Principle(s):

To the effect whether interest accrues on unpaid tax during the tax objection proceedings.

Brief facts:

The respondent is a company engaged in the business of providing various telecommunication services. In 2010, the Respondent acquired the assets and assumed the liabilities of Celtel including the tax debt referred to above. The respondent then opted to pay the unpaid balance left by Celtel or 70% of the disputed tax which amounted to Ug. Shs. 428,269,883. However, the Appellant informed the respondent that during the pendency of the tax objection proceedings, the unpaid tax had been accruing interest and that its tax liability increased to Ug. Shs. 1,555,836,915. The Respondent subsequently lodged a suit in the High Court to challenge the validity of the assessment in Court. The Application was dismissed by High Court and allowed by the Court of Appeal hence this appeal.

Holding:

It is not in doubt that Celtel was already a tax defaulter for failing to file tax returns in accordance with the law and that the VAT Act imposes a penal tax where a taxpayer defaults in paying tax on or before the due date.