Nyabiryo & 1,117 Others v Uganda Revenue Authority (Civil Appeal 24 of 2022; Civil Application 7 of 2024) [2024] UGSC 32 (2 September 2024)

Full Case Text

# THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA CIVIL APPEAL NO. 024 OF 2022

### AND

## **CIVIL APPLICATION NO. 07 OF 2024**

### PATRICK NYABIRYO AND 1,117 OTHERS::::::::::::::::::::APPELLANTS

#### **VERSUS**

### UsGANDA REVENUE AUTHORITY::::::::::::::::::::::::::::::RESPONDENT

(Appeal from the decision of the Court of Appeal (Kiryabwire and Mugenyi, JJA and Kasule, Ag. JA) in Civil Appeal No. 45 of 2013 dated 20th December, 2021)

#### CORAM: HON. LADY JUSTICE PERCY NIGHT TUHAISE, JSC HON. LADY JUSTICE ELIZABETH MUSOKE, JSC HON. MR. JUSTICE STEPHEN MUSOTA, JSC HON. MR. JUSTICE CHRISTOPHER MADRAMA IZAMA, JSC HON. LADY JUSTICE CATHERINE BAMUGEMEREIRE, JSC

## JUDGMENT OF ELIZABETH MUSOKE, JSC

This judgment addresses both Civil Application No. 07 of 2024 and Civil Appeal No. 024 of 2022 which came up for hearing on the same date.

### **Representation**

At the hearing of the matters, Mr. Moses Okurut appeared for the appellants. Ms. Diana Pridah Praff, Assistant Commissioner Litigation, Mr. Tony Kalungi, Ag. Manager Income Tax Litigation, and Mr. Simon Peter Orishaba, jointly appeared for the respondent.

The Court adopted written submissions, in respect of both the application and the appeal, filed by the respective counsel prior to the hearing, and has considered them in this judgment.

## Civil Application No. 07 of 2024

The appellants filed this application seeking for orders that:

- $"1)$ The time within which to file Civil Appeal No. 24 of 2022 be extended. - $2)$ Civil Appeal No. 24 of 2022 be validated; and - $(3)$ The costs of the application be in the cause"

The respondent opposed the application.

# **Background**

The Court of Appeal, in a decision dated 20th December, 2021, allowed the respondent's appeal against the appellants. The appellants were dissatisfied and instructed their former advocates of Okurut, Okalebo, Outeke & Co. Advocates to appeal to this Court. The former advocates, on 11th January, 2022, filed a Notice of Appeal and a letter requesting for certified proceedings and judgment, and the same were availed by the Registrar, Court of Appeal to the former advocates on 22nd February, 2022. The former advocates thereafter filed the appellants' record of appeal on 31st October, 2022 which was over 8 months from the date they were availed the proceedings and judgment.

Under Sub-rules (1) and (2) of Rule 79 of the Rules of this Court, an appeal is supposed to be filed within 60 days from the date of receipt by the appellant of the certified proceedings and judgment of the Court of Appeal. Therefore, the appellants' appeal filed after 8 months of receipt of the relevant appeal documents was filed out of time. It was averred that Mr. Bakyawa Mawazzi, one of the appellants discovered this default on 4th November, 2023, and shortly thereafter, on 6th December, 2022, he, on behalf of all the appellants, instructed the firm of Nazziwa, Omar & Co. Advocates to take over instructions from the appellants' former lawyers. The new firm, on 5th January, 2023, filed this application seeking to validate the appellants' belatedly filed appeal.

The grounds of the application are that: 1) the appellants have sufficient cause for the belated filing in that the same was occasioned by default of their previous counsel; 2) the appellants are interested in pursuing their appeal; and 3) the appellants have a good and meritorious appeal. The application was supported by the affidavit of Mr. Bakyawa Mawazzi, one of the appellants.

The respondent opposed the application through an affidavit sworn by Mr. Amanya Rodney Mishambi, a lawyer working with the respondent's legal department, setting out the following grounds of opposition: 1) the appellants are quilty of dilatory conduct and the application is merely intended to frustrate the respondent in execution of its mandate; 2) the appellants have not demonstrated any sufficient reason for the belated filing of their appeal; 3) the affidavit in support of the application is riddled with falsehoods.

# **Resolution of the Application**

I have carefully read the application and the respective supporting and opposing affidavits, and also considered the submissions of counsel and the law and authorities cited.

