The Tax Appeals Tribunal has ordered East African Breweries International Limited (EABIL) to pay Uganda Revenue Authority (URA) tax arrears of Shs9.7b.
The arrears, according to documents, accumulated over a period of seven years. The Tribunal dismissed with costs the case in which EABIL had challenged the assessment.
“We [Tribunal] note that the Commissioner [URA] has powers to apportion income on an intergroup company and issue an assessment. In this case the Commissioner chose the applicant over Uganda Breweries Limited. The Tribunal feels that the Commissioner was acting within his discretion and was justified to do so,” a coram of three members including Dr Asa Mugenyi (chairman), Mr George Mugerwa and Mr Siraj Ali, both members, ruled.
The ruling arose from an income tax assessment of Shs9.7b by URA on EABIL for income received on transactions involving companies within the group.
According to the ruling, URA audited Uganda Breweries Limited, a subsidiary of East African Breweries Limited and discovered that it was transacting with EABIL.
The Tribunal heard that EABIL was purchasing and disposing stock where the company purchased goods from Uganda Breweries Limited at a cost and markup of 7.5 per cent.
It also ruled that there was doubt as to how EABIL was able to purchase goods from Uganda Breweries Limited and export them without having a presence in Uganda.
“This doubt is exacerbated by the invoices and dispatch notes tendered in evidence that show that they were issued in Uganda. They had the address of the applicant as also in Kampala. How was the applicant stamping the said documents if it did not operate in in Uganda?” the tribunal ruled.
URA submitted that EABIL, a wholly owned subsidiary of East African Breweries Limited, and incorporated in Kenya, obtained income from the export of beer, which was sold to third parties at a cost and markup of 70 to 90 per cent.
The Tribunal also dismissed evidence presented by Mr John Kambo who testified that he was an employee of East African Breweries Limited, which is different from EABIL.
“Why would the applicant bring a witness working for another company who has limited knowledge of its operations?” the tribunal wondered.