The Court of Appeal has affirmed the decision of the Federal High Court Bauchi Division that lawyers and law firms are to pay Value Added Tax (VAT) to Federal Inland Revenue Service (FIRS). This decision by the tribunal was made in the case between AL-MAEER LAW FIRM and FEDERAL INLAND REVENUE SERVICE in Appeal No. CA/J/179/2018
SUMMARY OF THE CASE
By an originating summons the Plaintiff had sought for the determination of the following questions:
Whether or not by virtue of the provisions of the Value Added Tax Act Cap VI, 2004 (as amended) legal practice is a business venture and thus is required to register with Federal Inland Revenue Service Board for the purpose of collecting tax as its agent and remitting the amount collected on monthly basis.
Whether or not a legal practitioner duly called to the Nigerian Bar and who practices as such falls within the class of persons contemplated under section 46 of the Value Added Tax Act Cap VI, 2004 (as amended) to bring him under any obligation to render VAT returns in compliance with section 15 of the Act.
Whether or not the purported letters served on the Plaintiff demanding it to render monthly VAT not being business venture is irregular and of no legal effect whatsoever
She sought the following reliefs should the court determine the above issues in her favour:
A Declaration that by virtue of the provision of section 2 and 46 of the Act, the Plaintiff as a legal practitioner is not a taxable person within the contemplation of the Act and is not under any obligation to render any VAT or any other return to the Board
A Declaration that the Plaintiff does not fall under the category of persons contemplated under section 46 of the Value Added Tax Act Cap VI, 2004 (as amended) to bring him under any obligation to render VAT returns in compliance with section 15 of the Act
A Declaration that the purported letters for non-rendition of the monthly VAT served on the Plaintiff is irregular and of no legal effect whatsoever
An Order of perpetual injunction restraining the Defendant either by themselves, their privies, cohorts, or any person deriving authority from them from further serving on the Plaintiff any such letter on the subject
Upon hearing the case of the, the trial court delivered judgement in favour of the Respondent. Dissatisfied with the decision, the Plaintiff appealed to the Court of Appeal on three grounds wherein she formulated the following two issues for determination:
Whether in the circumstance of the case the trial court was right when it held that she is not exempted from registration with Respondents for the purpose of charging or collection of value added tax on the professional fees she collects from her clients.
Whether the trial court was right when it held that respondent had statutory power to demand payment of VAT from her.
ARGUMENT OF COUNSEL
On issue 1 the Appellant argued that words in a statute be given their natural and ordinary grammatical meaning and express mention of one thing excludes another. The Appellant referred to the provisions of section 46 of VAT Act and argued that law firms are not among taxable persons contemplated by the Act and that only persons who engage in activities relating to production, distribution and consumption of goods and those engaged in business of buying and selling of goods and services. That law firms and legal practitioners are not into business venture.
The appellant further argued that the lower court was not mindful of the difference between tax legislations and other ordinary legislations. Assuming without conceding that she was a taxable person, she argued, she is only enjoined to register with the Respondent and collect the said tax from his business partners on behalf of the Respondent. That registration is a condition precedent for tax to be demanded from her. She said she had consistently denied registration with the Respondent and even tendered evidence in respect of that but yet the trial court could not make pronouncement on it.
On issue two the appellant practically repeated the same argument on issue one. She contended that VAT Act does not empower the respondent to collect tax from her
The respondent on the other hand argued that the decision of the trial court is faultless. That tax is chargeable and payable on taxable goods and services except for those goods and services exempted in the first schedule to the VAT Act, 2004. Legal practitioners and law firms have not been mentioned in the exemption list and therefore within the contemplation of the VAT Act as a taxable person. That if the Act had intended to exclude legal practitioners and law firms, it would have expressly done so in the Act. The Respondent further argued that the mischief the Act intends to cure
DECISION OF THE COURT OF APPEAL
The court reaffirmed the decision of the lower court as follows:
“Applying the principles of law therefore, I am of the considered legal view that the list of service exempted from paying VAT by the aforesaid schedule clearly did not include ‘legal service’ which the plaintiff firm renders to the society. In the circumstance therefore, the argument of learned counsel for the plaintiff that because legal practitioner does not engage in production or distribution or consumption of goods and for this reason should not be VAT collection agent is baseless. This is because rendering service of professional expertise is what is in issue and not production or consumption of consumable goods
“I therefore resolve issue 1 in the negative and hold that the plaintiff is not exempted from registration with the defendant for the purpose of charging or collection of Value Added Tax on the professional service she collects from her clients. I would like to make it clear to the Plaintiff that Value Added Tax is paid by the client in addition to the professional fees. See s. 12 of the Act…”
The court of Appeal could not fault the above decision. It further upheld the decision of the court in respect of the consequential issue of the right of the Respondent to demand VAT from the Plaintiff. The court said the decision of the trial court is rooted in the provisions of the VAT Act so it cannot fault it.
“This decision is undoubtedly well rooted in the provisions of the Value Added Tax Act Cap VI, 2004 and I do not see how I can fault it.”
The court said contrary to the argument of the Appellant, the Act does not limit itself to only suppliers of good but extends to those who supply services. That a lawyer or firm of lawyers in private practice undoubtedly supplies legal services to the public for fee and so caught by the provisions of the Act. That legal practitioners and law firms are not mentioned in the goods and services exempted so by the rule of interpretation that what is not expressly mentioned is excluded, legal practitioners are not exempted from payment of VAT.
“For all the foregoing reasons, I fail to see merit in this appeal; accordingly, I hereby dismiss it in its entirety and uphold the judgement of the Federal High court dismissing appellant’s originating summons”
It awarded N60, 000 cost in favour of the Respondent.
Rilwan A. Jibrin, Esq. for appellant
A.M. Hassan, Esq., holding the brief of Ezenwa Ibegbunam, Esq., the Respondent
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