This application seeks this Court's orders for validation of the appellants' belatedly filed appeal. This Court's validation powers are granted under Rule 5 of the Rules of this Court, and are exercised for sufficient reason. Rule 5 reads:

### "5. Extension of time.

The court may, for sufficient reason, extend the time prescribed by these Rules or by any decision of the court or of the Court of Appeal for the doing of any act authorised or required by these Rules, whether before or after the expiration of that time and whether before or after the doing of the act; and any reference in these Rules to any such time shall be construed as a reference to the time as so extended."

In the present case, the appellant's appeal was, pursuant to Sub-rules (1) and (2) of Rule 79 of the Rules of this Court supposed to be filed within 60 days from the date of receipt by the appellant's advocates on 22nd February, 2022 of the certified proceedings and judgment of the Court of Appeal. However, the appeal was filed after 8 months which was out of time.

I have found sufficient reason in the fact that the appellants have been vigilant in pursuing their appeal and also in the fact that no prejudice has been occasioned by the respondent due to the appellants' late filing. I note that upon discovering the late filing on or about 4th November, 2022, the appellants filed the present application not long thereafter on 5th January, 2023. Furthermore, despite the late filing, the appellants duly appeared when the appeal was called for conferencing and adhered with the Court's guidelines to file written submissions and the respondent was given time to respond which it did. In my view, the respondent has suffered no prejudice by the late filing and this could explain the fact that although this application was filed on 5th January, 2023 and served on the respondent shortly thereafter, the latter only filed an affidavit in reply thereto on 9th April, 2024 more than a year later.

I also find sufficient reason in the need to address the merits of this appeal since it affects so many people (over 1000) and concerns a dispute about their terminal benefits, which they have pursued in litigation for many years since 2008.

For these reasons, I would validate the appellants' appeal and proceed to address its merits.

# Civil Appeal No. 024 of 2022

This appeal is against the decision of the majority of the Court of Appeal (Mugenyi, JA and Kasule, Ag. JA; Kiryabwire, JA dissenting) by which the Court allowed the respondent's appeal and set aside the decision of the High Court in the original suit.

# **Background**

The appellants instituted the original suit in the High Court against the respondent for, among other reliefs, recovery of Ug. Shs. 979,083,019/=

being the total amount of money that the respondent had separately collected as tax on respective retrenchment packages paid to each of them. The appellants averred that tax was unlawful as a retrenchment package was not taxable. The respondent filed a defence in which it averred that the appellants' retrenchment packages/terminal benefits were lawfully taxed.

The facts of the case are that the appellants were all former employees of the defunct Uganda Electricity Board, whose employment was terminated between 1998 and 2001, pursuant to a government restructuring programme. Upon termination, each appellant received a certain payment referred to in their pleadings as a "retrenchment package" or which the Court of Appeal and the trial Court also called "termination benefits". The payment to each appellant was taxed separately, but the appellants alleged that the total amount of money collected from all the appellants was Uq. Shs. 979,083,019/ $=$ . However, the respondent disputed this amount.

The original suit was tried by Musoke-Kibuuka, J and the main issue at the trial was whether the taxation $of$ the appellants' retirement packages/terminal benefits was lawful. The learned trial Judge found that the respondent could not lawfully charge PAYE on the retirement packages of the appellants under the provisions of either Section 19 (1) (a) or Section 19 (1) (d) of the Income Tax Act, Cap. 340. He reasoned that the payments made to the appellants did not amount to compensation for loss of employment of the nature envisaged under Section 19 $(1)$ (d) but were a "gratuitous post-employment payment" either not liable to tax or exempt from taxation by virtue of Article 254 (2) of the 1995 Constitution.

The learned trial Judge, therefore, in view of his findings granted an order directing the respondent to repay the amount of Ug. Shs. $979,083,019/$ = collected as tax on the respective appellants' retrenchment packages, with interest at 8% per annum from the date of the filing of the suit until repayment in full. He also awarded general damages of Ug. Shs. $1,200,000/$ = to each appellant with interest at 8% per annum from the date of judgment until payment in full; as well as the costs of the suit.

The respondent was dissatisfied with the decision of the learned trial Judge and appealed to the Court of Appeal, which, in a majority decision, reversed the learned trial Judge's decision. Mugenyi, JA and Kasule, Ag. JA both found that retrenchment packages were taxable under Section 19 (1) (d) of the ITA (additionally, Kasule, Aq. JA alone found that a retrenchment package could also be taxed under Section 19 (1) (a) of the ITA). Both learned Justices of Appeal relied on the holding in the decision of this Court in the case of **Uganda Revenue Authority vs. Siraje Kajura Hassan, Civil Appeal No. 09 of 2015** that a retrenchment package was subject to tax under either Section 19 $(1)$ (d) or Section 19 $(1)$ (a) of the ITA.

