BUSINESS

Sudhir’s lawyers lose case at Commercial Court

Commercial Court judge David Wangutsi. Courtesy photo.



KAMPALA–High Court (Commercial Division) Judge, David Wangutsi, has dismissed a case filed by businessman Sudhir Ruparelia’s lawyers, Birungi Barata & Associates.

In his ruling, Justice Wangutsi was in agreement with the Tax Appeals Tribunal that the applicant (Birungi) was not a party in the case before court.

“Having said so the Appellant (Birungi) should not have taken over their client’s (Sudhir) case and turned it into theirs. I agree with the Tax Appeals Tribunal that the Appellant in this case was the wrong party and cannot benefit by way of costs in a matter they entered wrongly. For those reasons the appeal is devoid of merit and is dismissed with costs.”

Background of the case

It all began on January 13, 2011 when Birungi Barata & Associates, who are a legal and tax consultancy, engaged in offering legal and tax services sought a private ruling on behalf of its client Sudhir Ruparelia.

It sought answers to questions; “Whether an involuntary disposal of an asset to the extent to which the proceeds are reinvested in an asset of a like kind within one year of the disposal concerning sales and shares in compliance with section 18 of the Financial Institutions Act 2004 fell in the non-recognition of gain or loss regime”.

She wrote to Uganda Revenue Authority (URA) informing it that Sudhir owned majority shares in a financial institution which wasn’t mentioned.

“Under the Financial Institutions Act 2004, and the Financial Institutions (ownership and control) regulations 2005, the shareholders are required to reduce their shareholding in the bank to 49% or less. The final phase of divestiture was completed in December 2010 after which Bank of Uganda was notified of the financial institutions full compliance with the regulations.

“Our clients are required to sell their ownership to comply with the law. The said shareholders, however, intend to invest the returns of the sold shares in other financial institutions on the stock exchange immediately after divestiture,” states judicial documents.

Unsatisfied with the information capable of helping the URA make a ruling, they wrote back to Birungi seeking what they called sufficient information.

Among the asked information was details of payment, basis of transfer, whether such transfer was in exercise of any pre-emption rights as existing shareholders, his rights and whether the shares were obtainable at par value.

The information was provided, though, the URA never gave its ruling since stating that the ruling was within their discretion and not mandatory.

This prompted Birungi to file an application with the Tax Appeals Tribunal. The proceedings started in the Appellant’s names although the party that had sought a private ruling in the first instance was Sudhir Ruparelia.

The tribunal in its ruling found that URA erred in refusing to give the private ruling sought by the Appellant’s client.

Though, it made it clear that it could not as an Appeals Tribunal give a private ruling in the first instance. That to do so would amount to turning itself into a tax collecting agency.

On the issue of costs the Tax Appeals Tribunal refused to award them to any of the parties and held that each should bear its own costs.

Unsatisfied with the ruling Birungi went to the Commercial Court thus this Ruling.

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