Summary of ruling

• The Applicant is a construction company in Uganda which entered into a long-term turnkey contract in September 2019 with Friends of Mustard Seed (the Employer) to construct a school. The contract provided for payments based on achieved milestones.
• For the Financial Year 2019/2020, the Respondent issued an additional assessment to the tune of Ushs. 233,805,988 based on a variance of Ushs. 779,353,296 between the VAT sales and the income tax sales.
• The Applicant objected on ground that the variance was due to advances received under the construction project in 2019 -2020 which were earned in 2020 – 2021 and treated as deferred income.
• The Respondent disallowed the said objection.
• The Applicant met all the milestones and invoiced for each completed milestone. Hence, all income earned was in respect of completed milestones and obligations was earned income.
• Since completion preceded invoicing, the Respondent was correct in treating all the income in 2019 – 2020 as having been earned in 2019 -2020.
• It’s double taxation to subject the same income for 2019/2020 to tax when the same was declared in 2020-2021. The proper remedy is to charge interest and penalties.
• Assessment set aside and Respondent is direct to compute penalties and interest accordingly.