Kiryabwire, JA dissented, finding that the decision in the **Siraje Kajura Hassan case (supra)** was ambiguous as there was some confusion from the decision as to whether the basis for taxing a retirement package was Section 19 $(1)$ (a) or Section 19 $(1)$ (d) of the ITA. He instead preferred the decision in another Supreme Court decision of Samuel Lubega and 2 Others vs. Stanbic Bank Ltd, Civil Appeal No. 24 of 2010 (**unreported**) which treated a retirement package as an amelioration and not compensation within the meaning of Section 19 $(1)$ (d) of the ITA. Basing on that distinction, Kiryabwire, JA would have upheld the learned trial Judge's decision that the appellants' retirement packages were unlawfully taxed.

The appellants were dissatisfied with the decision of the majority justices of the Court of Appeal and filed this appeal in this Court on the following grounds:

$"1)$ The learned majority Justices of the Court of Appeal erred in law and fact when they held that then package paid to the appellants was liable to income tax thus the respondent lawfully taxed the payments."

The appellants prayed for the following orders:

- "a) The appeal be allowed. - $\mathbf{b})$ Costs of this appeal be provided for"

The respondent opposed the appeal and prayed that this Court dismisses it.

# **Preliminary objection to the appeal**

Counsel for the respondent, in their submissions, raised a preliminary objection that the appeal is incompetent because the appellant, in whose name it was instituted is now deceased and no letters of administration have been obtained to replace him with his legal representative in accordance with Rule 81 (1) of the Rules of this Court. In those circumstances, according to counsel for the respondent, the present appeal is rendered incompetent for non-compliance with the highlighted sub rule and ought to be struck out.

Rule 81 provides as follows:

"81. Death of party to intended appeal."

(1) An appeal shall not be instituted in the name of a person who is dead but may be instituted in the name of his or her legal representative.

(2) An appeal shall not be incompetent by reason only that the respondent was dead at the time when it was instituted; but the court shall, on the application of any interested person, cause the legal representative of the deceased to be made a party in place of the deceased."

In my view, Rule 81 $(1)$ is inapplicable in this case. The sub rule should apply where the appellant has a unique interest in the case and it is necessary to replace him/her for the proper prosecution of the appeal. The deceased Patrick Nyabiryo was one of the representatives of over 1000 other former UEB employees who have a similar interest in the appeal, namely seeking the recovery of money allegedly unlawfully collected as tax on terminal benefits variously paid to them. Therefore, the appeal can be prosecuted by any of the other former employees, as has turned out to be the case. It is therefore unnecessary to insist on adding the deceased Patrick Nyabiryo's representative. I would therefore overrule the respondent's preliminary objection and proceed to determine the merits of the appeal.

## Appellants' submissions

Counsel for the appellants in support of the sole ground of appeal, submitted that the Court of Appeal erred in finding that the respective payments to the appellants were taxable under the ITA. He argued that the payments were not of the nature envisaged under either S.19 (1) (a) or Section 19 (1) (d) of the ITA as they were not compensation for loss of employment within the meaning of Section 19 (1) (d) of the ITA.

Counsel argued that the payments to the appellants arose out of an ordinary retrenchment exercise as envisaged in this Court's decision in the **Siraje Kajura Hassan case (supra),** and were unique emoluments made to the appellants due to a government policy on structural adjustments that did not arise from normal termination of their employment. The payments were not made in accordance with their contracts of employment and were therefore not of the nature envisaged under the ITA. For this distinction, counsel relied on Samuel Lubega vs. Stanbic Bank Uganda Ltd, Supreme Court Civil Appeal No. 24 of 2010 (unreported) where Katureebe, JSC (as he then was) found that a retrenchment package is given to ameliorate loss of a job and is akin to an amelioration.

Furthermore, counsel sought to draw a distinction between a compensation paid to an employee, on the one hand, and a retrenchment package paid as amelioration for an employee upon job loss, on the other. He referred to the Black's Law Dictionary (8th ed.) wherein compensation is defined as remuneration and other benefits received in return for services rendered especially wages, and is payment for work; and on the other hand, wherein amelioration is defined as the act of improving something, the state of being better.

Counsel also submitted that a terminal package may only be subject to taxation under Section 19 (1) (a) and (d) of ITA if there had been "voluntary termination" or "involuntary termination" of an employee on account of staff misconduct which was not the case for the appellants.

It was also submitted that the decision to pay the appellants was taken under the framework of the PERD Act enacted in 1994 and thus they could not be taxed under the ITA which was enacted three years later in 1997. In counsel's view, the ITA could not act retrospectively unless it had been expressly stated therein which was not the case.

