POWER AND PROCESS OF DISTRAIN: A CASE STUDY OF LAGOS

STATE

INTERNAL REVENUE SERVICE

BY

SAMUEL O. OYENITUN

LL.M LAW -149061003

BEING A THESIS PRESENTED TO THE FACULTY OF LAW,

UNIVERSITY OF LAGOS, AKOKA, LAGOS

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE

AWARD OF

MASTERS OF LAWS

DEPARTMENT OF COMMERCIAL AND INDUSTRIAL LAW

APRIL, 2017
DECLARATION
I hereby declare that this thesis has been written by me and that it is a record of my own research
work. All materials and works used in the research work have been duly acknowledged.

_____________________________ _____________________
Samuel Olutoyin OYENITUN Date
UNIVERSITY OF LAGOS, AKOKA

CERTIFICATION

2
This thesis is titled: Power and Process of Distrain: A Case-Study of Lagos State Internal
Revenue Service by Samuel Olutoyin OYENITUN, meets the regulations governing the award
of Masters of Laws degree (LL.M) of University of Lagos and is approved for its contribution to
knowledge and literary presentation.

_____________________________ ______________________
Prof. Abiola Sanni Date
Supervisor

DEDICATION

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This thesis is dedicated to God Almighty for his strength and help, to my Parents Elder and
Deaconess Oyenitun and to my beloved wife Victoria Eniola Taiwo Oyenitun and my Children
Isaac Olorundarasimi and Israel Jesufirepemi Oyenitun without which this thesis would not have
been possible.

ACKNOWLEDGMENT

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I express my sincere gratitude to Almighty God who created me, helped me this far and has
always supported me in all my endeavours. May His name be highly exalted.

My profound appreciation also goes to my Supervisor, Prof. Abiola Sanni FCTI,FCI and a
Professor of Tax at University of Lagos, an erudite scholar, whose thoroughness and articulated
guide has deepened my knowledge and source of inspiration in this aspect of law. Your lecture at
the LL.M class is the best; even a lay man will get a full grasp of knowledge of taxation under
your tutelage. I will always appreciate your scholarly role, humility, readiness to work and
personality at all times.

My appreciation also goes to my loving and caring parents Elder L.A and Deaconess P.O.
Oyenitun for their prayers, understanding and encouragement at all times during his program,
may the good Lord make you reap the reward of your labour.

Further, I am grateful to my wife Victoria Eniola Oyenitun for her understanding (while carrying
my second child to delivery stage which fell during this period), moral support and
encouragement before, during and after this academic period. I also appreciate my children
(Olorundarasimi and Jesufirepemi) as well for their co-operation and understanding throughout
this thesis. My prayer is that God of Heaven will bless and prosper you all.

I am also very grateful to Mr. Oladayo Oyetunji CILN (My-in-law) and Mrs. Temitope Oyetunji
(Sister) for your doggedness and support with supply of materials leading to the success of this
research work. I am always proud of you guys.

I will at this juncture, register my unreserved appreciation to Lagos state Internal Revenue
Service where I work, for not barricading the opportunity to this academic exercise and quest for
knowledge. Without permission, the program would have been an impossible mission. Special
thanks to Mr. Seyi Alade, Mrs. Badmus Oluwa and Mrs. Abosede Olukolu for permission to
proceed with this program at the time I started. God bless you all.

My appreciation will not be complete without appreciating my good friend, Seun Akinde Esq.,
who in the first place motivated me till I enrolled for this program on the last day the application
closed in 2014.May our togetherness continue to be profitable.

Mrs. Adeyinka and Alhaja Akanni, Samuel Odeyale, Oluwayemisi Akinsanya, Stella Avanrenren,
Akin-kunmi Alaja-Browne, Sessi Olubunola and Tolani thank you for your help during this
program.

