A disposal can arise out of two circumstances. Firstly, it is a result of third party acts or through acts of God. Examples in point are where an asset is stolen or destroyed by fire or hit by lightening. The owner who had insured the item may obtain indemnity from the insurance company. The second circumstance may arise where the taxpayer disposes of the item but does not have a choice. To amount to an involuntary disposal, it is sufficient to show that a party though unwilling to dispose of an interest or had any intention to dispose of it, had no option but to dispose of it,   Having discussed what amounts to an involuntary disposal the question is, did the applicants disposal of 16.67% of their interests amount to an involuntary disposal? The Tribunal notes that there was no official communication from the GOU to the applicants to sell 66.67 % of their interests. By official communication, it is understood to mean a letter or correspondence from GOU. There was no board resolution. There were also no minutes of a meeting to show that the applicants and GOU agreed that the former should sell the extra 16.67% of their interests. In fact, if there was a meeting where the parties agreed so, the Tribunal thinks the sale would not amount to an involuntary disposal. Mr. Graham testified that “there were several meetings with government officials at different levels where it was indicated that the applicants should retain a third of their interests.” With due respect to Mr. Graham’s testimony, though GOU is a legal entity it is not a physical one. Meeting Government is a myth. One can only meet its officials and agents.

Mr. Graham did not inform the Tribunal which government officials the applicants met and who represented the applicants. The Tribunal will ignore the said evidence from Mr. Graham.   In the witness statement of Mr. Graham, he went at length to show that Tullow did not wish to sell more than 50% of their interest. This showed that Tullow had the intention of selling 50 % of their interest. The said evidence was not rebutted. Mr. Inch testified that he met Mr. Lawrence Kiiza the Director of Economic Affairs, who informed him that  the GOU would not allow a 50% split. The GOU wanted the applicants to maintain 33.33% interest. There was an email to that effect by Mr. Inch to Mr. McDade. Mr. Lawrence Kiiza did not testify and rebut the said testimony.

If the said testimony is uncontroverted it should be taken as the truth. Under S. 133 of the Evidence Act, no particular number of witnesses shall be required for the proof of any fact. Mr. Inch’s evidence if unchallenged may suffice. There is no need to look at minutes of meetings or board resolutions. The Tribunal notes that the applicants testified that they would not sell their interest without GOU consent.  Looking at the circumstances of the case, it can be seen that the sale of the 16.67% of their interest was not out of the applicants’ choice or free will. The Tribunal feels that such a disposal amounted to an involuntary disposal.   The tribunal has already noted for an involuntary disposal to entitle one to a reinvestment relief, three other conditions have to be satisfied. The Tribunal will summarise the three conditions in one sentence.

The taxpayer ought to have made a reinvestment, in an asset of a like kind, within one year from the date of disposal. Did the applicants meet these conditions?   The Tribunal notes that the respondent issued assessment SA/LTO/2569 of US$ 390,924,460 and assessment SA/LTO/2570 of US$ 84,999,660 on TUL and TUOP respectively on the 18^th October 2010. On the 1^st December 2010, the applicants objected to the assessments. On the 24^th February 2011, the respondent made an objection decision. On the 25^th March 2011, the applicants filed an application for review before the Tax Appeals Tribunal (TAT) challenging the objection decision.

The SPAs between Total, CNOOC and the applicants were made on the 29^th March 2011. So by the time the assessments were issued and the matter filed in the Tribunal the sale of the applicants’ interests had not taken place.   In order to ascertain the date when the applicants disposed of their interests, one has to look at the SPAs they entered with CNOOC and Total on the 29^th March 2011. Under Clause 2.1 of both SPAs the transfer as between the parties shall be deemed effective on and from the Effective Date. Effective Date was defined under Clause 1.1 to mean “00.01 hours (United Kingdom time) on 1^st January 2010”. Clause 4 of the Agreement dealt with the completion of transfer. Under Clause 2.2 of both SPAs, the obligations of the parties under Clause 2.1 and Clause 4 were conditional on the satisfaction of the Minister’s consent having been duly obtained. Hence the effective date of the transaction and completion of the transfer were subject to the Minister’s consent.

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