they raised was that Tipex had been used in some instances. After Mr Phiri finished
his testimony on the books, the Tribunal invited Mr Mulako to cross examine Mr Phiri. Mr
Mulako declined to cross examine. According to him he was handicapped. He did not have
the investigation report which would have assisted him to cross examine. It should be put on
record that the said investigation report was not filed before the Tribunal.
140

On the foregoing facts, there are two issues that fall to be determined by the
Tribunal :-
1. Whether the total sum drawn by the Directors of the appellant company for
construction of their houses was K26,293,040.00 or K55,000,000.00 as
claimed by the respondent.
2 Whether the sum of K 76,562,411.00 should be treated as capital injection and
that the assessment made on Allen Fakeye should be set aside.
We will deal with the first issue Section 95D (2) of the Income Tax Act provides
that......
"where in any charge year a company to which the provisions of Section 95 applies
makes, directly or indirectly, any loan to any person who at the time the loan is
made is an effective shareholder of the company or a nominee of the effective
shareholder, the company shall pay without assessment, such an amount as is equal
to the difference between the amount of the grossed up equivalent of the loan and the
amount of the loan, as if the amount were tax charged on the company."
The facts disclose that there were indeed loans advanced to the Directors and
shareholders. The question is how much was the loan? As this Tribunal stated in the case of
TZI Limited vs Zambia Revenue Authority. 1998/RAT/Q2
"Upon an appeal to the Commissioners against an assessment the onus of proof
is upon the tax payer by evidence given on oath or affirmation or by unsworn
evidence to demonstrate that the assessment ought for be reduced or set aside."
In our considered opinion, the appellants have discharged this onus of proof. They led
evidence through two of the then Directors to the effect that the total loans advanced and
to be regressed amounted to K14,693,750.00 for Edward Banda and K 11,599,290.00 for
Simon Phiri. The evidence was not seriously challenged in cross examination. Infact, Mr
Mulako for the respondent declined to cross examine on the documents that the appellants
tendered in evidence.
141

On the foregoing facts, there are two issues that fall to be determined by the
Tribunal:-
1. Whether the total sum drawn by the Directors of the appellant company for
construction of their houses was K26,293,040.00 or K55,000,000.00 as
claimed by the respondent.
2 Whether the sum of K 76,562,411.00 should be treated as capital injection and
that the assessment made on Allen Fakeye should be set aside.
We will deal with the first issue Section 95D (2) of the Income Tax Act provides
that ......
"where in any charge year a company to which the provisions of Section 95 applies
makes, directly or indirectly, any loan to any person who at the time the loan is
made is an effective shareholder of the company or a nominee of the effective
shareholder, the company shall pay without assessment, such an amount as is equal
to the difference between the amount of the grossed up equivalent of the loan and the
amount of the loan, as if the amount were tax charged on the company."
The facts disclose that there were indeed loans advanced to the Directors and
shareholders. The question is how much was the loan? As this Tribunal stated in the case
of TZI limited Vs Zambia Revenue Authority, 1998/RAT/02
"Upon an appeal to the Commissioners against an assessment the onus of proof
is upon the tax payer by evidence given on oath or affirmation or by unsworn
evidence to demonstrate that the assessment ought for be reduced or set aside."
In our considered opinion, the appellants have discharged this onus of proof. They led
evidence through two of the then Directors to the effect that the total loans advanced and
to be regrossed amounted to K14,693,750.00 for Edward Banda and K11,599,290.00 for
Simon Phiri. The evidence was not seriously challenged in cross examination. Infact, Mr
Mulako for the respondent declined to cross examine on the documents that the appellants
tendered in evidence.
142

We therefore find that the amount to be treated as loans for regressing up pursuant to Section
95 (D) (2) is K26,293,040.00 as opposed to K92,307,692.00 which figure Mr Mulako has tried
to justify. The tax on this revised figure should be paid within 30 days from 22 nd February,
1999. The assessment includes income allegedly omitted from retail business and taxi
business. There was no evidence led to challenge these two aspects of the assessment and
the Tribunal will not disturb that aspect and the corresponding penalties on that income from
retail and Taxi business.
The second issue is whether the appellants are liable to pay the tax due on the
assessment of Allen Fakeye and not the appellants c.f. the assessment marked as 26 in "ID2".
That assessment was made pursuant to Section 64 (a) of the Income Tax Act Chapter 323 of
the Laws of Zambia. Section 64(a) provides
"An assessment may be made by the Commissioner General in any amount accruing to the
best of his judgement in respect of any person who has not delivered a return as required by
this Act, or on whose behalf no return has been so delivered"...
Allen Fakeye, the person assessed should have made arrangements to disprove the
assessment. This has not been done and therefore the assessment stands. The
Directors of the company in their testimony have conceded that the sum of K76,562,413.00
belongs to Allen Fakeye and that is not the appellant's money. Section 84 (i) of the
Income Tax Act provides that
"....Any person or partnership declared to be an agent in pursuance of subsection (i) shall
apply to the payment of the tax due so much of any kind of property whatso ever held by him
or coming into his hands on behalf of the person or partnership from whom the tax is due
as is sufficient to pay such tax and any such agent is hereby indemnified against any person
or partnership whatsoever in respect of all payments made by him".
Counsel for the appellant in making reference for an agent for paying tax has mentioned
Section 66 (I). This section is irrelevant here. That section refers to special relationship
created by operation of law such as trustee, executor of an estate
Mr Silweya has ilirther submitted that the appellants were not being fraudulent or attempting to
avoid liability. With the greatest of respect, this argument misses the issue. There has been no
allegation of fraud against the appellants. Infact, the assessment is not against the appellant.
Allen Fakeye did not file returns so alleges the respondent. It is up to Allen Fakeye to disprove
143

the assessment. Equally, there is no basis for treating the sum of K76,562,411.00 as capital
available to the appellant. The appellants have themselves conceded that this is money belongs to
Allen Fakeye. The respondents have merely assessed tax on that figure amounting to
K26,796.844.00. The appellants appeal on this issue therefore fails and we order that the said tax
of K26,796,844.00 should be paid within three months from 22 nd February, 1999.
Lastly Mr Silweya has submitted that the taxes due should be split between:
(i) Simon Phiri and Phinda Auto Spares Limited
(ii) Edward Banda and Auto Field Motor Spares Limited
The basis of his argument is that Mr Edward Banda is no longer Director and Shareholder of
Phinda Auto Spares Limited. This Tribunal respectfully declines to take the approach suggested
by counsel for the appellants. It is trite law that once a company is incorporated, it becomes a
person distinct from its members, not 'a mere aggregate of its shareholders', c.f. the celebrated
old case of Salomon, ys Salomon [1897] A.C.2. The appellant is an incorporated company.
The assessments were raised against the company as a corporate body and not as against the
directors and shareholders in their personal capacities. There is therefore no legal basis for this
Tribunal to split the liability between the two entities who are not even parties to the appeal. If we
follow Mr Silweya's suggestion, we would be creating a precedent not supported by any authority
in law.
144

As the appellant has succeeded on one aspect of the appeal and the respondent on the
other, we make no orders as to costs.
Dated the
CHAIRMAN M M MUNDASHI
Day
f/?
Member N A LUNGU
Member T MUSHIBWE
145

IN THE REVENUE APPEALS TRIBUNAL I998/RAT/02
AT LUSAKA
BETWEEN:
CORAM
P.C. LUHANGA
T.N. MULAKO
T. Z. I. LIMITED APPELLANT
and
ZAMBIA REVENUE AUTHORITY RESPONDENT
M. M. MUNDASHI, (CHAIRMAN), N. A. LUNGU 81 H. M.
MUYOYETA - 11TH AND 30TH NOVEMBER, 1998
FOR THE APPELLANT
SENIOR INSPECTOR - ZAMBIA REVENUE AUTHORITY
FOR THE RESPONDENT
RULING
This is an appeal against an assessment of the Commissioner General whereunder the
sum of K42,258,742.00 described as initial licence fees were disallowed.
At the start of the hearing, both parties agreed that the facts were not in dispute. The
parties elected that no viva voce evidence would be led.
Mr. Luhanga who argued the case for the appellant informed the Court that when the
return for the relevant charge year was submitted, the then appellants tax advisers
indicated that the sum of K42,258,742 was application and licence fees. According
to Mr. Luhanga, Coopers and Lybrand were the tax advisers who filed the return on
behalf of the appellant. This was in respect of the 1994/95 charge year. Mr.
Luhanga submitted that infact, the K42,258,742.00 should have been broken down
as follows:-
146

1) K 50,000.00 Licence fees
2) K2 75,000.00 employment permit fees for expatriate
employees
3) K41,933,742.00 payment to Coopers and Lybrand for
preparing cashflow and projections for the appellant
Mr. Luhanga submitted that these amounts were expenditure of a revenue nature and therefore
should have been allowed as expenses in the computation of tax. As indicated the appellant led
no other evidence. No documents were submitted before the Tribunal. At the Tribunal's
prompting, Mr. Luhanga agreed to submit documents to the Tribunal after the hearing. In
response to the Tribunal's question as to why no documents had been submitted to the
commissioner General to back up the appellant's contention that the expense of
K42,258,742.00 was of a revenue nature, Mr Luhanga replied that he was working against
time as he had to file an objection to the Commissioner General within the stipulated time. At
that time, the documents had not yet been retrieved from Coopers and Lybrand the accountants
for the appellant. Mr, Mulako on behalf of the Respondent Zambia Revenue Authority
submitted that when accounts were presented, the sum of K42,258,742.00 was indicated
as application and licence fees. He stated that Zambia Revenue Authority disallowed the amount
and it was treated as capital expenditure. According to Mr. Mulako, it was only at objection
stage that the appellant indicated that the K42,258,742.00 was revenue expenditure. There
was no documentation to support the tax payers contention. Mr. Mulako stated that as there
was no sufficient evidence to support the claim that the expenses were of a revenue nature, the
only inference that was made was that the expenses were of a Capita! nature.
According to Mr. Mulako, even if the K41,933,742.00 was consultancy fee, this was a
huge expense which could not have been used for such purpose considering the fact that the
company had just started trading.
147

Mr. Mufako submitted that he was relying on section 29 of the Income Tax Act Cap. 323.
Mr. Mulako submitted that he made that inference on the basis that a company formed
recently could not have incurred consultancy fees of such magnitude in a short time.
Mr. Luhanga in reply had submitted before the Tribunal that any expenditure incurred within
18 months of start of trading is allowable as long as it is of a revenue nature. The Tribunal
has carefully considered the brief facts before it. The Tribunal has no difficulty in finding
as a fact that when the appellant submitted accounts to Zambia Revenue Authority, the
sum of K42,258,742.00 was described as application and licence fees. The Tribunal has
also found as a fact that when an objection was lodged no documents were submitted to
back up the claim that the K42,258,742.00 were expenses of a revenue nature.
The Tribunal has noted that the receipt for K41,933,742.00 for the payment made to
Coopers and Lybrand has not been produced or any evidence on that point led. It should
also be noted that during the hearing of the matter before the Tribunal, no documents
were produced. The Tribunal in its desire to give fair hearing requested Mr. Luhanga to
produce documents such as accounts and Memorandum and Articles of Association after the
hearing. These were made available. However, these documents turned out not to be very
helpful to the appellant's case.
With the foregoing facts, it is our considered opinion that the appellant has not
discharged the onus of proof placed on it to discharge the assessment made by the
Respondent. It is a well settled principle of law that
"upon an appeal to the General or Special Commissioners against an
assessment the onus of proof is upon the tax payer by evidence given on oath
or affirmation or by unsworn evidence to demonstrate that the assessment
ought to be reduced or set aside" c.f. Halsbury's Laws of England paragraph
1607 Volume 23, 4th edition. See also Moll V I.R.C. [1955] T.C384.
148

If the appellant fails to lead evidence before the Commissioners, he cannot
have the assessment reduced or displaced c.f. R.A. Bird and
Company V I.R.C[1924] 12T.C. 785
As we have pointed out before there has been no credible evidence presented either oral or
documentary to challenge the assessments. We have had the benefit of looking at the
documents submitted by Mr. Luhanga after the hearing. The Statement of Accounts do not
in any way indicate that the sum of K41,933,742.00 was paid to Coopers and Lybrand in the
form of revenue expenditure. In view of the foregoing, the appeal of the appellant is
dismissed and the Respondents assessment will stand. Either party has the right of appeal to
the High Court. Costs to follow the event
Dated the : 11 th day of December 1998
, A. LUNGU
MEMBER
M M. MUNDASHI
CHAIRMAN
149
H. M. MUYOYETA
MEMBER

IN THE REVENUE APPEALS TRIBUNAL
AT LUSAKA
BETWEEN:
ZAMBIA CONSOLIDATED COPPER MINES LTD APPELLANT
AND
150
1999/RAT/05
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi - Chairman, N A Lungu and T Mushibwe on 19 th
FOR THE
APPELLANT:
FOR THE
RESPONDENT
RULING
and 3()' h April 1999.
Ms B N Nachilongo, KPMG Pcatmarwick
R Zulu, Assistant Commissioner of Taxes, Zambia Revenue
Authority
This is an appeal by Zambia Consolidated Copper Mines Limited whom we shall hereinafter
refer to as "the appellant" in respect of assessment no, 96/2/2276 (hereinafter referred to
as "the assessment") for the charge year 1995/96 issued on 31 st August 1997 (hereinafter
referred to as "the charge year"). We shall refer to the Zambia Revenue Authority as "the
Respondent".
The appellant submitted income tax returns for the charge year in which they claimed as a
deduction, the sum of K6/701,689,000.00 paid to the Government of the Republic of Zambia as
Mineral Royalty. The respondent disallowed the said expense. In disallowing the expense,
the respondent gave the following reasons:
1. That the royalty referred to in the Mines and Minerals Act which the appellant paid
does not fall within the definition of "royalty" in the Income '.fax Act

2. That the deduction of royalty is prohibited by section 44 (1) of the Income Tax Act
chapter 323 of the Laws of Zambia
These are the brief and undisputed facts on which the appellant brings this appeal. The
appellant called only one witness, the Director of Mines namely William Mumbi. This witness
confirmed that the letter marked "PI" dated 3 I

