[2025] KETAT 9 (KLR)

Border Palace Hotel Limited v Kenya Revenue Authority (Tax Appeal E1345 of 2024) [2025] KETAT 9 (KLR) (17 January 2025) (Ruling)

Neutral citation: [2025] KETAT 9 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E1345 of 2024

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

January 17, 2025

Between

Border Palace Hotel Limited

Applicant

and

Kenya Revenue Authority

Respondent

Ruling

Background 1. The Applicant by way of a Notice of Motion dated November 13, 2024 and filed on November 19, 2024 sought the following orders:a.That the unforeseen illness by the Applicant's director occasioned the delay.b.That the Applicant could not raise appeal filing fees on time for this Appeal.c.That upon being able to raise the appeal filing fees, the Applicant deposited the fees to National Bank of Kenya (NBK) account designated to the Tribunal (hereinafter “TAT”).d.That on 31st December 2024, TAT however, wrote to the Applicant that it has no access to money deposited to NBK and advised the Applicant to seek for refund.e.That the Applicant has a bona fide and arguable appeal on the merits and stands to suffer significant prejudice should leave not be granted.f.That the Respondent will not suffer any undue prejudice if the Applicant is granted leave to file the Appeal out of time.g.That this Appeal is brought in good faith and that it will be fair and just that it is allowed.

2. The Application which was supported by an Affidavit sworn by Mr. Thomas Wandera Oyalo, a Director of the Applicant, on the 18th day of November, 2024 was premised on the following grounds:a.The Applicant sought leave to appeal out of time against the decisions of the Respondent dated 15th April 2024 and 30th May, 2024 regarding tax assessments.b.That the Applicant was aware that it ought to have filed its Appeal within 30 days of the said decisions.c.That the Applicant was unable to file this Appeal on time owing to the health condition of its Director and the inability of the Applicant to raise the appeal filing fees on time as well as the delay in refund of Appeal fees after it deposited the Appeal fees in the wrong bank account.d.That immediately upon its Director regaining his stable health condition, all necessary steps were taken to seek legal guidance and prepare the requisite documents for filing this Application, demonstrating the Applicant’s intention and readiness to proceed with the Appeal.e.That its Director since discovered, established and accessed further documents which are currently in his possession and which if evaluated by both the Tribunal and the Respondent would enable the Respondent reach a different conclusion.f.That the Applicant has a bona fide and arguable appeal on the merits and stands to suffer significant prejudice should leave not be granted.g.That it was in the interest of justice that the Applicant is granted an opportunity to appeal out of time, as denying leave to appeal would result in unfair prejudice to the Applicant, who seeks to exercise its right to a fair hearing.h.That the Respondent will not suffer any undue prejudice if the Applicant is granted leave to file the appeal out of time.

