Perseus Mining Ghana Limited v. Commissioner-General (Court of Appeal)

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CASE BRIEF

PERSEUS MINING (GH) LTD v. THE COMMISSIONER GENERAL, GHANA REVENUE AUTHORITY

Court of Appeal, Accra

Suit No. H1/137/2022

Date: 1st June, 2023

FLYNOTE

Tax Law – Mining Operations – Forward Sales Contracts – Derivative Instruments – Loss Deductibility – Business Income vs Investment Income – Whether losses from forward gold sales contracts deductible from business income – Whether forward sales contracts constitute business activity or investment activity – Whether Commissioner-General wrongly re-characterised business transactions – Whether spot gold price or contract price applicable for royalty calculation – Sections 5(2), 6, 7(2), 131 Income Tax Act 2015 (Act 896) – Section 7(2) Internal Revenue Act 2000 (Act 592) – Regulation 10(2) Internal Revenue Regulations 2001 (L.I. 1675)

Held: (Unanimously) Forward sales contracts for gold constitute derivative instruments effectively connected to mining business, not investment activity. Losses from such contracts are business losses deductible from business income per Section 7(2) of Act 592. Subordinate legislation (Regulation 10(2) L.I. 1675) cannot override parent Act. Commissioner-General erred in re-characterizing business income as investment income and disallowing loss deduction. Royalty payments to Franco Nevada Corporation governed by Sale and Purchase Agreement, separate from statutory royalties to Government. Appeal allowed.

PARTIES

Appellant: Perseus Mining (Gh) Ltd (Mining company)

Respondent: The Commissioner General, Ghana Revenue Authority (GRA)

FACTS

  1. Appellant’s Business: Perseus Mining engaged in gold mining, production and sales
  2. Tax Audits: GRA conducted tax audits for periods:
    • First audit: 2010-2012 (issued 04/09/2013, revised 25/11/2013)
    • Second audit: 2010-2017 (conducted 2019)
  3. Tax Assessment: Total tax liability assessed at US$10,207,164.17 (revised from initial US$8,725,387.49)
  4. Forward Sales Contracts: Appellant entered forward gold sales contracts with:
    • Macquarie Bank Ltd
    • Credit Suisse AG
    • Purpose: Manage price volatility risk, provide income certainty
  5. Disputed Issues:
    • Loss Treatment: GRA treated losses from forward sales contracts as investment losses (not deductible from business income)
    • Royalty Calculation: GRA used spot gold price instead of contract price for calculating royalties and taxes
    • Related Party Transaction: GRA characterized forward sales as related party transactions requiring arm’s length pricing
  6. Franco Nevada Corporation: Appellant paid royalties to Franco Nevada under Sale and Purchase Agreement (separate from Government royalties)
  7. Objection Process:
    • Appellant filed objection 21/01/2014 (first audit)
    • Appellant paid 30% precondition (US$2,501,902.00 / GHc13,385,180.41)
    • Final Objection Decision: US$7,509,110.29 outstanding
  8. High Court Appeal: High Court (Commercial Division) affirmed GRA assessment 08/02/2022
  9. Court of Appeal: Appellant appealed on multiple grounds

ISSUES FOR DETERMINATION

  1. Whether trial judge made primary findings of fact before applying law
  2. Whether appellant discharged burden of proof under Section 92(1) of Revenue Administration Act 2016 (Act 915)
  3. Whether losses from forward sales contracts deductible from business income
  4. Whether appellant used two different prices for calculating royalties to Franco Nevada Corporation and Government
  5. Whether Commissioner-General properly exercised discretion in re-characterizing forward sales contracts
  6. Whether forward sales contracts were related party transactions
  7. Whether judgment against weight of evidence