"net book value means the market value of minerals free on board at
the point of export from Zambia or in the case of consumption within
Zambia, at the point of delivery within Zambia less; (a) the cost of
transport including insurance and handling charges from the mining
area to the point of export or delivery and (b) the cost of smelting and
refinery or other processing costs........... "
We agree with Ms Nachilongo that mineral royalty as defined in section 66 (1) of the
Mines and Minerals Act is simply a "royalty" and not a tax. As Lord Cairns stated in
Partington v Attorney -General.[1.8691 L. R. 4 H. L. 100
"1 am not at all sure that in a case of this kind, a fiscal case - form is not amply
sufficient; because as 1 understand the principal of all fiscal legislation, it is simply
this; if the person sought to be taxed comes within the letter of the law, he must be
taxed, however great the hardship may appear to the judicial mind to be, if on the
other hand if the crown, seeking to recover the tax, cannot bring the subject within
the letter of the law, the subject is free, however apparently within the spirit of the law
the case might otherwise appear to be."
This principal of law was further succinctly put in Brandy Syndicate y...Inland
Re venue Commissioners [ 1921] I. K. B. 614 where it was stated;
"In a taxing Act, one has to look at what is clearly said. There is no room for any
intendment. There is no equity_about_ tax. There is no presumption as to tax. Nothing
is to be read in, nothing is to be implied
(The underlining is ours for emphasis)
We agree with the appellant that the royalty created by section 66 (1) is simply that, a "royalty"
and not a tax. If it was the intention that the royalty should be a tax which is not deductible
under the Income Tax Act, then the statute could have stated so like the repealed Mineral
Royalty Tax Act did.
If the royalty referred to in section 2 and 66 (1) of the Mines and Minerals Act is not a tax, what
then is it? The English dictionary defines royalty as payment of money by a mining or oil
company to the owner of the land or sum paid to the owner of a copyright or a patent.
152

In the case at hand, the appellant has a mining licence which gives it the right to mine minerals.
The owner of all mining land in Zambia is the Government of the Republic of Zambia and the
fee that the appellant pays to the Government in consideration for mining the Government's
land is "royalty."
In response to this contention, the respondent has advanced at best what we can call a
disingenuous argument. The respondent contends that the definition of royally in the Mines and
Minerals Act does not fall within the definition of "royalty" in the Income Tax Act. Section 2 of
the Income Tax Act defines royally as
"means a payment in any form received as consideration for the use of, or the right to
use, any copyright of literally, artistic or scientific work (including cinematorgraphic
films and tapes for radio or television broadcasting), any patent, trade mark, design
or model, plan secret formula or process, or for the use of or the right to use industrial,
commercial or scientific equipment or for information concerning industrial or scientific
experience".
If it was the intention of the legislature that the definition of royalty under the Mines and
Minerals Act should be included in the definition of "royalty" in the Income Tax Act, the Income
Tax Act should have stated so. Similarly, there is nothing in the language of the statute i.e.
the Income Tax Act which suggests that the definition of royalty is the most exhaustive and
definitive. Infact "royalty" in the Income Tax Act is income in the hands of the recipient and
has been defined as such in section 17 (f) of the Income Tax Act.
This therefore means that anyone who earns income from any of the activities defined in the
definition of "royalty" earns "royalty" which is subject to tax at the rate as specified in
annexture G as read with paragraph 15 of part III of the charging schedule. The royalty
under the Income Tax Act is that income that will accrue to the taxpayer and be liable to be
taxed at the appropriate rate. Royalty in the Mines and Minerals Act on the other hand is that
fee or income that the Government of the Republic of Zambia earns on mining rights and
concessions.
153

In the ease at hand, the appellant has a mining licence which gives it the right to mine minerals.
The owner of nil mining land in Zambia is the Government of the Republic of Zambia and the
fee that the appellant pays to the Government in consideration for mining the Government's
land is "royalty."
In response to this contention, the respondent has advanced at best what we can call a
disingenuous argument. The respondent contends that the definition of royalty in the Mines and
Minerals Act does not fall within the definition of "royalty" in the Income Tax Act. Section 2 of
the Income Tax Act defines royally as
"means a payment in any form received as consideration for the use of, or the right to
use, any copyright of literally, artistic or scientific work (including cinematorgraphic
films and tapes for radio or television broadcasting), any patent, trade mark, design
or model, plan secret formula or process, or for the use of or the right to use
industrial, commercial or scientific equipment or for information concerning industrial
or scientific experience".
If it was the intention of the legislature that the definition of royalty under the Mines and
Minerals Act should be included in the definition of "royalty" in the Income Tax Act, the Income
Tax Act should have stated so. Similarly, there is nothing in the language of the statute i.e.
the Income Tax Act which suggests that the definition of royalty is the most exhaustive and
definitive. Infact "royalty" in the Income Tax Act is income in the hands of the recipient and
has been defined as such in section 17 (f) of the Income Tax Act.
This therefore means that anyone who earns income from any of the activities defined in the
definition of "royalty" earns "royalty" which is subject to tax at the rate as specified in
annexture G as read with paragraph 15 of part III of the charging schedule. The royalty
under the Income Tax Act is that income that will accrue to the taxpayer and be liable to be
taxed at the appropriate rate. Royalty in the Mines and Minerals Act on the other hand is that
fee or income that the Government of the Republic of Zambia earns on mining rights and
concessions.
154

It is there lore immaterial that the definition of royalty in the Mines and Minerals Act does not
fall within the definition of the Income Tax Act or the definition used in model treaties of the
Organisation for Economic Co-operation and Development (OECD). The royalty referred to
in the Income Tax Act is therefore income earned by someone and subject to tax.
The appellant in this case does not earn "royalty". The appellant instead pays royalty. What
then is the basis for charging the appellant tax under the income tax Act? In our view, the
answer is in Section 17 (a) of the Income Tax Act which states -"for the purpose of this Act,
income includes
a) gains or profits from any business for whatever period of time carried
on."
Paragraphs (b) to (h) arc in respect of other classes of income and do not apply to the
appellant here. This in fact is the import of the appellant's second ground of appeal. The
appellant contends that it earns income which is subject to income tax. Subject to exceptions,
exemptions, every income earned in Zambia is subject to charge of tax c.f. section 14 of the
Income Tax Act. The appellant has contended that in the computation of its tax, it is
entitled to deductions under section 29 (1) (a) which provides that;
"in ascertaining business gains or profits in any charge year, there shall be
deducted the losses and expenditure other than of a capital nature, incurred in
that year wholly and exclusively for the purposes of the business................ "
It is a well settled principle of taxation that subject to limitations imposed by a tax statute,
revenue expenditure is set off against gross revenue receipts c.f. Halsbury's Laws of England,
4 th edition paragraph 52.
This Tribunal also confirmed this position in the case of Trans Zambezi Industries limited
vsZambia Revenue Authority 1998/RAT/Q2. This means that any expenditure incurred by a
business wholly and exclusively for that business as long as it is not of a capital nature, such
expense is deductible from the gross income of the business in order to arrive at the income
to be taxed. Ms Nachilongo has argued that the royalty paid to the Government is an
expense for the purpose of pursuing the business of mining and that it is not capital
expenditure.
155

We entirely agree with this submission. The respondent in response argues that mineral
royalty is prohibited from deduction as an expense by virtue of section 44 (1) of the Income Tax
Act which provides;
"No deduction is made in respect of any of the following matters
(1) the amount of any copper tax or royally which is allowed as a
credit against mineral tax in prusurance of the provisions of the
Mineral Royalty Tax Act".
This section is referring to a mineral tax in prusurance of the provisions of the Mineral
Royalty Tax Act." (The underlining is ours for emphasis.) This prohibition is in respect
of the "Mineral Tax under the provisions of the Mineral Royalty Tax Act" (now repealed).
This obviously does not apply to "royalty" under the Mines and Minerals Act. As we have
staled when referring to English Authorities there is "no presumption or intendment to tax".
Section 44 (f) applied to the repealed Mineral Royalty Tax Act and not the Mines and
Minerals Tax Act. Ms Nachilongo has conceded that the Mines and Minerals Act took
effect on 6 lh September 1995. We therefore allow this appeal to the extent (hat all
royalties paid after (he enactment of the Mines and Minerals Act are deductible under
section 29 (a) of the Income Tax Act and all royalties paid after I st April 1995 but before the
enactment of the Mines and Minerals Act will not be deducted as provided for in the then
Mineral Royalty Tax A.ct. We order that the assessments be amended accordingly.
We award costs lo the appellant.
Dated the 30 th day of April, 1999.
CHAIRMAN
156

IN THE REVENUE APPEALS TRIBUNAL HOLDEN AT
LUSAKA
B E T W E E N:
157
1999/RAT/13
HITECH TRADING LIMITED Appellant
and
ZAMBIA REVENUE AUTHORITY Respondent
CORAM J.M. MULWILA (Vice-Chairman), T MUSH1BWE
and N.A. LUNGU on 27 th May and 2F l September, i 5* October and
17 th November, 1999.
FOR THE
APPELLANT
C.K. BANDA of Messrs Chifumu Banda & Associates
and
C.M. SAMPA of Messrs C.M. Sampa & Company
FOR THE
RESPONDENT: T. N. MULALA of Zambia Revenue Authority
R U LING
This is an appeal against the tax assessments totalling K 1,082,744,767-00 the Respondent raised
against the Appellant under Section 64(A) of the Income Tax Act for the periods 1994/95, 1995/96
and 1996/97 and the subsequent collection of a sum of Kl,582,328.067-23 from Commercial Banks
which the Respondent appointed as agents for purposes of collecting the tax.
The Appellant has contended that the taxation was malicious and in bad faith because the amounts
collected from the Commercial Banks where the Appellant maintained accounts exceeded what was
assessed by K499,583,300-23. Further the manner in which the collections were made was high
handed. The Respondent appointed Union Bank Zambia Limited, First Alliance Bank Limited and
First Merchant Bank Limited as agents and demanded from them to remit all the money that the
Appellant had in the accounts without regard to the fact that the money in the Banks was in excess of
the assessments

The Appellant has further contended that the assessments included undeclared sales which have
been estimated in lieu of cancelled invoices, expenses for travel to Malawi to explore business
expansion, and expenses for travel to India and Zimbabwe to acquire goods for the Malawi market.
In response the Respondent has stated that they first raised assessments for the periods 1994/95,
1995/96 and 1996/97 amounting to K 1,082.74-),767-00 on 17" 1 January, 1998 to which the Appellant
objected on 9 lh February, 1998. After protracted investigations amended assessments were raised on 3' d
November, 1998 for K134,02.1.628-00 (i.e K22,587,455-00, K59,704,694-00 and K51,73 1,479-00).
The Appellant raised objection to this assessment as well but their reasons were not accepted by the
Respondent which confirmed the assessments vide their letter of 16 th December 1998. The Appellant
(hen decided to appeal to the Revenue Appeals Tribunal.
The reasons advanced by the Respondent for rejecting the Appellant's objection to assessment was
that the Appellant had failed to furnish the Respondent with all the invoices as was necessary to
obtain full information in respect of sales and to verify that the invoices were actually cancelled or
not. Out of 36 invoices cancelled in 1995/96 only 14 were made available to confirm the
cancellation; and out of 25 invoices said to have been cancelled in 1996/97, only 4 were availed to the
Respondent.
The Respondent contend that under Normal Accounting Practice required under Section 55 of the
Income Tax Act, business records, including altered or cancelled invoices, must be kept. This is also
necessary for the sake of audit trail. In the absence of cancelled invoices, the Respondent
averaged all the invoices and arrived at apparent sales for purposes of assessment.
As regards travel expenses incurred in the exploration for business expansion in Malawi, the
Respondent stated that that would form part of pre-trading expenses in Malawi and is not
allowable. If income from Malawi was to be taxable in Zambia the expenditure would give
rise to a benefit of an enduring nature and annual payments for servicing the rights would be
allowable for tax purposes. The Respondent then cited the case of BRITISH INSULATED AND HELSBY
CABLES LIMITED v ANTHERTON (1926) A.C 205 in support of their position.
158

In their submission, the Respondent states that the travel expenses to India and Zimbabwe have
been allowed. However, the portion incurred for negotiating exclusive rights of agency for Zimbabwe
Dairy Produce Board and negotiating agencies in India has not been .
On the evidence and submissions available to us, we have found as a fact that the Respondent acted
arbitrarily in their first purported assessment of the Appellant. It is not a coincidence that Commercial
Banks were appointed agents for collection of tax and all the money that the Appellant had in the Banks
was demanded. The Banks were appointed as agents for payment of Income Tax but for reasons best
known to the Respondent the money was not entered as Income Tax. This is the import of the letter
dated 8 th December, 1998 on page 8 of the Appellant's Bundles. In that letter the Acting Principal
Revenue Officer - PAYE wrote as follows:-
"As discussed, we are unable to process the refund because you are claiming
Kl,448,304,439-82 whilst our records show K497,193,885.06 as credit. As explained some of
the payments made to ZRA as advised by the Bank did not come to our section, as a result our
receipts of payment and revised assessments could not balance up with the amount on your
claim.
If we have to settle your claim, we will have to base it on our figure, i.e.
K497,193,885-06."
Regardless of where the money has gone, we arc satisfied that a sum of K 1,582,328,067-82 has
been collected as tax from the Appellant as follows'-
First Alliance Bank Limited K 2,808,813-05
First Merchant Bank Limited K 253,858,610-65
First Merchant Bank Limited K 694,443,131-06
Union Bank of Zambia Limited K 631,217,513-06
159
K 1,582,328,067-82

The Appellant has conceded through their counsel's letter dated 12"' November, 1998 that their
client are liable to pay tax on the amended tax in the sum of K 134,023,628-00, leaving the
balance due to the Appellant in excess tax collected at K1,448,304,439-82.
In view of the foregoing, we do not uphold the Appellant's objection to the amended
assessment as notified on 3"' November 1998. We, however, allow the appeal to the extent that
the first assessment was done arbitrarily. Consequently, we order that, the Respondent refunds to
the Appellant a sum of K 1,448,304,439-82 being excess tax collected.
We make no order as to costs. Any party aggrieved by the Ruling is free to appeal to the High
Court.
Dated the 17 lh
day of November, 1999.
J.M. MULWILA (DR)
Vice-Chairman
160

IN THE REVENUE APPEALS TRIBUNAL HOLDEN AT LUSAKA
BETWEEN:
BUILDELECT ZAMBIA LIMITED
and
ZAMBIA REVENUE AUTHORITY
CORAM J.M. MULWILA (Vice-Chairman), N.A. LUNGU and I.
MUSH1BWE on 28 th May, 23 rti July, 15 l " October and
17* November, 1999
FOR THE
APPELLANT
FOR THE
RESPONDENT:
RULING
L.P. MWANAWASA S.C. of Messrs Mwanawasa and Company
and
L. MUUKA Legal Counsel for the Zambia Revenue Authority
161
1999/RAT/28
Appellant
Respondent
The Appellant is appealing against the 35% penalty charge imposed by the Respondent on
account that the Appellant had omitted certain income in the Income Tax Return
The appeal is argued under four heads of arguments which we have summarised as
hereunder:-
(a) The Appellant are not liable to pay penalties under Section 100 of the Income Tax Act
because there was no negligence, wilful default or fraud on their part. They appointed
a professional auditor in whom they put trust to do a proper job.
(b) The penalties were not payable by the Appellant because the Respondent have based
their penalty on incorrect Accounts as opposed to Returns as is provided under
Section 100 referred to above. Because of this, it was doubtful whether Returns were
actually made.
(c) The penalties were excessive since they were calculated on the turn over omitted
Hence the penalties plus the tax levied were in excess of 80% of the turn over

