https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/310

REPUBLIC OF KENYA IN THE TAX APPEALS TRIBUNAL AT NAIROBI TAT NO E024 OF 2026 AFRICAN COMMUTER SERVICES LIMITED ……………………………… APPELLANT -VS- COMMISSIONER OF LEGAL SERVICES AND BOARD COORDINATION............................................................................ ......RESPONDENT JUDGMENT BACKGROUND 1. The Appellant is a limited liability company incorporated in Kenya and involved in the aviation and airline industry. 2. The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act. The Kenya Revenue Authority is an agency of the Government of Kenya mandated with the duty of collection and receipting of all tax revenue, and the administration and enforcement of all tax laws set out in Parts 1 & 2 of the First Schedule to the Act, including assessing, collecting, and accounting for all tax revenues in accordance with those laws. 3. On 29th August 2025, the Respondent issued the Appellant with a default assessment for 1 March 2019 to 29th February 2020 for Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 1 of 27 principal income tax of Kshs 778,046,429, plus interest and penalties. 4. On 10th October 2025, the Appellant objected to the Respondent’s default assessments. 5. On 28th November 2025, the Respondent issued its Objection Decision, confirming the default tax assessments. 6. Aggrieved by the Respondent’s decision, the Appellant lodged its appeal dated 29th December 2025. THE APPEAL 7. In its Memorandum of Appeal filed and dated on 12th January 2026, the Appellant raised the following grounds of appeal: - a. The Respondent erred in law and in fact by assessing Corporation Tax on court compensatory awards which were not revenue attributable to income tax under Section 3(2) of the Income Tax Act. b. The Respondent erred in law and in fact by issuing assessments beyond the 5-year statutory time limit, contrary to Section 29 of the Tax Procedures Act. c. The Respondent erred in law and in fact by misapplying Section 23 of the Tax Procedures Act and demanding documents, while ignoring the fact that the Appellant was statutorily required to keep records for a period of 5 years. d. The Respondent’s actions amounted to gross violations of Article 47 of the Constitution of Kenya, which guarantees the Appellant a right to fair administrative action that is reasonable and procedurally fair. Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 2 of 27 APPELLANT’S CASE 8. The Appellant’s case is based on its Statement of Facts dated 12 th January 2026 and submissions dated 14th May 2026. 9. The Appellant identified the following issues for determination in this appeal: a) Whether the compensatory award constitutes taxable income under the income tax act; b) Whether the assessment is time-barred under tax procedures act; c) Whether the Respondent violated the Appellants’ right to fair administrative action; d) Whether allowable deductions ought to have been considered (without prejudice) 10. The identified issues were discussed as follows: A. Whether the Court Compensatory Award Constitutes Taxable Income under the Income Tax Act. 11. On the first issue, the Appellant’s case was that the Respondent erred in law and in fact by assessing Corporation Tax on a court compensatory award which is not revenue attributable to income tax under Section 3(2) of the Income Tax Act which only allows for the taxation of gains or profits of a business. 12. The Appellant stated that the compensatory award was not in the nature of income but was restitutive in nature, in that the court considered the fixed expenses incurred by the Appellant during the Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 3 of 27 period when its planes were grounded and the losses incurred by the Appellant as a result of the cancellation of the license. 13. The Appellant further stated that the intention of the court was to compensate it for losses and reinstate it to the position it would have been in if the licences had not been cancelled. 14. The Appellant averred that Section 2 of the Income Tax Act defines ‘business’ as including any trade, profession, or vocation and every manufacture, adventure, and concern in the nature of trade but does not include employment. 15. It asserted that there is no room for equity or judicial legislation in tax matters and that a statute must be construed strictly and literally, as was held in Republic v Kenya Revenue Authority Ex Parte Aberdare Freight Services Ltd [2004] eKLR. 16. The Appellant posited that any ambiguity in a tax statute must be read in favour of the taxpayer, as was held in CIT v Vegetable Product Ltd (1973) ITR 192. 