ARGUMENTS

Appellant’s Case

Ground 2: Failure to Make Primary Findings

  1. Material Facts Unresolved: Trial judge failed to resolve disputed facts:
    • Whether forward sales contract was related party transaction
    • Whether forward sales contract irrational/without economic sense
    • Whether Franco Nevada Corporation affiliate of appellant
  2. Order 54(9) Obligation: High Court sitting as appellate court still mandated to make findings of facts where disputed
  3. Wrong Assumptions: Respondent’s objection decision based on wrong assumption that appellant contracted with related parties
  4. Franco Nevada Admission: Respondent admitted Franco Nevada third party, not related to appellant – court contradicted this admission
  5. Undisputed Facts: Forward contracts with third parties (Macquarie Bank, Credit Suisse), not related parties

Ground 3: Burden of Proof Misconstrued

  1. Proper Compliance: Appellant provided sufficient evidence showing compliance with tax laws
  2. Evidence Established:
    • Transaction with Franco Nevada not with related party
    • Income from forward sales effectively connected to business income
  3. Commissioner Not Law: Whatever Commissioner says not gospel truth – dangerous proposition that Commissioner’s evaluation determines proof
  4. Appeal Right Rendered Redundant: Lower court’s interpretation makes statutory right of appeal meaningless

Ground 4: Loss Deductibility

  1. Regulation Cannot Override Act: Regulation 10(2) L.I. 1675 cannot amend/override parent legislation Section 7(2) Act 592
  2. Business Income, Not Investment: Forward sales contracts are business transactions, not investment
  3. Derivative Instruments Recognized: Section 131 Act 896 recognizes derivative instruments as financial instruments
  4. Effectively Connected: Forward sales effectively connected to gold sales business
  5. Canadian Authority: Cited Echo Bay Mines Ltd v The Queen and Placer Dome Canada Ltd – derivative instruments integral to income generation
  6. Sections 19, 21, 25 Act 896: Trial judge ignored these sections specifically dealing with gains/losses from forward contracts

Ground 5: Royalty Calculation

  1. Two Different Obligations: Distinguished between:
    • Franco Nevada royalties: Under Sale & Purchase Agreement (Clause 4.1, 4.3) – spot price stipulated
    • Government royalties: Under Section 25 Act 703/Act 794/Act 900 – 5% of total revenue
  2. Not Same Source: Two payments not same, don’t derive from same legal source
  3. Total Revenue Calculation: Government royalties should be 5% of total revenue (spot price + forward contract sales combined)
  4. Mining Lease Clause 21: Requires payment per legislation – total revenue from minerals
  5. Acquisition of Rights: Franco Nevada payment for acquisition of mineral rights (continuation from AngloAshanti), not Government royalty for sale of minerals

Ground 6: Exercise of Discretion

  1. Article 296(c) Requirements: Commissioner must publish regulations to govern discretionary power exercise
  2. Section 34 Requirements: To succeed under Section 34, respondent must prove arrangement:
    • Fictitious
    • Without substantial economic effect
    • Form not reflecting substance
  3. No Evidence: No evidence forward contract disguised agreement for tax avoidance

Ground 7: Not Related Party Transaction

  1. Section 31 Inapplicable: Section 31 doesn’t apply to transactions between independent parties
  2. No Controlled Relationship: Cannot establish controlled relationship under Section 128
  3. Independent Parties: Macquarie Bank and Credit Suisse independent third parties
  4. Franco Nevada Independent: Assignment from AngloAshanti to Franco Nevada merely extension of independent party transaction

Omnibus Ground: Against Weight of Evidence

  1. Core Business Established: Gold mining, production, marketing, sales
  2. Disregard Without Basis: Respondent disregarded forward contracts, substituted spot price without satisfying Section 34 requirements
  3. Admission Ignored: Respondent accepted Franco Nevada treatment but contradicted own position
  4. Statutory Mode Prescribed: Statute prescribed mode for Government royalties – respondent used different method

Respondent’s Case

On Findings:

  1. Royalty Price Issue: Real issue whether royalty taxed on spot price or contract price
  2. Two Different Prices Used: Appellant used spot price for Franco Nevada, contract price for Government – undisputed per audit report
  3. Court Correct: Lower court right to conclude respondent could use objective price for Government taxes
  4. Discretion Not Abused: Respondent never abused discretion under Article 296
  5. Gold Price Volatility: Appellant unable to show gold prices erratic with consistent downward trend

