[2025] KETAT 245 (KLR)

Aspire Kenya Limited v Commissioner of Domestic Taxes (Tax Appeal E715 of 2024) [2025] KETAT 245 (KLR) (9 May 2025) (Judgment)

Neutral citation: [2025] KETAT 245 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E715 of 2024

CA Muga, Chair, BK Terer, EN Njeru, E Ng'ang'a & SS Ololchike, Members

May 9, 2025

Between

Aspire Kenya Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is private limited company incorporated in Kenya.

2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws (hereinafter “ the Act”). Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent issued the Appellant with income tax and VAT Assessments dated 29th April, 2021 and 28th May, 2021 for the period 1st January, 2020 to 31st December, 2020. The Appellant objected to the said assessment on i-Tax on 2nd June, 2021 and on 5th October, 2022 respectively.

4. The Respondent however rejected the Appellant’s objection and issued an objection decision dated 9th July 2021 rejecting fully the Appellant's objection.

5. The Respondent also issued the Appellant with an Income Tax Confirmation of Assessment Notice dated 23rd March 2023.

6. The Appellant being dissatisfied with the Respondent’s objection filed its Notice of Appeal dated 28th June 2024 with leave from the Tribunal.

The Appeal 7. The Appellant lodged its Memorandum of Appeal dated 27th June 2024 on 28th June 2024 raising the following grounds of Appeal:a.That the Respondent erred in law and in fact by issuing its decision as contained in the confirmation of assessment notice dated 23rd March, 2023 late in violation of Section 51 (11) of the Tax Procedures Act, CAP 469B Laws of Kenya (hereinafter “TPA”).b.That the Respondent erred in law and in fact by disallowing expenses which were wholly and exclusively incurred in making the income in violation of Section 15 of Income Tax Act, Cap 470 (hereinafter “ITA”).c.That the Respondent erred in law and in fact by failing to credit input tax against the output tax in violation of section 17 of Value Added Tax Act, CAP 476 of the Laws of Kenya (hereinafter “VAT Act”).d.That the Respondent erred in law and fact by disregarding the supporting information and documents provided by the Appellant in making its decision.e.That the Respondent's actions have amounted to gross violations of Article 47 of the Constitution of Kenya (hereinafter “the Constitution”), which guarantees the Appellant a right to fair administrative action that is reasonable and procedurally fair.

Appellant’s Case 8. The Appellant lodged its Statement of Facts dated 27th June, 2024 and its written submissions dated 25th February 2025 and filed on even date.

9. The Appellant stated that the Respondent erred in law and in fact by disallowing expenses which were wholly and exclusively incurred in making the income in violation of Section 15 of the ITA.

10. It averred that only the costs incurred wholly or exclusively in the production of income on a person is tax deductible and that the specific expenses that the Appellant claimed met this threshold.

11. In view of the foregoing, the Appellant was apprehensive that the demands by the Respondent for the purportedly unpaid tax, if allowed, would occasion a grave injustice and harm to the Appellant's business operations due the misapplication of the after ITA by the Respondent.

12. The Appellant asserted that the Respondent erred in law and in fact by failing to credit input tax against the output tax in violation of Section 17 of the VAT Act.

13. The Appellant also asserted that the Respondent erred in law and in fact by issuing its Decision as contained in the confirmation of assessment notice dated 23rd March, 2023 late in violation of Section 51(11) of TPA. The Appellant stated that having objected to the assessment on 5th October 2022, the Respondent's decision dated 23rd March 2023 was late in violation of section 51 (11) of the TPA therefore, the Appellant objection ought to be allowed by operation of the law.

14. The Appellant also stated that the Respondent erred in law and fact by disregarding the supporting information and documents provided by the Appellant in making its decision.

15. That Appellant relied on the case of Krystalline Salt Ltd v Kenya Revenue Authority [2019] eKLR where the court held that failure to render an objection decision within the statutory period resulted in a deemed allowance of the objection. Consequently, the Appellant submitted that the objection should be deemed allowed by operation of law.

16. The Appellant submitted that the Respondent breached Section 15 of the ITA by failing to allow the incurred expenses. The Appellant relied on the case of Bidco Oil Refineries Ltd v Commissioner of Domestic Taxes [2022] eKLR to submit that legitimate business expenses incurred in generating taxable income must be deductible unless expressly disallowed by law. The Appellant submitted that the expenses in question were essential to the Appellant's business and must be allowed.