TABLE OF CASES

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A v Commissioner of Internal Revenue Vol. 1 ALL NTC p79. 38

Aboud v. Regional Tax Board Vol. 1 ALL NTC p 183.. 41, 48

Ainabebholo v. Edo State University Workers Farmers Multipurpose Coop. Society Ltd
&Ors(2007) All FWLR (Pt. 366)
712..53

AlhajiYahayaMohammadu v Oturkpo Local Administration Vol 1 ALL NTC p 371..

40

Anosike P.O. v Tax Assessment Authority (Abakaliki) Vol. 1. ALL NTC Pg 109 42

Attorney-General of Bendel State v. Attorney-General of Federation... 54

Beaver Steel Inc. v. Skylark Ventures Ltd(1983) 47 B.C.L.R. 99 (S.C.) 2

British Columbia vCivil Enforcement Act, in Alberta- R.S.A. 2000, c. C-15..... 2

Chairman of the Board of Inland Revenue v Joseph Rezcallah & Sons Ltd .48

Clement v Iwuanyanwu (1989)9 NWLR PART 107,Page 39; ... 51

Commissioner of Revenue v Attah M.O. Vol. 1 ALL NTC, pg 279 38, 39

Craft v United States, 535 U.S. 274 (2002)..... 33

D.S.A Agricultural Machinery Manufacturing Company Ltd v LSIRB (2013)11TLRN 115, 132
CA. 50

Duke v Akpabuyo (2008)19 NWLR PART 959, Page 13... 51

Drye v United States. 33

Ekpo v Calabar Local Government (1993) 3 NWLR (Pt. 281) 324 at 337. 52, 54

Fahrer v Blumenthal 125 Pa. Super. 568, 190 A, 206 (1930).. 11

FBIR v Solanke FM Vol 1 ALL NTC pg

417. 39
.
FBN v A.G Anambra & Anor. .45, 57

FIRS v Maiduguri International Hotels Vol. 8 ALL NTC Pg

24740, 48

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FBN v Mr. Olaleye Soji & Anor (1996) FHCLR 426 at 433 FHC.
21

Hall v Marshall145 Or. 221; p 2d 193 21

Ilorin Native Authority v. Mallam Musa AjaoVol 1. ALL NTC Pg 109.......42

Independent National Electoral Commission (INEC) v MUSA (2003)10. W.R.N.1..... 1

Independent Television/Radio v Edo State Board of Internal Revenue (2014)LPELR-23215

(CA), VOL. 9 ALL NTC Pg.421..7, 21, 25, 29,43, 44, 51, 52, 54, 55

Ishola v. Ajiboye (1994) 6 NWLR (Pt. 352) 506 at 559..55

Jamaledine A.R. v FBIR Vol. 1 All NTC, Pg

193.. 40

Lumsden v. Burnett (1898)2 QB 171... 53

MacGregor v. Clamp & Sons (1914) 1 KB 288..29, 43

Moretti V Zanfino, 127, Pa, super.286, 193 A. 106 (1937).11

Nigerian Breweries Plc v LSIRB(2002) 5 NWLR (Pt. 759) 1 C.A particularly at pg. 16-18, paras
G -E .........................................................................................................................49

Prime Plastichem Nig. Ltd v. Federal Inland Revenue Service.. 48

The Queen v Port Harcourt Tax Authority Vol. 1 ALL NTC page 63 at page 65,Vol 1
ALL NTC page 63 at page 65
40, 48

United States v Allen, 328 F.2d 377 (5th Cir. 1964). 30

United States v National Bank of Commerce..30

United States v. Ortiz 140 F. Supp. 355 (S.D.N.Y. 1956).

.......33

United States v. Rodgers 461 U.S. 677, 103 S. Ct. 2132, 83-1 U.S. Tax Cas. (CCH) para. 9374 (1983)
(dicta) . 30, 32

United States v Wintner, 200 F. Supp. 157 (N.D Ohio 1961)..32

7up Bottling Company Plc v LSIRB (2000) 3 NWLR (Pt. 650) 565 605 at para B, 618, para A,
Court of Appeal 9, 22, 49

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 Young Sheet &Tube Co. v Patterson-Emerson-Comstock of Ind., 227 F.Supp.208 (N.D Ind.
1963)34

TABLE OF STATUTES

1. Company Income Tax Act CAP C21 LFN 2004

2. Constitution of the Federal Republic of Nigeria 1999 as amended-sections 4(3)&(7), 24(f), 36,
44, item 59Exclusive Legislative Schedule.