3. The Applicant consequently prayed to the Tribunal to make an order permitting it to file its appeal out of time.

4. The Respondent opposed the Application through a Replying Affidavit sworn by one of its officers, Mr. Victor Ayieko dated 26th November, 2024 and filed on 27th November, 2024 in compliance with the directions of the Tribunal wherein the Respondent stated as that the Orders sought by the Applicant should not be granted by the Tribunal as they were an abuse of the Court process and the Applicant is undeserving of the same for the following reasons:a.That the Respondent issued the Applicant with a decision on 19th April, 2024 through which it gave a timeline within which to appeal or pay the confirmed taxes and that failure to pursue either option would lead to enforcement measures. The objection decision specifically advised the Applicant of its right to file a notice of Appeal within 30 days of the date of the objection decision.b.That despite the Respondent advising the Applicant of its rights and timelines to appeal, the Applicant failed to appeal within the timelines stipulated under section 13(1) to (6) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”).c.That the Applicant did not Appeal the decision to the Tribunal within thirty (30) days of the decision as required and only sought to file the instant application 7 months late on 18th November, 2024. d.That a delay of more than 11 months amounted to inordinate delay by the Applicant.e.That the draft memorandum of appeal attached by the Applicant did not raise triable issues and that further, one of the requirements for a party to be granted extension of time to file an appeal out of time, was that the Applicant must demonstrate that the intended Appeal is arguable and that this requirement was not met.f.That no credible reason was advanced by the Applicant to warrant extension of time to file its Appeal as provided at section 13 (4) of the TATA.g.That the Applicant stated that the Appeal was not filed within time due to the fact that the deponent[sic] was unwell and was therefore unable to raise the filing fees for the Appeal.h.That the medical report attached by the Applicant only demonstrated that the Applicant’s director was only hospitalized in the month of November 2024 and that the Applicant has not provided credible evidence to confirm his hospitalization in the months between April 2024 and November, 2024. i.That the delay in filing the Appeal from April 2024 and November 2024 remains unexplained and the period of over 7 months was not only unreasonable but inordinate.j.That the Applicant failed to provide evidence to support its assertion and that mere statements that are not backed by evidence of any sort are not solid grounds that would warrant the Tribunal to exercise its discretion in favour of the Applicant. The Applicant failed to lay a basis to the satisfaction of the Tribunal for extension of time to file an appeal.k.That the fact that the Applicant failed to follow up on its appeal for more than 7 months after issuance of the objection decision is a demonstration that the Applicant has not been vigilant and does not warrant the exercise of the Tribunal’s discretion in its favour. The Applicant is guilty of laches.l.That the delay is unreasonable and not excusable on the grounds that the Applicant like any other taxpayer has a duty to ensure that its tax affairs are well managed by making regular consultations or interactions with its tax agent for purposes of tracking progress of their tax matters.m.That the Application is an afterthought, brought in bad faith, meant to delay the Respondent from collecting taxes that are due and payable and should not be entertained by the Tribunal as doing so would offend the equitable maxim of equity aids the vigilant and not the indolent and ultimately create bad precedent.n.That the Applicant was not deserving of the orders sought in the Application as the whole period of delay has not been declared and explained satisfactorily to the Tribunal thus the Application ought to be dismissed.o.That the Respondent was merely carrying out its statutory duty under the law by issuing agency notices and consequently prays that its actions be upheld by the Tribunal and that its mandate of collection of revenue is key to the economic development of the Country and consequently, the public and all the arms of the Government and specifically the Tribunal is called upon to assist the Respondent in carrying out its mandate so long as the same is within the Law.p.That in the circumstances, it is in the Public interest that this Tribunal dismisses the Applicant's Notice of Motion application dated 18th November, 2024 to pave way for the Respondent to collect taxes due from the Applicant, which are key to the economic development of the Country.q.That the indolence and negligence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are due and payable.r.That the Applicant failed to satisfy the principles as set out in the case of Nicholas Kiptoo Arap Korir Salat V Independent Electoral and Boundaries Commission and 7 Others [2014] eKLR.

Analysis and Findings 5. The Tribunal notes that parties complied with its directions to canvass the matter by way of written submissions to be filed and served on each other on or before 16th December, 2024. The parties’ submissions have both been considered in this regard.

6. The power to expand time for filing an Appeal is donated by Section 13 (3) of the TATA which provides as follows:“(3)The Tribunal may grant the extension of time if it is satisfied that the applicant was unable to submit the documents in time for the following reasons—(a)absence from Kenya;(b)sickness; or(c)any other reasonable cause.”

7. The Tribunal’s power to grant extension of time is discretionary and not a right to be granted to the Applicant. In determining whether to extend time, the Tribunal was guided by the decision of the Court in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated as follows:“it is trite that extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party, at the discretion of the Court. “13. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the case of Odek, JJ. A in Edith Gichugu Koine vs. Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors as thus:“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

8. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held as follows:“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and the degree of prejudice that would be occasioned to the respondent if the application is granted.”

9. The Tribunal, guided by the principles as set out in John Kuria v Kelen Wahito, Nairobi Civil Application No. 19 of 1983 April 10, 1984, referred to by the Judges in the case of Wasike V Swala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and Section 13 of the TATA used the following criteria to consider the application:

(a) Whether there is a reasonable cause for the delay. 10. In considering what constitutes a reasonable reason for delay, the court in Balwant Singh v Jagdish Singh & Others (Civil Appeal No.1166 of 2006), held as follows:“The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention.”

11. The statutory timelines and provisions to file an Appeal have been clearly set out in Section 13 (3) of the TATA which provides as follows with regard to the statutory timelines to be adhered to in commencing an appeal process:“A notice of appeal to the Tribunal shall—a.be in writing;b.be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The Applicant 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.statement of facts; andc.the tax decision….”

12. For a taxpayer who has not met the timelines as provided in the above provision of the law, Section 13(4) of the TATA provides the conditions that the taxpayer ought to meet to enable the Tribunal to exercise its discretion to extend time to appeal. The Section provides as follows:“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from giving notice of appeal within the specified period.”

13. Regarding the reasons for delay, the Applicant averred first that its director suffered ill health at the time the objection decision was issued. He had chronic illness as evidenced by a report from his doctor dated 14th November, 2024. It was clear that this chronic illness is ‘sickness’ and since it is chronic it could afflict the director of the Applicant at any time and is a reasonable cause for not filing an appeal on time.

