Supreme Court Uganda 2017 63 - 2 PDF

THE REPUBLIC OF UGANDA
IN THE SUPREME COURT OF UGANDA

AT KAMPALA.
(CORAM: ARACH-AMOKO, NSHIMYE. OPIO AWERI, MWONDHA,

TIBATEMWA JJSC)
CIVIL APPEAL NO.09 OF 2015
BETWEEN
UGANDA REVENUE AUTHORITY:::::::::::::::::::::::APPELLANT
AND
SIRAJE HASSAN KAJURA ::::::::::::::::::::::::::::RESPONDENT
[Appeal against the judgment of Court of Appeal before Bossa, Kakuru

and Kiryabwire, JJA. given on the 7th day of June of 2013]
JUDGMENT OF A.S. NSHIMYE, A.G. JSC.
I have had the benefit of reading the lead judgment of

my brother, Hon Justice Opio Aweri JSC. I agree with his
evaluation of the issues and conclusion.
In his judgment, he sets out the background of the

dispute all through from the High Court to the Court of
Appeal, before it reached this Court. I need not to
reproduce the same in detail.
1
However, for the sake of emphasis, the respondent and
160 others whom I will refer to in the judgment as
“respondents” who were the plaintiffs in the High Court,
were retrenched employees of the then Dairy Corporation
Ltd, which Government Privatized in 1991 under the
Public Enterprises, Reform and Divestiture (PERD) Act
Cap 98.
The respondents lost their employment and income they

were deriving or had accrued to them from the defunct
Corporation. They were rendered redundant.
Parliament, in the Public Enterprises Reform and

Divestiture Act Section 21, obliged the Minister for
Finance to make payment of compensation to employees
who lost their jobs as a result of the Government’s policy
decision to divesture its Enterprises, Diary Corporation
Ltd having been one of them.
Section 21 of the said Act provides:

“The Minister responsible for finance should
ensure that provision is made for payment of
compensation to employees who are declared
2
redundant as a result of the restructuring or
liquidation of public enterprises through the
establishment and operation of redundancy
account to be opened at a commercial bank
approved by the Minister responsible for
finance”. (Underlining is mine)
The word “compensation” in the above section was not

defined. However, by it’s literal meaning in the
Dictionary it means, In the Black’s Law Dictionary 9th Ed
Page 322
“Compensation paid ……….. to an employed
person especially one who has been laid off”.
In my view, such money would put a retrenched

employee in such a position he/she would have enjoyed,
as if, he/she was on the job and earning within the ambit
of the contract of employment which was terminated.
In compliance with the above quoted section of the law,

the respondents were each given a terminal
retrenchment package. In the package, there was salary
that was due and payable, salary in lieu of notice,
3
gratuity, long service award, transport home allowance
and settlement allowance.
Bearing in mind section 19(1) of the Income Tax Act, the

appellant considered the items or lamp-sum constituting
the retrenchment package, to be taxable income subject
to exemptions. It collected tax totaling to Shs
1,171,778,314 (One Billion one hundred and seventy
one million seven hundred and seventy eighty thousand
three hundred and fourteen) from the respondents,
hence the dispute.
It was the case for the respondent in the two Courts

below that, the money received as retrenchment package
was not taxable in accordance with the Income Tax Act.
On the other hand, the case for the appellant was that
the terminal benefits were not except under the law and
therefore, they were taxable.
Both the trial and appeal Courts upheld the submission of

the respondents that their benefits were not taxable.
4
Being dissatisfied with both concurrent decisions of the
Courts below, the appellant appealed to this court on
three grounds namely:
1. That the learned justices of the Court of
Appeal erred in law and in fact when they
held that the benefits received by the
respondent are not taxable.

Appeal erred in law when they held that the
character of the package given to the
respondent was not such as those envisaged
under the provision of the Income Tax Act.

Appeal erred in law when they held that the
appellant unlawfully taxed the respondents
on the payments they received.
The consideration and disposal of the above three

grounds of appeal boil to the issue whether, what the
respondents received was employment income or
compensation. It was certainly not the former because
5
they were redundant and not working at the time of
receipt of the money.
The appellant is mandated and empowered by both the
Constitution Article 79(1) and the Income Tax Act Section
4 (1) to levy tax on employment incomes of citizen.
Equally Article 17 (1) (g) places an obligation on every

citizen to pay taxes in accordance with laws made by
Parliament.
Section 19(1) (a) (b) (c) (d) (e) (f) (g) and (h) of the Act
is clearly reproduced in the lead judgment. It spells out
those incomes, compensations and other benefits that
attract taxation. It is clear from the record and
submission of both counsel that the money that was paid
to the respondents and named “retrenchment
package” was compensation within the meaning of
Section 19 (1) (d) of Income Tax Act.
It provides:
19(1) d
“Any amount derived as compensation for the
termination of any contract of employment,
within or not provision is made in the contract
6
of employment of such compensation or any
among amount derived within communication
of amounts due under any contract of
employment”.
Section 21 of the PERD Act (Supra) did not specifically

exempt the compensation mentioned therein. It follows
therefore, that the retrenchment package that was paid
was compensation within the meaning of section 19(1)
(d) of the Income Tax Act and was taxable because it
was not exempted from tax.
As court, however sympathetic we may be, the rules of

interpretation of statutes prohibit us from adding or
subtracting anything in a statute which was sealed by
Parliament.
I adopt and agree with the authorities of RV the judge

of the city of London court [1892] 10B 273 and The
Registered Trustees of Kampala institute vs
Departed Asians property custodian board, SCCA
No. 21/1993 which both Counsel relied on, on this
point.
7
For that reason, I would agree with counsel for the
appellant on the three grounds of appeal that their
Lordships of the Court of Appeal and of the original court
erred in law when they held that the retrenchment
money was not taxable.
I would concur with the lead judgment that the appeal be

allowed and the judgment of the Court of Appeal be set
aside.
I would also order that each party bears its own costs
Dated at Kampala, this ----20th ---- day of ---December--- 2017.
A.S. NSHIMYE
A.G. JUSTICE OF SUPREME COURT

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THE REPUBLIC OF UGANDA

IN THE SUPREME COURT OF UGANDA

(CORAM: ARACH-AMOKO, NSHIMYE. OPIO AWERI, MWONDHA,

CIVIL APPEAL NO.09 OF 2015

UGANDA REVENUE AUTHORITY:::::::::::::::::::::::APPELLANT

SIRAJE HASSAN KAJURA ::::::::::::::::::::::::::::RESPONDENT

[Appeal against the judgment of Court of Appeal before Bossa, Kakuru

JUDGMENT OF A.S. NSHIMYE, A.G. JSC.

I have had the benefit of reading the lead judgment of

In his judgment, he sets out the background of the

The respondents lost their employment and income they

Parliament, in the Public Enterprises Reform and

Section 21 of the said Act provides:

The word “compensation” in the above section was not

In my view, such money would put a retrenched

In compliance with the above quoted section of the law,

Bearing in mind section 19(1) of the Income Tax Act, the

It was the case for the respondent in the two Courts

Both the trial and appeal Courts upheld the submission of

2. That the learned justices of the Court of

3. That the learned justices of the Court of

The consideration and disposal of the above three

Equally Article 17 (1) (g) places an obligation on every

Section 21 of the PERD Act (Supra) did not specifically

As court, however sympathetic we may be, the rules of

I adopt and agree with the authorities of RV the judge

I would concur with the lead judgment that the appeal be

Dated at Kampala, this ----20th ---- day of ---December--- 2017.

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