(d) The penalties were also excessive having regard to the co-operation the Appellant gave to the
Respondent in the matter.
The Respondent have submitted that the original penalty imposed on the Appellant was 50%. This was
reduced to 35% after the Appellant raised objections The Appellant raised further objections on the
amended assessments based on 35% penalty and have appealed to this Tribunal.
It is the contention of the Respondent that during an audit exercise on (he Appellant company, certain
income was discovered to have been omitted from the Appellant's Income Tax Return and the
Appellants have not refuted this. Since the Income Tax required every person to include in their tax
Return all income received, the omission of income from the. Return by the Appellant was sufficient proof
of negligence.
It is also the contention of the Respondent that Section 100 of the Income Tax provides penalties
for various offences calculated at a percentage of income omitted or overstated. By this argument
they counter the Appellants argument that since tax is imposed on income likewise penalties should
be charged on the net profit. They further argue that any earnings omitted from the Return are deemed
to be part of the balance of a company's trading results. In other words, they are net profits.
Finally, the Respondents refute the Appellant's argument that the Income Tax Act imposes
penalties on income omitted from a Return and not on income omitted in the Accounts. They contend
that the income that is reported in the Return originates from the Accounts Moreover, Section
56 of the Income Tax Act directs that every person submitting a Return in respect of business
income must submit such Return accompanied by business Accounts ^Penalties are not based on
incorrect Returns but rather on reporting incorrect income to the Zambia Revenue Authority.
We find as a fact that the Appellant had omitted from the Income Tax Return certain income and that
this fact is not contraverted. The onus to include all income on the Return is on the taxpayer and not
on the accountant or auditor. Infact. it is encumbered upon every taxpayer to ensure that the Tax
Returns are correct. The argument by the Appellants that they were not
162

negligent in that they put trust in the auditor to do a proper job and that one of the directors who
signed the accounts was not sufficiently educated is untenable. The action of the director, who had the
authority of the others to do so or whose action has not been disowned by others, binds the Appellant
company. This is regardless of whether he was educated or not. The others allowed him to sign the
accounts or adopted his action when they knew that he was semi-literate. This conduct on the
directors points to negligence and we agree with the Respondent that the Appellant was negligent
and deserved to be penalised.
We do not agree with the Appellant's submission that the penalties were excessive. The gesture
by the Respondent to reduce them from 50% to 35% was indeed generous. No authority has
been cited by the Appellant to persuade us to agree that the penalties were excessive and
accordingly we refuse to interfere.
We would wish to comment on the Appellant's argument that penalties were not payable because
the Respondent talked of incorrect Accounts as opposed to Returns It is our view that the spirit of
the Act is to ensure that correct Returns of income are made by taxpayers. The mischief envisaged
under Section 100 of the Act is submission of incorrect income.
For reasons aforesaid, we dismiss this appeal with costs for the Respondent. Parties, if aggrieved,
are free to appeal to the High Court.
Dated the 17"' day of November, 1999
J.M. MULWILA (DR) Vice-
Chairman
^.LUNGU \ /XMUSHIBWE
Member
Member
v'/
163

IN THE REVENUE APPEALS TRIBUNAL 1999/RAT/33
HOLDEN AT LUSAKA
BETWEEN
SPECTRA OIL CORPORATION LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi (Chairman), N A Lungu and
H Muyoyeta, 11 th August 1999, 16 th August 1999, 13 th September
1999, 27 th September 1999, 11 th October 1999, 1 st November
1999 and 3 rd December 1999.
FOR THE
APPELLANT: A M Wood -AM Wood and Company and J Mistry -
Deloitte & Touche
FOR THE
RESPONDENT: T N Mulako - Senior Inspector VAT, Zambia Revenue
Authority
RULING
This is an appeal by Spectra Oil Corporation limited whom we shall hereafter refer to as 'The
Appellant' in respect of an assessment for the 1996/97 tax year which we shall refer to as
'The Assessment'. The Assessment was raised by the Zambia Revenue Authority hereafter
referred to as 'The Respondent'.
The brief and uncontested facts are that in the 1996/97 year, the Appellant paid provisional
taxes late. As a result of the said late payments, the Respondent imposed penalty for late payment
amounting to K 126,481,000.
At the start of the hearing both parties elected not to call 'Viva Voce' evidence and have relied
on the documents filed before the Tribunal. The Appellant has only advanced one ground of
appeal, namely that at the time the penalty was imposed, there was no law that allowed for
imposition of penalty on late payment of provisional
tax.
148
164

The issue therefore that falls to be determined by this Tribunal is whether penalties were payable
for late payment of provisional tax during the 1996/97 tax year. The Appellant has argued that until
the enactment of Act No 3 of 1997 which amended section 78 (I) of the principal Act the scope for
charging penalties was restricted to tax assessed under sections 63 and 64 of the Act. It did not
include late payment for provisional tax.
The Appellants representatives further argued that before Act No 3 of 1997, there was no
reference in section 78 (1) to the dates in section 77 (1) from which penalties maybe accrued
in the case uf late payment of provisional tax. The Respondent countered the argument by
pointing out that by virtue of section 78 (2) of the Income Tax Act cap 323 1995 consolidated
edition, penalties were due on late provisional tax payment. The said section reads;
"Subject to the provisions of subsection (5) if any tax or
provisional tax remains unpaid for one month after the
dates referred to in subsection (I), a further sum equal to
five percentum of the tax or provisional tax unpaid shall
become chargeable by •way of additional penalty and
further penalties of five percentum shall become payable
in respect of any part of the tax, or provisional tax
remaining unpaid at the end of each month thereafter. "
In reply the Appellant's representatives countered that the consolidation to the 1995 introduced
some amendments to section 78 not through legislative amendments but at the time of revision
which had the effect of actually making provisional tax attract penalty in the case of late payment.
At this stage we, took the unprecedented step of asking for an opinion "Amicus Curiae" from the
Commissioner for Law Revision. We would like to take this opportunity to thank the
Commissioner for Law Revision for replying promptly. According to the Commissioner of Law
Revision, section 78(2) as reproduced in the 1995 edition has actually been in place since Act No
16 of 1972. According to the Commissioner, section 78(2) as introduced by Act No 16 of 1972
was the provision that gave legal basis for charging penalty on late payment of provisional tax.
No changes had been introduced at the time of consolidation.
165

The issue therefore that falls to be determined by this Tribunal is whether penalties were payable
for late payment of provisional tax during the 1996/97 tax year. The Appellant has argued that until
the enactment of Act No 3 of 1997 which amended section 78 (I) of the principal Act the scope for
charging penalties was restricted to tax assessed under sections 63 and 64 of the Act. It did not
include late payment for provisional tax.
The Appellants representatives further argued that before Act No 3 of 1997, there was no
reference in section 78 (1) to the dates in section 77 (1) from which penalties maybe accrued
in the case of late payment of provisional tax. The Respondent countered the argument by
pointing out that by virtue of section 78 (2) of the Income Tax Act cap 323 1995 consolidated
edition, penalties were due on late provisional tax payment. The said section reads;
"Subject to the provisions of subsection (5) if any tax or
provisional tax remains unpaid for one month after the
dates referred to in subsection (I), a further sum equal
to five percentum of the tax or provisional tax unpaid shall
become chargeable by -way of additional penalty and
further penalties of jive percentum shall become payable
in respect of any part of the tax, or provisional tax
remaining unpaid at the end of each month thereafter. "
In reply the Appellant's representatives countered that the consolidation to the 1995 introduced
some amendments to section 78 not through legislative amendments but at the time of revision
which had the effect of actually making provisional tax attract penalty in the case of late payment.
At this stage we, took the unprecedented step of asking for an opinion "Amicus Curiae" from the
Commissioner for Law Revision. We would like to take this opportunity to thank the
Commissioner for Law Revision for replying promptly. According to the Commissioner of Law
Revision, section 78(2) as reproduced in the 1995 edition has actually been in place since Act No
16 of 1972. According to the Commissioner, section 78(2) as introduced by Act No 16 of 1972
was the provision that gave legal basis for charging penalty on late payment of provisional tax.
No changes had been introduced at the time of consolidation.
149
166

According to the Commissioner for Law Revision section 78(2) as introduced by Act No 16 of 1972
was the provision that gave legal basis for charging penalty on late payment of provisional tax.
No changes had been introduced at the time of consolidation. When the response from the
Commissioner of Law Revision was made available to the parties, the Appellant modified its
submission. We must admit that this was a somewhat ingenious argument which initially we
did not grasp until detailed and minute examination of all the sections not in isolation, but in
totality. The Appellant concedes that section 78(2) of the Act has been in existence since 1972 and
they were not challenging its validity. They argue that section 78(2) if read together with section
78(1) does not create the scope for the penalty. They contend that subsection 2 of section 78
charges penalties by reference to subsection 1 which determines the scope and the dates from
which the penalties will be applicable. In response to this, the Respondent submit that there is
authority for charging penalty for late payment of provisional tax. under section 78(2). They submit
that this authority under section 78(2) cannot be abrogated simply because the Act refers to the
wrong section in connection with the dates.
We note from this submission that the Respondents concede that section 78(2) has an omission in
so far as it makes no reference to the due dates on provisional tax. The Respondents argue that
not with standing the omission in section 78(2), the Commissioner General is authorised to
make a determination where the law is silent or ambiguous, and, unless it can be proven that the
Commissioner General's action is unreasonable , such a determination cannot be challenged. It
should be noted that the Respondents have not cited any authority for this proposition of the law
they have advanced. They further add that the fact that the Act is silent as regards due dates
should not be misconstrued to mean that the Act is commanding the Commissioner General not to
do what he should do under section 78(2). In the absence of specific reference in the Act, the
Commissioner General has determined that payment of provisional tax. shall be deemed overdue
if not made by the due dates mentioned in subsection (1) of section 77. The Respondents submit
that in order to support their argument that the Act never intended to prohibit the changing of
penalties on overdue provisional tax payments, we should have recourse to section 46A(3)(ii)
which provides;
167

"Where upon the receipt of income pursuant to
•i
1
" section 46, it is discovered that income has been so
\ «
underestimated that the tax on such estimate has
i' been underpaid by at least one-third, then, in
addition to the penalties contained in section 78, such
person shall be liable to an additional penalty
\: under this section calculated at the rate of ten
percentum of the tax which has been underpaid. "
i> According to the Respondent, this section is eloquent proof that penalties are
j: chargeable. The section is not referring to assessed tax. Zambia Revenue Authority
does not assess returned income before the return lias been submitted.
h
i We would like to thank Counsel and the representatives of the parties for their
j
j industry, which has been demonstrated by the eloquent submissions before the
! « Tribunal. In order to determine the issue before us, we have looked at the relevant
| provisions of the Act as they existed before the 1995 Consolidation. Section 11(1)
provided and still does: -
»
fr "The provisional tax under section 46A shall be due
and payable in quarterly instalments as follows; I st instalment
on 3$ h June 2 nd instalment on 3(f h September 3 rd
instalment on 30 fh December 4 th instalment on 3ff h
March
Of the charge year to which such return of
provisional income relates
(2) All persons liable to tax and required to file a return
under section 46 shall remit, along with such
return, payment equal to the balance of tax
liability due if any, as computed by the tax payer
under subsection (2) of section 46.
168

Section 78(1) states:
(3) The payment referred in subsection (2) shall
be remitted by every person liable to tax no
later than 30 th September, following the end
of any charge year and shall be paid by that
person in such form as the commissioner
may determine.
(4) The tax liable to be paid under any
assessment pursuant to section 63 or 64
shall be due and payable by the person
assessed within 30 days of service or notice
of assessment ................... "
"Subject to the provision of subsection (5), any tax
assessed by the Commissioner General under section
64 shall be deemed overdue if payment of that tax has not
been remitted on or before the date prescribed-
(a) In subsection (2) of section 77 or as extended pursuant
to the provisions of subsection (5) of section 77 in
such cases where notice of assessment is served no
later than one year for which tax was assessed".
It appears that at the time of consolidating the 1995 revised edition of the laws, there was
realisation that 78(1) as amended by Act Noll of 1992 did not make any reference to
subsection 1 of section 77. In the 1995 edition 78(l)(a) was changed slightly so that it could
refer to subsection (1) of section 77 the subsection that prescribed the due dates for payment
of provisional tax. Before that, there was no reference to subsection (1) of section 77 in
section 78(1 )(a). When was the amendment to section 78(1 )(a) as reproduced in the 1995
edition done? We cannot find any legislative amendment and it appears that this was done at the
time of consolidation.
169

This change on the face of it cleared doubt on whether provisional tax was payable or not. As we
cannot find any legislative amendment to section 78(1 )(a) at the time of consolidation, that
change was "Ultra Vires". Section 5 of the Laws of Zambia (Revised Edition) Act Chapter 1
which provides:
"Save as otherwise provided, nothing in this Act shall
be taken to imply any power in the Commissioner
for Law Revision to make any alteration or amendment
in the matter or substance of any law".
We have also taken note of the fact that the Respondent in their last written submission have
conceded that there was no reference to subsection 77(1) in section 78(1) at the time of
assessment under dispute. We are further fortified in our conclusion that before Act No 3of
1997, section 78(1) did not refer to the due dates in section 77(1) of the Act by the very nature of
the amendment itself. We have had an opportunity to refer to the Hansand, which is the official
verbatim report of the daily parliamentary debates, specifically No 16 of the first session of the
8 th National Assembly for the period 6 th December 1996 to 26 th March 1997 at page 984. On 19 th
February 1997, the then Minister of Finance and Economic Development when tabling the
Income Tax (Amendment) Bill had this to say —
"Clause 13 is meant to take care of controversy •which
arose out of the drafting errors in the 1992 amendments.
Due to the said errors, penalties are being levied when
the section does not expressly state so."
We have had a look at the actual Income Tax (amendment) Bill dated 31 st January 1997 as
gazetted. The clause 13 being referred to by the Minister is actually amendment of section
78. This further lends more weight to our finding that section 78(1 )(a). as reproduced in the 1995
edition had not been changed by legislative amendments. According to the Bill presented in
parliament, the marginal heading reads, "Amendments to section 78". The Bill on clause 13 went
on -
170