3. Federal Inland Revenue (Establishment) Act-sections 3(2)(a), sections 59.

4. High Court of Lagos Civil Procedure Rules- Order 3 Rule 2, Order 39 Rule 3.

5. Personal Income Tax Act 2004- sections 60, 66.

6. Personal Income Tax Act 2004 as amendedSections 23, 30, 57, 58, 68, 78, 87, 88,96, 104,
108.Item 59 of the Exclusive Legislative List.

7. Value Added Tax

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LIST OF ABBREVIATION

ALL NTC All Nigerian Tax Cases

BOJ...... Best of Judgment

C.A.. Court of Appeal

CAP. Chapter

CITA Company Income Tax Act

CFRN... Constitution of the Federal Republic of Nigeria

FBN.. First Bank of Nigeria

FBIR. Federal Board of Inland Revenue

FIRS. Federal Inland Revenue Service

FIRSEA Federal Inland Revenue Service (Establishment)

Act

HMRC .. Her Majesty Revenue and Customs

IBID. Ibidem

INEC.. Independent National Electoral Commission

LIRS Lagos State Internal Revenue Service

LPELR Law Pavilion Electronic Law Report

LSBIR. Lagos state Board of Internal Revenue

NORA Notice of Refusal to Amend

NWLR Nigerian Weekly Law Report

OP CIT Opera Citaum

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P.. Page

PARA.. Paragraph

PAYE. Pay As You Earn

PITA.. Personal Income Tax Act

PITAM. Personal Income Tax Amendment Act

RAL.. Revenue Administration Law of Lagos State

SIRS. State Internal Revenue Service

SBIR State Board of Internal Revenue

TAMA. Tax Audit Monitoring Agent

TARC. Tax Audit Reconciliation Committee

RTA.. Relevant Tax Authority

TAT. Tax Appeal Tribunal

WHT.. Withholding Tax

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TABLE OF CONTENT

Declaration i
Certification. ii
Dedication.. iv
Acknowledgment. v
Table of Cases. vi-vii
Table of Statutes. viii
List of Abbreviations ix-x
Table of Content. xii
Abstract. xii

Chapter 1

-----Introduction

1 Background to the Study. 2

2 Statement of the Problem 3
3 Operational Definitions.................... 3
4 Scope and Limitation of Study. 4
5 Research Questions................... 4
6 Theoretical Framework. 5
7 Aims and Objectives. 5
8 Significance of the Study..... 5
9 Literature Review/ Discussion of Literature Review 5

Chapter Two Distrain Generally.................. 11

2.00 Distrain Generally..11
2.1 Distress for Rent.. 12
2.2 Distrain for Tax Purposes 19
2.3 Legal framework for the exercise of the power of Distrain20
2.4 Distrain as a Tax Enforcement Tool through Case Laws 21
2.5 Personal Income Tax Act.. 22
2.6 Classes of Assessment23
2.7 Appeal.. 25
2.8 Relevant Provisions relating to warrant of Distrain under Company Income Tax Act,
Federal Inland revenue Service Establishment Act and other Laws 26
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 2.9 Process of distrain under Personal Income Tax Act...............26
2.10 What May be Distrained. 27
2.11When Distrain may be made 27
2.12 Comparative Analysis ofDistrain Process in other Jurisdiction
(International Perspective).. 27
2.13 Distrain Process in United Kingdom..
27
2.14 Distrain Process in United States 30

