Jurisdiction of the Tax Appeal Tribunal over taxes accruing to the States; a review of Plateau State Internal Revenue Service (“PSIRS”) v. Jos Electricity Distribution Plc (“JEDC”)

Introduction

Jurisdiction has been one of the most agitated subjects in Nigeria’s jurisprudence. This stems from the critical nature of the question of jurisdiction in the adjudicatory process, as the validity or otherwise of judicial proceedings and their outcomes depend on whether the court or tribunal before which the proceedings were initiated had the jurisdiction to determine the dispute.

The Tax Appeal Tribunal (“TAT”), like regular courts, has experienced a fair share of challenge to its jurisdiction. One of the aspects of the TAT’s jurisdiction that has been a subject of controversy relates to the scope of the TAT’s jurisdiction over taxes accruable to the States. Fortunately, the Court of Appeal has now comprehensively addressed and determined the scope of the TAT’s jurisdiction over taxes accruable to States in its recent decision delivered on 18 February 2025 in PSIRS v. JEDC. This article discusses the Court of Appeal’s decision.

Overview of the Jurisdiction of the TAT

The TAT was established under the Federal Inland Revenue Service (Establishment) Act, 2007 (the “FIRS Act”) and conferred with jurisdiction over disputes arising from taxation statutes enacted by the National Assembly. Specifically, Section 59 of the FIRS Act which provides for the establishment of the TAT provides that the TAT shall have power to settle disputes arising from the operations of the FIRS Act and the laws listed in the First Schedule to the FIRS Act. The enactments set out in the First Schedule to the FIRS Act are: (i) Companies Income Tax Act; (ii) the Personal Income Tax Act; (iii) Petroleum Profits Tax Act; (iv) Capital Gains Tax Act; (v) Value Added Tax Act; (vi) Taxes and Levies (Approved List for Collection) Act; (vii) Stamp Duties Act; (viii) all regulations, proclamations, notices or rules under these enactments; (ix) any other enactment of the National Assessment for the assessment, collection and accounting of revenue accruable to the Government of the Federation conferring any power, duty and obligation on the FIRS; (x) enactments imposing taxes and levies within the Federal capital Territory; and (xi) enactments imposing taxes, fees and levies collected by other government agencies.

In addition to Section 59 of the FIRS Act which provides for the jurisdiction of the TAT in general terms, the Fifth Schedule to the FIRS Act sets out in detail, the procedure for initiating and conducting appeals at the TAT by taxpayers and the FIRS, the timeframe within which appeals are to be commenced by taxpayers and the implications of failure to commence appeals within the prescribed period, the procedure for enforcing tax liabilities following a decision of the TAT, and provides for the right of appeal and the timeframe for appealing decisions of the TAT to the Federal High Court (“FHC”). Regarding the right of appeal and the procedure for initiating appeals at the TAT, Paragraph 13 (1) and (2) of the Fifth Schedule provides that a person aggrieved an assessment, demand or other decision of the Service (that is, the FIRS) may appeal to the TAT within 30 days from the date on which the assessment, demand or decision was made.

Paragraph 14 of the Fifth Schedule similarly provides that where the FIRS is aggrieved by the non-compliance of a person with the provisions of the relevant tax laws, it may appeal to the TAT.

Considered on its own, Section 59 of the FIRS Act suggests that the TAT has jurisdiction over any question arising from the operations of the FIRS Act and the laws listed in the First Schedule. However, the Fifth Schedule which elaborately provides for the jurisdiction of the TAT, appears to contemplate only appeals against decisions of the FIRS and appeals by the FIRS. This is evident from the express reference in paragraphs 13 and 14 of the Fifth Schedule to appeals by taxpayers aggrieved with an assessment, demand notice or other actions or decisions of the FIRS on the one hand, and appeals by the FIRS to enforce compliance with the provisions of relevant tax laws on the other hand, and the absence of corresponding provisions in the FIRS Act providing for appeals against assessments and decisions of the State Internal Revenue Services.

The express reference to appeals against, and by the FIRS, and the absence of similar provisions for appeals against assessments and other decisions of the state tax authorities generated the jurisdictional question of whether the TAT’s jurisdiction covers all tax disputes arising from the laws listed in the First Schedule to the FIRS Act, including those relating to taxes accruable to the States, or limited only to taxes accruable to the Federal Government. Until the decision of the Court of Appeal in PSIRS v. JEDC, this question had not received a comprehensive or satisfactory response, and the TAT had continued to exercise jurisdiction over all taxes, including taxes accruable to the States. However, the Court of Appeal has satisfactorily answered the question in a manner that will clearly guide the TAT, taxpayers and the state tax authorities.

Overview of PSIRS v. JEDC

The PSIRS initiated Appeal No.: TAT/NCZ/002/2021 by a Notice of Appeal filed on 12 October 2021 claiming against JED the cumulative sum of N1,823,326,667.87 (One Billion, Eight Hundred and Twenty-Three Million, Three Hundred and Twenty-Six Thousand, Six Hundred and Sixty-Seven Naira, Eighty-Seven Kobo) as outstanding tax liability for the 2015 and 2016 financial years. The said liability comprised personal income tax of JED’s employees under the Pay-As-You-Earn (“PAYE”) scheme, withholding tax (“WHT”) on contracts and supplies, and professional and consultancy fees, development levy, and penalty and interest. JEDC denied the alleged liability and challenged the jurisdiction of the TAT to determine the claims of PSIRS.