Counsel also submitted that only income paid by an employer to an employee could be subject to tax under the ITA. In this case, however, the appellants had long been terminated by their employer, the UEB, when the payments were made and, therefore, the income they received did not qualify as taxable under the ITA.

Last, but not least, counsel submitted that the respondent discriminated against the appellants in taxing their payments yet it refunded similar tax it had collected from other former UEB employees who, unlike the appellants did not retire, but were transferred to sister companies, upon termination. Counsel contended that this discrimination was prohibited under Article 268 of the 1995 Constitution, and was unlawful.

Counsel concluded by submitting that this Court ought to find that the sole ground of appeal succeeds.

# **Respondent's submissions**

In reply to the appellants' submissions, counsel for the respondent submitted that the question of whether terminal benefits are taxable was answered in the affirmative in this Court's decision in **Uganda Revenue Authority vs.** Siraje Hassan Kajura, Supreme Court Civil Appeal No. 09 of 2015 (unreported) where the Court held that taxation of retrenchment packages/terminal benefits by way of PAYE is lawful under Section 19 (1) (a) or Section 19 (1) (d) of the ITA. Counsel further submitted that the Siraje Hassan Kajura case was binding and was rightly applied by the Court of Appeal in finding that the respondent was right to tax the appellants' retirement packages.

Counsel further submitted that, Hon. Justice Mugenyi, JA, while relying on the principles set out in the case of Cape Brandy Syndicate vs. IRC [1921] KB 64 as quoted in Mangin vs. Inland Revenue Commissioner [1971] 1 ALLER 179, correctly held, in her judgment, that regardless of any special considerations made in respect of redundancy compensations by

the appellants, so long as the tax law provision is still on our statute books, it represents the law as is and must be applied as such.

Counsel also relied on this Court's decision in Commissioner General, URA vs. Airtel (U) Ltd, Civil Appeal No. 032 of 2020 (unreported) for the legal proposition that the duty of a Court while interpreting tax statutes is to state what the position of the law is and not to frame policy in favour or against a particular provision.

Counsel concluded by submitting that Hon. Justice Mugenyi, JA who formed part of the majority decision of the Court of Appeal, had rightly found that Section 19 (1) (d) of the ITA when read together with Section 116 of the ITA provides for sweeping taxation of terminal benefits of whatever kind. Thus, the Court of Appeal properly evaluated the evidence and arrived at the right conclusion that the respondent lawfully charged PAYE on the appellants' redundancy payments/retrenchment package.

Counsel submitted that the sole ground of appeal ought to fail.

## Appellants' submissions in rejoinder

In relation to this Court's decision in Siraje Hassan Kajura (supra), counsel, giving various reasons, suggested in his submissions in rejoinder that the decision was either wrongly decided or was distinguishable and thus should not be applied in this case. First, he contended that the decision was not based on the issue raised by the parties during scheduling, which was whether the levying of PAYE under **Section 19 (1) (a)** and **(d)** of the **ITA** on the retirement package paid to the respondents in that case was illegal and amounted to double taxation. Counsel contended that the Court in that case instead went ahead and made a blanket decision on taxability of a retirement package, an issue which had already been addressed by an earlier binding decision of this Court in Samuel Lubega (supra).

Secondly, counsel submitted that as rightly pointed out in the dissenting judgment of Hon. Justice Kiryabwire, JA, there was ambiguity about the ratio-decidendi of the Siraje Hassan Kajura case which renders the decision difficult to apply. The ambiguity lies in the fact that of the four judges who formed the majority in that case, three based their conclusion that retirement packages are taxable on Section 19 $(1)$ (d) of the ITA while one based on Section 19 (1) (a). Counsel submitted that it is trite law that in cases of such ambiguity, the same should be resolved in favour of the tax payer.

Thirdly, counsel submitted that the Siraje Hassan Kajura decision overlooked an existing binding precedent of this Court in Samuel Lubega where it was held that a retirement package is not compensation *per-se* and is not subject to income tax. Counsel contended that as Katureebe, JSC (as he then was) rightly found in the Sam Lubega case, the purpose of a retrenchment package was to ameliorate an employee's loss of job and as such did not qualify as compensation within the meaning of Section 19 $(1)$ (a) or (d) of the ITA so as to be liable for tax.

In further support of the point that the payments to the appellants did not amount to compensation, counsel submitted that compensation in terms of Section 19 $(1)$ (a) or (d) constitutes an element of proportionality with what an employee was earning before termination but in this case, the retirement packages paid to the appellants were not determined by their salary, and thus did not qualify as employment income.

Counsel further contended that the retirement packages to the appellants were a compromise since their employment had been terminated without proper benefits as originally anticipated in their contracts. Furthermore, counsel contended that the retirement packages were paid by the Privatization Unit, which was not the appellants' employer, but a Government body established under the Public Enterprises Reform and Divestiture Act.

