The Federal High Court (FHC or "the Court") Lagos Judicial Division has ruled in the case between, CMA CGM Delmas SA (CMA or "the Company" or "the Appellant") and Federal Inland Revenue Service (FIRS or "the Respondent"), that income from ancillary activities such as cleaning fees, container demurrage etc. does not constitute inbound freight income and, as such, liable to tax in Nigeria.
Facts of the Case
CMA is a French shipping company that is engaged in the transportation of goods from foreign sellers to recipients in Nigeria and from Nigerian sellers to buyers in other countries. The FIRS conducted an audit on the Company's tax returns for 2014 – 2015 Years of Assessments (YOAs) and determined that the Company was liable to additional taxes on income earned in Nigeria. CMA disagreed with these assessments and argued that the additional tax obligations were not applicable in Nigeria, citing relevant provisions from the Companies Income Tax Act (CITA) and the Nigeria-France Double Taxation Agreement (DTA). Despite CMA's objections, the FIRS issued a Notice of Refusal to Amend (NORA), prompting CMA to appeal the case before the Tax Appeal Tribunal (TAT). The TAT upheld the FIRS's position in a judgment on December 3, 2020. Dissatisfied with the TAT's ruling, CMA referred the case to the Federal High Court
CMA's Argument
CMA argued that the TAT should have based its interpretation of Article 8 of the Nigeria-France DTA on the commentary to Article 8 of the OECD Model Tax Treaty. The Company cited precedents like Ansuldo (Nig) Ltd vs. NPFMB (1991) and Daniel vs. Fadugba (1995) and maintained that prior decisions in similar cases established that "the same phrase dealing with financial provisions in other statutes should not have different interpretations so as to avoid inconsistency". Thus, both Paragraph 1 of the DTA and the OECD Model, which are identical, should be construed in a consistent manner. CMA further added that the above commentary holds significance in the interpretation process, citing the Vienna Convention on the Law of Treaties, 1969, which Nigeria has ratified. The company noted that Nigerian courts use this convention to address treaty-related disputes. Regarding the substance of the matter, the Company acknowledged that it derives income from various sources, including container demurrage, shipping line agency charges, bounded terminal commission, cleaning fee, sale of containers and damage recovery cost as well as NIMASA Environmental Levy. However, CMA argued that its primary source of income comes from the carriage of goods and not the ancillary activities that it inevitably engages in during the carriage of goods into Nigeria. To support this argument, CMA referred to paragraphs 274 of the Bill of Lading and G & C Lines vs. Hangrace Nig. Ltd (2001).
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