Uganda Taxi Operators Drivers Association v Uganda Revenue Authority (Civil Suit No. 182 of 2010) [2013] UGHCCD 872 (25 January 2013)

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

## (CIVIL DIVISION)

## HCT-00-CV-CS- No. 0182 OF 2010

UGANDA TAXI OPERATORS DRIVERS ASSOCIATION: PLAINTIFF

VERSUS -

UGANDA REVENUE AUTHORITY :::::::::::: DEFENDANT

## BEFORE: HON. MR JUSTICE V. T. ZEHURIKIZE

## **RULING:-**

The plaintiff, Uganda taxi operators and drivers association (UTODA) is a registered company providing services of managing taxi operations and maintaining taxi parks in the city. It is comprised of drivers, taxi owners and operators in the supply of passenger transportation services.

The defendant for a period of 2004 -2010 raised assessment for payment of Value Added Tax by the plaintiff who has since then paid a sum of three billion, nine hundred three million, one hundred thirty six thousands and five hundred shillings $(3,903,136,565)=$ ) on account of VAT. The plaintiff being $-l$ 0 aggrieved with the assessment filed this suit challenging the

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seeks for a refund of moneys so far paid pursuant to the said assessment. ssment, together with the payment made to the defendant account of VAT on grounds that the same is without legal basis since the plaintiff is dealing in an exempt service for which the plaintiff

When the matter came up for hearing, the parties agreed to address court on the question of law;

Whether the plaintiff is liable to pay Value Added Tax for its services of management of tax parks and taxi operations in the <sup>I</sup> O city.

The plaintiff was represented by Mr. Moses Kabega while the defendant was represented by Mrs. Nakku.

to enhance others, entering into arrangements or contracts with is a company and promote the welfare of its members through Mr. Moses, Counsel for the plaintiff submitted that the plaintiff limited by guarantee whose primary objective is among local authorities, bodies and/or persons in order to negotiate,

.control, develop of tax parks or coordinate the management and standard services with a view of promoting its object.

He stated that, the plaintiff in its mandate is enjoined to control and **5"** ensure orderly loading and offloading of passenger vehicles as well as looking out for the welfare of passengers among others. It does not provide <sup>a</sup> distinct aim in itself. manage taxi parks by creating stages, creating a frame work to

Citing Section 11(1) and Section 19(1) of the Value Added Tax Act Cap 349, he argued that the services of management of \ *O* tax parks and taxi operations in and around the city by the authority is plaintiff pursuant to the contracts with Kampala Capital City incidental and ancillary to the provision of passenger transport services and as such is an exempt service and not liable to payment of Value Added Tax. - <sup>1</sup>

the case of **UTODA Entebbe Branch Ltd No TAT 8 of 2009;** where the Tax He *relied on the on Vs.* **URA** *application Appeals Tribunal held;*

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*of services provided by the applicant in respect management of taxi parks are an exempt service under the second schedule l(n) of the Value Added Tax Act" "The*

means that UTODA makes available <sup>a</sup> facility (maintaining taxi amounting to <sup>a</sup> supply of services. Relying on part 2(c)of the second schedule to the Act she maintained that passenger <sup>I</sup> q transportation services means the transportation of fare paying passengers, and their personal effects by road rail water or air. Counsel for the respondent did not agree. She submitted that — £> UTODA manages tax operations and maintains tax parks. This parks) and an advantage (managing taxi parks) thus

She argued that giving the definition a strict interpretation, the of the plaintiff are not part of this definition. The passengers related to that transportation. services definition only captures the actual transportation of fare paying — (S and does not extend to services that may be

in the above section has nothing to do with the description of services that are deemed to be incidental to passenger transportation. That whereas she agrees that transportation is deemed to commence when the passenger embarks in <sup>a</sup> tax park, it is not true that because services incidental to passenger transportation commence in a taxi park, the management of taxi operations is incidental to r- ( Q the supply of passenger transportation since the two are independent and distinct. services incidental to transport takes place where the transport commences. She argued that the inclusion of the term incidental Counsel further submitted that under Section 16(3) of the VAT Act, supply of

I have considered the submission of both Counsel, the law and authorities relied on.

Section 4(a) of the Value Added Tax Act provides a tax known added tax (VAT) to be charged on every taxable as value supply in Uganda by a taxable person.

. Taxable person is defined under S. 6(1) as a person registered under S.7 of the Act.