The principal Act is amended in section seventy-eight by the
deletion of subsection (1) and the substitution therefor of the
following:
"(I) Subject to the provisions of subsection (5) any tax
assessed under section forty-six, sixty-three, sixty
four or seventy-one shall be overdue if the tax had
not been paid on or before the due dates
prescribed in -
(a) section seventy subsection one;
(b) subsections one and two of section
seventy 77.........".
By virtue of this amendment, if provisional tax was not paid on the due dates prescribed in
subsection (1) of section seventy-seven, then the provisions of section 78(2) which charged
penalty became applicable. In our considered opinion, the charge and imposition of tax assessed
was not in doubt. What appeared to be in doubt was provisional tax and this has now been cleared
by the Amendment in Act No 3 of 1997. The amendment also extended to penalties on late
payments of Pay As You Earn under section 71. We will not dwell on whether there has also
been doubt on late payment of pay as you earn as this is not an issue before this Tribunal. Suffice
to say that though section 78(2) which had been in existence since 1972 had clearly stated the
legislative intent to charge penalty for late payment of provisional tax, section 78(2) as read with
section 78(1) before it* amendments created some doubt. The drafting was inconsistent. In the
process there was a mischief requiring amendment. The mischief was the doubt and controversy
on penalties (which included provisional penalties) referred to by the Minister of Finance when
introducing changes to section 78.
The learned author Benion on interpretation of statues 3 rd edition page 707 has this to say on
amendment;
171

"Parliament intends that an enactment shall remedy a
particular mischief. It presumed therefore thai parliament
intends the Court in construing the enactment, to
endeavour to apply the remedy ".
On page 708 the author goes on;
"Parliament is taken to do nothing without a reason.
Therefore, there is reason for the of every act, and for
every enactment within it .... So the reason for
parliament passing an Act passing must lies in some
defect in the existing law, for were its not defective,
parliament would not need or want to change it. The
defect is the mischief to which the act is directed".
The mischief which Act No 3 of 1997 intended to correct was a doubt on penalties being charged
on provisional tax. In the face of this doubt, was penalty chargeable on provisional tax paid late on
the basis of section 78 (2)?
The learned author Benion at page 637 states;
"it is a principal of legal policy that a per son should not be
penalised except under clear law. The Court, when
considering in relation to the facts of the instant case,
which of the opposing constructions of the enactment
would give effect to the legislative intention, should
presume that the legislator intended to observe this
principal. It should therefore strive to adopting a
construction which should not penalise a person where
the intention to do so is doubtful or penalises him or her
in a way which is not made clear ".
172

Although this proposition of the law may not be authoritatively binding in the Zambian
jurisdiction, we find it of persuasive value. It has been a well established general principle of law
that taxation of a subject is not to be done lightly. The taxing statute must not leave room for doubt
and controversy c.f. IRC v Ayrshine Employers Mutual Association Limited [1946] All E.R. 637 ..,
"yet I can come to the conclusion than that the language of the section fails to achieve its apparent
purpose and I must decline to insert words or phrases which might succeed where the draftsman
failed".
The penalty imposed is in fact additional taxation. The learned author Benion observes that
there are cases where the courts have refused to adopt a construction of a taxing Act which
would impose liability where doubt exists. We are mindful of the fact as pointed out by the author
that revenue from taxation is essential to the running of the state, and that the duty of the judiciary
is to aid in its collection while remaining fair to the subject c.f. Inland Revenue Commissioners V
Berril [1981] I.W.L.R. 1449.
In that case the construction which would have made it impossible for the Inland Revenue to raise
an assessment was rejected. The issue at hand here is whether additional tax in the form of
penalty on provisional tax should be paid. Although the penalty is 'penal', a court must decide
whether the provision imposing the tax on penalty is reasonably clear. It is not the duty of the
court to mitigate such harshness. As we stated in Zambia Consolidated Copper Mines Limited v
Zambia Revenue Authority [1999] RAT 05, the intention to impose tax must be clear and
ambiguous. This assessment relates to the 1996/97 charge year. Act No 3 of 1997 which
categorically makes it clear that penalty is payable on late payment of provisional tax became
applicable in April 1997 and applied to the 1997/98 charge year. For the forgoing reasons, we
allow this appeal with costs. We note that the penalty has already been paid. We will not order
an immediate refund. Instead, we order that the Commissioner General complies with section 113
of the Income Tax Act cap 323 as read with section 87 of the same Act in particular subsection 3.
This means that adjustments will have to be made to the 1996/97 assessments and the excess
amount paid by the appellant should be used as a credit or to offset any outstanding tax
liabilities for subsequent charge years after 1996/97. The refund will only be made if there are no
outstanding tax liabilities.
173
.

Although this proposition of the law may not be authoritatively binding in the Zambian
jurisdiction, we find it of persuasive value. It has been a well established general principle of law
that taxation of a subject is not to be done lightly. The taxing statute must not leave room for doubt
and controversy c.f. IRC v Ayrshine Employers Mutual Association Limited [1946] All E.R. 637 ..,
"yet I can come to the conclusion than that the language of the section fails to achieve its
apparent purpose and I must decline to insert words or phrases which might succeed where the
draftsman failed".
The penalty imposed is in fact additional taxation. The learned author Benion observes that
there are cases where the courts have refused to adopt a construction of a taxing Act which
would impose liability where doubt exists. We are mindful of the fact as pointed out by the author
that revenue from taxation is essential to the running of the state, and that the duty of the judiciary
is to aid in its collection while remaining fair to the subject c.f. Inland Revenue Commissioners V
Berril [1981] I.W.L.R. 1449.
In that case the construction which would have made it impossible for the Inland Revenue to raise
an assessment was rejected. The issue at hand here is whether additional tax in the form of
penalty on provisional tax should be paid. Although the penalty is 'penal', a court must decide
whether the provision imposing the tax on penalty is reasonably clear. It is not the duty of the
court to mitigate such harshness. As we stated in Zambia Consolidated Copper Mines Limited v
Zambia Revenue Authority [1999] RAT 05, the intention to impose tax must be clear and
ambiguous. This assessment relates to the 1996/97 charge year. Act No 3 of 1997 which
categorically makes it clear that penalty is payable on late payment of provisional tax became
applicable in April 1997 and applied to the 1997/98 charge year. For the forgoing reasons, we
allow this appeal with costs. We note that the penalty has already been paid. We will not order
an immediate refund. Instead, we order that the Commissioner General complies with section 113
of the Income Tax Act cap 323 as read with section 87 of the same Act in particular subsection 3.
This means that adjustments will have to be made to the 1996/97 assessments and the excess
amount paid by the appellant should be used as a credit or to offset any outstanding tax
liabilities for subsequent charge years after 1996/97. The refund will only be made if there are no
outstanding tax liabilities.
174
9.

We will add that in future cases where the tax has already been and the appeal against
assessment under the Income Tax Act successful, this is the correct approach that this Tribunal
should follow.
Datedthe , ................................ day of........................... 1999
M MUNDASHI
CHAIRMAN
JNGU H M MUYOYETA
MEMBER MEMBER
175

IN THE REVENUE APPEALS TRIBUNAL 1999/RAT/36
HOLDEN AT LUSAKA
B E T WEE N :
PHILIPS ELECTRICAL ZAMBIA LIMITED Appellanj
and
ZAMBIA REVENUE AUTHORITY Respondent
CORAM: C H J CHILESHE (CHAIRMAN), T T MUSHTBWE and J M
KASANGA on 27th April and 12th May 1999
FOR THE APPELLANT: MR P CHANDRASEKERA (Philips Electrical Zambia
Limited and P C LUHANGA (B & W Consulting Limited)
FOR THE RESPONDENT: MR L MUUKA (Legal Counsel ZRA) and
MRT MULAKO (Senior Inspector Direct Taxes ZRA)
RULING
This is an appeal by Philips Electrical Zambia Limited (the "Appellant") against Zambia Revenue
Authority ("the "Respondent") hi relation to the Commissioner General's determination to charge
penalty of K10 Million hi relation to the late submission of tax returns for the charge year 1995/1996
on behalf of the Appellant's under Section 46(4) of the Income Tax Act Cap 323 of the Laws (the
'Act")
1.0 Briefly, the undisputed facts are as follows:
1.1 That as at 30th September 1996 no tax return for Income Tax under the Act for the
charge year 1995/96 had been submitted on behalf of the Appellant to the
Respondent.
1.2 That conclusive evidence have been tendered to show that Messrs KPMG Tax
Advisors Limited, as duly appointed agent for the Appellant, had completed the
1995/1996 tax return which was duly signed on behalf of the Appellant and dated
I3th June 1996 The Appellant reasonably believed that the relative tax return had
been submitted by its said agent within the statutorily prescribed time.
176

Which presumption is fortified by Messrs KPMG Tax Advisors limited’s fee note to the
Appellant of 26th November 1996 for services rendered inter alia the submission of the
1995/1996 tax returns.
1.3 That on 2lst March 1997 the meeting was held between the parties to resolve the
objection by the Appellant to the Respondent's imposition of a penalty under
the Act for late submission of income tax return for the charge year 1995/1996
in the sum of K107 million. This meeting resolved that, the Appellant pay a deposit of K10 million
by 27th March 1997, pending further investigations by the Respondent and the final decision of
the Commissioner General on the matter of the penalty. the deposit was duly paid.
1.4 That following the Respondent's said investigations, it was determined that all
Income Tax due by the Appellant as at 30th September 1996 had been paid.
Nonetheless, the Commissioner General decided to treat K10 Million deposit paid
as payment towards the penalty and waived the balance of the amount of
K107 million imposed earlier.
1.5 It is against this latter decision that the Appellant now appeals.
2.0 The Appellant's submissions of 23rd May 1996 argues persuasively and
forcibly, inter aha, that:
2.1 The Commissioner General's determination to charge a penalty of K10 Million
was unreasonable where there is no outstanding principal liability to Income Tax
as at 30th September 1996 all correct taxes having been paid by the Appellant
as early as 13th June 1996. Consequently, that the position is the same as the one which
obtains when there is no tax payable because of a loss situation or where there is no profit
nor loss. The Appellant states that hi such a case, as present facts, the maximum penalty is
K60 000 per month or part of the month. In a zero profit situation, there is no tax payable as
5% of zero is zero. The maximum penalty is therefor K60 000 per month for 5 months to 13th
February 1997 the total penalty is K300 000. The Appellant argues, with justification, that it is
therefor considered unreasonable for the Commissioner General to charge a penalty of K10
Million instead of K300 000.
2.2 It is further submitted on behalf of the Appellant that it is a loyal and prompt
tax payer and a significant contributor tot he public revenue in the order of
in excess of K1.5 Billion per annum in VAT, Customs and Excise Duties, in
addition to Income Tax Further that the Appellant has never been charged
a penalty before. Which facts should be taken into consideration in this matter. ...31
177

2.3 It is submitted that the Respondent is "mixing the law" hi that the use of "may"
does not confer a discretion on the Commissioner General because other
stronger words such as "shall" can be used, still they do not confer such a
discretion on the Commissioner General. In normal Income Tax Law
discretion is specifically spelt out as such and not through the use of such
words as "may" or "shah"', all determination are appellable. Similarly, that Section
46(4) of the Act does not confer discretionary powers on the Commissioner
General and it is for this reason that there is a proviso under Section 46(4)(b).
Under which sickness absence from Zambia or other reasonable cause are
mitigating factors. The Appellant stresses that by comparison the Section 100(4)
which specifically confers upon the Commissioner the discretion to mitigate or
remit any penalty by the use of the words "in his discretion", which words are
absent in Section 46(4).
2.4 The Appellant goes on to give a comprehensive analysis to show that between
the charge years 1990/1991 and 1992/1993 the Appellant accumulated aggregate
overpayments of K3 783 605.15 in respect of its income tax liabilities which was
reconciled at 31st March 1992 and offset in the charge year 1992/1993 by the
payment of tax hi the sum of K54 943 984 against a total assessment for that year
of K58 729 589.05.
3.0 Similarly, the Respondent's submissions of 5th May 1997 argues that:
3.1 The Commissioner General had informed the Appellant following the meeting
of 21st March 1997 that he would make a final decision after Mr C W N Masiye
Assistant Commissioner Lusaka "A" of Zambia Revenue Authority had
investigated and confirmed that all tax due to be assessed on or before
30th September 1996 had hi fact been paid . He had not promised to waive the whole penalty.
3.2 Following Mr Masiye's investigations., it was determined that there was a
balance payable on the 1992/1993 Assessment of K1143 282.15 which the
Appellant had been informed of. On this point, we are persuaded that the
Appellant contentions are correct as exhaustively set out in the Appellant's
submissions and we do not accept the Respondent's contention that, between
charge years 1990/1991 to 1995/1996, there were any balances of Income Tax
due and unpaid by the Appellants. Conversely, we find that the Appellant was
meticulously compliant in payment of its Income Tax obligations.
3.3 The Respondent argues that the Commissioner General decided to treat the
KIO Million deposit paid by the Appellant as "sign of goodwill" in payment
178

towards the penalty of K107 Million assessed against Income Tax payable for the charge year
1995/1996 in accordance with the provisions of Section 46(4) of the Act and to waive the
remainder of the penalty. The Respondent further argues that the penalty charge under this
section 46(4) unlike that under Section 78 of the Act (which deals with penalties for non
payment of taxes due) is not calculated on overdue or unpaid tax. The Section 46(4) penalty
is distinctively made to enforce submission of return forms.
3.4 The Respondent further argues that an appeal under Section 114 (l)(b) of the Act can only
succeed on the grounds of unreasonableness. That it is not considered unreasonable by the
Respondent, for the Commissioner General to waive 90.65% of the penalty imposed for the
purpose of enforcing the submission of returns on time. The relative return having not: been
submitted on time. The law is clear on the calculation of penalty on the basis of tax payable
for that charge year. This is a computed tax liability as per the "late" return and accounts.
4.0 We have considered the detailed written submissions made available to us by both parties and
the issues falling for determination before us. Accordingly, it is our considered opinion that the
principal questions to be decided are whether or not, on the undisputed facts of this case,
firstly, the Act imposes upon the Appellant, as a tax payer, any further liability, in addition to the
payment of the principal amount of Income Tax due and payable by the Appellant to the
Respondent on or before 30th September 1996. Secondly, if the Act confers upon the
Respondent or its representatives any discretionary powers in relation to the Appellant in the
circumstances. If so, to what extent is the Respondent proscribed in exercising such discretion.
It is common cause between the parties that the dispute arises out of the Income Tax Returns
for the charge year 1995/1996. The obligation of each tax payer to furnish the Commissioner
General no later than 30th September following the end of the charge year is express and clear
in Section 46(3) of the Act. We take cognisance of the fact that through no fault of its own the
relative returns were not submitted on behalf of the Appellant by its then agents KPMG Tax
Advisors Limited. However, it is trite law that the principal liability to submit returns falls upon
the Appellant as the tax payer notwithstanding any default or deficiency on the of its servants
or agents, barring of course the usual legal defences, of fraud, mistake, force majeure etc. as
the case may be.
179

