{"id":94,"date":"2025-04-02T12:47:00","date_gmt":"2025-04-02T12:47:00","guid":{"rendered":"https:\/\/taxbaraza.co.ke\/?p=94"},"modified":"2025-08-12T08:50:03","modified_gmt":"2025-08-12T08:50:03","slug":"case-study-diamond-trust-bank-tanzania-ltd-v-commissioner-general-tanzania-revenue-authority-civil-appeal-no-413-of-2022-2025","status":"publish","type":"post","link":"https:\/\/taxbaraza.co.ke\/?p=94","title":{"rendered":"Case Study: Diamond Trust Bank Tanzania Ltd v Commissioner General, Tanzania Revenue Authority (Civil Appeal No. 413 of 2022) [2025]"},"content":{"rendered":"\n

<\/p>\n\n\n\n

Genesis and Background of the Case<\/strong><\/p>\n\n\n\n

This appeal was filed by Diamond Trust Bank Tanzania Ltd (DTB)<\/strong> against the Tanzania Revenue Authority (TRA)<\/strong> following unfavorable decisions by both the Tax Revenue Appeals Board<\/strong> and the Tax Revenue Appeals Tribunal<\/strong>. The dispute concerned DTB’s claimed deductions for interest in suspense<\/strong> and written-off loans<\/strong> for the income years 2012, 2013, and 2014<\/strong>. The TRA’s audit disallowed these deductions, leading to tax assessments totaling over TZS 18.5 billion<\/strong>.<\/p>\n\n\n\n

TRA argued that DTB failed to comply with statutory requirements under the Income Tax Act, 2004 (ITA 2004)<\/strong> and the Bank of Tanzania (BOT) Risk Asset Management Regulations, 2008<\/strong>. The Tribunal ruled in favor of the TRA, prompting DTB to appeal to the Court of Appeal on grounds of misapplication of the law and disregard of banking regulations.<\/p>\n\n\n\n

Background of the Case \u2013 Key Points<\/strong><\/p>\n\n\n\n

    \n
  1. Audit and Assessment<\/strong>: TRA conducted a tax audit for 2012\u20132014 and issued tax assessments including disallowed bad debts and taxed interest in suspense.<\/li>\n\n\n\n
  2. Amounts Disputed<\/strong>:\n
      \n
    • 2012: TZS 15.5B assessed; TZS 4.66B payable<\/li>\n\n\n\n
    • 2013: TZS 19.96B assessed; TZS 5.98B payable<\/li>\n\n\n\n
    • 2014: TZS 26.2B assessed; TZS 7.86B payable<\/li>\n<\/ul>\n<\/li>\n\n\n\n
    • Interest in Suspense<\/strong>: TRA required taxation on an accrual basis, while DTB argued for treatment on a cash basis under BOT rules.<\/li>\n\n\n\n
    • Loan Write-Offs<\/strong>: TRA required proof of irrecoverability and Board approval; DTB argued this was not mandatory for pre-2014 years.<\/li>\n<\/ol>\n\n\n\n

      Appellant\u2019s Submissions (DTB)<\/strong><\/p>\n\n\n\n

        \n
      1. Interest Not Deductible Until Paid<\/strong>: Cited BOT Regulation 30(2)<\/strong> mandating interest on non-performing loans be placed in suspense and reversed.<\/li>\n\n\n\n
      2. Accrual vs. Cash Basis<\/strong>: Argued that Section 25(5)<\/strong> of ITA 2004 and BOT rules harmonize accrual-based accounting with cash-based tax treatment for suspense interest.<\/li>\n\n\n\n
      3. Loan Write-Off Compliance<\/strong>: Maintained it had followed BOT\u2019s Regulation 19(c)<\/strong> procedures for writing off loans.<\/li>\n\n\n\n
      4. No Board Resolution Required<\/strong>: Contended that board resolutions for write-offs were not a legal prerequisite under ITA.<\/li>\n\n\n\n
      5. Pre-2014 Standard Applied Retrospectively<\/strong>: Criticized Tribunal for applying post-2014 standards retroactively to 2012\u20132014 assessments.<\/li>\n\n\n\n
      6. Lack of Itemized Evidence Guidelines<\/strong>: Noted that the law does not enumerate required recovery efforts or evidence.<\/li>\n<\/ol>\n\n\n\n

        Respondent\u2019s Submissions (TRA)<\/strong><\/p>\n\n\n\n

          \n
        1. Accrual Accounting Obligations<\/strong>: Asserted that Section 23(1)-(2)<\/strong> requires interest be recognized when receivable, not when collected.<\/li>\n\n\n\n
        2. BOT Rules Do Not Supersede ITA<\/strong>: Emphasized that BOT regulations guide financial reporting but cannot override tax statutes.<\/li>\n\n\n\n
        3. Proof of Write-Offs Required<\/strong>: Stressed that under Section 39(d)<\/strong> of ITA, DTB had to prove loans were absolutely uncollectable.<\/li>\n\n\n\n
        4. No Evidence of Recovery Measures<\/strong>: Alleged DTB failed to provide proof such as Board resolutions, account entries, or legal recovery steps.<\/li>\n\n\n\n
        5. Prior Case Precedents<\/strong>: Cited rulings in Access Bank<\/strong> and National Bank of Commerce<\/strong> cases affirming similar interpretations of Sections 23 and 39.<\/li>\n\n\n\n
        6. Burden of Proof on Taxpayer<\/strong>: Argued that under Section 18(2)<\/strong> of the Tax Revenue Appeals Tribunal Act, DTB bore the burden to disprove the assessment.<\/li>\n<\/ol>\n\n\n\n

          Court of Appeal Decision \u2013 Key Points<\/strong><\/p>\n\n\n\n

            \n
          1. Interest in Suspense is Taxable<\/strong>: Held that DTB\u2019s recognized interest qualifies as taxable under Section 23(2)<\/strong> since it was accrued and recorded as an entitlement.<\/li>\n\n\n\n
          2. BOT Guidelines Don\u2019t Override ITA<\/strong>: Found that BOT Regulation 30(2)<\/strong> does not supersede the accrual obligations under ITA for tax purposes.<\/li>\n\n\n\n
          3. Loan Write-Off Requires Evidence<\/strong>: Affirmed that under Section 39(d)<\/strong>, DTB had to show all recovery steps were taken and that loans were uncollectable.<\/li>\n\n\n\n
          4. Proof Deficiencies Noted<\/strong>: Found no Board resolutions or recovery documentation had been provided; DTB did not meet evidentiary thresholds.<\/li>\n\n\n\n
          5. Court Cannot Overturn Its Own Decisions<\/strong>: Declined invitation to depart from prior rulings in NBC<\/strong>, Access Bank<\/strong>, and KCB Tanzania<\/strong> cases.<\/li>\n\n\n\n
          6. Appeal Dismissed<\/strong>: Found no error in the Tribunal\u2019s ruling and upheld the tax assessments.<\/li>\n\n\n\n
          7. Costs Awarded<\/strong>: DTB to bear costs of the appeal.<\/li>\n<\/ol>\n\n\n\n

            Judgement Date<\/strong>: 28 February 2025<\/strong>, delivered by Justices Kerefu, Fikirini, and Masoud<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

            Genesis and Background of the Case This appeal was filed by Diamond Trust Bank Tanzania Ltd (DTB) against the Tanzania…<\/p>\n","protected":false},"author":1,"featured_media":124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-94","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/94","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=94"}],"version-history":[{"count":1,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/94\/revisions"}],"predecessor-version":[{"id":96,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/94\/revisions\/96"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/media\/124"}],"wp:attachment":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=94"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=94"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=94"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}