Chapter Three Power and Process of Distrain: A Case Study of Lagos State Internal
Revenue Service
3.0 Power and Process of Distrain: A Case Study of Lagos State Internal Revenue
Service. 36
3.1 Procedure in Lagos State 36
3.2 Administrative Aspect37
3.3 Tax Audit Exercise (Pay As You Earn And Withholding Tax Scheme)38
3.4 Best of Judgment. 39
3.5 Service of Demand Notice 40
3.6 Payment of Undisputed Amount 40
3.7 Objection 40
3.8 Notice of Refusal to Amend..41
3.9 Final and Conclusive.41
3.10 Administrative Policy of LIRS
42
3.11 Appeal.
42
3.12 Letter of Intention to Levy Warrant of Distrain..
42
3.13 Institution of Distrain action in
Court.43
3.14 Obtaining Court Order, Letter of Authority and Execution of
Distrain.43
Chapter FourIssues and Challenges in the Process of Distrain

4.1 Issues and Challenges in the Process of Distrain 47

4.2 Issue arising from assessment having become final and conclusive. 47
4.3 Issues bothering on who is subject to distrain-employer or employee?.....................49
4.3.1 Mode of Instituting the action for distrain in court, whether it supersedes the Rules of
Court?....................................................................................................................... 50
4.4 Whether ex parte provisions in PITA contradicts the principle of fair hearing?...... 51
4.5 Issues on the constitutionality of distrain with regards to right to own properties 54
4.5.1 Interpretation and application of Section 104 of PITA with respect to seizure and sale of
goods as opposed to sealing 55

Chapter Five Summary, Recommendations and Conclusion 59

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 5.0 Summary59
5.1 Recommendations 59
5.2 Conclusion 60-61
Bibliography 62-63

POWER AND PROCESS OF DISTRAIN UNDER PITA 2004 AS AMENDED: A CASE

STUDY OF LAGOS STATE INTERNAL REVENUE SERVICE.

ABSTRACT.

Tax has been widely defined by various tax practitioners and educationist; however a good
description of the tax will contain three main characteristics which are: It is compulsory; it is
imposed by government and it is for public purpose. Taxation is no doubt an enablement of
statutes as enshrined under section 24 (f) Constitution of the Federal Republic of Nigeria, 1999
as amended and its payment is not only compulsory but also a civic obligation of every citizen of
Nigeria as provided for in the Personal Income Tax Act (PITA), 2004 as amended. Failure to pay
taxes is punishable under sections 94-96 of Personal Income Tax Act earlier cited. Tax by its
nature is a payment that even the most compliant being on earth will not want to pay or where
they pay, do not pay accurately. It is to this end that laws have been made to enforce the payment
and punish tax evaders and avoiders. Enforcement of tax payment is therefore, a veritable tool by
relevant tax authority to compel and or punish failure to pay taxes. There are many modes of
enforcing payments of taxes all over the world and it includes criminal prosecution, civil actions
in form of debt recovery and distrain among others. Enforcement of tax payment via distrain is
an aspect of enforcement that has been criticized as being unconstitutional and against the
principle of fair hearing although the courts have held it to be constitutional and an exception to
the general provision of compulsory acquisition in Nigeria while referring to section 44(3) of the
Nigerian constitution. This work seeks to critically analyse the power and process of Distrain
under the Personal Income Tax Act (PITA) 2004 as amended: a case-study of Lagos State
Internal Revenue Service (LIR). The project begins with an introduction to definition of key
terms, a brief history of distrain and a scholarly literature review on Distrain. Chapter Two
considers the power and process of Distrain: a case study of Lagos State Internal Revenue
Service. Chapter Three examines a comparative analysis of Distrain process in other jurisdiction,
particularly from international perspective. Chapter Four discusses the various legal and other
issues and challenges arising under the process of distrain such as whether the ex parte procedure
supersedes the rules of court, the constitutionality of distrain power, the disposition of section

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104 PITA 2004 as amended and section 44(2)&(3) of the Nigerian constitution. This project
work concludes by summarizing and making necessary recommendations such as proper and
effective service of demand notice and other statutory notices; clear and unambiguous provisions
on the meaning of distrain; clear provision for mode of instituting an action for distrain in court;
and inclusion of neutral and independent third party in its Tax Audit Reconciliatory Meetings
among others.

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