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Platinum Credit sought a review by the Tax Appeals Tribunal, arguing that it had taken reasonable steps to recover bad debts before writing them off
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By Michael Odeng
The Commercial Court has upheld a UGX 1.7 billion tax assessment levied by the Uganda Revenue Authority (URA) against Platinum Credit Limited, a moneylending company. The dispute arose after a URA audit of Platinum Credit's financial records for the 2014/2015 fiscal year revealed discrepancies. Initially, the audit assessed the company for UGX 4.4 billion in taxes, but the figure was later reduced to UGX 1.7 billion following objections from the company.
Dissatisfied with the revised assessment, Platinum Credit sought a review by the Tax Appeals Tribunal, arguing that it had taken reasonable steps to recover bad debts before writing them off. However, the tribunal dismissed the company’s application, prompting Platinum Credit to escalate the matter to the Commercial Division of the High Court.
Court ruling
In a ruling dated November 11, 2024, Justice Cornelia Kakooza Sabiiti dismissed Platinum’s appeal, stating that the company’s arguments focused on evidentiary issues rather than legal questions.
The court found that Platinum Credit had failed to demonstrate compliance with a key requirement under Section 24 of the Income Tax Act: that the bad debts claimed as deductions had been included in the company’s gross income for the 2014/2015 fiscal year.
“Although the company showed it had tried to recover the debts, it failed to meet a crucial condition set out in the Income Tax Act, hence weakening its case,” Justice Sabiiti stated.
Contradictions in financial records
The court noted discrepancies between Platinum’s financial statements and its board resolutions regarding the written-off bad debts. Justice Sabiiti ruled that the bad debts should have been reflected in the company’s audited financial accounts and not merely in board resolutions or minutes.
“The burden of producing credible evidence lies with the appellant. It is not the tribunal’s responsibility to reconcile conflicting accounts or evidence presented by the parties,” she emphasized.
Platinum Credit argued that the tribunal erred in dismissing its case, claiming that the contradictions in its records were immaterial and reconcilable. The judge disagreed, reiterating that for bad debts to qualify for deduction, they must be included in the company’s income for the relevant year.
The court further highlighted that Platinum’s financial accounts, as signed by its directors, did not align with the figures presented during the appeal. Specifically, while the company claimed to have declared bad debts of UGX 135,000 in its 2014 online returns and audited accounts, it did not declare any bad debts for 2015.
Implications
The ruling underscores the importance of adherence to tax regulations and accurate financial reporting. Justice Sabiiti ruled that the tribunal was correct to rely on the company’s audited financial statements and returns, dismissing other documents that contradicted these records.
“In the absence of amended financial statements or returns, Platinum must adhere to what is stated in its audited financial records. Board minutes and other documents that conflict with these records cannot be relied upon,” she concluded.
The case serves as a cautionary tale for businesses to ensure compliance with tax laws and maintain consistent financial records to avoid disputes with tax authorities.
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