4.1
Section 46(4) states:
"Where a person fails to submit a return on or before 30th September there shall
be charged a penalty of fix per centum per month of the tax payable for that
charge year or -
(a) in the case of an individual, three hundred penalty units; or
(b) in the case of a company, six hundred penalty units;
whichever is the greater
Provided that, where the Commissioner General is satisfied that, owing to
absence from the Republic, sickness or other reasonable cause, a person
was prevented from furnishing the return on or before the due date, the
Commissioner General may remit the whole or part of any such penalty"
In the present instance, the Appellant clearly is liable to be charged penalty of 5% per
month of tax payable for the charge year 1995/1996 from 30th September 1996 until 13th
February 1997. In the alternative, as a limited company the Appellant is liable to a penalty
of K60 000 per month which ever is the greater.
The Appellant has argued that the provisions of Section 46(4) do not confer upon the
Commissioner General a discretionary powers because of the lack of inclusion in the text
of the wording "in his discretion.", as indeed is the case in Section 100(4) of the same
Act
The distinction between discretionary and compulsory powers derived from
construction of the wording of statutes is a matter of a large body of well established
case law and precedent. The application of fiscal statutes is, prima facie, subject the
rule or principle rule strict interpretation of statutes.
This principle of strict construction was well stated byRowlattJin CAPE BRANDY
SYNDICATE v IRC (192l) ]KR64at 71-12TC358at 366.
"In a taxing Act one has to look merely at what is clearly said. There is
no equity about tax. There is no presumption as to tax. Nothing is to be
read in, nothing is to be implied. One can only look fairly at the
language used..."
Accordingly, the words of the statutes must be given their natural and orderly meaning.
180

Further, it is well established that the word "may" always gives rise to a power, but the
further question of whether, given the power, there is a duty to exercise it must depend on
the word creating the power. If the donee has nobody interest to consult but his own, the
power is permissive merely, but if a duty to others is at the same time created, the exercise
of the power is imperative.
"may" is a permissive or enabling expression but there are cases in which
for various reasons as soon as the person who is within the statutes is
entrusted with the powers it becomes his duty to exercise it. So the
provisions of the Customs Consultation Act 1876 enacted that "when
goods become liable to forfeiture. As for instance, a certain mixture of oils
was illegally, the vehicle conveying the goods shall also be forfeited
(Section 202).
The Act by Section 226 laid dawn that of powers of the owner of the goods the justices may
proceed to the examination of the matter and "may condemn" the goods. The Act was held
to give the justices in discretion to refuse to forfeit, the vehicle on the ground of hardships to
an innocent owner.
Per Talbot, J., in Sheffield Co-operation vs Laxford (1929)
2KB 180 as cited in Odgers - Construction of Deeds and Statutes -
Sweet & Maxwell at page 250 et seq.
Thus in this case, the Commissioner General has the discretion, under the proviso to Section
46(4), to remit the whole or any part of the penalty for late submission of returns if he is
satisfied that the tax payer has been prevented from furnishing the return before the
prescribed date for any of the reasonable causes set out. In this case due consideration of the
Appellant's tax paying history and the inadvertence, as far as the AppeEant is concerned or the
cause for late submission. Namely the oversight of Messrs KPMG Tax Consultants Ltd.
4. We disagree with the Appellant's analogy to Section 100(4) of the Act. For the reason that this
section specifically refers and is limited to returns which include incorrect statements, including
omissions under Section 46(2). The absence of the word "in his discretion" in Section 46(4)
does not negate the discretionary power conferred upon the Commissioner General in relation
to the penalty for late returns.
181

4.3 It is contended that an appeal from the Commissioner General discretions and
determinations can only succeed on the grounds of unreasonableness. Further,
that the Commissioner General's discretion can not be questioned in any
proceedings under Section 114(l)(a). This contention by the Respondent's
contradicts the provisions of Section 114(l)(b ) and (2) and (3). It is trite law
of the interpretation of statute that there is the presumption against absurdity;
"parliament does not intend to enact an absurdity and statutes
will be construed as far as possible to avoid absurdity."
Odgers Construction of Deeds and Statutes op. cit. page 177 set seq
Accordingly, we find that the Appellant, being dissatisfied with the Commissioner General's
determination, has rightfully exercised its right to object to or appeal against such
determination as if the determination were an assessment hi accordance with the provisions of
Section 114(2) of the Act.
4.4 On the basis of the foregoing, we find and hold that the Appellant having failed
to submit or have submitted on its behalf the appropriate tax return for the charge
year 1995/1996, in accordance with Section 46(3)of the Act, it is liable to a penalty
imposed under the provisions of Section 46(4) of the said Act.
Similarly, pursuant to the proviso to Section 46(4) of the Act the Commissioner General Is
empowered to and did exercise his discretion to remit the part of such penalty and accept in
place thereof a sum of K10 million instead of K107 million. There are no statutory guidelines
proscribing the parameters for the use of such discretion apart from those that are enshrined
in the decided common law authorities regarding the reasonableness of the conduct of a
public officer, such as the Commissioner General, in the exercise of a power deposited with him
by statute for the purposes of being used.
It is against this backdrop that the question of the Respondent arriving at the amount or
extent of the waiver or remission of the penalty must be view. In the circumstances, although
the figure of K10 Million appears arbitrary, the sum was arrived at by negotiation and consent of
the parties as to the amount of the initial deposit against the ultimate penalty.
For the avoidance of doubt, we would state, that contrary to the Appellant's contentions the
maximum penalty for late submission of returns is not K60 000 per month from 30th September
until the date of actual submission of the late and correct, return, but the greater of this sum, or
5% per month of the tax payable in the charge year in which the liability to a penalty under
Section 46(4) arises as the calculated over the same period, case may be.
182

Further, that the imposition of a penalty is a matter of mandatory obligation under Section
46(4) the Act. the Commissioner General's determination in this matter is within the scope
of the statutory powers conferred upon him, to remit the whole or part of any such penalty.
As long as the same are not unreasonably exercised they can not be interfered with.
Accordingly, the said determination shall stand unaltered. Therefore, we find that the
appeal cannot succeed and is dismissed. We find for the Respondent in this matter. We
order that each party shall bear its own costs.
DATED this 3rd day of March 2000
C H J CHILESHE
TTMUSHIBWE
/ /
183
JMKASANGA..

IN THE REVENUE APPEALS TRIBUNAL AT LUSAKA
BETWEEN:
NANGA FARMS LIMITED
REVENUE AUTHORITY
AND ZAMBIA
CORAM: M M Mundashi — Chairman, N A Lungu and W Z Mwanza
on 26 th March 1999, and 12 th April 1999.
FOR THE
APPELLANT:
FOR THE RESPOND
ANT:
RULING
K Puiu, Price Waterhouse Coopers
184
1999/RAT/38
APPELLANT
RESPONDENT
R Zulu, Assistant Commissioner of Taxes, Zambia Revenue Authority
This ruling is a unanimous opinion of the Tribunal, This is an appeal by the appellant in respect of
the following charge years:
1. 1991/92
2. 1992/93
3. 1993/94
4. 1994/95
5. 1995/96
6. 1996/97
Although there are six charge years which are under appeal the point in dispute is applicable to all
the charge years. The Tribunal's ruling will therefore apply for all the charge years' 1991/92 to
1996/97 inclusive. It was agreed by both parties that the facts were not in dispute and that none
of the parties would call witnesses. Both parties informed the Tribunal that they would rely on
written submissions filed before the Tribunal.

The appellant is a company involved in Agriculture as its main business. The Appellant
submitted returns for all the relevant charge years on 11 th February 1998. The Respondent
issued assessments in respect of the said charge years taking into account the returns
submitted. When making the tax assessments, the Respondent treated the interest
received/receivable by the company as arising from a separate source.
According to the facts before us, the appellant, during the relevant charge years placed some
money in deposit accounts on which the appellant earned interest. Similarly, the appellant
during the relevant charge years obtained loans from its bankers on which it had to pay interest.
We will not dwell on the figures relating to interest received by the appellant and the interest paid
by the appellant to its bankers. The amounts of the interest received or paid are not in dispute.
These are the undisputed facts before the Tribunal. The issue arising from these facts is how the
interest received should be treated in relation with the interest paid. According to the appellant,
the interest received and paid should be taken into account in computing the income from farming
for tax purposes. The appellant in its written submissions has submitted four grounds in support of
its appeal: -
1. It is generally a common feature and practice for business enterprises to earn
or to receive interest on their ordinary business banking accounts or form
favourable banking arrangements so r s to enhance their income and it would
be grossly erroneous to construe such feature and practice as giving rise to a
separate business source which is contemplated under section 30 of the
Income Tax Act.
2. The interest in question arose in respect of the company's normal use of
banking facilities, which it utilises in the ordinary course of its farming
business. That is the interest arose from the company's ordinary farming
business banking accounts and not from any other source such as Treasury
Bills or other similar financial instruments. That is the reason why the
company is of the view that the interest involved is incidental to and is part of
the company's farming business income.
185

3, The interest involved did not arise as a result of loans given by the company to
other persons or business enterprises and so such interest cannot be said to
have arisen from the company's separate business of money lending and hence
subject to separate assessment.
4. The company's working capital does not only consist of funds from the sale of
its farm produce but also includes substantial loans and other borrowed funds
in respect of which it has been incurring substantial amounts of interest.
In response, the Respondent advanced several grounds, which we will summaries as follows: -
1. Section 17 of the Income Tax Act classifies income sources for assessing
purposes. According to the respondent, farming income would fall under
paragraph (a) of section 17 which states
"gains or profits from any business for whatever period of time carried on."
The Respondent has directed our attention to paragraph (e) of section 17 were interest is
classified separately.
2. Although income tax is one tax, each source might not only have its own rules
for computation of the income but also different rates. It is therefore
necessary that one identifies each income source, compute the profit and
strictly charge tax in accordance with rates it falls under. In this particular
case, interest is charged at the rate of 35% as it is not income from farming for
charge years 1995/96 and 1996/97. Prior years interest has been taxed at as
provided by the law by then.
3. Section 30 of the Income Tax Act restricts setting off of losses to only income
of the person from that source as that in which the loss was incurred. You
cannot set off interest against farming losses.
186

The Appellant in reply to the appellants response has in our summarised version argued firstly
that section 17 is only a useful guide in determining the types or nature of receipts which are
generally liable to tax but it does not create "income sources", per se. Secondly, they argue that
the interest arises from the company's business banking accounts and so is incidental to and is
part of the company's farming business which falls under section 17 (a). Thirdly, the appellant
agrees that the necessity to identify a source is not in dispute but that the facts and circumstances
do not disclose a separate source as the interest earned by the company is merely incidental to
and is part of the main farming business income.
Having carefully considered the arguments before us, we have come to the conclusion that these
are the issued to be resolved:-
1. Is interest earned by the appellant from funds placed in deposit income
capable of being treated as part of farming income for the reason that the
deposits were created with funds from the farming business?
2. Can the interest expense incurred to facilitate the operations of the farming
business be offset against the interest income?
In our view interest earned on deposits with funds from farming income cannot be said to be
necessarily incidental. Interest cannot be expected to necessarily happen when one is carrying
on a farming activity and indeed any other commercial venture unless as recognised by the
appellant in its written submissions, interest earned by banks or other financial institutions. We
agree that for interest to be treated as part of the same source as the core business, the interest
must be a necessary incidence to the core business e.g. banks. In the case of General
Reinsurance Co. Limited v Tomlinson (1920) 48 TC 81, the court used this principal. In that
case, a reinsurance company had several deposit accounts and other investments wherefrom it
earned interests. In trying to challenge assessments of the Inland Revenue, the appellant in that
case inter ail suggested that the interest earned should be treated as separate from the core
business of insurance.
187

The Appellant in reply to the appellants response has in our summarised version argued firstly
that section 17 is only a useful guide in determining the types or nature of receipts which are
generally liable to tax but it does not create "income sources", per se. Secondly, they argue that
the interest arises from the company's business banking accounts and so is incidental to and is
part of the company's farming business which falls under section 17 (a). Thirdly, the appellant
agrees that the necessity to identify a source is not in dispute but that the facts and circumstances
do not disclose a separate source as the interest earned by the company is merely incidental to
and is part of the main farming business income.
Having carefully considered the arguments before us, we have come to the conclusion that these
are the issued to be resolved:-
1. Is interest earned by the appellant from funds placed in deposit income
capable of being treated as part of farming income for the reason that the
deposits were created with funds from the farming business?
2. Can the interest expense incurred to facilitate the operations of the farming
business be offset against the interest income?
In our view interest earned on deposits with funds from farming income cannot be said to be
necessarily incidental. Interest cannot be expected to necessarily happen when one is carrying on
a farming activity and indeed any other commercial venture unless as recognised by the appellant
in its written submissions, interest earned by banks or other financial institutions. We agree that
for interest to be treated as part of the same source as the core business, the interest must be a
necessary incidence to the core business e.g. banks. In the case of General Reinsurance
Co. Limited y Tomlinspn (1920) 48 TC 81, the court used this principal. In that case, a
reinsurance company had several deposit accounts and other investments wherefrom it earned
interests. In trying to challenge assessments of the Inland Revenue, the appellant in that case
inter ail suggested that the interest earned should be treated as separate from the core business
of insurance.
188

