[2024] KETAT 1306 (KLR)

Avipro East Africa Limited v Commissioner of Domestic Taxes (Appeal E112 of 2023) [2024] KETAT 1306 (KLR) (26 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1306 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal E112 of 2023

CA Muga, Chair, BK Terer, D.K Ngala, GA Kashindi & SS Ololchike, Members

July 26, 2024

Between

Avipro East Africa Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

Background 1. The Application is by way of Notice of Motion dated 5th June 2024 and filed on 7th June 2024. It is supported by an Affidavit sworn by the Appellant’s Tax Director, Mr. Henry Sang and is premised on the following grounds:a.The Appellant filed an Appeal against the Respondent’s decision dated 17th February, 2023. b.Since the filing of the Appeal, the Appellant obtained new and relevant documentation that was not available at the time the original Appeal was filed. The documentation is critical to the Appellant’s case and will assist the Tribunal in making a fair and informed decision.c.The additional documentation includes but is not limited to the following:i.Intercompany Loan Agreement between Avipro Company Limited dated January 2020;(ii)Transaction Report detailing the interest paid by the Applicant on group loan for the year 2020;(iii)Payment slips numbers 2020210003032XXXX and 2020210003643XXXX;(iv)Related party balances journal entries for the years 2021;(v)Transaction Report detailing the interest paid by the Applicant on group loan for the year 2021;(vi)Payment slip number 2020220000269XXXX;(vii)Transaction Report detailing the interest paid for the year 2022. (viii)Payment slips numbers 2020220000184XXXX and 20202200002213XXXX;(ix)Intercompany payables.(d)The Appellant believed that admitting the new documents would not cause undue prejudice to the Respondent but would ensure that all relevant facts were before the Tribunal, thereby aiding the administration of justice.

2. The Appellant consequently prayed to the Tribunal to make an order permitting it to file the additional documentation.

3. The Applicant did not file Written submissions.

4. The Respondent opposed the Application through the following grounds of opposition as filed on 19th June 2024:a.That the Notice of Motion Application did not disclose the ground upon which it was premised but simply listed the documents; further the Appellant did not provide the reason why the documents were not availed at the earlier stages before the close of pleadings and filing of the submissions.b.That for the Tribunal to be able to appreciate the delay was very inordinate and only aimed to encourage litigation in piece meal it is import to appreciate the following facts.c.That the genesis of the dispute is the Respondent’s objection decision issued upon the Appellant on 17th February 2023 wherein it fully confirmed the Appellant’s assessments for Pay as You Earn (PAYE) and Withholding Tax (WHT) on deemed interest amongst others.d.That the Appellant had the opportunity at this stage to avail all documents required but failed leading to the objection decision.e.That based on the law on deemed interest and the nature of the indebtedness highlighted above, the Respondent raised and confirmed WHT assessments for the periods between 2018 and 2022 on the amounts in the Appellant’s financial statements declared under its current liabilities as payables or related parties.f.That the Appellant thereafter filed the Memorandum of Appeal and Statement of Facts dated 24th March 2023 and the Respondent filed Respondent’s submissions in opposition dated 27th submissions in opposition dated 27th May, 2023 at this point, the Appellant had another opportunity to avail documents.g.That the Appellant filed an Appeal on 24th March 2023 and thereafter both parties engaged in Alternative Dispute Resolution when the Appellant had another opportunity to avail documents they deemed were relevant for the case.h.That following the discussions and availing of documents an Alternative Dispute Resolution Agreement was signed on 12th July 2023, which partially settled the case leaving the single issue of deemed interest which the Appellant was unable to support as the issue is a pure point of law and not a factual issue.i.That the matter was thereafter mentioned more than eight times and not once did the Appellant indicate that they had documents to avail.j.That the Appellant, despite having sufficient time, has failed to provide supporting documents which the Respondent had specifically requested for during a meeting held between the agents and those of the Appellant.k.That the matter was mentioned several times at the Tribunal including on 30th May 2024, 2nd February 2024 and 6th June 2024 wherein the parties indicated they wanted to proceed by way of written submissions.l.That thereafter all parties filed submissions and the pleadings were closed, hence the Appellant cannot be allowed to introduce new documents as this will only serve to convolute issues.m.That the new document having not formed the basis of the Assessment and the objection decision cannot be used to make a finding if the objection decision is proper.n.That Section 56 of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”), the objection decision was limited to the documents availed at the objection stage and new documents after submissions cannot give any clarity as to the dispute.o.That the Appellant having already also filed submissions, the case as far as filing pleadings is concerned is closed.p.That the Respondent is highly prejudiced by introduction of documents at this point as it will need a re-evaluation of all documents issued by the Appellant in light of the documents this will start from the Assessment, objection decision, the Respondent’s Statement of Facts and also the submissions.q.That contrary to the Appellant’s allegations at paragraph 1-8 of the Notice of Motion Application and the Affidavit, the Respondent stands to suffer great prejudice based on the following grounds:(i)The revenue/tax liability has crystalized pursuant to the assessment and the partial consent filed herein and thus the Appellant as a show of good faith, should pay the total amount of taxes collectable.(ii)The Respondent will be highly prejudiced as the Appellant litigating in perusal as they need proper examination.(iii)There is no reason that has been availed to support why the Appellant’s documents are being introduced at this stage (2years later).(iv)Whereas the matter came up on 30th May 2024 when the Tribunal confirmed all parties filed all their response awaiting determination.(v)It is the knowledge of the Appellant that all information that should be availed before the close of pleadings and therefore the delay will prejudice the Respondent.(vi)Therefore, there is great prejudice that the Respondent will suffer if the Applicant is granted an order to introduce new documentsr.That the delay defeats equity and at this point the Tribunal should not exercise its discretion in favour at the Applicant especially now that no reason for the delay has been provided.s.That if the Tribunal find it right to exercise the discretion in favour of the Applicant then the Tribunal should refer the matter to the Commissioner for consideration and a fresh objection be issued.t.That the orders sought by the Applicant be declined and the Application herein be dismissed with costs to the Respondent.