On Burden of Proof:

  1. Totality of Evidence: Judgment reflects totality of evidence before court
  2. Legal Basis Lacking: Appellant’s claims lack legal basis
  3. Section 9 Act 896: Losses from contract sales not deductible from income per Section 9
  4. Spot Price Correct: Lower court right agreeing spot gold price should be basis for income calculation
  5. Insufficient Evidence: Appellant failed to introduce sufficient evidence showing forward sale contract recognized in Ghana tax laws
  6. Sections 10 & 11 NRCD 323: Appellant carried burden to produce sufficient evidence to avoid ruling against it

On Loss Deductibility:

  1. Investment Loss: Forward contracts constitute investment activity per Regulation 10(2) L.I. 1675
  2. Not Tax Deductible: Such deductions not tax deductible from business income
  3. Section 13 Act 592, Sections 9 & 81 Act 896: Court considered whether losses wholly, exclusively, necessarily incurred for production of income
  4. Legal Justification Required: Appellant lacked justification to hedge at lower price than prevailing market

On Related Parties:

  1. Multiple Considerations: Court didn’t base decision solely on related party issue
  2. Broader Analysis: Court considered integration with business operations and economic reasonableness

On Canadian Cases:

  1. Foreign Law Inapplicable: Canadian cases based on Canadian tax law, therefore inapplicable in Ghana
  2. Not Binding: Foreign cases merely persuasive, not binding

HOLDING & JUDGMENT

Per Bright Mensah JA (Senyo Dzamefe JA and Bartels-Kodwo JA concurring):

APPEAL ALLOWED (Except Ground 6)

Ground 2: Failure to Make Primary Findings – ALLOWED

Findings:

  1. Material Facts Unresolved: Lower court failed to resolve material disputed facts before reaching conclusions
  2. Unsupported Conclusions: Court’s conclusions not supported by evidence:
    • Held forward contracts irrational and tax avoidance scheme – no evidence
    • Held Franco Nevada related party – contradicted respondent’s own admission
  3. Clear Admission Binding: Respondent admitted Franco Nevada third party, not related to appellant (pp 145-147 Vol. 3, p. 159 para. 2 Vol. 3)
  4. Estoppel by Conduct: Where adversary admits fact advantageous to party’s cause, party needs no better evidence – In re: Asere Stool: Nikoi Otai Amontia V v Akotia Oworshika III
  5. Erroneous Holdings:
    • Franco Nevada was related party – WRONG (contradicts admission)
    • Forward contracts irrational/without economic sense – WRONG (unsupportable)
    • Tax avoidance scheme – WRONG (no evidence)

Ground allowed.

Ground 3: Burden of Proof – ALLOWED

Lower Court’s Erroneous Position:

Court held (pp 182-183 Vol. 4):

“When the law in Section 92(1) of Act 915 places the onus of proof on the appellant in tax appeals, it was not meant for the production of voluminous documentation…It is the Commissioner-General’s evaluation of these documents, acts and transactions vis-à-vis the tax laws, practice and conventions in the industry both local and international that will determine whether the proof offered is proof in law…”

Court of Appeal’s Rejection:

  1. Dangerous Proposition: This is dangerous proposition of law
  2. Commissioner Not Law: Commissioner-General is not the law, neither is it that whatever he says must be taken as gospel truth
  3. Right of Appeal Rendered Redundant: Proposition renders statutory right of appeal under Order 54, rule 2(1) C.I. 47 redundant
  4. Correct Interpretation: Nature of evidence put forward by taxpayer + Commissioner objectively applying tax laws and statutes = determines whether burden discharged
  5. Discretion Must Be Lawful: Commissioner has discretion to determine assessable tax, but exercise must be grounded in law, not capricious/arbitrary (Article 296(c))
  6. Key Evidence Established:
    • Transaction with Franco Nevada not with related party
    • Income from forward sales effectively connected to business income
  7. Sufficient Evidence Provided: Appellant provided sufficient evidence to prove compliance with law provisions
  8. Burden Discharged: Appellant discharged burden cast on it

Ground allowed.

