Ican 2026 Advanced Taxation Question 3

Nigeria has established double taxation relief (DTR) mechanisms through laws, treaties, and agreements with other nations. This is to mitigate financial burdens from having to assess the same income twice (in the country where it is earned and again in their country of residence). Section 44 of the Companies Income Tax Act Cap C21 LFN, 2004 (as amended) provides for the treatment of relief in respect of Commonwealth income tax (that is, when there is no double taxation agreement/arrangement between Nigeria and the other country). Ajoseh Nigeria Limited, Kaduna, is a manufacturer of indigenous clothing fabrics. The company which was incorporated in 2010, opened a business operation, Hellen Incorp., in Montreal, Canada, five years ago. The Canadian company was established to respond to the needs of Africans in Canada, the United States, and Caribbean/Latin American countries. The abridged income statements of Ajoseh Nigeria Limited and Hellen Incorporated for the year ended December 31, 2024 are presented below: Ajoseh Nigeria Limited, Nigeria Hellen Incorp., Canada N’000 CAD $ Gross turnover 778,500 470,700 Deduct: Cost of goods sold 381,400 147,400 Salaries and other emoluments 131,700 94,400 Depreciation 25,300 14,200 Bad debts written off 18,100 9,900 Repairs and maintenance 1,200 900 Vehicle running expenses 1,000 700 Administrative expenses 13,600 8,250 Foreign exchange provision - 1,750 Foreign tax paid - 41,400 Share of head office expenses - 33,500 572,300 352,400 Net profit 206,200 118,300 The following additional information was provided: i. The amount incurred on cost of goods sold was directly related to the business operations. ii. The foreign exchange provision arose as a result of fluctuations in the conversion rate of the two currencies. iii. The capital allowances as agreed with the Federal Inland Revenue Service were: Ajoseh Nigeria Limited N18,520,000 Hellen Incorp. N10,490,000 iv. Assume that the average exchange rate during the financial year was N1,100 to CAD $1.