The court rejected that argument. The court took the view that the company was in the business
of receiving money as premiums from clients to create a pool of funds where from it could pay
claims to its clients. It had to have money to pay clients. Interest earned was purely for that
purpose and it was necessarily incidental for that purpose. Similarly a bank is in the business of
receiving money and it will naturally earn interest. Interest earned by a bank will be deemed to
be part of the bank's business. It is not any investment of a business that will be treated as
necessarily incidental. For instance., if the plaintiff had chosen to invest in real estate as opposed
to interest earning deposits, would the rentals of the properties been treated as farming income?
Clearly not.
The appellant in its submissions has argued that the intention of section 17 was not to create
separate source rule. While we agree with this construction of the section, we disagree that
"interest income" can also be gains or profits from any business whatever. According to the
appellants submission every business that earns interest is entitled to treat that interest as part of
that business. If this is correct, then interest earned by an individual after placing excess income
from emoluments or salary under paragraph (b) could be said to be part of emoluments or
salary. This would be the result if we were to agree with the appellants reasoning. We do not think
this was the intention of the statute.
The classification of income under section 17 is extremely important as the rates of tax differ
according to the class of income. For instance according to part III of the charging schedule
paragraph II sub paragraph (ii) the rate of tax on farming income shall be 5% whilst the rate
interest is 35% in accordance with annexture G of paragraph 15 of part III of the charging
schedule (as amended). If we are to take the argument of the appellant to its conclusion, the rate
for interest cannot stand on its own, it must depend on who earned the income and what type of
business that person is engaged in. If this is correct, then paragraph (e) of section 17 and the
charging schedule on interest should be ignored. If we are to accept the plaintiffs arguments,
then interest should be taxed at the farming rate i.e. 15%. We do not think this was the intention
of the legislation when paragraph (e) and the annexture G of the charging schedule were
included in the statute.
189

The court rejected that argument. The court took the view that the company was in the business
of receiving money as premiums from clients to create a pool of funds where from it could pay
claims to its clients. It had to have money to pay clients. Interest earned was purely for that
purpose and it was necessarily incidental for that purpose. Similarly a bank is in the business of
receiving money and it will naturally earn interest. Interest earned by a bank will be deemed to
be part of the bank's business. It is not any investment of a business that will be treated as
necessarily incidental. For instance, if the plaintiff had chosen to invest in real estate as opposed
to interest earning deposits, would the rentals of the properties been treated as farming income?
Clearly not.
The appellant in its submissions has argued that the intention of section 17 was not to create
separate source rule. While we agree with this construction of the section, we disagree that
"interest income" can also be gains or profits from any business whatever. According to the
appellants submission every business that earns interest is entitled to treat that interest as part of
that business. If this is correct, then interest earned by an individual after placing excess income
from emoluments or salary under paragraph (b) could be said to be part of emoluments or
salary. This would be the result if we were to agree with the appellants reasoning. We do not think
this was the intention of the statute.
The classification of income under section 17 is extremely important as the rates of tax differ
according to the class of income. For instance according to part III of the charging schedule
paragraph II sub paragraph (ii) the rate of tax on farming income shall be 5% whilst the rate
interest is 35% in accordance with annexture G of paragraph 15 of part III of the charging
schedule (as amended). If we are to take the argument of the appellant to its conclusion, the rate
for interest cannot stand on its own, it must depend on who earned the income and what type of
business that person is engaged in. If this is correct, then paragraph (e) of section 17 and the
charging schedule on interest should be ignored. If we are to accept the plaintiffs arguments,
then interest should be taxed at the farming rate i.e. 15%. We do not think this was the intention
of the legislation when paragraph (e) and the annexture G of the charging schedule were
included in the statute.
190

Similarly the interest paid by the appellant to its bankers cannot be offset against interest
received by it. The interest expense is incurred to facilitate the operations of the business and is
an allowable expense under the 'wholly and exclusively basis which is an amplification of the
same source rule as contained in section 30 of the Income Tax Act chapter 323 of the Laws of
Zambia. The interest expense is not incurred to sustain the deposit account. The interest suffered
by the appellant when it borrowed from its bankers cannot therefore be deducted as an expense
in earning interest. We have no evidence before us to support such a finding. If anything, the
evidence we have is that in raising operating capital, money had been borrowed on which interest
had to be paid. Section 29 of the Act is very clear on what is to be deducted from income in
computing income for the tax purposes - 29 (i) (a)
" In ascertaining business gains or profits in any charge year, there
shall be deducted the losses and expenditure other than of a
capital nature, incurred in that year wholly and exclusively for the
purpose of the business"
Subsection (2) further goes to strengthen the 'same source' rule. For the foregoing reasons
the appellant's appeal is therefore dismissed with costs.
Datedthe ................'.............................. dayof ...!../. .................................... 1999
M M MUNDASHI
CHAIRMAN
W Z MWANZA.." N A LUNGU
MEMBER yi' MEMBER
191

. - IN THE REVENUE APPEALS TRIBUNAL 1999/RAT/49
AT LUSAKA
BETWEEN:
ZIMCO LIMITED ( I N LIQUIDATION) APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Muiulashi - Chairman, N A Lungu and J Kasanga
on 26"' March 1999, and 19 th April 1999.
FOR THE
APPELLANT: Mrs Nachilongo,
KPMG Pcalmanvick
FOR THE RESPONDENT: R
Zulu,
Assistant Commissioner of Taxes
192
RULING
This is a unanimous opinion of the Tribunal. This is an appeal against the assessments
raised for the charge years 1990/91, 1991/92, 1992/93, 1993/94, 1994/95 and 1995/96 hereinafter
referred to as the "charge years". The appeal is brought pursuant to section 91 of the Income
Tax Act.
The brief facts arc that a number of subsidiaries of the Zambia Industrial and Mining Corporation
Limited now in liquidation hereinafter referred to as the appellant paid withholding tax to the
Government during the charge years. The total amount withheld as tax is K 1,745,288,000.00.
Doth parties are agreed that the amounts were deducted in error. Any dividend due to Government
is not subject to withholding lax in terms of section 81 (1) of the Act.

The issue before the Tribunal therefore is can the withholding tax which was wrongly
withheld and paid to the Government be refunded to the appellants so that they in turn pay
it back to the Government? The appellant relics on section 9 1 ( 1 ) which provides "If any
person alleges that an assessment is excessive by reason of some error or mistake
in the return or statement made by him for the purposes of the assessment , he may,
at any time, not later then six years after the end of the charge year in respect
of which the assessment is made, rnake an application in writing to the
Commissioner - General for relief
The respondent in reply argues that though Z1MCO subsidiaries wrongly withheld tax on
dividends and paid to the Revenue, the amount in any event ended up with the ultimate
beneficiary, the Government. The respondent further argues that the appellant, a
separate entity from Government and its subsidiaries acted as a conduit pipe in
accounting for dividends from its subsidiaries to Government. We entirely agree with
this contention. As Mr Zulu for the respondent points out, the proper person to claim
withholding tax by way of relief under section 91 is the Government. Of course, the
Government cannot put in a claim as it has got the dividend in full including the
withholding tax wrongly deducted. The withholding tax was not deducted from Zimco.
Zimco cannot get credit for the said withholding tax. In our considered view, the appellant
has no "locus standii" for relief under section 91. The tax was deducted from subsidiaries
who are separate legal entities from the appellant. In our considered view the person who
can claim relief under section 91 is the person who made the return for assessment. The
appellant did not make any return on which it was assessed in respect of the withholding
tax on dividend.
The appellant has argued that the respondent should not be credited with having
collected the withholding tax on dividends as they will earn commission of 3% on the total
dividends collected. The appellant further argues that the respondent cannot earn
commission on amounts that it is not entitled to collect by law. We think this is a
statement not fully supported by law or facts.
193

We will take judicial notice of the fact that the respondent came into operation on I s1 April 1994
c.f. the Zambia Revenue Authority Act Chapter 321 of the Laws of Zambia. If the
Respondent collected any commission on dividends, then it is only in respect of the 1994/95
and 1995/96 charge years. Our mandate is limited to disputes that arise between the taxpayer
and the respondent in so far as the Income Tax Act is concerned. Whether the respondent
wrongly collected commission on the two charge years is a matter to be dealt with
administratively between the respondent and the Ministry of Finance and Economic
Development. We hope the respondent will follow up this matter with the Ministry of Finance
and Economic Development.
or the foregoing reasons we dismiss this appeal with costs.
Dated the
dayoi ...f.'.jf..................................... 1999
,M M MUNDASHI
CHAIRMAN
MEMBER MEMBER
194

IN THE REVENUE APPEALS TRIBUNAL 1999/RAT/50
AT LUSAKA
BETWEEN:
BARCLAYS BANK ZAMBIA LIMITED APPELLANT
AND
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: M M Mundashi - Chairman, N A Lungu and W Mwanza
on 14 th June and 28 th June 1999.
FOR THE
APPELLANT: J Chashi,
Muponda Chashi & Partners
FOR THE
RESPONDENT: T N Mulako,
Senior Inspector, Zambia Revenue Authority
RULING
This is an appeal by Barclays Bank Zambia Limited who we shall hereafter refer to as "the
Appellant" on imposition of penalty. We shall refer to Zambia Revenue Authority as "the
Respondent".
At the hearing, both parties indicated that they would not call viva voce evidence and would rely on
the facts as disclosed through documents submitted before the Tribunal. The brief undisputed facts
are this. The Respondent imposed penalties and interest amounting to K 416, 935, 097 as late
payment for P.A.Y.E. on expatriate emoluments for 1997/98 and 1998/99. The appellant does not
dispute that the P.A.Y.E. was paid late. According to the Appellant, the P.A.Y.E. was paid late for
the reason that they were not sure whether P.A.Y.E. was payable or not.
195

This P.A.Y.E. was in respect of emoluments for expatriate employees paid offshore by the
holding company of the Appellant. There is evidence on record that the Appellants Tax
Advisers had informed them that there was a possibility the P.A.Y.E. was not payable. As a result
of this uncertainty on their part, they sought clarification from the Respondent. According to the
Appellant, the Respondent took time to revert to them and confirm that the tax was payable. The
Appellant therefore argues that under those circumstances it is inequitable to impose penalties
and interest. The Appellants further argue that at the time the P.A.Y.E. remained unpaid, the
Appellant had amounts to its credit with the Respondent on Withholding Tax remittances. The
Appellant argues that the Respondent could have used that Withholding Tax to offset the
indebtedness on P.A.Y.E. For this reason, the Appellant sees no reason why the Respondent
should impose penalties and interest.
The Respondent's reply is that it is relying on section 71(3) of the Income Tax Act, which inter alia
provides
"where the tax payable in accordance with subsection (2) is not paid by the prescribed
date, a penalty equal to 5 percentum of the amount of the tax payable but not paid
shall be charged thereto for each calendar month or part thereof for which, and to the
extent that such tax remains unpaid, and for the purposes of any regulations relating to
the Collection and Recovery of tax deducted under subsection (1), such penalty shall
be deemed to be tax deducted".
The appellant wants the penalty to be waived. In order to address the issue before the Tribunal, it
is imperative that the Tribunal ascertains whether infact P.A.Y.E. was due on these emoluments.
Section 18 (1) (b) of the Income Tax Act provides
"Income is deemed to be from a source within the Republic if that income is remuneration
from employment exercised or office held in the Republic or if it is received by virtue of
any service rendered or work or labour done by a person or partnership in the carrying
on in the Republic of any business, irrespective of whether payment is made outside the
Republic, or by a person resident outside the Republic".
196

The provisions of the afore mentioned section are clear and unambiguous. The P.A.Y.E.
became due immediately the expatriate employees emoluments were paid offshore. There
was therefore no need to seek clarification or confirmation that the same was payable. In our
considered view, the penalty was correctly imposed by the Commissioner - General. However,
the Appellant is challenging the Commissioner -General's discretion in refusing to waive the
penalty. Section 71 (5) provides that
"The Commissioner - General may in his discretion, remit the whole or any
part of the penalty due under subsection (3)".
The Tribunal is treating this appeal against the Commissioner - General's discretion as if it
is an appeal against an assesment, in accordance with the provisions of section 114 (2) of
the Income Tax Act. The principle that this Tribunal approved in the case of Trans Zambezi
Industries Limited vs Zambia Revenue Authority 1998/RAT/02 equally applies. When an
assesment is made by the tax authority, the onus of proof is on that tax payer to discharge the
assesment. It should also be borne in mind that the Commissioner - General's discretion
cannot be challenged in any proceedings unless it is proved that he acted unreasonably c.f.
section 114 (1) of the Income Tax Act. Have the Appellant adduced any evidence to show
thai the Commissioner - General acted unreasonably? Clearly not. The Appellant has
not adduced evidence compelling us to interfere with the Commissioner - General's
discretion. The appellant further attempted to argue that the imposition of the penalty
was unequitable. There is no presumption or equity about a tax. Tax is simply what the law
states c.f. Brandy Syndicate v Inland Revenue Commissioners [1921] 1K.B614. This argument
is therefore untenable.
For the foregoing reasons, this appeal is dismissed with costs.
r
Dated the ...... ........................... day of ............................. 1999
N A LUNGU MEMBER
CHAIRMAN
197

IN THE REVENUE APPEALS TRIBUNAL HOLDEN AT
LUSAKA
BETWEEN:
198
1999/RAT/52
SATWANT TRANSPORT LIMITED Appellant
and
ZAMBIA REVENUE AUTHORITY Respondent
CORAM J.M. MULWILA (Vice-Chairman), T. MUSHIBWE and N.
A. LUNGIJ on 27 th May, 21 st September, 15 th October and
17 th November, 1999.
FOR THE
APPELLANT
N.K. MUTUNA of Messrs NKM & Associates
FOR THE
RESPONDENT: N. MULAKO of Zambia Revenue Authority
RULING
This is an appeal by Satwant Transport Limited against tax assessments amounting to Kl
20,344,252-00 for the 1993/94 and 1994/95 charge years and the penalty under section 100 (l)(d)(i) of
the Income Tax Chapter 323 of the Laws of Zambia.
The facts of the case are. that Satwant Transport Limited was in 1992 granted an investment licence
under the Investment Act of 1991. Section 18 of the said Act provided that investment incentives shall
apply to an investor who holds an investment licence provided his/her enterprise is an exporter of
non-traditional products or services which result in net foreign exchange earnings The incentives the
Appellant became entitled to were stated in a letter dated 2'"' June 199-1 written by Mr. R.J. Banda,
Deputy Commissioner of Tax (South) which read in part -
"Your client is entitled to the following tax incentives under Section 32 (1) of the 1991
Investment Act'-
(a) exemption from tax on dividends for a period of seven (7) years from 1993/94
up to the year 2000;