Ground 4: Loss Deductibility – ALLOWED

Legal Framework Analysis:

1. Regulation Cannot Override Parent Act:

  • Regulation 10(2) L.I. 1675 cannot amend/override Section 7(2) Act 592 (parent legislation)
  • Mornah v Attorney-General [2013] – subordinate legislation cannot override parent Act
  • Section 7(2) Act 592 in pari materia with Section 5(2) Act 896

2. Proper Characterization:

Regulation 10(2) L.I. 1675:

  • Deals with tax treatment of loss from investment vs business
  • Becomes operational AFTER income established as either business or investment
  • Loss from business shall not be set off against investment income
  • Loss from investment shall not be set off against business income

Section 7(2) Act 592 / Section 5(2) Act 896:

  • Income earned by taxpayer attributed to business AND would otherwise be included in calculating investment income = BUSINESS INCOME
  • This is the parent legislation

3. What Constitutes Income:

Business Income:

  • Any income earned from business activity
  • Any transaction bringing taxpayer revenue = business income for tax
  • Appellant engaged in gold mining, production, sales = core business
  • Therefore, sale of any gold = pure business transaction

Investment Income (Section 6 Act 896):

  • Dividends, interest, annuity, natural resource payment, rent, royalty
  • Gain from realization of investment asset
  • Gift received
  • Quite different and distinct from business income

4. Forward Sales Contracts as Business Income:

Definition & Nature:

  • Agreement for future delivery when gold unavailable for immediate sale
  • Negotiation for future delivery
  • Purchaser may pay spot price with future delivery OR pay price prevailing at delivery

Spot Gold Price:

  • Benchmark pricing at any given time per London Bullion Marketing Association
  • “Cash and carry” system
  • “As is” price at time of sale
  • No element of loss or gain

Forward Sales Contract Price:

  • Price using derivative financial instrument
  • Recognized under Section 131(1)(a)(ii) Act 896: “‘financial instrument’ means a derivative instrument”
  • Upon delivery, if spot price falls = loss occurred = deductible from income
  • If spot price rises = profit = added to business income for tax

5. Derivative Instruments Integral to Business:

  • Section 131(3) & (a) Act 896 recognizes financial gain/loss from financial/derivative instruments
  • Used in normal course of mining business
  • Hedge exposure to future price and currency fluctuation
  • Transactions effectively connected to business of mining

Canadian Authority (Persuasive):

Placer Dome Canada Ltd v The Queen:

“Production activities yield no income without sales. Activities reasonably interconnected with marketing the product, undertaken to assure its sale at a satisfactory price, to yield income, and hopefully a profit, are…activities that form an integral part of production which is to yield income and resource profits.”

Echo Bay Mines Ltd v The Queen:

  • Use of derivative instruments integral to generation of income by mining company

6. Application to Present Case:

  • Forward sales contracts effectively connected to gold sales business
  • Loss therefrom should form basis for deduction from business income
  • Loss should be set off against business income
  • Appellant’s core business: mining and sale of gold
  • Derivative transaction arose from mining and selling gold (income asset)
  • Income/loss from derivative effectively connected to business income
  • Should be recognized as loss from business per Section 7(2) Act 592
  • NOT loss from investment

7. Respondent’s Errors:

  • Failed to treat forward sales as income from business
  • Wrongly characterized as income from investment
  • Did not set off loss from forward sales against business income
  • Wrongly set off against investment income (which didn’t exist per Section 6 Act 896)

8. No Investment Income Evidence:

  • Evidence did not establish appellant earned any incidents stipulated in Section 6 Act 896
  • No dividends, interest, annuity, natural resource payment, rent, royalty earned
  • Respondent cannot insist on investment income tax method when transactions were business income
  • Respondent lacks power/jurisdiction to re-characterize business income as investment income where none existed

9. Sections 19, 21, 25 Act 896:

  • Trial judge erred by focusing on Section 9 Act 896
  • Failed to consider Sections 19, 21, 25 specifically dealing with gains/losses from forward sales contracts

Ground allowed.