In its judgment, the TAT assumed jurisdiction to entertain the appeal, awarded the sum of N128,292,567.55 (One Hundred and Twenty-Eight Million, Two Hundred and Ninety-Two Thousand, Five Hundred and Sixty-Seven Naira, Fifty-five Kobo) in favour of the PSIRS and ordered JEDC to deliver its staff payroll and WHT records to the PSIRS within 21 days for a proper assessment of JEDC’s liability under the PAYE scheme.

JED appealed the decision of the TAT to the FHC. In its judgment, the FHC held that jurisdiction to determine disputes relating to taxes due to the Plateau State Government was vested in the Plateau State Revenue Court and that neither the TAT nor the FHC had jurisdiction over such disputes. For this reason, the FHC allowed the appeal and set aside the judgment of the TAT for want of jurisdiction. Dissatisfied with the decision of the FHC, the PSIRS appealed to the Court of Appeal.

At the Court of Appeal, PSIRS argued that by virtue of Section 59 of the FIRS Act which confers jurisdiction on the TAT over the tax statutes set out in the First Schedule thereto including the PITA, and Section 60 of the PITA which confers jurisdiction on the TAT over all disputes arising from the PITA, the TAT had jurisdiction over taxes accruing to the Government of Plateau State and the FHC wrongly held that the TAT lacked jurisdiction to the determine PSIRS’ appeal.

JEDC on the other hand, argued that: (i) the jurisdiction of the TAT under Section 59 of the FIRS Act is limited to disputes relating to taxes accruing to the Federal Government and that disputes relating to taxes accruing to State Governments are outside the jurisdiction of the TAT; (ii) the FIRS Act only provides for appeals against or by the “Service” which is defined in the FIRS Act and the Tax Appeal Tribunal (Procedure) Rules as the “Federal Inland Revenue Service”; and (iii) in respect of the PITA, the jurisdiction of the TAT is restricted to the taxation of persons employed in the Nigerian Armed Forces, the Nigeria Police, the Nigerian Foreign Service and non-resident persons deriving income from Nigeria, being the persons within the authority of the FIRS. Given that the PSIRS’ appeal at the TAT concerned taxes accruing to Plateau State, only the Revenue Court established under the Plateau State Revenue (Consolidation) Law, 2020 had jurisdiction to entertain the claims.

In resolving the issue of whether the TAT has jurisdiction over taxes accruable to the States, the Court of Appeal distinguished income taxes under the PITA (including income taxes of employees under the PAYE scheme and WHT) from other forms of taxes due to the States. With respect to income taxes under the PAYE scheme and WHT due to the States, the Court held that disputes relating to these taxes were under the jurisdiction of the TAT, while other forms of taxes and levies, such as development levy, are outside the jurisdiction of the TAT.

Income tax under the PAYE scheme, and WHT

In concluding that income taxes under the PAYE scheme and WHT due to the States are within the jurisdiction of the TAT, the Court of Appeal, Per Affen JCA conducted a thorough and comprehensive analysis of the relevant provisions of the FIRS Act, the PITA and the Constitution of the Federal Republic of Nigeria, 1999 (as amended) (the “Constitution”). This demonstrated a clear recognition of the fact that the jurisdiction of the TAT over income taxes accruable to the States cannot be determined exclusively under the FIRS Act notwithstanding that the TAT is a creation of the FIRS Act and derives its jurisdiction primarily from the FIRS Act. By considering the PITA and the Constitution, the Court of Appeal also acknowledged that the provisions of the FIRS Act may not be sufficient to confer jurisdiction on the TAT over disputes relating to income taxes under the PAYE scheme and WHT due to the States.

The Court of Appeal properly identified that under the Constitution, taxation of income or profits is an Exclusive Legislative List item within the exclusive legislative remit of the National Assembly and that the PITA was enacted by the National Assembly pursuant to this exclusive legislative authority. The Court however recognised that the power to impose tax is different from the power to collect or administer tax and that while only the National Assembly enjoys exclusive powers to impose income tax, the power to administer or collect income tax is allowed to be delegated to the States under the Concurrent Legislative List. In this regard, the National Assembly delegated the power to collect income taxes under the PITA to the States and that PAYE and WHT remain federal taxes even though the States exercise the power to collect these taxes from persons resident within their territories.

On the jurisdiction of the TAT, the Court held that by Section 59 of the FIRS Act and the First Schedule thereto, the TAT had from inception in 2007, been conferred with jurisdiction over disputes arising from the PITA. The Court however acknowledged that under the FIRS Act, the jurisdiction of the TAT is limited to appeals against or by the FIRS and this impliedly excludes appeals by or against the state tax authorities. The Court noted that the powers of the FIRS under the FIRS Act are limited to the administration, collection and enforcement of taxes accruable to the Federal Government while the States Boards of Internal Revenue established under Section 87 of the PITA are responsible for “ensuring the effectiveness and optimum collection of all taxes and penalties due to the Government under the relevant laws.”