Fourthly, counsel submitted in rejoinder that the Siraje Hassan Kajura decision wrongly digressed from the well-established principles of tax interpretation enunciated in the case of Cape Brandy Syndicate (supra) against importing words into the literal text in a taxing statute in that the Court in rendering that decision read some words into the statute.

Counsel reiterated his earlier prayer that the Court ought to find that the sole ground of appeal succeeds.

# **Consideration of the Appeal**

I have carefully studied the record, and considered the respective counsel's submissions as well as the law and authorities cited.

This is a second appeal from a decision of the Court of Appeal; the trial of the original suit having been held in the High Court. This appeal revolves around the point of law raised in the sole ground of appeal, and as such the duty of this Court is to determine whether the Court of Appeal of appeal correctly answered the highlighted point of law. I shall bear this duty in mind as I resolve the sole ground of appeal.

The appellants allege in the sole ground of appeal that the learned majority justices of the Court of Appeal erred in holding that the respondent lawfully taxed the relevant payments to the appellants. It is undisputed that the relevant payments were made to the respective appellants following the termination of their employment with the Uganda Electricity Board (UEB). Therefore, in resolving the sole ground of appeal, this Court has to consider whether the payments to the appellants amounted to taxable income under the relevant tax laws.

I note that under the framework established by the Income Tax Act, Cap. 340, as amended ("the ITA"), the chargeable income earned by every person in a year of income is subject to income tax. (Section $4(1)$ ). In so far as relevant to this appeal, this chargeable income includes employment income as defined under **Section 19 (1)** of the ITA which provides that employment income refers to any income derived by an employee from any employment, whether of a revenue or capital nature, including the income defined under subsections $1$ (a) to (h); but excluding the income defined under subsection $2.$

The learned majority justices of the Court of Appeal held that the relevant payments to the appellants qualified as employment income within the meaning of either Section 19 (1) (a) or Section 19 (1) (d) of the ITA, which respectively provide as follows:

### "19. Employment income

(1) Subject to this Section, employment income means any income derived by an employee from any employment and includes the following amounts, whether of a revenue or capital nature—

(a) any wages, salary, leave pay, payment in lieu of leave, overtime pay, fees, commission, gratuity, bonus, or the amount of any travelling, entertainment, utilities, cost of living, housing, medical, or other allowance;

$\mathbf{a} \mathbf{a} \mathbf{a}$

(d) any amount derived as compensation for the termination of any contract of employment, whether or not provision is made in the contract for the payment of such compensation, or any amount derived which is in commutation of amounts due under any contract of employment"

The **Oxford Advanced Learner's Dictionary (7th ed.)** defines compensation as:

"...something, especially money that somebody gives you because they have hurt you, or damaged something that you own..."

In the context of Section 19 (1) (d), which provides that employment income includes, "any amount derived as compensation for the termination of any contract of employment," it is my view that this amount includes any sum of money paid to an employee because his/her contract has been terminated. In the present case, the relevant payments to the appellants were made following the termination of their employment contracts with UEB. Accordingly, these payments amounted to employment income within the meaning of Section 19 (1) (d) of the ITA. This was the view of Mugenvi, JA (as she then was), who stated, in a passage from her judgment, at page 57 of the record, as follows:

"Compensation would in its literal sense denote making up for another's injury or loss. Collins English (online) Dictionary more specifically defines it as "money that someone who has experienced loss or suffering claims from the person or organization, or from the state. At face value, the ordinary construction of that provision would suggest that any monies dues from termination of employment would amount to taxable employment income under Section 116 of the Act.

### In that regard, it seems to me that section 19 (1) (d) read together with Section 116 propose a sweeping taxation of all staff terminations regardless of the different variants thereof."

$\alpha\neq\alpha$

I agree with Mugenyi, JA's view. It is a well-established principle that the literal meaning of the words used in a taxing statute is the primary indicator of what is taxable thereunder. In the oft-cited passage from the famous decision in Cape Brandy Syndicate vs. IRC [1921] KB 64 at p.71, cited with approval by this Court in **Uganda Revenue Authority vs. Siraje** Hassan Kajura, Civil Appeal No. 09 of 2015 (unreported), Rowlatt, J stated:

### "...in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."

I would therefore find that Mugenyi, JA correctly held that the retrenchment packages/terminal benefits paid to the appellants qualified as compensation for termination of an employment contract, and were taxable employment income. It is therefore clear that counsel for the appellants' contrary submissions are misconceived.

