IN THE TAX REVENUE APPEALS BOARD AT DAR ES SALAAM CONSOLIDATED TAX APPEAL NO. 88 & 90 OF 2023 BETWEEN TANZANIA BREWERIES PUBLIC LIMITED COMPANY... APPELLANT VERSUS COMMISSIONER GENERAL (TRA) RESPONDENT JUDGMENT Tanzania Breweries Limited is a company incorporated and registered in Tanzania and its main activities are production, packaging, marketing, and distribution of alcoholic and non- alcoholic beverages in Tanzania. The company is situated at Plot No 79, Block “AA” Mchikichini, lala District, Dar Es Salaam with TIN No, 100-159-864, and VAT Number 10-001011-A, ‘The dispute in this appeal is related to the Respondent's rejection of input tax claim on hotel accommodation for the years of income 2019 to 2021 on the basis that this is an input tax incurred on entertainment and therefore ‘not claimable under section 68(3) (a) of the Value Added Tax Act, 2014. (the VAT Act) ‘The historical background of the present appeal culminated from the Respondent's comprehensive audit conducted in the year 2022 on theappellant's tax affairs. This audit covered various taxes including Value ‘Added Tax (VAT) for year of income 2019 to 2021. On that audit the Respondent decided to disallow input tax claimed by the Appellant on hotel accommodation costs for its employee on the ground that these are input tax incurred on entertainment and therefore not claimable, ‘The disallowed input tax claim resulted into assessments of the principal liability and imposition of interest for the late payment of tax for all years Under the audit. The Appellant being aggrieved by the assessrrents objected the same by advancing several grounds. On objection determination, the Appellant informed the Respondent that hotel accomadation costs for its employees do not constitute entertainment as defined by the Value added Tax Act as the cost was incurred in furtherance of the appellants economic activities and for making taxable supply as those employees were required to work away from their usual place of work and the costs for the employee to work outside their Usual working station is bone by the appellant. Further the appellant challenged the interest imposed by the respondent for being arising from incorrect principal tax. Regardless to the Appellant's justification the Respondent maintained his position of cisallowing those expenses hence the present appeal. The ‘Appellant's is based on the folowing grounds: i. That the respondent's decision to reject input tax clairrs on hotel ‘accommodation is arbitrary and wrong in law and facts il, That the Respondent's decision to impose interest is wrong in aw aOn the date fixed for hearing parties agreed to consolidate the two appeals, that is appeal no 88 and 90 both of 2023 a prayer which was granted and the Board ordered the proceedings to be recorded in appeal number 88 of 2023. On due course the following issues were framed and agreed for determination by the Board: i) Whether the Respondent's decision to reject input tax claim on hotel ‘accommodation was correct in law and fact ii) Whether the Respondent's decision to impose interest was correct in law and fact lil) To what reliefs are the parties entitled to. ‘Submitting on the first issue the Appellant argued that the Respondent's decision was arbitrary and legally incorrect. The Appellant contended that the Respondent's interpretation of the word accommodation to fit in the definition of entertainment specifically under the word hospitality of any kind ‘and thus forming part of entertainment input tax of which is resicted under Section 68(3)(a) of the VAT Act is not correct, and he went on examining that provision of section 68(3)(a) of the VAT Act. ‘The Appellant went on showing that inputs incurred on hotel accommodation Is for the furtherance of the Appellant's economic activities and for making taxable supply and therefore is entitled to input tax credit on input tax incurred on hotel accommodation costs in terms of Section 68(1) of the VAT ‘Act as they were not for entertainment envisaged under Section 68(3)(a) read together with Section 2 of the VAT Act hence itis allowable,In emphasis he defined the term entertainment under section 2 of the VAT ‘Act, 2014 alleging that the use of the phrase “hospitality of any kind” was ‘meant to include everything that is connected to, related to, or associated with hospitality. However, he concluded that the VAT Act does not provide 2 definition of “hospitality” ‘The Respondent on the other side submitted that input tax incurred on entertainment including hotel accommodation costs is not claimable under section 68(3)(@) of the VAT Act. He argued that the essence of this appeal is centered on interpretation of section 68(3)(2) of the VAT Act, hence he ‘examined it in detail and come to the conclusion that the VAT Act provision that governs an input tax credit claim is very clear on the essential requirements, mentioning those criteria to be related to the acquisition of goods, services, or immovable property, to the extent that it is used to provide entertainment, unless the person's economic activity involves providing entertainment in the ordinary course of the person's economic activity ‘Thereafter the Respondent referred to the case of Pan African Energy Tanzania Limited