Ground 5: Royalty Calculation – ALLOWED

Two Distinct Royalty Obligations:

1. Franco Nevada Corporation Royalties:

Legal Basis:

  • Sale & Purchase Mining Lease between appellant and AngloAshanti Corporation Ltd
  • AngloAshanti assigned interest to Franco Nevada Corporation
  • Clause 4.1(a), (b), (c) and Clause 4.3 (p. 25 Vol. 1) – stipulated spot gold price
  • Clause 21 Mining Agreement (p. 82 Vol. 4)

Nature:

  • Payment for acquisition of mineral rights
  • Continuation of royalties to independent party under Sale & Purchase Agreement
  • NOT payment of Government royalties
  • NOT payments for sale of minerals attracting Government royalty
  • Independent party transaction, not related party (per admission p. 145-147 Vol. 3, p. 159 Vol. 3)

2. Government of Ghana Royalties:

Legislative Framework:

Section 25, Minerals & Mining Act 2006 (Act 703):

  • Taxpayer required to pay royalty to Republic

Section 1, Minerals & Mining (Amendment) Act 2010 (Act 794):

  • Rate: 5% of total revenue earned from minerals obtained by holder

Section 1, Minerals & Mining (Amendment) Act 2015 (Act 900):

  • “Holder…shall…pay royalty to the Republic at the rate and in the manner that may be prescribed”
  • Research revealed rate and manner NOT yet prescribed

Application of Interpretation Act:

  • Section 35(2)(c) & (3) Interpretation Act 2009 (Act 792) invoked
  • Rate of 5% under Act 794 continued in force under Act 900
  • Appellant shall pay 5% of total revenue earned from minerals

Calculation Method:

  • Mining industry: gold price may be spot price, forward sale contract, or combination
  • Once minerals sold, appellant computes royalties on total revenue generated
  • Total revenue = revenue from both spot price + forward price contract sales
  • Reported in appellant’s audited accounts

Clause 21 Mining Agreement (p. 82 Vol. 4):

  • Appellant shall pay Government royalties in manner prescribed by legislation
  • Manner = 5% of total revenue earned from minerals obtained by holder
  • Total = spot + forward sales revenue combined

Court’s Conclusions:

  1. Two Separate Obligations: Franco Nevada payment distinct from Government royalty
  2. Different Legal Sources:
    • Franco Nevada: Sale & Purchase Agreement
    • Government: Sections 25 Act 703, 1 Act 794, 1 Act 900
  3. No Scheme to Avoid Tax: Payment to Franco Nevada not scheme to avoid tax payment
  4. Statutory Breach: Any mode of computing Government royalties contrary to legislation = breach of statute
  5. Lower Court Error: Trial judge erred holding otherwise

Ground allowed.

Ground 6: Exercise of Discretion – DISMISSED

Article 296(c) Requirements:

  • Where person exercising discretion not judge/judicial officer
  • Shall publish constitutional/statutory instrument
  • Regulations to govern exercise of discretionary power

Appellant’s Argument:

  • Commissioner-General must publish regulations per Article 296(c)
  • Section 34 Act 896 requires proof arrangement:
    • Fictitious, OR
    • Without substantial economic effect, OR
    • Form not reflecting substance
  • No evidence forward contract disguised agreement for tax avoidance

Respondent’s Response:

  • Respondent did not abuse discretionary power
  • Article 296 properly interpreted in:
    • Ransford France (No.3) v Electoral Commission [2012] 1 SCGLR 703
    • Gregory Afoko v Attorney General (unreported)
  • Obligation to make regulations limited to quasi-judicial situations
  • Not every discretionary power requires Article 296 compliance