17. That, based on this definition, compensatory awards cannot be deemed to be income earned in the course of business and thus cannot be subjected to income tax under Section 3(2) of the Income Tax Act. It supported its position with the following case laws: a.A.M. Bahaji & Company Limited v Kenya Ports Authority, b.Ibrahim Manvara v Registered Trustees of the Agricultural Society of Kenya (Ask) 20141 eKLR, Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 4 of 27 c. Muema Kitulu t/a Muema Kitulu & Co. Advocates v County Secretary, County Government of Kitui [20201 eKLR. B. Whether the assessment is time-barred under tax procedures act; 18. Its argument on this second issue was that the Respondent erred in law and in fact by issuing assessments beyond the five-year statutory time limit, contrary to Sections 23 and 29 of the Tax Procedures Act. 19. Its view was that the judgment leading to the assessment was delivered by the Court of Appeal in 2014 and that the assessment on 29th August 2025, which is almost 10 years after the award was made. 20. That as such, it was unlawful and prejudicial for the Respondent to require the Appellant to produce documents in support of a period extending to more than 10 years from the date of assessment. 21. That additionally, the Respondent failed to provide reasons and sufficient proof of its allegations of gross or willful neglect, evasion, and fraud against the Appellant; hence confirming the assessments as issued was unjustified. 22. Additionally, the Respondent failed to give reasons and sufficient proof of its allegations of gross or willful neglect, evasions, and fraud against the Appellant; hence confirming that the assessments as issued were unjustified. It supported this position with the following cases: Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 5 of 27 a.Commissioner Investigation and Enforcement V Suma Health Products (k) Ltd (Income Tax Appeal E082 of 2024) (2025). b.Kenya Fluorspar Company Limited v Commissioner of Domestic Taxes (2020) eKLR. c. Imara Steel Mills Limited V Commissioner of Investigation and Enforcement (2025) KEHC 15394 (KLR), d.Commissioner of Investigation and Enforcement V Asea Brown Boverthe Court (Abb) Limited (2025) KEHC(KLR) e.TAT No. 88 of 2021, Glenrose Ltd v Commissioner of Investigation and Enforcement 23. That without prejudice to the foregoing grounds, the Appellant states that even if the income was taxable as the Respondent alleged, the Respondent ought to have allowed the expenses incurred by the Appellant during the period, in accordance with Section 15 of the Income Tax Act, which provides that all expenses incurred wholly and exclusively in the generation of income are deductible in the computation of income tax. C. Whether the Respondent violated the Appellants’ right to Fair Administrative Action. 24. On this issue, the Appellant submitted that the Respondent’s actions breached its right to a legitimate expectation and to fair administrative action as provided under Articles 10 and 47 of the Constitution and sections 4(3)(b) and 4(4)(b) of the Fair Administrative Actions Act. It supported its position with the following cases: Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 6 of 27 a.Kenya Revenue Authority, Commissioner Customs Services and Julius Musyoki V Darasa Investments Limited (2018) EKLR. b.Kenya Revenue Authority and 2 Others v Darasa Investments Limited, MLD Civil Appeal No. 24 of 2018 (2018) eKLR. D. Whether allowable deductions ought to have been considered. 25. On a without prejudice basis, it was the Appellant’s case that the Respondent subjected its court award to tax without deducting allowable expenses incurred wholly and exclusively for the purpose of generating the taxable income as decreed in Section 15 of the Income Tax Act. 26. That the said expenses accounted for 85% of the award by the Court of Appeal. 27. Additionally, the Appellant stated that while computing the interest charged to tax, the Respondent failed to properly show how the interest was arrived at. 28. The Appellant submitted that the Respondent brought to charge the entire interest as per the court award, whereas the interest included some items that were not chargeable to tax, such as capital losses and aggravated damages. 29. That this resulted in an excessive collection of tax beyond its gains and profits, contrary to the dicta in the case of Republic v Kenya Revenue Authority Ex parte Bata Shoe Company (Kenya) Limited (2014) eKLR. Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 7 of 27 30. The Appellant submitted that Section 51(4) of the Tax Procedures Act required the Respondent to issue it with an invalidation notice instead of an objection decision if it was determined that the Appellant had not lodged a valid objection. Appellant’s Prayer 31. The Appellant’s prayer to the Tribunal is for orders that: a) This appeal be allowed. b) The Respondent’s Objection Decision dated 28th November 2025 of the Commissioner of Domestic Taxes to confirm corporation tax assessments amounting to Kshs. 1,174,850,107.04 be set aside in its entirety. c) The Appellant be awarded costs of the Appeal. RESPONDENT’S CASE 32. The Respondent filed its Statement of Facts dated 10th February 2026 and its Written Submissions dated 14th May 2026 in opposition to the Appeal. 33. The Respondent identified the following issues for determination: a) Whether the Respondent erred in law and fact by issuing an additional corporation tax assessment on the award for loss of revenue. b) Whether the Respondent erred in issuing assessments beyond five years. c) Whether the Appellant discharged the burden of proof to demonstrate that they were entitled to deductible expenses. Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 8 of 27 34. The identified issues were argued as follows: A. Whether the Respondent erred in law and fact by issuing a default corporation tax assessment on the award for loss of revenue. 35. The Respondent stated that it received intelligence from a third party that the Appellant had received huge sums of money pursuant to the Court of Appeal judgment delivered on 7th February 2014 and the garnishee order absolute issued in 2019. 36. That it subsequently reviewed the Judgment, subjecting the portion of damages with respect to loss of business income and profits to tax, and issued an assessment amounting to Kshs. 1,174,850,107. 37. The Respondent averred that compensation for loss of business income, profits, and interruption of trade is taxable to the extent that it replaces income that would have been taxable had the normal business not been interrupted. 38. That tax law looks at what the compensation is substituting, not the label used. That compensation is meant to give the Appellant the earnings it could have made had the business not been interrupted, as confirmed in the Appellant’s Auditor’s report and the (Chief Finance Officer) CFO’s five-year projection report on the business income and profits it would have earned if its Air Operators Certificate (AOC) had not been cancelled. 39. The Respondent averred that if the original income would have been taxable, then: Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 9 of 27 a) The compensation for loss of revenue with respect to business income and profits is also taxable irrespective of whether it is received as a lump sum or by court award. b) Compensation for the loss, destruction, or damage of an aircraft is compensation for a capital asset, not income. 40. The Respondent posited that it did not assess the award with respect to capital assets. 41. That this was a mixed award, and each portion can be treated differently if it falls within the definition of Section 3 of the Income Tax Act. 42. It was its position that under section 4(c) of the Income Tax Act (ITA), amounts received as compensation for loss of profits are treated as gains or profits and are taxable. A view it supported with the case of Tax Appeal No. E 042 of 2020, Commissioner of Domestic Taxes v. Sony Holding Limited. B. Whether the Respondent erred in issuing assessments beyond five years. 43. The Respondent averred that: a. The Appellant’s act of not disclosing the extra income amounting to Kshs. 2.3B and the amount compensated amounted to willful neglect since it was aware that the compensation was for the loss of business income and profits which, had the business not been halted, would have been subject to tax. Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 10 of 27 b. Having failed to disclose the said information, there was no way for the Respondent to know about it until it received intelligence of the said transaction from a third party. c. The law permits it to make an assessment beyond five years where it can be demonstrated that there was willful negligence on the part of the Appellant. d. The Appellant received Kshs 1.5B more than what the court awarded; yet the Appellant filed nil returns during that period by failing to account for this additional Kshs 1.5B. e. Under these circumstances, it was justified to assess beyond five years, since the figures did not appear in the Appellant’s returns such that the Respondent could issue the assessment within five years. f. The Appellant was granted an opportunity to respond to the audit findings and to object to the assessment in accordance with due process. 44. It justified its decision to issue an assessment beyond five years under Section 29(6) on the grounds that the Respondent was guilty of willful neglect when it failed to file its returns upon receipt of the award. It supported this position with the following authorities: a. UK case of Maciejewski v Revenue and Customs (INCOME TAX/CORPORATION TAX: PENALTY) (2018) UKFIT 754(TC). b. Appeal No. E111 of 2023, Mount Kenya Breweries Limited vs Commissioner Investigation and Enforcement. Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 11 of 27 c. Mburu v Commissioner of Domestic Taxes, Income Tax Appeal E036 of 2021(2023) d. Black’s Law Dictionary, which it is said to have defined knowingly and willfully to mean consciously and intentionally. 45. That the Appellant decision not to file the said returns was intentional and willful, and it justified its decision to assess beyond five years. 46. The Respondent submitted that, as per the accounting principles, the Appellant was supposed to state the court award in its contingency income until the same was realised in 2019, but the Appellant did not disclose it in its books. 47. That the Appellant had not challenged or denied the fact that it did not declare the income received from KCAA and that its only grievance was that the assessment was beyond five years. 48. The Respondent also stated that the court award was, in any event, realised in 2019 and accordingly the delay was not 10 years, as alleged by the Appellant. C. Whether the Appellant discharged the burden of proof to demonstrate that it was entitled to deductible expenses. 