IN THE COURT OF APPEAL OF TANZANIA
AT PAR ES SALAAM.
(CORAM: NDIKA. J.A.. MWANDAMBO. J.A.. AND KENTE. J JU
CIVIL APPEAL NO. 265 OF 2021
MLIMANI HOLDINGS LIMITED................................................... APPELLANT
VERSUS
THE COMMISSIONER GENERAL...............................................RESPONDENT
(Appeal from judgment and decree of the Tax Revenue Appeals 
Tribunal at Dar es Salaam.)
(Haii. Vice Chairperson^
dated the 30th day of April, 2021 
in
Tax Appeal No. 66 of 2020
JUDGMENT OF THE COURT
5th & 18th July, 2022 
MWANDAMBO. J.A.:
The issue for our determination in this appeal is narrow but with
significant importance. It involves a challenge on the interpretation of an 
agreement between two contracting states viz. the Governments of the 
Republic of South Africa and the United Republic of Tanzania. The 
dispute is centered on Article 7 of the Agreement for Avoidance of 
Double Taxation and the Prevention of Fiscal Evasion with respect to 
Taxes on Income, henceforth the DTA, yet again before the Court for
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determination on its interpretation. The tale behind the dispute is easy 
enough to comprehend.
Between the year 2013 and 2016, the appellant made payments to 
a South African entity, to wit, MDS Architecture, henceforth, the foreign 
consultant in the sum equivalent to TZS 1,500,549,808.00 as service 
fees for architectural services to its project in Tanzania. In terms of 
section 83(1) (b) of the Income Tax Act, (the Act), the appellant had an 
obligation to deduct 15% from the amount paid as withholding tax and 
remit it to the respondent. As the appellant did not make the deduction, 
it did not account for the said amount to the respondent by way of 
withholding tax returns for the relevant period.
Sometimes in 2017, the respondent conducted a tax audit on the
appellant's affairs which revealed that the appellant had paid the
foreign consultant an un-accounted sum of TZS. 1,500,549,808.00 as
fees for the services rendered without deducting 15% from that amount
and remitting it to the respondent on account of withholding tax. Whilst
admitting that ordinarily, such amount was liable to 15% withholding
tax, the appellant contended that it was exempt from deduction by
reason of Article 7 of the DTA. The respondent contended that
notwithstanding the DTA, such payment was liable to deduction because
it did not constitute part of the business profits of the foreign payee
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service provider falling within the scope of Article 7 of the DTA. 
Eventually, the respondent issued three withholding tax certificates 
demanding a total sum of TZS. 346,492,916.00 for the period 2013 to 
2016.
Following an unsuccessful objection against the demand, the 
appellant appealed to the Tax Revenue Appeals Board (the Board). The 
appellant's case before the Board was that, it was not obliged to deduct 
the invoiced amount on the strength of Article 7 of the DTA which 
exempted the foreign consultant payee from withholding tax in Tanzania 
in which it had no permanent establishment and thus taxable in South 
Africa in which it was resident. The respondent's stance was that the 
DTA had no avail to the appellant in so far as the service fees paid to a 
foreign consultant was outside the scope of Article 7 of the DTA because 
it did not form part of its business profits and thus liable to withholding 
tax in Tanzania.
In its decision, the Board sustained the respondent's position. It 
held that the service fees were not embraced in the definition of 
business profits of the payee in the carrying of its business neither did it 
fall under any of the categories of the specific articles in the DTA. The 
Board reasoned that the service fees fell under Article 20 of the DTA 
which subjected such payment to withholding tax and, since the
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appellant defaulted in accounting for it, the respondent was entitled to 
demand it as he did. On appeal, the Tax Revenue Appeals Tribunal (the 
Tribunal) concurred with the Board sustaining its decision resulting into 
dismissing the appeal.
Aggrieved, the appellant is now before the Court in this appeal 
predicated on one ground of appeal. She is faulting the Tribunal for the 
alleged erroneous interpretation of the DTA and holding that service 
fees paid to MDS Architecture were not covered under section 128 of 
the Act read together with Article 7 of the DTA.