Court’s Analysis:

1. Initial Administrative Role:

  • At initial tax assessment stages, respondent’s role purely administrative
  • Allowed to exercise best discretion – R v Commissioner of Income Tax: Ex parte Maatschappij De Fiinhouthandel N.V. [1971] 1 GLR 213

2. After Objection Raised:

  • Administrative role elevated to adjudicator
  • Article 296(c) and other statutes apply

3. No Clear Abuse:

  • No clear evidence of abuse of discretionary power per Article 296

4. Wrong Method Applied:

  • Respondent applied wrong mode/method in calculating tax assessment
  • But exercised discretion within jurisdiction
  • Decision being wrongful may be corrected through appeal/judicial review

5. Discretion Within Jurisdiction:

  • Adjudicator may proceed on wrong basis
  • If exercised within jurisdiction, correctable through appeal

Ground dismissed.

Ground 7: Related Party Transaction – ALLOWED (by implication through other grounds)

Evidence Established:

  1. Forward Contracts with Independent Parties:
    • Macquarie Bank Ltd
    • Credit Suisse AG
    • Neither affiliate of nor related to appellant
  2. Not Controlled Arrangement: Cannot be described as controlled arrangement or related party transaction (Section 128 Act 896)
  3. Section 31 Inapplicable: Section 31 Act 896 doesn’t apply to transactions between independent parties
  4. Franco Nevada Independent:
    • Third party per respondent’s admission
    • Assignment from AngloAshanti to Franco Nevada
    • Extension of independent party transaction to another independent party
  5. Derivative Transaction Nature:
    • Arose from gold (income asset of appellant)
    • Per Section 7(2) Act 592, income/loss from derivative effectively connected to business income
    • Should be recognized as loss from business, NOT investment
  6. Lower Court Error: Lower court erred accepting wrongful characterization by respondent

Findings align with analysis under other grounds.

Ground 1: Against Weight of Evidence – ALLOWED

Legal Principles:

Owusu-Domena v Amoah [2015-2016] SCGLR 799:

  • Omnibus ground throws up entire case for fresh consideration
  • Question of law and fact both addressable

Djin v Musah Baako [2007-2008] SCGLR 686:

  • Appellant implying certain pieces of evidence wrongly applied
  • Onus on appellant to clearly demonstrate lapses

Opoong v Anarti [2001] SCGLR 556:

  • Appellate court analyses entire record
  • Satisfies itself conclusions reasonable/supported by evidence

Akuffo Addo v Catherine [1992] 1 GLR 377:

  • Appellate court examines totality of evidence
  • May reach own decision on admitted/undisputed facts

Evidence Established:

  1. Core Business: Gold mining, production, marketing, sales – undisputed
  2. Respondent’s Admission (pp 145-147 Vol. 3, p. 159 Vol. 3):

“Franco Nevada Corporation, Canada – We have considered your explanation on the above issue and accepted the treatment of the royalty payments to Franco Nevada Corporation as an allowable deduction for tax purpose. The add back as per our audit report has therefore been reviewed.”

  1. Contradictory Treatment: Despite admission, respondent treated payment under Section 5 Act 896 instead of Sale and Purchase Agreement
  2. Statutory Prescription: Statute prescribed mode for determining Government royalties
  3. Wrongful Method: Respondent used another method; lower court affirmed wrongfully

Conclusions:

  • Patently Against Weight of Evidence: Judgment clearly contradicted established evidence
  • Admission Ignored: Clear admission re Franco Nevada contradicted
  • Wrong Assessment Method: Statutory method for royalties ignored
  • Forward Contracts Mischaracterized: Business income wrongly treated as investment income

Ground allowed.

On Use of Foreign Cases

Respondent’s Objection:

  • Canadian cases based on Canadian tax law
  • Inapplicable in Ghana

Court’s Response:

General Principle – Afranie v Quarcoo [1992-93] GBR 1451:

“Where there are laws governing a decision of our courts on a particular matter within our municipality, a court ought not apply any foreign law of interpretation or decision except where such laws and decisions are in pari materia with our own.”