v. Commissioner General (TRA), Civil Appeal No. 81/2019 (Unreported) on the requirement in Interpreting taxing statutes where the court insisted that "The ‘statutes enacted for imposition and collection of income tax must be strictly construed.” From there the Respondent referred to various ordinary defintions of the term “hospitality” and come to the conclusion that hospitality” is an ordinaryEnglish term which comprises various components which among others includes food, drinks, and accommodation and thus by using the catching phrase “fospitality of any kind’ the law aimed to leave no stone unturned hence it is his view that is to say, the law aimed to take on board anything that is related/connected/associated to hospitality and thus it goes without saying that the term is not ambiguous hence per the decision in Pan African. Energy (Supra) judicial inquiry is complete. Therefore, considering that there is nothing to suggest that the Respondent went against the canons of interpretation of tax statues, as the Appellant claims, the Respondent appropriately employed the proper interpretation approach for the word “hospitality of any kind” as provided in section 2 of the VAT, 2014, ‘The Respondent supported his view with the case of AB (PTY) Limited v. The Commissioner for the South African Revenue Service, Case No: VAT 1015 (Unreported), where the South African Tax Court was faced With similar issue and it had to determine whether meals and acosmmodation should be construed as ‘entertainment’ In that case, the Respondent’s South African counterpart disallowed the appellant's input VAT deduction on the basis that such deduction is prohibited by section 17(2)(a) of Value-Added Tax Act, Act 89 of 1991 (the Act), which is almost in pari materiawith section (68(3)(@) of our VAT Act 2014. He reproduced that provision and examined it, Where under ...Section 1(xvitl) the word entertainment was defined to inciude the following: “entertainment” means the provision of any food, beverages, ‘accommodation, entertainment, amusement, recreation or hospitality of any kind by a vendor whether directly orindirectly to anyone in connection with an enterprise carried on by him; ‘The Respondent argued that the battlefield ofthe parties in the above appeal was whether the provision of hostel accommodation and catering services obtained by the appellant for the contract employees at C Entty where they stayed while providing services in mines, constitute “entertainment” as escribed in the VAT Act 1991. Basing on that decision the Respondent prays for this Honorable Board be Persuaded by the above foreign decision since it involves similar facts to the ‘current matter under this appeal and the Tax Court found that the section bars claim of input tax in respect of good and services acquirec for purposes of entertainment. Based on the above explanation and submissions, the Respondent is reiterating to their position that hotel accommodation is part of hospitality and eventually forms part of entertainment and its input VAT is restricted from being claimed under Section 68(3)(a) of the VAT Act 2014 read together with Section 2 of the VAT Act 2014. (On the second issue the Respondent submitted that the Respondent was Correct in imposing interest for late payment of principal tax as provided by Section 76(1) read together with Section 81(1) of the Tax Administration Act [Cap 448 R.E 2019) and since the principal withholding taxes as per assessments remain unpaid, the Respondent correctly imposed the sald interest. ‘The Appellant in his rejoinder though he agrees with the Respondent that words of a statute are to be given their natural and ordinary meaning, But 6he has a different view on the definitions relied by the Respondent, on the term hospitality of any kind which includes hotel accommodation costs, itis his contention that since this definition was found in the google, it cannot be relied by the Board in its decision because google is an unreliaale source as it allows people to write anything and edit as and when they want. (On the same term he rejoined on the definition given by Oxfcrd dictionary he argued the ordinary meanings of the word hospitality do no: support the contention that't includes hotel accommodation in the context of this appeal. Iti his rejoinder that the phrase hospitality of any kind used inthe law does not suggest that the law aimed to cover anything related to hospitality refering to the ejusdem generis rule and concluded that the word hospitality must be construed within the confinement of the specific words, He went on showing that those specific words have nothing wrich suggests that hospitality in the context of the VAT Act includes accommodation and thus to construe hospitality to include accommodation in the context of section 2 of the VAT Act is contrary to the ejusdem generis principle of statutory construction, The Appellant cemented his rejoinder on interpretation of words by referring to the case of Pan African Tanzania Limited vs. Commissioner General, Tanzania Revenue Authority, Civil Appeal No. 172 of 2020 (unreported) and the decision of the Supreme Court of the Lrited States in the case of CIRCUIT CITY STORES INC VS ADAMS, 532 US 105 [2001] Whereby the maxim was