Respondent’s Submissions 5. The Respondent’s submissions filed on 19th June 2024 raised one issue for determination:

Whether the orders sought in the Application to hear the case for purposes of adducing additional documentary evidence can issue. (a) The reason for the delay in producing the documents in good time has been provided. 6. The Respondent submitted that the Appellant failed to provide any reasons as to why they should be allowed to file further documents later after the matter was marked ready for adoption of submissions.

7. The Respondent relied on the case of Raila Amollo Odinga & 5 others vs IEBC & 3 others (2013) eKLR and Sendy Kenya Freight Ltd vs Multiple Solutions limited (2021) eKLR respectively, where the courts underscored the necessity to tender and provide necessary explanation for the failure to file the witness statement and bundle of documents, if any, accordance with the provisions of Order 11 of the Civil Procedure Rules 2010.

8. The Respondent further relied on the case of Marriot African International Limited vs Mungu & 3others Ukombozi Holdings ltd (Interested party) (Environment & Land case 4 of 2021) (2024) KCELC 1699(KLR)(4th April 2024(Ruling) where it were held as follows:“To the extent that the Applicant now seeks liberty to file and serve documents out of time, it was incumbent upon the Applicant herein to account for the detail or better still, to tender plausible explanation attendant to the delay in the filing of the Application beforehand .Quite clearly, one would have expected the Applicant to articulate and espouse the reasons why same was unable to file a witness statement and the bundle of documents..”

9. The Respondent submitted that the Applicant had an obligation to explain why they have never tendered the documents from the objection stage, the ADR stage and at the Appeal stage until way after the parties have done submissions and the matter now pending determination. Further that the parties have attended more than eight mentions and on 30th May, 2024, the matter was marked ready for adoption of the submissions of the parties.

(b) The documents to be produced are the Appellant’s documents. 10. It was the Respondent’s submission that the documents being produced were not just many but from the list, they were documents held by the Appellant and not those with any other party and that from the list, not a single document was in the custody of a third party but ordinary accounting documents maintained by a party in the ordinary accounting cause. Further the Appellant did not indicate the person from whom they were getting the documents, as such the documents were all the times in their possession and are only being introduced at this point to litigate in piece meal. To buttress its argument, the Respondent relied on the case of Abdigan Omari Mohammed & 2 others VGAM (2020) eKLR.

(c) Timely compliance with directions of the Tribunal. 11. The Respondent submitted that the TPA, the TATA and the Tax Appeals Tribunal Procedure Rules 2015 guide the Tribunal in discharge of its mandate and that these guidelines are not cosmetic but aimed at ensuring that issues are dealt with systematically.

12. It submitted that a party’s case is contained in pleadings and a party cannot purport to be introducing documents which does not sustain the case as drafted. It wondered how the Appellant indicated that the documents were not within its possession yet such documents explain the interest it ought to have deducted.