49. The Respondent stated that whereas Section 15 of the ITA allows for the deduction of expenses incurred in generating income, the Appellant in this case did not provide supporting documents to show that it indeed incurred the expense and that the same was incurred in the process of generating income. It supported this position with the case of Court of Appeal decision in Commissioner Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 12 of 27 of Domestic Taxes v Ocean Freight (East Africa) Limited (2018) eKLR. 50. The Respondent submitted that Section 56(1) of the TPA and Section 30 of the TAT Act place the burden on the Appellant to demonstrate that it incurred expenses in generating income. That this burden was not discharged in this case. 51. The Respondent further submitted that it complied with the requirements of procedural fairness under Article 47 of the Constitution to the extent that: a) A notice to audit was issued, and the audit process was transparent, lawful, and procedurally fair. b) An assessment was conducted as mandated under Section 29(6) of the TPA. c) An assessment was issued. d) The Appellant was afforded an opportunity to respond to the assessment. e) The Appellant filed its objection, which was lodged. f) A reasoned objection decision was issued on 28th November 2025. 52. That its final objection decision was thus justified and properly grounded on statute. Respondent’s Prayers 53. The Respondent prays that the Tribunal: a) Dismiss the appeal in its entirety; Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 13 of 27 b) Uphold the tax assessment as confirmed by the Respondent; and c) Order the Appellant to pay the costs of the appeal. ISSUES FOR DETERMINATION 54. The Tribunal, having considered the parties' pleadings, submissions, and documents filed before it, is of the view that the issues that fall for its determination are: a) Whether the Respondent’s assessment was time- barred and hence unlawful. b) Whether the Respondent failed to consider the Appellant’s allowable deductions as required under Section 15(1) of the Income Tax Act. c)Whether the Respondent’s default assessment, as enshrined in its Objection decision dated 28th November 2025, was justified. ANALYSIS AND DETERMINATION 55. The issues identified for determination shall be determined sequentially as hereunder: A. Whether the Respondent’s assessment was time-barred and hence unlawful. 56. The Appellant averred on this issue that the assessments were statute-barred to the extent that they were made almost 11 years after the assessments were made. Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 14 of 27 57. The Respondent asserted that lawful because they were realised in 2019 and that the Appellant was also willfully negligent when it failed to declare the assessments. 58. It is now trite that the Respondent can audit, amend, or issue tax assessments within five years from the date a taxpayer submits their self-assessment return. That once this window closes, the tax becomes time-barred and irrecoverable unless there is clear evidence of fraud, willful neglect, or tax evasion. A position that was explained in Fabro Ltd v Commissioner [TAT Appeal No. 132 of 2023] where the court stated that: “The reopening of assessments outside the limitation period must not be whimsical. Without demonstrable fraud or willful neglect, the taxpayer’s position becomes immutable after five years.” 59. This position is set out in Section 29(5) and (6) of the TPA, which provides as follows in relevant part: “(5) Subject to subsection (6), an assessment under subsection (1) shall not be made after five years immediately following the last date of the reporting period to which the assessment relates. (6) Subsection (5) shall not apply in the case of gross or willful neglect, evasion or fraud by a taxpayer.” 60. Section 23 provides as follows regarding record keeping: “A person shall— (a) maintain any document required under a tax law, in either of the official languages; Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 15 of 27 (b) maintain any document required under a tax law so as to enable the person's tax liability to be readily ascertained; and (c) subject to subsection (3), retain the document for a period of five years from the end of the reporting period to which it relates or such shorter period as may be specified in a tax law.” 61. The law is thus clear that an assessment can only go back 5 years, and a taxpayer is also only required to keep records for a period of 5 years from the end of the reporting period. 62. Income tax is an annual assessment, due and declared by the 30th June of the subsequent financial year. The default assessment in this appeal was issued on 29th August 2025 and the Respondent indicated that the Appellant’s assessment was running from 1st March to 28th February. The return for this financial period was due within six (6) months in the month of August of each year. 63. Considering that the assignment was issued on 29th August 2025, the assessments for the period February 2023 to March 2024 would be included in the computation of time running backwards. The outcome of this calculation is that the assessments from February 2029 to March 2020 were within the statute of limitation period under Section 29(5) of the TPA. 64. Consequently, it is the finding of the Tribunal, as supported by the Fabro case, that the Respondent’s assessments for the years March 2019 to February 2020 were lawful to the extent that they did not contravene Section 29(5) and (6) of the Tax Procedures Act. Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 16 of 27 B. Whether the Respondent failed to consider the Appellant’s allowable deductions as required under Section 15(1) of the Income Tax Act? 65. The Appellant took the view, on a without prejudice basis, that the Appellant had contravened Section 15(1) of the Income Tax Act when it failed to consider its allowable expenses that were wholly and fully applied in the generation of its income. That this resulted in excessive, erroneous, and unjustified assessments. 66. The Respondent took the opposite view that the Appellant did not provide it with documents supporting its expenses. That its failure to discharge its burden of proof under Section 56(1) of the TPA left it with no option other than to apply its best judgment to determine the Appellant’s tax liability. 67. The Appellant attached the following documents in support of this appeal: a) The compensation decision/judgment by the Court of Appeal dated and delivered on 7th February 2014. b) The assessment dated 29th August 2025. c) The objection letter dated 10th October 2025. d) The objection decision dated 28th November 2025. 68. On the face of it, it is clear that the Appellant did not provide any evidence showing the alleged expenses it had incurred in the course of running its business, as envisaged in Section 15(1) of the ITA which provides as follows; “15. (1) For the purpose of ascertaining the total income of a person for a year of income there shall, subject to section 16, be deducted all expenditure incurred in that year of income which is expenditure wholly and exclusively Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 17 of 27 incurred by him in the production of that income, and where under section 27 any income of an accounting period ending on someday other than the last day of that year of income is, for the purpose of ascertaining total income for a year of income, taken to be income for a year of income, then the expenditure incurred during that period shall be treated as having been incurred during that year of income.” 69. The issue of non-deductibility of allowable expenses is also eloquently argued in the Objcetion letter, but nothing was attached to support these averments and yet it was the duty of the Appellant to prove that the assessment he was objecting to was erroneous or unjustified. 70. The Tribunal takes the position that, in the absence of relevant receipts, invoices, or any other relevant evidence to support allowable expenses, the Respondent could not be faulted for applying its best judgment to determine the Appellant’s tax liability. 71. Besides, it is now settled that the Respondent’s assessment is often presumed to be correct in the absence of any objection or contradicting evidence; as was explained in Commissioner of Domestic Taxes v Trical and Hard Limited (Tax Appeal E146 of 2020) [2022] KEHC 9927 (KLR) (Commercial and Tax) (8 July 2022) (Judgment) where the High Court stated thus. “A presumption of correctness arises from the Commissioner’s determination/assessment. The presumption remains until the taxpayer produces competent and relevant evidence to support his/her position. When the taxpayer comes forward with such evidence, the presumption vanishes and the case must be decided upon the evidence presented.” Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 18 of 27 72. In this Appeal, the taxpayer never came forward with evidence to prove its allowable expenses. In the circumstances, the Respondent was thus justified in confirming its assessed taxes vide its letter dated 15th February 2024. C. Whether the Respondent’s default assessment, as enshrined in its Objection decision dated 28th November 2025, was justified. 73. The gravamen under this issue is whether the award issued by the court was not taxable, as argued by the Appellant, or whether it was indeed taxable, as affirmed by the Respondent. 74. It is not in dispute that the Appellant was awarded a decreed judgment by the Court of Appeal amounting to Kshs 362,615,656 plus costs and interest. The issue regarding the taxation of decrees has been settled by superior courts in several cases, as exposited below. 