I must also point out that the interpretation that terminal benefits amount to employment income within the meaning of Section 19 (1) (d) of the ITA was the view of the majority of this Court (Arach-Amoko, Nshimye and Tibatemwa-Ekirikubinza, JSC) in the Siraje Hassan Kajura case (supra). Opio-Aweri, JSC also thought that terminal benefits amounted to employment income within the meaning of Section 19 $(1)$ (d) although he was of the view that they also amounted to employment income within the meaning of Section 19 $(1)$ (a), too. Counsel for the appellants submitted that this decision was wrong and urges this Court to depart from it. I will consider the submissions on this point later in this judgment.

I shall now move on to comment on some aspects of counsel for the appellants' submissions. Counsel for the appellants submitted that the payments to the appellants were not compensation within the meaning of Section 19 $(1)$ (d) but were payments borne out of a government policy of structural adjustment. While it may be true that the appellants may have lost their jobs because of a government restructuring programme; nonetheless, the loss of their jobs resulted in them being paid terminal benefits. In those circumstances, the terminal benefits amounted to compensation for termination of their jobs. It is immaterial, for purposes of Section 19 (1) (d) that the appellants' jobs were lost as a result of restructuring, the wording of the provision is broad enough to apply to the appellants' circumstances.

I would similarly reject counsel for the appellants' submission that the ITA was inapplicable because the appellants lost their jobs prior to its enactment. The evidence showed that the payments to the appellants were made and taxed after the coming into force of the ITA.

Counsel for the appellants next submitted that the compensation envisaged under Section 19 $(1)$ $(d)$ is one attained in the ordinary course of business where the employee-employer relationship exists. I do not see the basis for this submission since Section 19 (1) (d) does not impose the condition referenced in counsel's submission. Thus, in my view, this submission is premised on reading into Section 19 (1) (d) words that it does not contain, and cannot be sustained.

Counsel for the appellants also submitted that retrenchment packages/terminal benefits amount to amelioration and not compensation within the meaning of Section 19 $(1)$ (d). He allegedly bases this distinction on the decision of this case in Samuel Lubega and 2 Others vs. Stanbic Bank Ltd, Civil Appeal No. 24 of 2010 (unreported). I have read the said decision and find it wholly inapplicable to this case. The Samuel Lubega decision concerned the effect of employees signing a document by which they accepted payment of certain amounts of terminal benefits that were less than what they were entitled to under their respective contracts of employment. This Court held that the document signed by the employees constituted a waiver of their rights under their contracts of employment.

The Samuel Lubega decision neither discussed the meaning of Section 19 (1) (d), nor established a distinction between compensation and amelioration for purposes of that provision. However, Katureebe, JSC (as he then was) who wrote the lead judgment while justifying his order not to award costs stated as follows:

"Each party applied for costs. The normal rule is that costs follow the cause. But in the peculiar circumstances of this case where the appellants were retrenched from their employment and have been trying to claim a little more based on their own interpretation of the terms, it would defeat the whole purpose of the retrenchment package were these people condemned in costs. The purpose of the retrenchment package was to ameliorate their loss of a job. I believe this is a case where the court should exercise its inherent powers to do substantive justice and not award costs against the appellants. I would order that each party bears its own costs in this court and the courts below."

I also considered counsel for the appellants' submission that the taxation under Section 19 (1) (d) applies only to voluntary terminations or involuntary terminations on account of staff misconduct and was therefore applicable to the appellants who were retrenched. I do not agree. In my view, counsel's submission is based on reading words into Section 19 (1) (d) which would be improper. I would agree with Mugenyi, JA that the language used in Section 19 $(1)$ (d) is broad and extends to any amount derived as compensation for termination of an employment contract, whether the termination was voluntary or involuntary or whether it was caused by employee misconduct or not.

Furthermore, counsel for the appellants, for several reasons I shall assess shortly, submitted that the Siraje Hassan Kajura decision was wrong and that this Court ought not follow it. Firstly, he contended that the Siraje Hassan Kajura decision was arrived at in disregard of the earlier binding Samuel Lubega decision that had handled the question of taxability of retrenchment packages. This contention is, however, simply untrue. The Samuel Lubega decision was not concerned with the interpretation of Section 19 (1) (d) and whether retirement packages/terminal benefits amounted to employment income within the meaning of that provision, and was therefore not directly on point in the Siraje Hassan Kajura case. Accordingly, the statement of Katureebe, JSC that the purpose of a retrenchment package is to ameliorate an employee's loss of job was *obiter* and not binding. Moreover, as I have illustrated above, Katureebe, JSC made that statement while giving his reasons for not awarding costs against the employees who had lost the appeal. Counsel for the appellants' reference to the statement is therefore taken out of context and quite misleading.