17. It submitted that Section 17 of the VAT Act provides that a registered taxpayer is entitled to input tax credit against output tax. That further, Respondent's failure to allow the credit violated the statutory framework. It relied on the case of Republic v Kenya Revenue Authority ex parte Bata Shoe Company (Kenya) Limited [2014] eKLR to submit that taxpayers are entitled to offset input VAT against output VAT where the statutory conditions are met. The Appellant insisted that it met all conditions but was unjustly denied this right.

18. It submitted that the Respondent arbitrarily dismissed the Appellant's documentary evidence, violating principles of fair administrative action. It relied on the case of Jaffer Kassam v Commissioner of Domestic Taxes [2021] eKLR to submit that tax authorities must consider all evidence presented before arriving at an assessment decision. It submitted that the Respondent's failure to do so rendered its decision unlawful.

19. That the Respondent breached Article 47(1) of the Constitution. It submitted that the Respondent's delay, arbitrary assessments, and failure to consider the Appellant's documentation amount to an unfair administrative action. It relied on the Supreme Court decision in Commissioner of Domestic Taxes v Unga Group Ltd [2021] eKLR to submit that tax authorities must act within constitutional bounds, including ensuring procedural fairness.

20. Consequently, the Appellant prayed for the following orders:a.That the Appeal be allowed;b.That the Respondent's objection decision dated 9th July 2021 and Confirmation of Assessment Notice issued on 23rd March 2023 be set aside;c.A declaration be issued that the Respondent's demand for additional taxes, penalties, and interest as unlawful and unenforceable.d.Costs of this Appeal be awarded to the Appellant.e.Any other relief the Tribunal deems just and appropriate.

Respondent’s Case 21. The Respondent having been given opportunity to file its response to the appeal failed to do so. The Tribunal thus deems the Appeal undefended.

Issues for Determination 22. The Tribunal having carefully evaluated the Appellant’s case, the Tribunal puts forth the following issues for determination:a.Whether the Appeal is properly before the Tribunal;b.Whether the Respondent’s objection decision was time barred; andc.Whether the Appellant discharged burden of proof.

Analysis And Findings 23. The Tribunal having established three issues for determination will proceed to analyze them as follows:

a. Whether the Appeal is properly before the Tribunal. 24. The Tribunal after perusing the Appellant’s pleadings and noted that whereas the Appellant made references to assessment orders dated 29th April 2021 and 28th May 2021; notice of objection dated 2nd June 2021 and on 5th October 2022; Objection Decision dated 9th July 2021; and Income Tax Confirmation of Assessment Notice dated 23rd March 2023, these documents were not on placed on record either physically or on the judiciary online portal.

25. Section 13 (2) (d) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) provides as follows:‘‘(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—d.such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.” (emphasis ours)”

26. Further, Section 13(2)(a)-(c) of the TATA provides as follows:‘‘(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)a memorandum of appeal;(b)statements of facts;(c)the appealable decision (emphasis is ours).

27. The Appellant did not provide or place on record the appealable decision for the Tribunal’s review as it made consideration and determination of the Appeal. A reading of Section 13 (2) (c) and (d) denotes that the provision or furnishing of the appealable decision is critical in the consideration of the appeal.

28. The Tribunal reiterated its position in the case of Kibunyi v Commissioner of Legal Services (Tax Appeal 1253 of 2022) [2023] KETAT 872 (KLR) (8 December 2023) (Judgment) stated as follows:‘‘It is the Tribunal’s position that the Appellant cannot find an appeal against a non-existent tax decision. The Appellant ought to have provided the tax decision it was appealing against for the Tribunal’s consideration as required by law.’’

29. The provisions of Section 13 (2) (c) of the TATA is crafted in peremptory terms and ought to be adhered to in a very strict sense, to the extent that the Tribunal would have no business or jurisdiction to entertain an appeal where the Appellant has not presented an appealable decision as it is in the instant case. Premised on the foregoing, the appeal is improperly before the Tribunal and untenable and ought to be struck out.

30. Having so found that the Appeal is improperly before it, the Tribunal will not delve into the other issues since they have been rendered moot.

Final Decision 31. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal is incompetent and proceeds to make the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own cost.

32. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 9TH DAY OF MAY, 2025. ………………………………….CHRISTINE A. MUGA CHAIRPERSON………………………….. …………….……………..BONIFACE K. TERER MEMBER………….…..…………… ……….……..…………….ELISHAH N. NJERU MEMBER………….…..…………… ……….……..…………….EUNICE N. NG’ANG’A MEMBER………….…..…………… ……….……..…………….OLOLCHIKE S. SPENCER MEMBER