Mr. Juvenalis Joseph Ngowi, learned advocate from Dentons EALC 
East African Law Chambers represented the appellant in this appeal and 
filed his written submissions in support of the appeal raising two 
interrelated issues. One, whether the service fees paid by the appellant 
to MDS Architecture in the years 2013 to 2016 ordinarily subject to tax 
under section 83(1) of ITA fell under Article 7 of the DTA. Two, whether 
the withholding tax certificates issued by the respondent reflecting a 
withholding tax liability were justified.
Mr. Hospis Maswanyia, learned Senior State Attorney, filed the 
respondent's written submissions in reply resisting the appeal urging the 
Court to dismiss it. We are indebted to both learned counsel for their 
industry unveiling valuable material in support of their respective
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positions in their submissions. We shall be excused for our inability to 
make reference to each of them in the determination of this appeal not 
as a result of lack of courtesy to them, but due to the dictates of the 
issue involved in this appeal.
Essentially, the appellant's submission faults the Tribunal's 
approach in the interpretation of the DTA which is said to be erroneous. 
The learned advocate impressed upon the Court that the DTA traces its 
origin to the OECD Model Tax Convention and UN Model Treaties and 
thus their interpretation of the relevant articles by the courts in other 
jurisdictions has based on the Model Convention and Commentaries 
having a persuasive guidance to the interpretation of the relevant 
articles in the DTA. The learned advocate contended that a proper 
interpretation of the DTA should have followed the approach taken in 
other jurisdictions which have interpreted similar double taxation 
agreements.
A great deal of the history of the double taxation agreements and 
development in their interpretation occupied a significant space in the 
submissions of the learned advocate. This was meant to justify why it 
was wrong for the Tribunal to hold as it did that the term profits did not 
include service fee of the payee in the carrying out of its business within 
the context of Article 7 of the DTA. Reference was made to the
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principles governing interpretation of tax treaties citing an excerpt from 
the judgment of Lord Denning in Bulmer Limited v. S.A Bollinger
[1972] 2 All. ER 1226 for the proposition that such interpretation must 
look at the purpose as opposed to the words used in meticulous detail or 
be concerned about the precise grammatical sense. In addition, the 
learned advocate made reference to Article 3(1) of the Vienna
Convention on the Law of Treaties of 1969 on the approach towards 
interpretation of international conventions based on good faith in 
accordance with the ordinary meaning used in their context in the light 
of its objects and purpose.
Further reference was made to the decision of the Supreme Court 
of South Africa in Commissioner for the South Africa Revenue 
Service v. Tradehold Ltd 2012, 3 All SA 15 to reinforce the application 
of the approach to the interpretation of the conventions based on giving 
effect to their purpose in a manner which is in harmony with the words 
used. In that case, the Supreme Court was interpreting a double 
taxation agreement between the Republic of South Africa and
Luxembourg based on OECD Model Tax Convention. The learned 
advocate underlined an excerpt in the judgment underscoring that the 
DTAs use wording of a wide nature aimed at encompassing the various
taxes generally found in the OECD member countries.
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From the foregoing line of argument, the learned advocate sought 
to persuade the Court that the fees the appellant paid to MDS 
Architecture were for professional services or other activities of an 
independent character to the tax payer earning the income in her 
resident state who has the right to tax such income and not the state of 
the recipient of services considering that the payee had no permanent 
establishment so as to attract tax in Tanzania.
Mr. Ngowi could not mince words responding to the Court's 
question on the correctness of the approach he was championing in the 
light of the decision in Kilombero Sugar Company Limited v. 
Commissioner General, Tanzania Revenue Authority, Civil Appeal 
No. 218 of 2019 (unreported). He was unrelenting in his oral address 
that the decision was erroneous. Even though he did not give notice 
under rule 106(4) of the Tanzania Court of Appeal Rules, 2009 (the 
Rules), he invited the Court in the course of hearing to depart from 
Kilombero for having taken a narrow approach in interpreting the DTA. 