13. The Respondent submitted that the issue that is pending in the suit is the issue of deemed interest which is a pure point of law and that the only thing is to explain why interest was not charged. It relied on the Court of Appeal case of Independent Electoral and Boundaries Commission & Ano. vs Stephen Mutinda Mule &3others (2014) eKLR which cited with approval the decision of the Supreme Court of Nigeria in Adetoun Oladeji(NIG) vs Nigeria Breweries PLC SC 91/2002 where Adereji JSC expressed himself thus on the importance and place of pleading ;“….it is now trite principle in law that parties are bound by their pleadings and that any evidence led by any of the parties which does not support the averments in the pleadings, or put in another way which is at variance with the averments of pleadings goes to the issue and must be disregarded…in fact, that parties are not allowed to depart from their pleadings is on the authorities basic as this enables parties to prepare their evidence on the issues as joined and avoid any surprises by which no opportunity is given to the other party to meet the new situation.”

(d) The granting of the order will require fresh pleadings. 14. It submitted that Parties have since filed all pleadings and submissions in the matter, granting the orders at this point will mean the Respondent would be allowed to review the same and see if it needed to issue a fresh objection decision as it has never sighted the document as it will mean that the documents are not supported by the pleadings before the Court.

15. The Respondent argued that Parties had already tabled the requisite pleadings and documents in support of their case/defence and that Parties had also since filed submissions which the Tribunal confirmed on 30th May,2024 to be duly on record. It argued further that the Applicant did not indicate they wanted to re-open the case and that it was the Applicant who once indicated to the Tribunal first on 2nd February 2024 that it wanted to proceed by way of written submissions. Therefore, an attempt to introduce documents which are not supported by the pleadings could not be allowed.

16. The Respondent relied on the Supreme Court Ruling in the case of Raila Amolo Odinga & Another vs IEBC & 2 others (2017) eKLR where it was held as follows:“In absence of pleadings, evidence if any, produced by the parties, cannot be considered. It is also a settled legal preposition that no party should be permitted to travel beyond its pleadings and parties are bound to take all necessary and material facts in support of the case set up by them. Pleadings ensure that each side is fully alive to the questions that are likely to be raised and they may have an opportunity of placing the relevant evidence before the court for its consideration. The issues arise only when a material proposition of facts or law is affirmed by one party and denied by the other party. Therefore, it is neither desirable nor permissible for a court to frame an issue not arising on the pleading….”

(e) Delay being inordinately late 17. It was the Respondent’s submission that the Appellant had every opportunity since 2023 to seek the leave of this Tribunal to put in any additional documents in support of its case before the Appeal was set down for hearing which it failed to do.

18. The Respondent submitted that the Appellant filed an appeal on 24th March 2023 and subsequently parties proceeded to Alternative Dispute Resolution (ADR) where the Appellant had another opportunity to avail documents it deemed relevant for its case. The matter was thereafter mentioned from the month of December 2023 to 30th May 2024 when parties indicated they wanted to proceed on the remaining issue by way of submissions.

19. It averred that the Parties have long since filed submissions and Tribunal confirmed on 30th May 2024 that the parties had fully complied. It submitted therefore that the Tribunal should not allow the Appellant to introduce this matter at this point as it would be undermining the principles of the TPA and also the essence of Tribunal proceedings.(f)Order being prejudicial to the Respondent.

20. The Respondent submitted that the Tribunal in allowing this Application would highly be prejudicial to the Respondent as the new documents were never considered in making the objection decision which is the subject of this case. Further, that the Appellant coming late after it has seen the Respondent’s case and submission to try change the facts and provide new documents changes the whole case, documents which have now become conveniently available to the Appellant just before the Tribunal renders its judgement on the matter. The Respondent again relied on the case of Abdigan Omari Mohamed & 2 others vs GAM (2020) eKLR (Supra).

21. The Respondent argued that the Application is contra statute, specifically Section 56 of the TPA as these documents ought to have been produced at the point that the Appellant lodged its objection to the assessment before the Respondent issued its objection decision .Further that the Appellant had sufficient opportunity before the assessment, objection and at the earlier state of the Appeal to avail these documents which it failed to utilize, hence the Tribunal should not allow such indolence. This position was well brought out in Kapa Oil Refineries Ltd vs Kenya Revenue Authority, Commissioner of Income Tax and Commissioner of Value Added Tax & Commissioner of Domestic Taxes, Nairobi JR Misc Application No 283 of 2009.

