MULTI CHOICE GH. LTD. v. THE COMMISSIONER INTERNAL REVENUE SERVICE ACCRA
2004
COURT OF APPEAL
GHANA
CORAM
- P.K. TWUMASI JA.
- OMARI-SASU JA
- J.A. OSEI JA
Areas of Law
- Tax Law
2004
COURT OF APPEAL
GHANA
CORAM
AI Generated Summary
Multichoice Ghana Limited, a pay television company, placed subscription receipts in a commercial bank, earning interest. Between 1994 and 1999, Multichoice sustained operational losses from its television business but earned significant interest income on those deposits. The company sought to offset its television losses against the interest income, but the Commissioner treated interest as a separate taxable source and disallowed the setoff. On appeal from the High Court, where Asiama JA had held the interest inseparable from business income and declared the assessments null and void, Osei JA for the Court of Appeal held that Multichoice had two separate sources—television operations and interest under Section 1(2)(c) of SMCD 5—and that only expenses wholly, exclusively, and necessarily incurred in producing the interest could be deducted from that interest. The High Court’s tax liability order was set aside, and the appeal succeeded in part.
J.A. OSEI, JA -
The undisputed facts of this appeal are that: MULTICHOICE GHANA LIMITED [Plaintiff/Respondent hereinafter referred to simply as Plaintiff] is a Television Company operating in Ghana.
It serves its customers in return for their subscriptions which subscriptions the Company saves in a banking account and, as expected earns interest income thereon.
From the year 1994 to 1999, the company, without dispute, incurred losses from its Television business as such but made substantial gains from its Banking Account by way of interest.
The plaintiff company [Multichoice Ghana Ltd.] then sought to set off its losses incurred from its Television business as such against the interest income earned from the Banking Account.
The[ Defendant/Appellant] the [Commissioner] [hereinafter referred to simply as Defendant] disallowed that move as illegal and insisted that the income derived from the television business, and the interest accruing to the Bank Account should be taxed separately as being two separate sources of income.
When the matter came before my learned brother Asiama JA [then sitting as additional High Court Judge] the made a very eloquent observation as follows:- “In our present volatile economy where the national currency is very susceptible to frequent depreciation, prudent business practice would dictate that part of the floating capital of an on-going business would be deposited in a banking institution to earn some interest so as to constantly be able to keep up its circulating capital and thereby remain in business.
Any financial benefit which might accrue to the money so deposited would be an income derived from the operations of the business which made the deposits at the bank and would from a fractional portion of the full amount of income of the Company” In other words, such an interest must be deemed and treated as part of the income produced by the business: namely, the Television business and not considered as constituting a separate source of income which should be taxed separately as the defendant is, as it were compelling the plaintiff to do in the instant case.” The Defendant has appealed and has based his appeal solely on one major ground of appeal which reads: “ that the judgement is not supported by the relevant provisions of the applicable law ie.
Section 1(2)(c) 4, 4A, 5 and 11”(1) of the Income Tax Decree of 1975 (as amended) SMCD 5” And according to the Appellant that ground of appeal raises three issue