Justifying his standpoint, the learned advocate contended that the 
Court's attention was not drawn to the OECD commentaries on the 
relevant Articles from the OECD Model Tax Convention from which the 
DTA traces its route as a result of which the Court gave a narrow view in 
interpreting the DTA. By reason of such approach, Mr. Ngowi argued,
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the Court erroneously concluded that the service fees paid to the foreign 
consultant fell under Article 20 of the DTA subjecting it to withholding 
tax. Mr. Ngowi invited us to be persuaded by the foreign decisions 
which, according to him, have correctly interpreted similar agreements 
based on the OECD Tax Convention model to give effect to the DTA.
Resisting the appeal, Mr. Maswanyia stuck to his written 
submissions in reply in support of the decision of the Tribunal urging the 
Court to dismiss the appeal. Stripped off the nitty gritty of his 
submissions, the learned Senior State Attorney argued that the Tribunal 
rightly interpreted the DTA by holding that the service fees paid to the 
foreign consultant were not part of the payee's business profits 
envisaged under Article 7 of the DTA justifying the respondent's 
demand for the payment of the withholding tax from the appellant as he 
did. It was his further argument that as the service fees did not fall in 
any of the specific articles, it fell under Article 20. He was emphatic that 
except for interpretation of anti-avoidance tax provisions, it is trite law 
that tax statutes must be interpreted strictly. We think the latter 
argument is not necessarily correct in the context of the instant appeal 
considering that the Tribunal was not interpreting a tax statute per se 
but an international treaty. Otherwise, the learned Senior State Attorney 
was unmoved by the invitation to rely on foreign decisions in
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interpreting the DTA considering that the Court had already pronounced 
itself on a similar issue in Kilombero followed subsequently in Mantra 
(Tanzania) Ltd v. Commissioner General TRA, Civil Appeal No. 430 
of 2020 (unreported).
In his rejoinder, Mr. Ngowi reiterated his submissions and added 
that, the term service fees should be given a wider interpretation to be 
accommodated under the term business profits within the scope of 
Article 7 of the DTA. He reiterated that even though the appellant had 
not properly moved the Court to depart from its previous decisions in 
Kilombero and Mantra (supra) it had discretion to do so to give a 
proper interpretation to the DTA, subject of the appeal.
Having examined the written submissions and heard oral 
arguments for and against the appeal, the critical issue for our 
determination is whether the service fees paid to the foreign consultant 
constituted part of the business profits covered by Article 7 of the DTA. 
An affirmative answer to the issue attracts an inevitable holding that the 
appellant had no obligation to deduct from the fees paid to the foreign 
consultant withholding tax payable to the respondent, hence, the 
demands in the withholding tax certificates in the amount of TZS. TZS 
346, 462,916.00 were invalid and vice versa.
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As alluded to earlier on, the interpretation of the DTA is not new 
before this Court. It featured as one of the interrelated issues for the 
Court's determination in Kilombero where the appellant challenged the 
decision of the Tribunal which, like here, made a similar interpretation of 
the DTA. That case involved a dispute over the liability to remit 
withholding tax on service fees paid to a South African entity who had 
provided management services to her. Like in the instant appeal, 
Kilombero was caught up in a demand for withholding tax which it failed 
to deduct from the service fees it had paid to her foreign service 
provider. Again, as it is the case in the instant appeal, Kilombero argued 
that the service fees it paid constituted part of the business profit of the 
South African consultant payee which were not liable to withholding tax.
It is apparent from the judgment that, the learned counsel for 
Kilombero had reinforced his arguments on the OECD commentaries as 
well as a book titled: International Tax Policy and Double
Taxation Treaties, 2nd edition 2014 by Kevin Homes with a view to 
persuading the Court to hold that the service was covered under Article 
7 of the DTA. The Court took a different view. It endorsed the Tribunal's 
decision which had held that the service fees were outside the scope of 
Article 7 (1) rather, Article 20 of the DTA. After revisiting the two 
articles the Court stated:
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"Flowing from the above, as service fee is  an 
item which does not feature anywhere in the 
Double Taxation Agreement, Article 20 becomes
handy,......it  is our considered view that, as per
the Double Taxation Agreement, service fees by 
a South African entity for provision o f 
professional services to a Tanzanian entity, do 
not form part o f business profits provided for 
under Article 7 o f the Double Taxation 
Agreement which is not taxable in Tanzania but 
fa ll under Article 21 o f the Double Taxation 
Agreement and thus subject to withholding tax in 
terms o f section 83 (1) (b) o f the FT A, 2004. "[At 
page 25].