Secondly, counsel for the appellants submitted that the Siraje Hassan Kajura decision was wrong because it was ambiguous as it did not specify under which of Section 19 (1) (a) or Section 19 (1) (d) of the ITA were terminal benefits/retrenchment packages taxable. However, again, this submission is simply incorrect. As I earlier stated, the majority of the Court (Arach-Amoko, Tibatemwa-Ekirikubinza, JJSC) held that terminal Nshimye and benefits/retrenchment packages were taxable under Section 19 (1) (d). It was only Opio-Aweri, JSC who thought that terminal benefits/retirement packages were taxable under both Section 19 $(1)$ $(a)$ and Section 19 $(1)$ $(d)$ ; while Mwondha, JSC dissented.

It is worth mentioning that where this Court's decision is not unanimous, it is the views of the majority that constitute its decision. Therefore, in relation to the Siraje Hassan Kajura decision, it is the views of Arach-Amoko, Nshimye and Tibatemwa-Ekirikubinza, JJSC that constitute the court's decision, and their unambiguous view was that terminal benefits/retrenchment packages qualify as employment income within the meaning of Section 19 (1) (d). It is therefore clear that counsel for the appellants' submission that the Siraje Hassan Kajura decision is ambiguous was based on an improper reading of the decision, and I therefore cannot accept it.

Thirdly, counsel for the appellants submitted that the Siraje Hassan Kajura decision was wrong because it disregarded the principles articulated in the Cape Brandy case (supra) to the effect that words should not be read into a taxing statute besides the words actually employed therein. He contended that the Court in arriving at its decision read the word "retrenchment package" into Section 19 (1) (d) yet it was not provided there under. I cannot accept this submission. I would reecho my earlier findings that a retrenchment package would qualify as compensation for termination of a contract of employment within the meaning of Section 19 $(1)$ (d) as the majority in the Siraje Hassan Kajura correctly held.

I would therefore find no merit in counsel for the appellants' submissions that the Siraje Hassan Kajura decision was wrong and I would reject his invitation to depart from it. Instead, I would agree with the respondent's counsel that the Siraje Hassan Kajura case decided the question of taxability of terminal benefits/retrenchment packages and that the majority of the Court of Appeal properly relied on it in reaching their decision that the retrenchment packages/terminal benefits paid to the appellants were taxable.

I would therefore find that the sole ground of appeal fails, and would dismiss the appeal.

In relation to costs, although the general rule is that the successful party is entitled to costs, the court is exceptionally allowed to depart from that rule for good reason. In the present case, I would depart from the general rule because this appeal touches on the public interest of clarifying the law on taxation of terminal benefits, and it would not be fair to condemn the appellants to costs against the respondent whose litigation expenses were funded from public money. I would therefore order that each party bears its own costs.

In conclusion, I would dismiss the appeal for having no merit but order that each party bears its own costs in this Court and in the two courts below.

| Dated at Kampala this | 2024. day of. $\mathcal{A}$ | |-----------------------|-----------------------------------| | | | | | | | | | | | |

Elizabeth Musoke

Justice of the Supreme Court

dolining

tom the so

DAJ 9624

#### THE REPUBLIC OF UGANDA

#### IN THE SUPREME COURT OF UGANDA AT KAMPALA

#### CIVIL APPEAL NO. 024 OF 2022 & CIVIL APPLICATION NO. 07 **OF 2024)**

(Arising out of the decision of the Court of Appeal (Kiryabwire, Mugenyi and Kasule, Ag. JJA) in Civil Appeal No. 45 of 2013)

#### CORAM: **TUHAISE; MUSOKE: MUSOTA: MADRAMA** AND **BAMUGEMEREIRE, JJSC**

# PATRICK NYABIRYO AND 1117 OTHERS ...........: APPELLANT

#### **VERSUS**

#### **UGANDA REVENUE AUTHORITY :::::::::::::::: RESPONDENT**

#### **JUDGMENT OF STEPHEN MUSOTA, JSC**

I have had the benefit of reading in draft the judgment by my sister Musoke, JSC.

I agree that the Court of Appeal cannot be faulted for following the decision in Uganda Revenue Authority vs Siraje Hassan Kajura; Supreme Court Civil Appeal No. 09 of 2015 on what amounts tp taxable income under Section 19 (1) (d) of the Income Tax Act.

As such, I agree with the analysis, conclusions and the orders proposed by my sister.

