ICAN 2024 Taxation | Mixed

Mr. Ola Alao works as the manager of XYZ Limited which has its office located at Ikeja, Lagos. He lived with his family in Ibafo, Ogun State, and he provided the following information in respect of his 2021 assessment year: (i) He was paid a gross monthly income of N 204,000; (ii) In addition to his salary, he was paid the following bonuses; (iii) He attended a workshop outside his station for a period of ten days and was paid a daily allowance of N45,000, to cover hotel expenses, transportation and other incidental expenses; (iv) As a senior sales staff of the establishment, he was given non – assignable luncheon vouchers to the tune of N120,000 in year 2021; (v) He was assigned an official vehicle for his exclusive use which was purchased at the cost of N8,000,000 by the company; (vi) He enjoyed the services of a night guard and a domestic staff fully paid for by the company. Domestic servant (staff of the company) was paid N360,000 per annum and the night guard received N480,000 per annum but was hired from a company offering security services; (vii) He was transferred to the Port-Harcourt office on November 1, 2021 and was paid the sum of N2,000,000 for the purpose of relocating to his new station; (viii) He lived in a rented apartment fully paid for by company for N600,000 per annum; (ix) He contributes to an approved pension scheme at the rate of 8% of his salary and has a life insurance policy with a capital sum assured of N5,000,000, paying a premium of N20,000 per month; (x) He subscribed to National health insurance and National housing fund schemes making contributions of N35,000 and N40,000, respectively on a monthly basis.

Adidas Nigeria Limited has been in business for so many years. The company is into supply of furniture, fixtures and fittings. Since the date of commencement of business to the accounting year ended October 31, 2018, it had posted reasonable profits. In year 2019, a competitor, ABC Limited, was able to introduce a new brand of furniture into the market, which boosted the sales of the company. Unfortunately, this had an adverse effect on the gross turnover of Adidas Nigeria Limited. Despite concerted efforts made by Adidas Nigeria Limited to compete favourably with ABC Limited, its fortunes continued to dwindle. To allow for capital injection, the directors of Adidas Nigeria Limited, decided on February 1, 2020, to change its accounting date to be in line with one of its foreign partners. The board, therefore, decided that the accounting year-end be changed to December 31, every year.

Section 6 (6A) of Personal Income Tax Act Cap P8 LFN 2004 as amended by Finance Act 2020, states that the Minister by Order can determine what constitutes the significant economic presence of a non-resident, executor or trustee. Alhaji Yanko Abdulahi was a successful businessman in Kano before he died. He is survived by two children, namely: Yahaya and Binta. A trust was created for the benefit of his two children. The records of the trustee for the year ended December 31, 2021, revealed the following information: Rental income (gross) 2,400,000 Profit from trading activities 32,160,800 Interest received (gross) 840,000 Other income 630,500

Pkikan Nigeria Limited has been in business for several years preparing accounts to December 31 annually. You are given the following information about the company’s activities for the year ended December 31, 2021. N’000 Turnover 1,300 Cost of sales (400) Gross profit 900 Less: Total expenses (1,100) Net loss for the year (200)

Havillah Manufacturing Limited is a company that is engaged in the manufacture of different kinds of perfume, body lotions and other cosmetic products. The statement of profit or loss of the company for the year ended September 30, 2021, is as follows: N’000 N’000 Turnover 206,250 Less cost of sales (112,750) Gross profit 93,500 Other income 34,375 127,875 Less operating costs: Operating expenses 62,975 Interest and similar charges 3,520 (66,495) Profit before tax 61,380 Taxation (6,875) Profit after tax 54,505 Dividend (42,350) Retained profit for the year 12,155

Mr. Abiodun James returned to Nigeria after a long sojourn in America. In 2018, he incorporated James and Sons Nigeria Limited. At the company’s board meeting held in August 2021, the accountant of the company presented the tax query letter received from the Federal Inland Revenue Service (FIRS) for the consideration of the directors. Some of the directors thought that having engaged the services of external auditors, the FIRS should rely on the technical competence of the auditors in ascertaining the correctness of the audited financial statements submitted to them for their review. The Managing Director explained to the other directors that the administration of taxation on the profits of incorporated companies is vested in the FIRS whose management board is known as Federal Inland Revenue Service Board (FIRSB). The Federal Inland Revenue Services (Establishment) Act, 2007 (as amended) is relevant.

Kanbus Nigeria Plc is a company incorporated to manufacture and distribute food products that are widely accepted in many homes in Nigeria. It has operated for over 15 years since taking over the business of JHN Nigeria Limited. The Chief Executive Officer (CEO) of Kanbus Nigeria Plc, Mr. Babadada, was a former staff of Collinson India Limited for several years and thus brought into Kanbus Nigeria Plc a wealth of experience. Earlier in his working career, Mr. Babadada, had worked with Kong Manufacturing Limited, a Chinese company, where he imbibed the culture of collaboration with staff in the decision making process. Mr. Babadada, is assisted by a formidable team of managers recruited from major food and beverage companies in the country. The management of Kanbus Nigeria Plc. engaged different consultants to handle professional issues, including consultancy matters in respect of law, medical, finance, tax, accounting, etc. which were outsourced to different, well-known and competent hands. Your firm, Kassman and Co. (Chartered Accountants), were engaged to handle both corporate and personal income tax matters.