Abuja Residents, Others Won’t Have Electricity If We Pay FIRS N5.3bn Tax Owed Since 2013, AEDC Tells Court

The Abuja Electricity Distribution Company (AEDC) has asked the Federal High Court sitting in Abuja to stay the execution of the judgment of the Tax Appeal Tribunal sitting in Abuja which ordered the company to pay the Federal Inland Revenue Service (FIRS) N5.3 billion in Value Added Tax (VAX) and Withholding Tax (WHT) liabilities owed between 2013 to 2017.

The AEDC’s lawyer Nduka Ukeyi told the court that if the judgment is enforced before the determination of the motion for stay of execution, it will affect electricity supply to consumers in Abuja, Niger, Kogi and Nasarawa states.

A five-man Tax Appeal Commissioners led by its presiding judge, Hon. Iriogbe Alice, entered an appeal against the AEDC in suit No: TAT/ABJ/APP/330/2022.

In its case, the AEDC’s legal team contended that sometime in 2018, the FIRS, in conjunction with the Economic and Financial Crimes Commission (EFCC) conducted a tax investigation on the company for the 2013-2017 years of assessment period (YOA).

After the assessment, the AEDC expressed dissatisfaction with the findings of the tax collection agency of the federal government, contending that the FIRS did not provide any lawful basis for such liability.

The electricity company then formulated three grounds of appeal against FIRS.

Its legal team argued that the FIRS was wrong to have assessed the AEDC to tax based on an unauthorised representation by its agent and to issue a Value Added Tax (VAT) assessment of NGN4,534,358,874 (Four Billion five hundred and thirty-four million, three hundred and fifty-eight thousand, eight hundred and seventy-four Naira) based on a purported letter instead of relying on the legal basis of the VAT Act.

The company added that the respondent was wrong in assessing the AEDC to additional Withholding Tax (WHT) liability of NGN780,307,078.00 (Seven hundred and eighty million, three hundred and seven thousand, and seventy-eight Naira) without taking into due consideration of relevant laws and procedures.

“The Respondent was wrong to have issued the Appellant a VAT assessment of NGN4.534,358,874.00 (four billion, five hundred and thirty-four million, three hundred and fifty-eight thousand, eight hundred and seventy-four Naira) without stating the basis for such liability,” the AEDC maintained, thereby praying the Tribunal to quash the tax liability.

Objecting to the appeal, the FIRS legal team in its response dated May 16, 2022, denied the appellant’s claims that the assessment was invalid.

The respondent asserted that an investigation conducted by a Joint Task Force of the FIRS and the EFCC was owing taxes to the tune of over N20 billion for 2013 -2017.

The respondent said further that a reconciliatory meeting was held with the AEDC which was represented by a Consortium of Tax Consultants: TBS Professional Services, ACS Ascension and TEK Financial Services and KPMG Professional Services.

“The Respondent asserted that at the Reconciliation Meeting, the Appellant’s representatives /agents streamlined the VAT Assessment to N4,534.358,874.00 (Four Billion, Five Hundred and Thirty-Four Million, Three Hundred and Fifty-Eight Thousand, Eight Hundred and Seventy-Four Naira only) and the Respondent therefore raised an assessment in the agreed sum and served same on the Appellant,” FIRS team added.

FIRS also argued that it rightly assessed the AEDC to the sum of N780,307,078.00 (Seven Hundred and Eighty Million, Three Hundred and Thousand and Seventy-Eight Naira only) for Withholding Tax (WHT) being an amount also agreed upon by the Appellant’s agent: KPMG, in the course of the Reconciliation Exercise and that the Appellant did not issue a valid notice of objection.

The tax collection agency urged the Tribunal to dismiss the appeal and compel the AEDC to pay the tax liability.

Passing its judgement, Hon. Alice held that evidence showed that the AEDC defaulted in the tax dispute.

The Tribunal held that the appellant is bound by the action of its agents whom it appointed to act on its behalf for Reconciliation of Value Added Tax in respect of the tax investigation Reconciliation Exercise.

The rest of the Tribunal’s orders read,” That the Assessment of Value Added Tax in the sum of N4,534,358,874 (Four Billion, five Hundred and thirty-four million, three hundred and thousand, eight hundred and seventy-four Naira only) made by the Respondent on the Appellant is valid and in accordance with the Value Added Tax Act (VATA).

