The Court of Appeal has ordered the Board of Inland Revenue (BIR) to refund US$481,724.21 in overpaid taxes to two foreign companies, after finding that the tax authority had been unjustly enriched.
In a written judgment delivered by Justice of Appeal Ricky Rahim, the court overturned a 2023 decision by Justice Lambert-Peterson, who had previously refused to grant an order of mandamus for the refund. The appellants, HMV Ingenieros LTDA and HMV Engineering Corporation, successfully argued that the BIR unlawfully retained funds that were never subject to tax under the Income Tax Act.
The dispute arose from a contract between the appellants and the Trinidad and Tobago Electricity Commission (T&TEC). Between 2013 and 2016, T&TEC deducted and remitted withholding tax to the BIR on payments made to the companies. However, the appellants contended that US$348,373.84 of those payments were for the supply of goods, while the remainder concerned services performed entirely outside of Trinidad and Tobago. Under Section 50 of the Income Tax Act, such payments do not attract withholding tax.
While the BIR admitted it received the funds and acknowledged that payments for goods were not taxable, it refused to issue a refund.
The BIR argued the appellants failed to provide sufficient evidence that the services were performed offshore.
At the High Court level, Justice Lambert-Peterson found that the BIR failed to make a determination on the refund request within a reasonable time. However, she declined to order the refund or declare unjust enrichment, suggesting the appellants had not properly pleaded the specific legal basis for such a claim.
The Court of Appeal disagreed, describing the trial judge’s refusal as “plainly wrong.”
Justice Rahim noted that the appellants had clearly articulated that the money was paid under a mistake of law or fact.
“The judge’s finding that the appellants’ case was not properly pleaded or that they had not established the basis for the claim in unjust enrichment was an error,” Justice Rahim said.
The court found that once the BIR admitted it held funds it had no statutory authority to collect, the principle of unjust enrichment applied.
The judgment clarified that the BIR cannot retain money simply because a taxpayer failed to jump through extra-statutory hurdles, especially when the facts showed the tax was not due.
The Court of Appeal granted a declaration that the BIR was unjustly enriched and issued an order of mandamus compelling the refund of the full US$481,724.21.
The court dismissed a separate claim by the appellants regarding the “expropriation” of their property.
The panel, which included Justices of Appeal Nolan Bereaux and James Aboud, concluded that there was sufficient evidence before the lower court to determine the refund amount.
Justice Rahim concluded: “There was sufficient evidence before her on which she could have made such a determination. The failure to make the order for the issuance of the writ of mandamus was an error on her part.”
The appellants were represented by Barrie Attzs, instructed by Gary Ramkissoon, while Rorey Gaya appeared for the respondent.
