Tax - GBC1 – Foreign Tax Credit – ARC – amend ground of representation – refusal – appeal – Supreme Court – ARC should function with less formalism

Mode Yellow Holdings Limited (“MYHL”) holds a Global Business Licence Category 1 (GBC1) since 2014.? The company’s business consists in providing micro and nano products to customers of telecommunication companies and other utility service providers.

A notice of assessment was issued by the? Mauritius? Revenue? Authority? (“MRA”) against the MYHL based? on? audit findings? in? relation? to? three aspects, including on Foreign Tax Credit. MYHL made representations before the Assessment Review Committee (“ARC”).

Thereafter, MYHL received additional documents from abroad. MYHL sought to amend a ground of representation from “we are agreeable to? the? 80%? deemed? tax credit”? to? “the company should be allowed foreign tax credit for an amount being the higher of the foreign tax suffered and the 80% deemed foreign tax credit”. Through the amendment sought, MYHL took a totally different stand from its initial acquiescence to 80% deemed tax credit, but it explained that documents had just been received from abroad and had not been available before. In fact, from the time it objected to the assessment, MYHL had included the following caveat: “Kindly note that it is very difficult to obtain certificates from tax authorities in certain African countries ...”.

Not surprisingly, the MRA resisted the motion to amend the ground of representation. The ARC refused MYHL’s motion to amend its ground of representation. MYHL appealed to the Supreme Court against this refusal.

In a decision delivered this week, the Supreme Court found that, in the circumstances, an appeal cannot lie against a ruling of the ARC as such ruling did not amount to a final decision taken by the ARC. Reference was made to sections 20 and 21 of the Mauritius Revenue Authority Act 2004, leading to the Supreme Court’s conclusion that “even if the word “final” does not appear in section 21, there can be no doubt that an appeal may only lie against a final decision of the ARC, and not otherwise”.

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However, interest in the Supreme Court judgment goes beyond its decision on the appeal. The Supreme Court went on also to observe that –

(i)??????????? the ARC was set up to replace the then Tax Appeal Tribunal, back in 2006,

(ii)????????? a committee is presumably less formal than a tribunal and necessarily much more relaxed than a court of law,

(iii)??????? whilst? courts? themselves? are? regularly? looking? towards? being? less? rigid? and formalistic? when? it? comes? to? procedure,? and? not? allowing? fairness? to? be? sacrificed in? the name of formalism, it is not ideal for the ARC to function with more formalism than tribunals or courts,

(iv)???????? a party who seeks to amend a representation following the receipt of documents from abroad should hardly have to deal with the level of? black? letter? methodology? that? has? been given? in? the? ruling? at? hand.

It is expected that these observations will have an impact on the manner in which the ARC will in the future deal with representations lodged before it, the more so since a sizeable number of aggrieved taxpayers are not legally represented and either appear by themselves or are represented by accountants or other non-lawyer advisors.