(b) exemption from the payment of tax on income for a period of three (3) years, i.e.,
1993/94, 1994/95 and 1995/96, and thereafter exemption from the following two
(2) years at the rate of seventy-five per cent (75%), i.e., 1996/97 and 1997/98. The
incentive relate to the expansion of international transport haulage services;
(e) exemption from the - payment of selective employment tax, in case it is re-
introduced (1993/94 up to the year 2000)."
After the grant of the investment certificate the Appellants bought trucks duty free under the
investment licence and allocated some of these for domestic routes while others went for international
haulage. It was the view of the Appellants that the incentives attached to trucks rather than the routes
used. Hence the income generated both from the trucks that operated locally and those that were used
on the international routes was not separated for purposes of computation of income tax. The
Respondents rejected this approach and insisted that only the revenue generated between Zambia and
international boundaries be treated as exempted from tax. For purposes of computing tax, the
Appellants had classified their business into "Existing Project" which was not entitled to tax incentives
and "Investment. Project" which was entitled to tax incentives. Income generated from the trucks
which were bought duty free but operated on local routes was shown under the Investment Project
and enjoyed tax exemption. The tax due on the "Existing Project" was paid in foil for the years 1993/4 at
K11,000,000-00 and 1994/95 at K 1 9,483,396-00. Under these computations of income tax,
depreciation/capital allowances claimed on trucks and all costs were allocated to the "Investment
Project".
As already stated, the Defendants rejected the Appellants' understanding that all the income generated
by the trucks acquired under the Investment Licence be exempted from tax. They insisted that only the
revenue generated on international routes be treated as exempt from tax. The Defendant,'; then gave to
the Appellants a formula for apportionment of expenses. This formula was as follows;-
(a) Fuel, oil, repairs and maintenance was 75% for "Existing Project" and 25% for the
"Investment Project",
199

(b) Tyres and Tubes was 80% for "Existing Project" and 20% for the "Investment
Project",
(c) Toll fees was 100% for the "Investment Project".
The Defendants also disallowed certain expenses claimed by the Appellants such as Rally Expenses.
The Defendants then raised a demand of additional tax of K52,391,063-00 plus penalty of
K10,968,875.00 for 1993/94 and K53,351,735-00 plus Kl7,532,578-00 for 1994/95. The total
additional tax thus demanded was Kl 38,244,251 -00.
The Appellants accepted the interpretation of income to be exempt from tax, the
apportionment of expenses and disallowable expenses as suggested by the Defendants. However,
they contended that there was need to recalculate and restructure all the calculations with regard to
depreciation/capital allowance and other operating and administrative expenses which were shown in
the original lax returns. They argued that since local income generated by trucks imported under the
"Investment Project" was allowed to "Existing Project", the cost of depreciation of the truck and capital
allowance should be to the "Existing Project".
On the basis on the new formula for apportionment of expenses, the Appellants found enhanced
capital and depreciation allowances for the "Existing Project" as follows:-
1993/94 - K62,336,764-00 instead of K7,802,486-00 earlier claimed in the return 1994/95 - Kl
16,861,985-00 instead ofK5,054,136-00 claimed earlier.
On the revised figures an amount of K57,899,999-00 was due from the Appellants to the Defendants
on the "Existing Project". The Appellants paid the revised tax but refused to pay penalty charge at 10%
as there was no purposeful understatement of income or overstatement of expenditure.
200

From the facts above, it is clear that the Appellants used a wrong formula to compute tax due to the
Respondents. This was brought to the Appellants attention and a new formula was provided by the
Respondents. The Appellants accepted the new formula and revised their tax figures in the sum of
K57,899,999.00 in favour of the Respondent. In the absence of any evidence that the Respondents
disputed the revised figures, it is our view that the new tax assessments for the 1993/94 and 1994/95
charge years have been agreed and paid.
The question that remains to be resolved is whether or not a penalty should be imposed on the
Appellants under section 100 (1) (d) (i) of the Income Tax Act, The Respondents have argued
that the Appellants understated the income and overstated the expenses for the 1993/4 and 1994/95
charge years. They claim this was due to negligence and lack of diligence to ensure the correctness
and accuracy of the trading results liable to tax. The Appellants, however, have contended that they
did not act negligently nor fraudulently. The omission for which they are accused does not amount to
negligence which has been defined in the case of BLYTH BIRMINGHAM WATER WORKS (1856) 11
EX 781. 784 as " the omission to do something which a reasonable man, guided upon those
considerations which ordinarily regulate the conduct of human affairs, would do, or doing something
which a prudent and reasonable man would not do" They have submitted, and have not been
contraverted, that any understatement of the income or overstatement of expenses was due to their
classification of "Existing Project" and " Investment project" which the Respondent did not agree with.
We adopted the definition of negligence found in Blyth's case above and are unable to see any
negligence on the part of the Appellants. Consequently, we uphold the contention that the Appellants
should not be liable to penalty charge under the said section 100 of the Income Tax. The final result
is that the appeal has succeeded with costs to follow the event.
Delivered at Lusaka this 17th day of November, 1999,
N.A. LUNGl'
Member
J.M. MULWILA (DR)
Vice-Chairman
201
T. MUSH1BWE
Member

In its reply, the Respondent quoted Section 21(5) of the Income Tax Act which reads that:
"Where, upon the termination of the services of an individual in any office or employment,
income is received by such individual by way of compensation for loss of office or
employment, including termination for reason of redundancy or early retirement, the first
two million Kwacha (2,000,000.00) of such income shall be exempt from tax."
After quoting the above section, the Respondent wanted to know why the services of the Appellant
were terminated. They contended that if the services were terminated on account of indiscipline or
misbehaviour, then the Appellant would not be entitled to enjoy the benefit provided for under Section
21(5) of the income Tax Act.
We wish to point out that at the time the Appellant's employment was terminated leading to payment of
terminal benefits on 22nd January, 1996 it was a sum K1,000,000.00 that was exempt from tax and not
K2,000,000.00 as quoted in the Respondent's reply above. We find that only a sum of K391,616.00 out
of the gross basic pay of Kl,391,616 00 of the Appellant's terminal benefits was liable to tax. This means
that his tax liablity was K39,161.60.
The Appellant through his advocates wrote back to the Respondent and explained that the letter
terminating his contract did not disclose any reason for termination. Neither did the letter amount to a
dismissal, in which case reasons would have been necessary. The said letter in part read:
"We would like to inform you that your services have been terminated with
immediate effect. Your last working day is 22nd January, 1996
You will be paid three months salary in lieu of notice, less whatever you owe
203

In its reply, the Respondent quoted Section 21(5) of the Income Tax Act which reads that:
"Where, upon the termination of the services of an individual in any office or employment,
income is received by such individual by way of compensation for loss of office or
employment, including termination for reason of redundancy or early retirement, the first
two million Kwacha (2,000,000.00) of such income shall be exempt from tax."
After quoting the above section, the Respondent wanted to know why the services of the Appellant
were terminated. They contended that if the services were terminated on account of indiscipline or
misbehaviour, then the Appellant would not be entitled to enjoy the benefit provided for under Section
21(5) of the income Tax Act.
We wish to point out that at the time the Appellant's employment was terminated leading to payment of
terminal benefits on 22nd January, 1996 it was a sum Kl,000,000.00 that was exempt from tax and not
K2,000,000.00 as quoted in the Respondent's reply above. We find that only a sum of K391,616.00 out
of the gross basic pay of Kl,391,616 00 of the Appellant's terminal benefits was liable to tax. This means
that his tax liablity was K39,161.60.
The Appellant through his advocates wrote back to the Respondent and explained that the letter
terminating his contract did not disclose any reason for termination. Neither did the letter amount to a
dismissal, in which case reasons would have been necessary. The said letter in part read:
"We would like to inform you that your services have been terminated with
immediate effect. Your last working day is 22nd January, 1996
You will be paid three months salary in lieu of notice, less whatever you owe
204

the company, and your pension contributions as soon as we shall receive the same from
the Administrators of our Pension Scheme, You may remain in the company rented
house until 29th February, 1996."
On 30th April, 1996 the Respondent issued a Notice of decision on objection under Section 108 of the
Income Tax Act informing the Appellant that his objection to tax assessment was not accepted. This
effectively meant that the request for tax concession was rejected and the Appellant was advised to
appeal to the Tax Appeal Court (which is the predecessor of this Tribunal) if he so wished. The
Appellant lodged his appeal with the Tax Appeal Court on 30th October, 1996. By virtue of section
8(2)(a) of the Revenue Appeals Tribunal Act, TNo. 11 of 1998, the appeal has been recommenced
before this Tribunal.
When this matter came up for hearing on 28th May, 1999 the Respondent did not oppose the appeal.
On the evidence available, and in view of our finding that a sum of K391,616.00 was liable to tax, we
uphold the appeal and order that a sum of K508,489.40 be paid to the Appellant with interest at 40% per
annum from 25th March, 1996 until final payment,
We further order that costs limited to out of pocket expenses be paid to the Appellant by the Respondent.
The parties have a right to appeal to the High Court.
Dated the day of 1999.
.A. LUNGU
Member
J.M. MULW1LA (DR)
Vice-Chairman
205
T. MUSHIBWE
Member

IN THE REVENUE APPEALS TRIBUNAL HOLDEN AT LUSAKA
BETWEEN:
KALEYA SMALL HOLDERS COMPANY LIMITED
AND
206
1999/RAT/103
APPELLANT
ZAMBIA REVENUE AUTHORITY RESPONDENT
CORAM: J. M MULWILA (VICE CHAIRMAN), N.A LUNGU (MEMBER) AND W.
FOR THE APPELLANT:
FOR THE RESPONDENT:
RULING
MWANZA (MEMBER) 1" MARCH, 2000 AND 10- MAY, 2000.
K.L PULU OF PRICEWATER HOUSE COOPERS
P.K.R VARMA OF KALEYA SMALL HOLDERS COMPANY
LIMITED.
L. MUUKA, LEGAL COUNSEL, ZRA D. MUUMA,
SENIOR INSPECTOR, ZRA
This is an appeal by Messrs Kaleya Smallholders Company Limited, whom we shall hereafter refer to as the
"Appellant", against a decision by the Zambia Revenue Authority, whom we shall hereafter refer to as the
"Respondent", to disallow Exchange Losses for the charge years 1995/1996 and 1996/1997.
SUBMISSION BY APPELLANT
1. An internal memo dated 10 April, 1984 Mr.. M.D Taylor, the General Manager of the company at
that time, shows that about 41% of the loan amounting to UK 0.52 Million pounds obtained on 23«
February, 1984 was utilised for the

purchase of inputs of a revenue nature which jam marked with asterisk (*) at Appendix 1 of the memo in
question. Therefore, the company is of the view that also 41 % of the exchange losses are of revenue nature
and so should be allowed for tax purposes.
2. As the other loan amounting to UK 2.9 Million Pounds was also obtained many years ago it has not
been possible for the company at this stage to establish the split of the loan between the portion
relating to expansion and development projects and the portion relating to seasonal and annual revenue
inputs.
3. (a) The loan involved nevertheless included a substantial portion, which was
utilised for the purchase of revenue inputs. The loan also included a portion which was intended for
and was used for the purpose of enabling the company to pay the salaries or remuneration (which
are also of a revenue nature) of the expatriates who were seconded to the company (by CDC) in
order to improve and enhance its manageha! and operational capability.
(b) Therefore, the company submits that at least 41% of the loan in question also be treated
as having been used for the purpose of inputs of a revenue nature and that, in turn, 41 % of the
realised exchange losses be treated as relating to inputs of a revenue nature and so deductible
for tax purposes
4. In summary, the company's appeal to the Tribunal is that 41% of the two CDC loans which gave rise to
the exchange losses which have been disallowed in full by the Zambia Revenue Authority be treated as
relating to the components which were utilised for the purpose of inputs of a revenue nature and so are
deductible for tax purposes.
207

SUBMISSION BY RESPONDENT
It is the respondent's submission that the loans were used for capita! expenditure as clearly evidenced by the letter
from the company. The appellant company has submitted no substantive evidence to prove either the purpose for
which the loans were given or the use to which the loans were put. The onus is on the appellant to produce this
evidence and the internal memorandum the appellant seeks to rely on cannot rebut this onus.
Notwithstanding the foregoing, it is our submission that loans granted for a long period of time form part of the capital
base of the company: See the case of BEAUCHAMP V F.W WOQLWORTH PLC (1387) 5 TC 540 (reported also in
Simon's Direct Tax Service at Page 4085). The company was temporarily short of cash which it required both for
revenue items such as purchase of stock and capital items such as enlargement of shops. It raised two loans from
Swiss Banks repayable in five years, which it converted into sterling and used for the general purposes of its
business. Subsequently, the company had to purchase Swiss Francs to repay the loans, and on both conversions
exchange losses were incurred. The special commissioners considered that the loans represented a temporary facility
rather than permanent additions to capital, but the High Court held that it was necessary to consider the terms of the
loans which the company actually raised rather than the purpose or the alternatives which might have been
available. The Court came to a conclusion that loans for a fixed term of years, dearly constituted an addition to the
company's capital. The House of Lords affirmed this decision
In the case at hand, the Appellant has not adduced before the Tribunal copies of the ioan agreements. The only
evidence we have is that these loans were obtained in 1980 and 1984, respectively. Applying the principle in the
BEAUCHAMP case, a loan granted for such a long period of years constitutes an addition to the company's capita!
and cannot be apportioned as claimed by the Appellant company.
208

It is our submission to this Honuorable Tribunal that this appeal be dismissed on the aforesaid.
FURTHER SUBMISSION BY APPELLANT
We refer to the Tribunal hearing held on the above appeal in which the Tribunal had asked the company to furnish
copies of the !oan agreements, necessary correspondence and accounting entries relating to CDC Loans.
Accordingly, we are enclosing five (5) copies of the loan agreements (2.900,000 and 520,000 pounds) and
relevant correspondence regarding the disbursement of the loan.
We would like to reiterate our submission as follows:
1. The total project cost was estimated at K13.4 Million, out of which the first CDC loan was K5.3 Million,
which represents 36.8% of the total loan. The proportion of revenue expenses (land acquisition and fixed
assets) were around 52.76% of the total sum.
2. The second loan of GBP 520,000 pounds was obtained to meet the other finance requirements which were
mainly of a revenue nature such as management fees, staff secondment fees, fertilizers, chemicals and
spares.
3 It is difficult, at this stage, to trace accounting entries of the relevant purchases since most of the documents
and files relating to the initial years are not available,
4. The loan amounts were drawn over a period of five years. Substantial payments arrears on the loan were built
up during the period 1985-88 due to non-availability of forex and uneconomical sugar prices. The pipeline
amount with the Bank of Zambia stood up to GBP 335,700 pounds. The cumulative effect of the above
necessitated the rescheduling of the entire loan.
209

