April 7, 2022
COURT OF APPEAL
GHANA
CORAM
AI Generated Summary
The Court of Appeal, per George K. Koomson JA, reviewed an appeal from the High Court’s Commercial Division that had affirmed a Ghana Revenue Authority (GRA) tax assessment of GH¢7,655,676.22 against an ice cream and dairy products manufacturer. The assessment stemmed from the Appellant’s failure to withhold tax on payments made to its distributors, which the Appellant described as discounts. The central question was whether those payments were discounts (cash or trade) or commissions. Relying on commercial definitions and accounting practice, the Court held that discounts reduce price for prompt or bulk payment and are recorded accordingly, whereas the Appellant’s end‑of‑month percentage payments tied to sales volumes matched commissions paid to agents. Exhibit FM3, titled “TRADE TERMS CONTRACT FOR AGENTS,” and the absence of accounting entries for cash discounts supported reclassification. Applying sections 34, 116(1)(a)(v) and 117(3) of Act 896, and section 92 of Act 915, the Court held GRA’s withholding assessment was justified and dismissed the appeal, affirming the High Court.
KOOMSON J.A,
This is an appeal from the judgment of the High Court (Commercial Division), dated 29th April, 2019 in which the Court affirmed the tax decision of the Respondent herein.
The background to this appeal is that, Appellant/Appellant (‘Appellant’) an ice cream and dairy products manufacturing company, had its accounts for the accounting periods in 2014, 2015 and 2016, audited for tax purposes by the Respondent. It is to be noted that Respondent is the statutory body, that is, the Ghana Revenue Authority, responsible for tax administration in Ghana. Respondent, based on the tax audit report, imposed a tax liability of Gh¢7,655,676.22 on Appellants for failure of Appellants to withhold taxes from its distributors, who received ‘discounts’ from Appellants.
Dissatisfied with the decision of Respondent, Appellant paid 30% of the disputed tax liability imposed on it and exercised its right under section 42 of the Revenue Administration Tax 2016 (Act 915) to object the tax decision. However, the objection was dismissed by Respondent and the Appellant requested to pay the outstanding 70% of the tax liability imposed on it by Respondent.
Appellant aggrieved by the propriety of the tax decision of Respondent, further appealed to the High Court for a reversal of the tax decision made by Respondent on the following grounds:
a. The Ghana Revenue Authority (GRA) which is headed by the Respondent, erred in law when it re-classified the existing relationship between the Appellant and entities who out of their own resources, purchased products from the Appellant in bulk quantities hereinafter (Independent Purchases/Distributors), as one of principal-agent relationship.
b. The GRA erred in law when it disallowed discounts from the Appellant to the Independent Purchases/Distributors and re-classified as ‘commissions’, the discounts granted and paid to them by the Appellant.
c. The GRA erred in law when based on its re-classifications indicated in grounds a and b above, it imposed a withholding tax liability on the Appellant in the sum of GH¢7,655,676.22.
d. The GRA erred in law when it ignored its own practice of treating discounts under the Appellant’s Model as exempt from tax which practice the GRA subsequently confirmed by its Practice Notes issued on October, 2016 and which by its definition of ‘commissions’ does not include “discounts”.
The High Court, upon a perusal of the affidavit evidence and written submissions filed by the parties, affirmed the t