Harmonizing the Provisions for determining third-year Basis Period
for Loss Reliefs under the Personal Income Tax Act, 2011 in Nigeria.

1
Ihendinihu, J. U., 2 Alpheaus, O. E., 3 Nmesirionye, J. A., & 4 Ujah, P.I.
1 Professor of Accounting, College of Management Sciences, Michael Okpara University of Agriculture,
Umudike, Abia State, Nigeria. E-mail:ihendinihu.john@gmail.com; Tel: +2347013560060.
(Corresponding Author)
2 Associate Chartered Accountant & Lecturer, Department of Accounting, College of Management
Sciences, Michael Okpara University of Agriculture, Umudike, Abia State, Nigeria.
E-mail: alpheausogechieberechi@gmail.com Tel: +2347031076627.
3 SeniorLecturer, Department of Accounting, College of Management Sciences, Michael Okpara
University of Agriculture, Umudike, Abia State, Nigeria. E-mail: adandynmesi@yahoo.co.uk
Tel: +2348030713650.
4 Lecturer, Department of Accounting, College of Management Sciences, Michael Okpara
University of Agriculture, Umudike, Abia State, Nigeria.
E-mail: ujahpromise@gmail.com Tel: +2348066575009.

Abstract
The provision for ascertaining loss reliefs in the third tax year of new businesses under the Personal
Income Tax Act (PITA), 2011 is ambiguous and conflicts with the provisions for determining the
basis period under other parts/sections/schedules of the Act. This paper investigates the implications
of the difference with a view to harmonizing the policy of PITA on the subject matter and resolving
the ambiguities which have given rise to multiple interpretations/ applications with different claims
for loss reliefs in the Nigerian tax system. Simulated data of the operating results of new businesses
were generated and the amounts of relieved and unrelieved losses in the third tax year computed
based on three interpretation approaches using different scenarios of dates of commencement and
accounting year-ends. The data were analyzed using descriptive statistics, ANOVA and Bonferroni
Post Hoc test. With F-ratios of 10.187 for relieved losses and 3.030 for unrelieved losses, both being
significant at 1% level, the study indicates that mean relieved and unrelieved losses for the third tax-
year of new businesses significantly differed among the three approaches applied. Based on
purposivism theory and rulings in Oputeh v. Ishida (1993), the paper concludes that the applicable
rule envisaged in S.36(4) of PITA for relieving losses in the third year is S.23(1) as set out in both
S.24(c) and Paragraph (1)(a) of the 5 th Schedule to the Act. The study therefore recommends that
S.36(4) of PITA should be reviewed to align the meaning of basis period used therein with the
definition of basis period in other sections and schedules of PITA.
Keywords: Personal Income Tax Act, ambiguous provisions, multiple interpretations, Purposivism
theory, Loss reliefs, basis period, tax administration.

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