“This Honourable Tribunal therefore, compels the Appellant to pay N4,534,358,874.00 (Four Billion, Five Hundred and Thirty -Four Million, Three Hundred and fifty -eight thousand, eight hundred and seventy four naira) only as VAT liability for 2013 – 2017 as contained in the Notice of Refusal to Amend (NORA) to the Respondent forthwith.

“This Honourable Tribunal compels the Appellant to pay the sum N780,307,078.00 (Seven Hundred and eighty million, Three Hundred and Seventy-Eight Naira) only as WHT liability for 2013 and 2016 as established by its consultant KPMG.

“This Honourable Tribunal compels the Appellant to pay the sum of N100,000 (One Hundred thousand naira Only) pending cost awarded in favour of the Respondent in the course of the proceeding.

“The Appellant is also liable to interest on the judgement sum at the prevailing
CBN rediscount rate from the date of judgement until the judgement debt is liquidated.

“This is the judgement of this Honourable Tribunal.”

But the AEDC dragged the FIRS before Justice Inyang Ekwo of the FHC Division praying to the court for the following reliefs: “An order staying the execution and or enforcement, by whatever means (including garnishee proceedings), of the judgment of the Tax Appeal Tribunal, Abuja Zone (“Tribunal”) delivered on 14 December 2023 in Abuja Electricity Distribution Plc v Federal Inland Revenue Service (Appeal No: TAT/ABJ/APP/330/2022) (“Judgment”‘) pending the hearing and determination of the appeal filed against the Judgment by the Applicant (“Appeal”).

“An order of injunction restraining the Respondent, whether by its employees, its agents, and or privies from enforcing, or seeking to collect, payment, by whatever means (including by distraining the Applicant by its properties or other obstruction to the Applicant’s business operations) of the taxes contained in the Notice of Refusal to Amend dated 24 February 2022 with reference number FIRS/SCD/MSC/0042/2022/089/001 (“NORA”), pending the hearing and determination of the Appeal.”

In its affidavit in support of the motion on notice seen by our correspondent, Mr. Ifeanyi Olonu, AEDC’s head of litigation deposed that the AEDC’s financial statements for the year ended 31 December 2023 have not yet been audited.

Olonu said although the AEDC has begun to minimise the loss on an annual basis, the company is still in a huge loss-making position, notwithstanding the best endeavours of Jeolan (the Applicant’s majority shareholder and private investor) and the applicant’s new management team.

He said compelling the AEDC to pay the Disputed Tax pending the determination of the appeal will frustrate the efforts of the AEDC’s new management to turn the electricity billing company around, and gravely “jeopardise the supply of electricity to millions of consumers in Kogi State, Nasarawa State, Niger State and the Federal Capital Territory, Abuja.

“Furthermore, given the Applicant’s financial challenges, the Applicant cannot prosecute the Appeal if this Honourable Court does not stay the enforcement of the Judgment or the payment of the Disputed Tax.

“The Applicant has historically been in very challenging financial condition and has not made any profit since it was established.

“The Applicant is a public utility engaged in the delivery of a very critical utility (i.e., the distribution of electricity in the Federal Capital Territory, Kogi State, Nasarawa State and Niger State).

“The enforcement of the Judgment or the payment of the Disputed Tax by the Respondent prior to the determination of the Appeal will adversely constrain the Applicant’s capacity to deliver electricity to millions of its customers and will further lead to significant disruption in the operations of key government institutions and essential services, with severe hardship on members of the public,” he stated.

The AEDC legal team further contended that enforcement of the judgment or payment of the Disputed Tax before the hearing and determination of the appeal will foist a “situation of helplessness on the electricity company.”

“It is expedient and in the interest of justice to grant this application in order not to render the decision of the Court nugatory in the likely event that the Appeal is successful,” he stated.

At the proceedings on Tuesday, Destiny Chukwu announced an appearance for the AEDC but counsel for the FIRS was not in court.

The matter was subsequently adjourned by Justice Inyang to February 7 for hearing on the motion on notice in suit number FHC/ABJ/TA/01/24.