Under S. person for consideration as part of his or her business activities. 18 (1) Taxable supply is defined as a supply of goods or services other than ari\_exempt supply, made by a taxable

Under S. 19 (1) a supply of goods and services is an exempt schedule. As far as it is relevant to this case paragraph <sup>1</sup> (n) of the schedule the supply of passenger transportation services (other than tour and travel operators) is an exempt supply. supply if it is specified in the 2nd

Thus the central issue in this case is whether management of Taxi Operations transportation services and therefore also an exempt service. is incidental to the supply of passenger

Paragraph 2 services to mean the transportation of fare transportation (c) of the said schedule defines passenger

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paying passengers water or air. and their personal effects by road, rail,

In the instant case the management of taxi operations in Kampala by the plaintiff is by virtue of a management contract between the plaintiff and the defendant.

In my view the passenger transportation services is a separate business, entity from the management of taxi operations and maintaining of taxi parks.

What is common in the two businesses is that they are run by the same body - the plaintiff. Any other business organisation — <sup>|</sup> <9 or the Kampala City Council Authority could have done the management of taxi operations and the maintenance of taxi parks.

that the plaintiff carry out both business does not The fact management of taxi operations incidental to the — \ <5 services which is exempted from V. A. T. make the *supply of passenger transportation*


passenger transportation service but later and with revenue from its to V. A. T. agreement with the Kampala City Council they assumed the It is clear from the second role of collecting members on behalf of the KCC and now KCCA which is subject plaint that the initial business of the plaintiff was the supply <sup>O</sup>f

In other words it is not the income from the supply of passenger transportation service which is being taxed. Such income is definitely exempt from V. A. T.

But the income accruing to the plaintiff from the business of — \ O managing the operations of taxi parks on behalf of the KCCA is definitely not exempted. To do so would lead to many absurd exemptions.

if the plaintiff company were to be contracted to should the road. In my view that would be an absurd by running on claim. For instance collect road tolls, it would assert that any income it makes — <sup>|</sup> be exempted from V. A. T simply because taxis operate

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parcel of the transportation business. They that taxi parks provide a convenient way for the supply of passengers transportation services just as stages and roads do. remain separate understandings. It is clear to me But such relationships do not make these facilities part and

and management of taxi parks is merely a convenient way of not necessarily an integral part of that business. — <sup>1</sup> O Needless to say that taxi transport services can operate without <sup>a</sup> taxi park albeit with some inconveniences. The use running the supply of passenger transportation services. It is

the affirmative. The plaintiff is liable to pay the V. A. T for its of management of the taxi park and taxi operations in services the city. The exemption for payment of V. A. T applies only to the supply of under the 2 nd schedule to the Act. For the above reasons I find the agreed issue in passenger transportation services as defined — <sup>|</sup>

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$-24$ Consequently the plaintiff's suit is dismissed. I will make no $\bar{\phantom{a}}$ order as to costs given the peculiar circumstances of this case.

$\overline{ }$ VINCENT T. ZEHURIKIZE

$\mathcal{L}_{\mathcal{A}}$

**JUDGE**

Delivered by the Deputy Registrar this day of - S January 2013.

$\n *mg.*\n$ JOHN EUDĚS KEITIRÍMA

**DEPUTY REGISTRAR**

CERTIFIED TRUE<br>COPY OF THE ORIGINAL $bol3$

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### **THE REPUBLIC OF UGANDA**

# **IN THE HIGH COURT OF UGANDA AT KAMPALA**

### **CIVIL DIVISION**

### **CIVIL SUIT NO. 182 OF 2010**

#### **PLAINTIFF UGANDA TAXI OPERATORS DRIVERS ASSOCIATION ::**

### **VERSUS**

**UGANDA REVENUE AUTHORITY DEFENDANT**

### **ORDER**

THIS MATTER is coming up for disposal this 25th day of January 2013 by and before **HIS LORDSHIP VINCENT T. ZEHURIKIZE** and in the presence of counsel **RONALD BOGEZI** for the plaintiff and **NAKKU MWAJUMA** for the defendant.

## **IT IS HEREBY DECREED:**

- **1.** The plaintiff is liable to pay VAT for its services of management of the taxi park and taxi operation in the city. - 2. The exemption for payment of VAT applied only to supply of passenger transport service as defined under the 2nd schedule of the VAT Act. - 3. The plaintiff's suit be and is hereby dismissed. - No orders as to costs. **4.**

**GIVEN** Under my Hand and Seal of this Honourable Court this 25th day of January, 2013. ,

**RE ISTRAR/JUDGE**

*To be served on:* Uganda Revenue Authority

I

Extracted By:- KABEGA, *BOGEZI & BUKENYA ADVOCATES, PLOT 4 PILKINGTON ROAD,* FAMI HOUSE 3rd FLOOR RM 47/48, P. O. *BOX 16530 KAMPALA*