Acceptable Use:

  1. Foreign Cases Persuasive: Not binding, but persuasive where helpful
  2. Poverty of Local Authority: Where lack of judicial authorities in Ghana on matter
  3. Comparable Considerations: Comparable issues in Commonwealth jurisdictions
  4. In Pari Materia: Where foreign statutes similar to Ghanaian statutes

Supreme Court Precedent:

Miel Ampofo v Attorney General [2011] 2 SCGLR 1104:

  • Supreme Court adopted American doctrine of “void for vagueness”
  • Applied to Constitutional interpretation
  • Article 21 Constitution vis-à-vis Section 63(d) Chieftaincy Act 2008

Canadian Authority Applicable:

James S.A. Macdonald v Her Majesty The Queen (SCC File No: 38320, 2019):

  • Interpretation of financial derivatives
  • Definition from The Law of Financial Derivatives

Two-Part Test:

  1. “Linkage” Principle:
    • Connection between derivatives transaction and underlying transaction
    • If sufficient link exists, derivatives takes character of underlying transaction
  2. “Integration” Principle:
    • Relationship between derivatives transaction and taxpayer’s business operations
    • If sufficient integration, transactions will be income account

Application to Present Case:

  • Test fits squarely with Section 7(2) Act 592
  • Forward contract effectively connected/linked to appellant’s gold sales business
  • Gold producer deriving income from gold sale = business income for tax
  • Gold sales contracts (paid advance or at delivery) = business income for tax
  • This is nature of forward sales contract

Conclusion: Canadian cases helpful and properly applied

FINAL ORDERS

Appeal Allowed (except Ground 6)

  1. Entire High Court Judgment Set Aside
  2. All Reliefs in Notice of Appeal Granted (filed 12th April 2021):
    • Order setting aside entire judgment of appellate High Court
    • Order granting appellant all reliefs set out in notice of appeal filed in High Court
  3. Costs: Appellant’s costs assessed at GHc50,000.00

RATIO DECIDENDI

  1. Forward sales contracts for gold constitute derivative instruments that are effectively connected to the business of gold mining and sales, and therefore income and losses from such contracts constitute business income and business losses, not investment income or investment losses.
  2. Subordinate legislation (Regulation 10(2) L.I. 1675) cannot override or amend parent legislation (Section 7(2) Act 592 / Section 5(2) Act 896). Where parent Act provides that amounts attributable to business that would otherwise be investment income shall be included as business income, this takes precedence.
  3. The Commissioner-General’s evaluation and opinion does not conclusively determine whether a taxpayer has discharged the burden of proof. It is the nature of evidence provided by the taxpayer and the objective application of tax laws and statutes to that evidence that determines whether the burden has been discharged. To hold otherwise renders the statutory right of appeal redundant.
  4. Where a party to litigation makes a clear admission of fact advantageous to the opposing party’s cause, that admission constitutes binding evidence and the opposing party needs no better evidence than relying on such admission (estoppel by conduct).
  5. Royalty payments made under a Sale and Purchase Agreement for acquisition of mineral rights are distinct from statutory royalties payable to Government for minerals extracted. The former is governed by contractual terms while the latter is governed by mining legislation requiring calculation based on total revenue from minerals.
  6. Investment income is statutorily defined (Section 6 Act 896) as dividends, interest, annuity, natural resource payment, rent, royalty, gains from investment assets, and gifts. The Commissioner-General lacks power or jurisdiction to re-characterize business income as investment income where no elements of investment income as defined by statute exist.
  7. A trial court sitting as appellate court in tax appeals has obligation to make primary findings of disputed material facts before applying law and reaching conclusions. Failure to resolve disputed facts before making legal conclusions renders judgment unsupportable.

 

 

 

Perseus Mining Ghana Limited v. Commissioner-General (Supreme Court)Download

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