5. The company further requests the Tribunal not to compare the case law quoted by Zambia Revenue
Authority (BEAUCHAMP VS FW WOOLWORTH) as the situation in Zambia is totally different.
Even in the case of the loan, the company requested the Bank of Zambia to make special allocation of
forex in order to clear the entire loan, it is the foreign exchange control mechanism that prevailed during
the relevant period that contributed to this delay. The company should not be punished for the second
time, after the failure by the Government and the Bank of Zambia to provide sufficient cover to repay
loans committed and guaranteed by themselves.
FURTHER SUBMISSION BY RESPONDENT
It is the respondent's submission that the case of Beauchamp V.F W Woolworth is
relevant to the case before us. Section 7 of the 1981 and 1985 agreements provided that the loans were
repayable over a period of 15 years. Since this loan was for a fixed term of years, it clearly constituted an
addition to the company's capital and thus it falls within the ambit of the case. The non-availability of forex had
nothing to do with the period provided for in the agreement. The only role played by the non-availability of
forex was that it led to the rescheduling of the loan agreement thus increased the period of repayment.
Further, without the relevant accounting entries, the claim by the appellant that part of the loan was used for
the revenue purpose is a mere assumption that cannot be substantiated.
V8VA VOCE EVIDENCE SUBMITTED Mr. Phiri
for the Appellant
Zambia Revenue Authority disallowed exchange losses. They are saying losses are of a capital nature. There is
no dispute that the company borrowed money to enable it to carry
210

in the case before the Tribunal, it is our considered opinion that the onus rests on the Appellant to prove that in fact
part of the disbursements were used on revenue expenses. The Appellant has not been able to do this, despite requests
from the Tribunal, as well as the Respondent. !n reply to the request by the Respondent, the Appellant submitted that
the loan "was used in putting up the dams, canals, roads, land preparation and acquisition of equipment and
machinery, for use on the estate,"
The Appellant claims that ail this, was a mistake of fact.
The Tribunal was not afforded any documentary evidence of reputable of the letter written by the Acting Company
Secretary. Indeed, it is not conceivable that so much details of the use of the loan funds, would have been a 'mistake
of fact'.
The Tribunal afforded the Appellant the opportunity to prove the expenses that related to the Profit and Loss Account
(of a revenue nature), The Appellant, by use of an internal memorandum dated 10 April 1984, from the Genera!
Manager, Kaleya Smallholders Company Limited to the R.C(CA) and Rep (Zambia), estimated the Operational cost
at 41% of the 520,000 Sterling loan. This appears to be the basis for using this percentage to compute the
other loan of 2,900,000 Sterling
Both loans were "for the purposes of a smallholder sugar project." We did not find any breakdown of the uses of the
two loans. The Appellant, in its submission conceded that it is difficult to trace accounting entries of the relevant
purchases, since most of the documents and files relating to the initial years, are not available/'
It is obvious that the Appellant is not able to provide details of the expenses which should be allowed by the
Respondent, other than its estimates.
in view of these facts, we dismiss the appeal, with costs.
Any party aggrieved is at liberty to appeal to the High Court within 30 days,
211

W. MWAN2X
MEMBER
I
IN THE REVENUE APPEALS TRIBUNAL
HOLDEN AT LUSAKA
BETWEEN:
BUCHIES INVESTIMENT LIMITED
AND
VICE CHAIRMAN
212
N. A. LUNGU
MEMBER

ZAMBIA REVENUE AUTHORITY
Coram: M. M Mundashi (Chairman)
For the Appellant: L. M. Kasula, Lemard Lane & Partners
For the Respondent: T. Folotiya Zambia Revenue Authority
1 August 2001
RULING
The appeallant applied exparte before me for an order that the auctioning of the motor belonging to
the appellants be stayed pending the hearing of tills appeal The facts relied on in the affidavit in support
of the exparte summons were as follows;
1. Some time on July 2000, the Drug Enforcement Commission seized motor vehicles
belonging to the appellant
2. That the Drug Enforcement prosecuted employees and relatives of the Chairman of the
plaintiff company,
3. That the Drug Enforcement Commission failed to secure a conviction.
4, That on their failure to convict the Drug Enforcement Commission discretely handed the motor
vehicles to Zambia Revenue Authority.
5, That the appellants made numerous representations to the respondents.
6. That the respondents have now decided to seize the motor vehicles and auction them on
7. That the appellants have appealed against the decision of the respondents and the appeal is
likely to succeed and if so the appeal would be rendered and academic exercise,
When I scrutinized the documents in chambers, l declined to sign the experts order to stay
enforcement and ordered an impromptu inter parte heating for the appellant to address the
Tribunal on whether the stay of executions could be granted Miss Folotiya appeared on
After the appellant failed to present any Segal authorities on whether this Tribunal could grant the relief
sought I promptly dismissed the application with reasons to be given in a written ruling later, I now
give the reasons.
213

The application was premised on the fact that there was a notice of appeal, As Mr Kasula
concocted, there was no notice of appeal filed before the Tribunal ipso facto, the application was fatal
procedurally, Even if there was a notice of appeal, the issues raised to be the basis of to appeal are not
appealable matters. The jurisdiction of the Tribunal Is to be found in Section 3 of the Revenue
Appeals Tribunal Act No, 11 of 1988, Appeals are in respect of assessments and determinations
made by the Commissioner General. The assessments and determinations relate to the three taxes
administered by the respondent ie Income Tax, Customs and excise duty and Value added Tax
Though the appellant did not state exactly which type of tax it was challenging, it was clear from
the affidavit in support of the application that the appellant was challenging the respondents
decision to seize or detain the appellants motor vehicles.
The respondent has powers to detain items under section 159 of the Customs and Excise act and
to seize under section 162 of the same Act. In my considered view, these are not appealable
matters under the Revenue Appeals Tribunal Act No. 11 of 1998. The jurisdication of the Tribunal in
relation to customs and Excise matters is to be found in section 3{a) of Act 11 of 1998. The sum of
total of the provisions in the section is to the effect that the Tribunal can only entertain an appeal if;
i) the Commissioner-General wrongly classifies an imported item under any item of the
Customs Tariff,
ii) An importer is not satisfied with the valuation of an imported manufactured item for
purposes of calculating import duty or excise duty.
As we stated in Mohammed Hussein vs Zambia Revenue Authority 199/RAT/13. the jurisdiction
of the Tribunal is to be found in the enabling statute. The enabling statute is clear and
unambiguous, We have no jurisdiction to inquire in the conduct of the Commissioner-General in the
way he exercises the power to detain or seize items under the provisions of the Customs and Excise
Act. It follows therefore that the Tribunal cannot grant a stay pending the hearing of an issue on
which it has not jurisdiction to hear,
Dated the ........... . ..... . ....... ..... ........ day of
214

M M Mundashi (Chairman)
196
215

IN THE REVENUE APPEALS TRIBUNAL 1999/RAT/27
HOLDEN AT LUSAKA
BETWEEN:
TWDCATANE AFRICAN ART COMPANY LIMITED Appellant
and
ZAMBIA REVENUE AUTHORITY Resp_QiLdent
CORAM: C H J CHILESHE (CHAIRMAN), H MUYOYETA AND
A N LUNGU on 6th May 1999
FOR THE APPELLANT: MR ECMATSIKA (NKWAZ1 CHAMBERS)
FOR THE RESPONDENT: MR T MULALA - Senior Inspector VAT Policy
R U L I N G
MS N HAMANYANGA - Legal Department ZRA
This is an appeal against the Zambia Revenue Authorities assessment of Value Added Tax
Arrears in the sum of K33,647,493 penalties and interest thereon issued against the
Appellant in relation to incomes realised by it from the production and sale of hungarian
sausages.
The substance of the appellants contentions have been submitted before the Tribunal in the
form of a notice of appeal and an affidavit in support thereof sworn by one Granger Gugwin
Mulomba dated 9th April 1999. Similarly, the respondent has elected to put its case in the
form of a three page memorandum dated 23rd March 1999.For the purpose of expediency
the Tribunal decided to adjudicate on the basis of the documents before us albeit that these
have been filed in an irregular fashion.
We would like to take this opportunity to remind parties who wish to file documents they
wish to rely on to follow the provisions of regulation 10 of The Revenue Appeals Tribunal
Regulations S.I. No. 143 of 1998. For ease of reference, it is advisable to submit these
documents in the form of a bundle with an index and the documents numbered in
chronological sequence.
The brief facts of this matter as disclosed by the documents before the Tribunal are this:
216

These are the undisputed facts before the Tribunal. Both parties elected not to adduce oral
evidence and relied on written submissions and documents submitted before the Tribunal.
1.1 On 23rd August 1996 the Respondent under the hand of one Reuben Kamanga,
Inspector - Enforcement wrote to the Appellant stating, inter aha,
"Examination of your account show (sic) that on 22nd August 1996 a balance
of K33,647,493 was owing to Zambia Revenue Authority ...
The above amount is now due and should be paid within seven days from the date of
this letter. Failure to do so will be viewed with such seriousness as to result in the
Commissioner of VAT to institute distress proceeding (sic) against you without any
further notice."
1.2 On 21st October 1996 the Appellant under the hand of one G Fyers wrote
to the Appellant objecting to the said assessment on the grounds that
Hungarian Sausages in question were exempt from Value Added tax because
they were not a cooked product.
1.3 In March 1995 the Respondent published as First Schedule to the Value
Added Tax Act Cap.331(the "Act") (The VAT "Liability Guide (1995")
which under sub item 2 states:
"Animal products - uncooked edible meat and offal of cattle, swine,
sheep, goats, game and poultry (including eggs), except
(a) any of the above products that is supplied by a restaurant,
cafeteria, canteen or like establishment; or
(b) pate, fatty livers of geese or dues and any other product
prescribed by the Minister by regulation"
the explanatory notes in the same Liability Guide made the following
clarification: "In the case of meats and fish the exception only applies to
uncooked products."
In our considered view, the issue before the Tribunal is whether or not Hungarian Sausages
were a taxable supply within the ambit of the Act as amended by the First Schedule of goods
liable to Value Added Tax.
217
,

As this Tribunal has stated, in line with the General principles of taxation law, the onus of proof
is on a tax payer to discharge a tax assessment failure to which such an assessment will
stand valid see 'Trans Zambezi Industries Limited V Zambia Revenue Authority.
Therefore, has the appellant proved that Hungarian Sausages were not at the material time a
taxable supply and thus not subject to Value Added Tax?
In order to ascertain the legal position we must have recourse to both the applicable statute
law and any binding or persuasive precedents and authorities,
2.The Respondent contends, inter alia, that:
2.1 Hungarian sausages were taxable since the inception of VAT and are
still taxable at standard rate.
2.2 In the production process, Hungarian sausages undergo a steaming process
and then they are smoked to give them taste. It is immaterial that the process
of cooking is not complete so as to enable immediate consumption of the
sausages. Suffice to say that the cooking process takes place. The end product
is sausages which are cooked and this disqualified the sausages from exemption
under the First Schedule to the VAT Act. They were taxable before 1 st July,
1996.
2.3 Statutory Instrument No. 109 of June, 1996 also known as the Value Added
Tax (Zero-rating) order which came into effect on 1st July, 1996 Zero-rated
most agricultural products. Animal products also became zero-rated in the
Second Schedule which states the following in group l(b)
(a) Animal products - meat and offal of cattle, swine, sheep, goats and
poultry (including eggs), except -
(i) any of the above products that is supplied by a restaurant,
cafeteria,canteen or like establishment; or
(ii) cooked or smoked meats; meat processed beyond, cutting,
grinding or mincing including sausages; pate and the fatty livers
of geese or ducks, and any other product prescribed by the
Minister by regulation, or
(in) pet food.
218

2.4 Although uncooked sausages were expent from VAT before 1st July 1996,
cooked sausages have always been taxable since inception of VAT. Hungarian sausages
undergo steaming and smoking during processing and they have always been taxable for
VAT purposes and, therefore, the assessment should be upheld.
3. Conversely the appellant contends, inter alia, that:
3.1 Hungarain sausages in question were exempt from attracting VAT
because they were not a cooked product;
3.2 The said exemption on sausages was only lifted in July 1996; and
3.3 In July 1996 the respondent issued a further guideline on the subject
(see leaflet entitled "ANNOUNCING THE PACKAGE ON VAT-ZERO-
RATING2) in this leaflet the respondent confirmed that processed meat beyond
cutting i.e. sausages, meat pies and other prepared meat products became vatable.
3.4 On 21st October 1996 the appellant wrote to the respondent and argued that
hungarian sausages could not be described as "cooked", because, according to the
appellant's view, "they are only preserved and no individual would eat a hungarian
suasage without cooking it."
It is well established law that:
"A citizen is not to be taxed unless he is designated in clear terms by the taxing Act as a
tax payer and the amount of his liability is clearly defined..." per Lord Wilberforce in
VESTEY v IRC (1980) STC 10 at 18
This principle of strict construction was well stated by Rowlatt J in CAPE BRANDY SYNDICATE v
lRC (1921) 1 KB 64 at 71- 12 TC 358 at 366
In a taxing Act one has to look merely at what is clearly said. There is no
equity about tax. There is no presumption as to tax. Nothing is to be read in,
nothing is to be implied. One can only look fairly at the language used...."
In the instant set of facts the relative taxing Act as amended by the Liability Guide March 1995
conferred an exemption to VAT in respect of Animal products- uncooked edible meat and offal of
cattle etc. The Act imposed a corresponding liability to VAT Ono all other meat products. The
natural meaning unequivocal import of this wording is to impose VAT upon all meat products and
derivatives other than uncooked products. This is the established rule of Statutory interpretation
expressed in the Latin maxim of
219

Expressio unius est exclusio alterius - that is to say, that the expression or specific mention of
one person or tiring naturally implies the exclusion of other persons or things of the same class of
class of person or thing. Therefore by excluding uncooked meat products, the Act automatically
includes cooked meat products.
By reason of the foregoing the pivotal point of contention is, what is the natural and ordinary
meaning of the word "cooked"? The Collins Cobuild English Language Dictionary avails
the following:
"Cook: when you cook food, you prepare it for eating by heating it in a particular
way. For example, by baking, boiling, or frying it."
It follows that "cooked" presupposes that the raw or original ingredient must first pass through a
heating process to transform this into a finished, or an end product. Whether or not this product
would, in turn, need to be re-heated before being consumed does not of itself have any bearing
on the definition. We think that nobody would have any problem with agreeing to the proposition
that a frozen meat pie is a cooked product, much akin to the infamous Hungarian sausage, the
subject in atter of the present appeal.
Accordingly, we find and hold that this appeal must fail based on the evidence adduced before us
and relied upon by the parties. We uphold the respondent's assessment with penalties and interest
in accordance with the relative Act as for the time being amended, together with the costs of these
proceedings. This appeal is dismissed on the terms as aforesaid.
DATED this 20th day of OCTOBER 1999
C H CHILESHE:
H MUYOYETA:
220

221

222

A
223