defined as: ‘situation in which general words follow specific words in statutory enumeration, the general words are construed toembrace only objects similar in nature to those objects enumerated by the preceding specific words.” He concluded his rejoinder by insisting that the words hospitality of any kind should be construed to embrace only objects similar in nature to those enumerated i.e, food, beverages, amusement, or recreation which do not include hotel accommodation. Also he rejoined by commenting on the PWC article cited by the Respondent ‘and the South Africa decision also cited by the Respondent, to tie effect that this Board is not bound by the article written by PWC as it expresses the author's view ~ not even PWC's ~ on the term hospitality, a view which is not supported by law. On the party of the South African decision relied by the Respondent he argued that is not binding to this Board for being a foreign judgment and lastly the South African lew is different from the VAT ‘Act, 2004 and as such the South African decision must be disregarded. ‘That marks the end of the parties’ submissions hence we are dwelling into ‘analysis of the same for the sake of reaching to the fair and just decision. Having gone through submissions by the parties there is no dispute between them on the fact that accommodation costs were incurred by the Appellant The dispute is on whether these costs incurred by Appelant for his employees are allowable expenses. Having this contentious issue, we preferred to revisit the enabling provisions guiding treatment of expenses. As per the nature of the matter at hand the law governing the treatment of expenses is the VAT Act, whereby section68(1)(a) of the VAT Act,2014 provides for conditions on allow ability of a credit for an amount of input tax incurred by the person; that Is to say It ‘creates right or entitlements to input tax credit. As per this provision the law is very clear that for input tax incurred by the person to be allowable it has to be incurred in the course of the person's economic activity and for the purpose of making taxable supplies; Moreover, section 68(3)(a) of the VAT Act, 2014 provides input tax credit which Is not allowable. This is the one relied by the Respondert basing on the listed item namely “entertainment” Itis well settied that the term entertainment under section 2 of the VAT Act, 2014 involved the phrase “hospitality of any kind” which in our case turn to be a subject matter to the parties as they interpreted the same differently, hence we are taking it as a pertinent issue to be determined by this Board, ‘The dispute under this phrase is to the effect that does this prrase relates to “hotel accommodation"? ‘The Respondent in his interpretation of the word “hospitality of any kind” relied on google and Oxford dictionary, where the Appellant challenged for them to be relied as per the reasons advanced by him in his submissions. Basing on that conservation we asked ourselves on what was the right way of interpreting the same, There is no dispute that the source of reaching to the so called subject matter in our case which is that phrase” hospitality of any kind is the definition provided Under section 2 of the VAT Act, where the Respondent via the means heUsed came to the conclusion that in includes accommodation which is the issue before us on whether its expenditure is allowable or not. Having a look on the definition section of VAT Act, section 2 of the VAT Act fhas not mentioned “accommodation” in the definition of entertainment and that is why the Respondent went into other sources :0 get more interpretation. The Respondent considered accomadation to be part of the word hospitality. As we have said the Appellant chellenged that interpretation, hence we also decided to go through other sources of definition where we went through The Oxford Advanced Learner's Dictionary 9" Edition which defined “hospitality” as the /ienaly and generous behavior towards guests, or food, drink or services that are provided by organizations for guests, customers ete. This definition does not mention accommodation at all and per its qualifications among others, it cannot fit in the present matter as the relationship that exist between the employer @ appellant and his employees does not allow such a behavior, that is, the qualification at the end that of it where it reads “che services are provided by organizations for quests, customers etc.”, as it is well known that employees are not guests or customers of the employer. The appellant on elaborating the definition of entertainment under section 2 Of the VAT Act, argued that the same listed specific words forming a genus. According to the Appellant the last word in this provision is hospitality where according to ejusdem generis rule; in a statute there are general words following specific words, hence the general words must be confired to thingsof the same kind as those specifically mentioned in that list and ‘accommodation is not near to any word provided in the defintion. Basically this Board is on the same page with the Appellant as the rule in ejusdem generis principle of statutory construction is very clear that the meaning of the words has to be confined to things of the same