Dated this $\frac{\partial^{\text{reg}}}{\partial x^{\text{q}}}$ day of $\frac{\partial^{\text{reg}}}{\partial x^{\text{q}}}$ $\underline{\hspace{1.5cm}} 2024$

midlin

**Stephen Musota JSC.**

#### THE REPUBLIC OF UGANDA.

#### IN THE SUPREME COURT OF UGANDA AT KAMPALA

(CORAM: TUHAISE, MUSOKE, MUSOTA, MADRAMA AND BAMUGEMEREIRE, **JJSC)**

#### CIVIL APPEAL NO 024 OF 2022 & CIVIL APPLICATION NO. 07 OF 2024

PATRICK NABIRYO AND 1117 OTHERS} .................................... 10

**VERSUS**

### UGANDA REVENUE AUTHORITY} ....................................

(Appeal from the decision of the Court of Appeal (Kiryabwire and Mugenyi, JJA and Kasule, Ag. JA) in Civil Appeal No. 45 of 2013 dated 20th December, $2021)$

$\mathsf{S}$

### **JUDGMENT OF CHRISTOPHER MADRAMA IZAMA, JSC**

I have had the benefit of reading in draft the ruling and judgment of my learned sister Hon. Lady Justice Elizabeth Musoke, JSC in Civil Application No. 07 of 2024 and in Civil Appeal No. 024 of 2022 respectfully.

I concur with the decision of my learned sister Musoke, JSC that there is no basis 20 to depart from the decision of this Court in Uganda Revenue Authority vs Siraje Hassan Kajura; Supreme Court Civil Appeal No. 09 of 2015 on the issue of what amounts to taxable employment income under section 19 (1) (d) of the Income Tax Act (before revision of the laws). The Court of Appeal was bound to follow the said decision under Article 132 (4) of the Constitution and did not err to do so. 25

In the premises, I concur with the judgment of Musoke, JSC and have nothing useful to add. I also agree with the orders proposed therein.

Dated at Kampala the $\overrightarrow{C}$ day of \_\_\_ $\gamma$ $\gamma$

Christopher Madrama Izama

Justice of the Supreme Court

#### THE REPUBLIC OF UGANDA, IN THE SUPREME COURT OF UGANDA AT KAMPALA **CORAM:**

{Tuhaise, Musoke, Musota, Madrama, Bamugemereire, JJSC}

#### CIVIL APPEAL NO 024 OF 2022 & CIVIL APPLICATION NO. 07 OF 2024 PATRICK NABIRYO AND 1117 OTHERS ::::::::::::: APPELLANTS **VERSUS** UGANDA REVENUE AUTHORITY ::::::::::::::::::::::::::::::::::::

[Appeal from the decision of Kiryabwire, Mugenyi, JJA & Kasule, Ag. JA) in Court of Appeal Civil Appeal No. 45 of 2013 dated 20th December 2021

#### JUDGMENT OF CATHERINE BAMUGEMEREIRE JSC

I have had the privilege to read the draft the ruling and judgment of my learned sister Elizabeth Musoke, JSC in Civil Application No. 07 of 2024 and in Civil Appeal No. 024 of 2022 respectively.

I agree with the reasoning and conclusions of my learned sister that the court of appeal was bound to follow our decision on what amounts to taxable income as laid down in **Uganda Revenue** Authority v Siraje Hassan Kajura; Supreme Court Civil Appeal No. 09 of 2015 unless it could be distinguished which it was not.

I would follow the orders proposed in her draft.

**Catherine Bamugemereire Justice of the Supreme Court**

delivered 2rd sept 2024.

# THE REPUBLIC OF UGANDA IN THE SUPREME COURT OF UGANDA AT KAMPALA (CORAM: TUHAISE; MUSOKE; MUSOTA; MADRAMA; BAMUGEMEREIRE; JJSC)

## CIVIL APPEAL NO. 024 OF 2022 & CIVIL APPLICATION NO. 07 OF 2024

# PATRICK NYABIRYO AND 1,117 OTHERS .................................... **VERSUS**

#### **UGANDA REVENUE AUTHORITY ....................................**

(Appeal from the decision of the Court of Appeal in Civil Appeal No. 45 of 2013 before Kiryabwire and Mugenyi JA and Kasule, Ag. JA) delivered on 20th December, 2021)

#### JUDGMENT OF PERCY NIGHT TUHAISE, JSC.

I have had the benefit of reading in draft the Judgment prepared by my learned sister, Lady Justice Elizabeth Musoske, JSC. I agree with her analysis, decision, and the orders she has proposed.

#### **Decision of Court**

Since all members of the Coram agree with the lead judgement, this appeal is dismissed on the terms proposed in the lead judgment.

Dated at Kampala, this $\frac{2}{\sqrt{2}}$ day of $\frac{2}{\sqrt{2}}$ 2024.

Theise

Percy Night Tuhaise **Justice of the Supreme Court**