22. It therefore asserted that there was no miscarriage of justice or breach of the Appellant’s right to natural justice to be occasioned to the Appellant should this Application fail, which it ought to do so. The single issue was that of deemed interest which the Appellant was unable to support as the issue is a pure point of law and not factual. It was therefore mischievous and in bad faith for the Appellant to seek to adduce documents now when parties are awaiting judgement, documents which the Appellant all along had and now wishes to adduce at this late stage.

23. In conclusion the Respondent submitted that parties cannot litigate in piecemeal as the Appellant herein filed its Appeal being aggrieved by the objection decision issued by the Respondent on 24th March, 2024, which objection decision was rendered based on the materials and documents availed by the Appellant. Hence the Appellant could not cry foul that it stands to be prejudiced when it did not act vigilantly to discharge its burden under Section 56(1) of the TPA to show that the tax decision was wrong.

24. The Respondent stated that it was evident that:(i)The Appellant did not provide sufficient grounds in the Notice of Motion for introduction of new documents at the close of pleadings and when the matter is now only awaiting judgement.(ii)The delay defeats equity and at this point the Tribunal should not exercise its discretion in favour of the Appellant especially now that no reason for the delay has been provided. The Respondent will suffer prejudice.(iii)Allowing the Appellant to litigate in piece meal from the conduct will really prejudice the Respondent as the documents were never considered at any point and it will mean the matter be referred back to the Assessment stage and a new objection decision be issued.

Analysis and Findings 25. The Tribunal is enjoined to determine the length and reason for delay when considering an Application to avail new documents long after parties have filed pleadings and submissions to an Appeal. In doing so the Tribunal will consider the length of the delay, the reason for the delay and the degree of prejudice that would be occasioned to the Respondent if the application is granted.

26. The Tribunal notes that the Appellant filed an Appeal before the Tribunal on 24th March 2023 and now is seeking to avail new set of documentation to litigate the said Appeal. The Respondent has also pointed out that there were about eight mentions between December 2023 to 30th May 2024, a period where parties were allowed to comply with submission of documentation and pleadings to support their cases. Further that after the conclusion the ADR process parties agreed on 30th May, 2024 to proceed with the remaining issues by way of submissions.

27. It is the Tribunal’s considered view that the Appellant had adequate time between the 24th March, 2023 and the final mention date of the Appeal on 30th May 2024 to seek leave of the Tribunal to avail any documents it wished to avail. Approaching the Tribunal more than one year later to seek to avail documents which ought to be in the possession of the Appellant exposes the indolence of the Appellant as delay defeats equity. The Tribunal will therefore not be in a position to entertain such mischief.

28. The Tribunal further notes that in its Notice of Motion filed on 7th June 2024 the Appellant has just attached the documents seeking to be admitted without presenting a plausible reason why its request is coming later in the day when the substantive appeal is awaiting judgement. Further that it would be unfair if a party is allowed to withhold its evidence and ambush the other party long after the conclusion of the pre-trial process.

29. It is the Tribunal’s considered view that in the absence of any valid reason for the inordinate delay in seeking to admit the documents, the Appellant’s attempts to do so cannot be entertained.

30. It is worth noting that the pre-trial period offered parties the opportunity to file and respond to each other’s pleadings and submissions and avail all the necessary and relevant supporting documents to prosecute their case. Seeking to introduce fresh documents after the pre-trial process has been concluded would mean reopening the Assessment process all over again which in the Tribunal’s view would be prejudicial to the Respondent. Further that it should not be at the whim of a party to wake up from its slumber and make requests as and when they deem fit without due regard to the process and consequences.

31. In view of the foregoing, the Tribunal is of the considered view that entertaining the Applicant’s request would be prejudicial to the other party and in the circumstances is persuaded to exercise its discretion in favour of the Respondent.

Disposition 32. Based on the foregoing analysis, the Tribunal finds that the Application is not merited and accordingly proceeds to make the following Orders:a.The Application to allow for filing of additional documents is hereby dismissed.b.No orders as to costs.

33. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JULY, 2024. .........................................CHRISTINE A. MUGA - CHAIRPERSON...........................................BONIFACE K. TERER - MEMBER...........................................DELILAH K. NGALA - MEMBER...........................................GEORGE KASHINDI - MEMBER...........................................OLOLCHIKE S. SPENCER - MEMBER