kind. In the present appeal the phrase “hospitality of any kind” has to be confined to other items included in that definition of the word entertainment such as food, beverages, amusement, and recreation listed in the definition provision while defining the term entertainment. This position on rules of interpretation was fortified by the decision of the court of appeal in Pan African Tanzania Limited vs Commissioner General, Tanzania revenue Authority, Civil Appeal No 172 of 2020 (unreported) where it explained in detail on applying the preposition “including”, In that case the the Court Appeal stated that, while applying, the rule, “In particular, under section 50 (1) of the TAA, the preposition ‘including’ between the phrases ‘any tax decision’ and Assessment or ‘other decision’ or ‘omission’ means that the former isa larger group which embraces the latter. Ths is cemented by a Latin maxim ofejusdem generis rule wiich means ‘of the same kind’. The rule requires that: where in a statute there are general words {following particular specific words, the general words must be confined to things of the same kind as those specifically mentioned, In the light of the jusdem generis rule, the phrase any tax decision including isa general large fly rwhich includes ‘assessment, ‘other decisions’ or ‘omissions’ to be part ofthe larger family that is, “tax decision”. We are fortified in that account because in order to asceriain the meaning of a clause in a statute, courts must look at the whole statute, ‘at what precedes and what succeeds and not merely the clause itself and also compare the clause with other parts of the lw and the setting in which it ocaus. If we can napply the rule therefore, the phrases ‘other decisions or omissions’ must be of the same nature as tax decisions and not otherwise Back to our case the important quotation from the aforementioned authority is "Of the same kind” as rule requires that: where in a statute there are general words following particular specific words, the general words must be confined to things of the same kind as those specifically mentioned, This Board expected the Respondent to connect its interpretation with the items listed under the term entertainment to come to the conclusion he Teached rather than going to other sources of interpretation without exhausting the available avenue provided by the law itself, As per section 2 entertainment definition mentioned food, beverages, amusement, and recreation and the last word is hospitality hence according to ejusdem generis rule accommodation has to be near to any word provided in the definition, which isnot the case as accommodation is not near to food, not near beverages, not near amusement and not near recreation. Basing on statutory construction expressed in Latin maxim ejusdem generis rule, the Respondent's interpretation was not correct, we corcur with the Appellant's view and basing on the Appellant's activities, where the Appellant's employees often work away from their work duty stetions the act which necessitate the Appellant to cover associated travel cost including hotel accommodation this is an expense to the Appellant. Considering on the fact that when an employee travels out of his working station ta work for his employer like employees of the appellant who do the distribution, that is 2furtherance of the Appellant's economic activity the same are allowable expenses. From the above analysis we are of the settled view that the accommodation costs were incurred to employees who went for furtherance of the Appellant's economic activity and such expenses are allowable under the law hence the respondent was not correct to reject input tax claim on ‘accommodation. That is to say the first issue is answered in negative, to the effect that the Respondent's decision to reject input tax claim on hotel accommodation was not correct in law and fact. ‘The second issue is whether the Respondent's decision to Impose interest was correct in law and fact, as per its nature this is consequential to the first Issue, As per the answer on the first issue there is no principal tax liability established to impose interest on it, thus the interest imposed by the respondent is based on incorrect principal, which means the Respondent was not correct to impose interest on Appellant as it was based on an Incorrect, principal tax. Having answered all issues in negative this Board is satisfied that this appeal hhas merit and therefore it is hereby allowed. No order as to costs, that is to say each party has to bear its own costs,Hon. AS. Lutalla, Vice Chairperson... Mr. S.C. Msangi, Board Member........ Mr. G.I. Mnyitafu, Board Member... 27 March, 2024, Judgment is delivered this 27% March, 2024 in the presence of Mr. Stephen ‘Axwesso, Advocate for the Appellant and Ms. Sarayogo Imbo together with Mr. Samuel Kaya both State Attorneys for the Respondent. Right of appeal is explained Hon. $8. Sanga, Successor Chairman. Pun Mr, G.E, Mkocha, Successor Board Member Mrs. C.X, Nkelebe, Successor Board Memb&i o 27% March, 2024. ‘We certify that this is a true copy of the original Hon. $.8, Sanga, Successor Chairman.db Mr. G.E. Mkocha, Successor Board Member... Mrs. C.X, Nkelebe, Successor Board Member. 27 March, 2024,