75. In the case of Ibrahim Manyara V Registered Trustees of Agricultural Society of Kenya (ASK) [2014] eKLR, the court stated that: “The offshoot of my finding on this subject is that there is no known law that subjects decrees of court to taxation. The Income Tax Act aforecited is silent on this and we should so far trend that path. If the tax man wishes to rethink his position on this, we shall not disallow the same.” 76. Justice D.K Njagi additionally stated as follows in the Ibrahim Mayara case: ` Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 19 of 27 “Would a decretal amount, in the circumstances be subjected to taxation as of this case? If this be the case, would this be feasible in law? My answer is no. If this were the case, the legislature would have come out clearly and provided for this. 77. The issue has also been recently discussed in a ruling delivered on 24th November 2020 by Justice D.O. Chepkwony in AM Bahaji & Company Limited v Kenya Ports Authority [2020] eKLR - Civil Suit 410 of 2002, where the court stated that: “If the intendment of the Income Tax Law was to have a Decree of court taxable under its provisions, the legislature would have come out clearly and provided for this.” 78. The court also addressed the issue of interests arising from a court judgment like the one that the Respondent has assessed in this appeal as follows: “A court Decree or interest arising thereof is not mentioned as a form of income and this court cannot presume the contrary” 79. The court in the same judgment also addressed the issue of dividing a decretal sum into portions to ensure tax assessment on the divisible parts in its conclusion of the ruling in issue as follows: “It is therefore the finding of this Court that the Applicant was under no obligation to retain portion(s) of the subject payments and to remit the same to the Kenya Revenue Authority on account of Withholding Tax since the Decretal Sum does not amount to an “income” for purposes of withholding tax under the Income Tax Act.” Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 20 of 27 80. Additionally, in Muema Kitulu t/a Muema Kitulu & Co Advocates v County Secretary, County Government of Kitui [20201 eKLR the Court affirmed that: “Would a decretal amount, in the circumstances be subjected to taxation as of this case. f this be the case, would this be feasible in law" My answer is no. If this were the case, the legislature would have come out clearly and provided for this. It cannot be argued that this was lost to the law maker.” 81. The High Court in the above-cited cases has taken the view that the charging provisions under Section 3 and 4 of the Income Tax Act do not include court decrees as taxable income/items. 82. The settled common law practice and Article 163(7) of the Constitution, which embodies the doctrine of stare decisis, require the Tribunal to follow and be bound by decisions from superior courts. Accordingly, once a superior court has settled a legal position, the Tribunal is legally estopped from second-guessing, re- litigating, or engaging in any other form of legal jargonry that would result in disregarding the legal position that has been settled by the courts above it. 83. This position on the sacred place of precedents and their binding nature to courts below it was affirmed by the supreme Court in the following cases: a. Wasike & another v Eldoret Express Limited & 13 others (Environmental and Land Originating Summons E001 of 2025) [2025] KEELC 6876 (KLR) (13 October 2025). Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 21 of 27 b. Asanyo & 3 others v Attorney-General [2020] KESC 62 (KLR) when it stated that: “Article 163(7) of the Constitution establishes the principle upon which rests the authority of judicial decisions as precedent in subsequent litigation, guiding Judges who are bound to follow the same. Courts and tribunals exercising judicial authority are duty-bound to follow this principle.” c. Jasbir Singh Rai & 3 others v Tarlochan Singh Rai & 4 others Supreme Court Petition No 4 of 2012, [2013] eKLR where it stated that: “Adherence to precedent should be the rule and not the exception ....; the labour of judges would be increased almost to breaking-point if every past decision could be reopened in every case, and one could not lay one’s own course of bricks on the secure foundation of the courses laid by others who had gone before him.” d. Kidero & 5 others v. Waititu and others, Sup Ct Petition No 18 of 2014 (Consolidated with Petition No 20 of 2014), Njoki Ndungu, SCJ, in her concurring opinion, made the following pertinent remarks (para 236): “The principle of stare decisis in Kenya unlike other jurisdictions is a constitutional requirement aimed at enhancing certainty and predictability in the legal system. The articles of establishment and jurisdiction reveal the Court’s vital essence and the Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 22 of 27 decisions of this court protect settled anticipations by ensuring that the Constitution is upheld and enforced, and that the aspirations of the Kenyan people embodied in a system of constitutional governance are legitimized. 