It was an express condition of the MOU that GOU’s consent was required to the farmdown. The applicants also submitted that they could not present evidence at the hearing as to the expenditures incurred on the reinvestment relief as their one year period had not expired. This was because the respondent assessed the disposals before they had taken place. The dispositions were completed on the 21st February 2012 and the one year period ran until 21st February 2013. The hearing was on 26th to 28th November 2012 and 19th to 21st February 2012. This was a result of the respondent assessing the gain over a year before the disposals actually took place.
The Tribunal was only asked to rule if the applicants were entitled to relief in principle. The applicants argued that the respondent’s submission that the proceeds of sale can only be used to acquire an interest in a new PSA is not correct. The applicants cited Black’s Legal Dictionary which defines it, inter alia, as: “The act or process of replacing or being replaced; substitution.” The applicants have substituted the interests disposed of under the PSAs with interests in assets or rights which are dealt with under the PSAs.
The reference in S. 54(1) (c) to “assets of a like kind” can simply be a reference to a contract, under which expenditure is made. The provisions do not require reinvestment in assets to be of an “identical” kind. Therefore, expenditures on “interest data” and “interest property” are expenditure on assets “of a like kind” within S. 54(1) (c). Expenditures were incurred on machinery, wells, facilities, offshore and onshore installations and structures.
- FINDINGS AND DECISION OF THE TRIBUNAL
The Tribunal having read the witnesses’ statements, heard the evidence adduced, read the parties’ submissions and perused the authorities cited, wishes to rule as hereunder. 6.1 ARTICLE 23.5 OF THE EA2 PRODUCTION SHARING AGREEMENT (PSA) On the 8th October 2001, the applicants and the GOU executed a PSA under which the former were granted exploration, development and production rights in EA2. There were two Articles in the PSA that referred to taxation. The first one was Article 11 of the PSA, which read as follows: “All central, local, district, administrative, municipal or other taxes, duties, levies or other lawful impositions applicable to the Licensee shall be paid by the Licensee in accordance with the laws of Uganda in a timely fashion.” The said Article does not seem to be in dispute. The applicants were aware that they were required to pay taxes. The second Article which is the bone of contention is Article 23.5 of the EA2 PSA which purportedly attempts to exempt transactions which involve the assignment or transfer of an interest under the PSA from tax.
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