Given that taxes due to the States are collectible by the States Boards of Internal Revenue, and the jurisdiction of the TAT under the FIRS Act is limited to appeals involving the FIRS, it was arguable that the TAT lacked jurisdiction over taxes due to the States. On this point, the Court noted that prior to 2011, neither the PITA nor any other law conferred jurisdiction on the TAT over taxes due to the States including income taxes that are collectible by the state tax authorities under the PITA. However, the PITA was amended by the Personal Income Tax Act (Amendment) Act, 2011 (“Amendment Act”) to amongst other things, confer jurisdiction on the TAT over all disputes arising from the administration of the PITA. Specifically, Section 60 of the PITA as amended by the Amendment Act provides that: “The Tax Appeal Tribunal established pursuant to Section 59 of the Federal Inland Revenue Service (Establishment) Act, 2007 shall have the powers to entertain all cases arising from operations of this Act.”
In view of Section 60 of the PITA as amended, the Court concluded that the TAT has jurisdiction over all cases arising from the operations of the PITA, including disputes relating to personal income tax on employment income under the PAYE scheme, and WHT collectible by the States.

In reaching this conclusion, the Court considered its earlier decisions in Skye Bank Plc v. Kwara State Internal Revenue Service where the Court held that the FIRS Act and Section 60 of the PITA as amended do not confer jurisdiction on the TAT over taxes due to a State Government, and RECTAS (Ile-Ife) v. Osun State Board of Internal Revenue where the Court affirmed the jurisdiction of the TAT over all cases arising from the PITA and held that the RECTAS’ case, being later in time, serves as binding precedent, and also accords with the legislative intent behind Section 60 of the PITA.

Other forms of taxes and levies accruable to the States

With respect to the jurisdiction of the TAT over other forms of taxes and levies, the Court noted that the States are empowered to legislate on taxes and levies other than income tax, capital gains tax and stamp duties and that several states have introduced taxes and levies such development levy, land related taxes, infrastructure maintenance levy etc. The Court concluded that such taxes and levies being creations of State laws, the High Courts and Magistrate Courts of the States, and not the TAT, have jurisdiction over disputes arising from their administration.

Comments

The decision of the Court perfectly aligns with relevant constitutional and statutory provisions. Section 59 of the FIRS Act clearly conferred jurisdiction on the TAT over disputes arising from the operation or administration of the laws listed in the First Schedule thereto including the PITA. However, the Fifth Schedule to the FIRS Act, which sets out in detail the establishment, jurisdiction and procedure of the TAT, only provides for appeals against decisions of the FIRS, and appeals by the FIRS.

The specific reference to appeals involving the FIRS, to the exclusion of appeals involving the tax authorities of the States in the Fifth Schedule to the FIRS Act strongly suggested that the TAT’s jurisdiction was limited to taxes due to the Federal Government. This informed and indeed justified the argument that the jurisdiction of the TAT under the Fifth Schedule to the FIRS Act did not extend to taxes due to the States, including personal income taxes of residents of the States under the PITA. However, with the amendment of the PITA in 2011 by the Amendment Act, the TAT now has jurisdiction over all cases arising from the administration of the PITA and this argument has lost merit.

Despite the clear provisions of Section 60 of the PITA as amended expressly conferring jurisdiction on the TAT over all cases arising from the administration of the PITA, there still appeared to be some confusion regarding the scope of the TAT’s jurisdiction over income taxes payable to the States under the PITA, as the conflicting decisions in Skye Bank and RECTAS suggest. Fortunately, the Court of Appeal has now clarified whatever confusion remained on the scope of the TAT’s jurisdiction over income taxes due to the States by affirming the TAT’s jurisdiction over all disputes arising from the operations of the PITA in line with Section 60 of the PITA.

Equally significant is the decision of the Court in respect of other taxes and levies such as development levy, infrastructure maintenance levy, etc. which are within the legislative purview of the States. There is presently no law conferring jurisdiction on the TAT over such State taxes and levies. As these taxes and levies are creations of State laws, the High Courts, Magistrate Courts and Customary Courts of the States have jurisdiction over these taxes and levies. The TAT had however held (wrongly in the author’s view and as the decision of the Court of Appeal confirms) that it had jurisdiction over state taxes. The Court of Appeal clarified the jurisdictional scope of the TAT over taxes due to the States by holding that the TAT’s jurisdiction is limited to income taxes under the PITA and does not extend to state taxes, that is, taxes and levies created by State laws.

Conclusion

The decision of the Court of Appeal in this case has comprehensively resolved the questions regarding the scope of the TAT’s jurisdiction over taxes due to the States. On the one hand, the decision affirms the TAT’s jurisdiction over all income taxes payable to the States under the PITA, and on the other hand, the decision addressed the limits of the TAT’s jurisdiction in respect of state taxes and affirms the jurisdiction of the States’ courts in this regard. The decision has provided the necessary certainty on the proper forum for adjudication of disputes over taxes accruable to the States.