84. It is clear from the foregoing consistent avowals by the Supreme Court that the principle of judicial precedent must be strictly adhered to and the Tribunal must regard itself as bound by the decisions of the superior courts on any question of law. 85. Accordingly, the issue of whether decrees are taxable has been determined by the High Court, which has held that court decrees are not taxable under the current Kenyan legal taxation infrastructure. The Tribunal, irrespective of whether it concurs with the settled precedent or not, cannot depart from, re-litigate, or reopen matters already determined, concluded, and settled by the superior courts. And it shall not do so in this case. 86. Despite the foregoing position, the Tribunal has further noted that the following documents relied on by the Respondent to charge this assessment against the Appellant were all crystal clear that the payment in issue was sent and made in the name of the firm of Ahmednasir, Abdikadir and Company Advocates: a) Letter from Kenya Civil Aviation Authority dated 4th August 2025. b) Payment vouchers dated 30/06/19, 24/10/19 and 30/12/19. c) Evidence confirming online payment by KCB dated 20/12/2019 Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 23 of 27 87. Considering that this was a court decree that comprised the advocates’ costs, disbursements, court fees, and other fees that may have been due to other third parties, including the said firm of advocates, it would have been prudent for the Respondent to make a similar inquiry to the said firm of Advocates to seek information on: a) Whether it had actually paid the Appellant. b) How much was paid to the Appellant? c) How much was retained by the firm of advocates as its legal fees? d) How much of it was retained to cover court fees and other related disbursements? 88. The Respondent was obliged to comply with these minimum requirements to ensure that it only charged tax on fees that legally accrued and or were received by the Appellant. Exercising the same due diligence applied in obtaining information from the Kenya Civil Aviation Authority should have been applied to also obtain this relevant and necessary information regarding this payment from the said firm of advocates. After all, the information on how this money was disbursed was within the knowledge of the said firm. 89. This way, it would have been clear that its assessment was rational, made in good faith, and purely intended to ensure that the Appellant had paid tax on what it had received or had accrued to it and that it was not being pushed to bear tax burdens of other parties, as was explained in Republic v Kenya Revenue Authority (Ex parte) Jaffer Mujtab Mohammed (2015) eKLR where the learned Judge held that: “a taxing authority is not entitled to pluck a figure from the air and impose it upon the taxpayer without some rational Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 24 of 27 basis for arriving at the figure and not another figure. Such action would be arbitrary, capricious and in bad faith. It would be an unreasonable exercise of power and discretion, and that would justify the court intervening.” 90. The Tribunal would recommend that the Respondent considers these obiter comments by the Tribunal in helping it deal with near- similar assessments in future so that it is not seen to be exrcing its duty like a trawler in the deep seas, expecting to catch all the fish by casting its net wide, irrespective of whether the income of such taxpayers falls within the legal definition of a taxable income. See Republic v Commissioner of Domestic Taxes, Large Taxpayer's office ex-parte Barclays Bank of Kenya Ltd [2012]. 91. The High Court has also supported this position, that a taxpayer should never be caused to bear a tax burden for a coin that it never received, in Republic v Kenya Revenue Authority Exparte Bata Shoe Company (Kenya) Limited 2014] KEHC 7529 (KLR) where the court held that: “That being the case, a taxpayer is not obliged to pay a single coin more than is due to the taxman. The taxman, on the other hand, is entitled to collect up to the last coin that is due from a taxpayer” 92. Despite the foregoing additional obiter comments by the Tribunal to guide the Respondent in subsequent similar assessments, the upshot of the above analysis is that the decree issued by the Court of Appeal on 7th February 2014 and all the monies forming part of, or arising from, that decree are not legally taxable, as was affirmed in High Court cases of: Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 25 of 27 a) AM Bahaji & Company Limited v Kenya Ports Authority [2020] eKLR - Civil Suit 410 of 2002 b) Ibrahim Manyara V Registered Trustees of Agricultural Society of Kenya (ASK) [2014] eKLR c) Muema Kitulu t/a Muema Kitulu & Co Advocates v County Secretary, County Government of Kitui [20201 eKLR 93. Accordingly, the Respondent’s default assessment, as enshrined in its Objection Decision dated 28th November 2025, was not justified. DISPOSITION 94. Consequently, the Tribunal’s makes the following orders: a. The Appeal be and is hereby allowed. b. The Respondent’s Objection Decision dated 28th November 2025 be and is hereby set aside. c. Each Party is to bear its own costs. 95. It is so ordered. DATED and DELIVERED at NAIROBI this……10th ………..day of..… July……..…2026 ..........................………………………. DR. RODNEY O. OLUOCH CHAIRPERSON Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 26 of 27 .…..….……………………. ..….………………………. ABDULLAHI DIRIYE DR. ERICK KOMOLO MEMBER MEMBER Judgement TAT No. E024 of 2026 African Commuter Services Limited -vs- Commissioner of Legal Services and Board Coordination Page 27 of 27