Few months later, a similar issue involving a dispute on the liability 
to withholding tax by another South African entity which had rendered 
services to a Tanzanian entity, arose in Mantra (Tanzania) Limited 
(supra). The Court reaffirmed its position in Kilombero and dismissed 
Mantra's argument for being untenable.
We heard Mr. Ngowi arguing with deep conviction that Kilombero 
was decided without the benefit of arguments based on OECD Model 
Tax Convention Commentaries hence taking a narrow interpretation of 
the DTA. It is against that argument that the learned advocate 
championed for a departure from Kilombero. With unfeigned respect,
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Mr. Ngowi's argument falls on the face of the very judgment he wants 
us to depart from. As seen earlier, the OECD Commentary in the 
Materials on International TP and EU Tax Law and International Tax 
Policy and Double Tax Treaties (supra) were placed by Kilombero's 
counsel to persuade the Court accept the argument that the service fee 
was not liable to withholding tax it was caught up by Article 7 (1) of the 
DTA. The Court felt unmoved to interpret the DTA in line with the 
learned counsel for the appellant in that appeal. Mindful of the doctrine 
of precedent, the Court rejected the arguments by the learned advocate 
and sustained the Tribunal's decision.
Quite unfortunate to the appellant, the Court is bound by its 
decision in Kilombero reaffirmed in Mantra on similar factual setting 
except for the parties involved. In any case, despite Mr. Ngowi's 
submission and invitation to depart from the position taken in the two 
cases, the Court has not been properly moved to take that route if we 
were minded to agree with his argument. The learned advocate 
conceded as much on the noncompliance with rule 106 (4) of the Rule 
which states:
"(4) Where the parties intend to invite the Court to 
depart from one o f its own decisions, this shall be 
clearly stated in a separate paragraph o f the
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submissions, to which special attention shall be 
drawn; and the intention shall also be restated as 
one o f the reasons."
That has not been done in the written submissions neither did Mr. 
Ngowi intend to do so before the commencement of the hearing of the 
appeal. He did so in answer to the Court's question. Be that as it may, it 
is now settled that departing from a previous decision cannot be 
undertaken by an ordinary court rather, a full bench empaneled by five 
justices which may entail overruling the previous decision if the Court 
sees justification to depart. See: Freeman Aikaeli Mbowe v. Alex O. 
Lema & Another, Civil Appeal No. 84 of 2001 (unreported), Abually 
Alibhai Aziz v. Bhatia Brothers Ltd [2000] T.L.R. 288, National 
Microfinance Bank v. Commissioner General, TRA, Civil Appeal No. 
168 of 2018 and Ophir Tanzania (Block 1) v. Commissioner 
General, TRA, Civil Appeal No. 58 of 2020 (both unreported).
It is thus obvious that despite Mr. Ngowi's urging, it would not 
have been opportune for us to accept his invitation and consider 
departing from Kilombero in the manner he submitted.
The above said, consistent with our decision in Kilombero, we 
hold that the service fees the appellant paid to MDS Architecture did not 
constitute part of the business profits of the payee and thus liable to
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withholding tax in Tanzania. Consequently, as the appellant did not 
remit the withholding tax in accordance with section 83 (1) (b) of the 
Act, the respondent was entitled to issue the impugned withholding tax 
certificates as he did.
In the event, we find no merit in this appeal and dismiss it with
costs.
DATED at DAR ES SALAAM this 15th day of July, 2022.
G. A. M. NDIKA 
JUSTICE OF APPEAL
L. J. S. MWANDAMBO 
JUSTICE OF APPEAL
P. M. KENTE 
JUSTICE OF APPEAL
The Judgment delivered this 18th day of July, 2022 in the presence of 
Mr. Walter Massawe, learned counsel for the Appellant and Mr. Andrew 
Francis, learned State Attorney for the Respondent, is hereby certified 
as a true copy of the original.
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