14. The Tribunal notes that the Respondent opposed this vehemently by suggesting that the attached medical records were in respect of an admission to hospital which only occurred conveniently in November, 2024 around the time when the Applicant made this application. However, having sighted the medical report, it is clear that it was not in relation to an admission but was a medical report stating that the director suffers from a chronic illness.

15. In determining the competence and relevance of the evidence, produced by the Applicant, the Tribunal further relies on the following holding in the case of McQuire v. Western Morning News (1903) by Sir Richard Henn Collins MR on how to determine how an ordinary man would reason:“One thing, however, is perfectly clear, and that is that the jury have no right to substitute their own opinion of the literary merits of the work for that of the critic, or to try the "fairness" of the criticism by any such standard. "Fair," therefore, in this collocation certainly does not mean that which the ordinary reasonable man, "the man on the Clapham omnibus," as Lord Bowen phrased it the juryman common or special, would think a correct appreciation of the work”;

16. The 10th Edition of the Oxford Advanced Learners Dictionary, defines ‘Chronic’ as follows:“(of a disease) lasting for a long time, difficult to cure”

17. The finding of the Tribunal in placing itself in the shoes of the “ordinary man” is that the director of the Applicant had a chronic illness. It matters not the period to which it was related for the illness was long lasting and difficult to cure. It was therefore a chronic illness. The chronic illness was serious enough to disempower the Applicant’s director and it made him unable to file his Appeal in accordance with the timelines outlined in the tax statutes. In this case, the indisposition of the Applicant’s director is infinite based on the evidence adduced. The Tribunal is therefore persuaded that the director of the Applicant had indeed been sick at the time the Applicant received the objection decision since his illness was chronic.

18. The Tribunal has also considered “the other reasonable cause” which was that there was an issue regarding the payment of the Tribunal fees. This was also a reasonable cause for the delay in filing its Appeal.

19. Consequently, the Tribunal determines that the Applicant demonstrated reasonable cause for delay.

(b) Whether the Appeal is merited? 20. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal’s time, or it was material to the extent that it deserved its day in the Tribunal.

21. The test is not whether the case is likely to succeed. Rather, it is whether the case is arguable. This was the finding in Samuel Mwaura Muthumbi V Josephine Wanjiru Ngungi & Another (2018) eKLR where the court stated as follows:“Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is inarguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended or filed appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, a demonstration that the Applicant has plausible grounds of either facts or law to overturn the original verdict. The Applicants have easily met that standard. I believe that the Applicant has discharged this burden.”

22. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited Vs Nicholas Ombija (2009) eKLR where it was held as follows:“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

23. Similarly, this was also the position held in Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) eKLR where the court held as follows; “on whether the appeal is arguable, it is sufficient if a single bonafide ground of appeal is raised an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court: one which is not frivolous.”

24. The Tribunal noted that the Respondent’s decisions dated 19th April, 2024 and 9th May, 2024 confirmed the assessments for Income Tax and Value Added Tax respectively. Upon a perusal of the Memorandum of Appeal by the Applicant, the Tribunal noted that the Applicant had raised six grounds of Appeal that required rebuttal by the Respondent. Pursuant to the standards set out in the Stanley Kangethe Kinyanjui Vs Tony Keter & others case, the Tribunal finds that the Applicant had an arguable case which required to be canvassed and considered on its full merits.

(c) Whether there will be prejudice suffered by the Respondent if the extension is granted? 25. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the Judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the finding in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in finding as follows:“…….a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate………”

26. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted. However, having found that the subject matter was arguable, it is the view of the Tribunal that the Applicant’s recourse to justice now lies in an appeal to the Tribunal. Thus, the Applicant would suffer prejudice if it is not granted leave to file its appeal. The Respondent on the other had will not suffer prejudice since it will still be able to collect the taxes plus interest and penalties should the Applicant be found to be at fault.

27. The Tribunal therefore finds that the Respondent will not suffer prejudice if the extension is granted.

Disposition 28. Based on the foregoing analysis, the Tribunal finds that the Application is merited and accordingly proceeds to make the following Orders:a.The Application be and is hereby allowed.b.Leave be and is hereby granted for the Appellant to file its Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time.c.The Appellant’s Notice of Appeal, Memorandum of Appeal and Statement of Facts are deemed as having been duly filed on November 19, 2024. d.The Respondent to file and serve its response to the Appeal within 30 days of the date of this Ruling.e.No orders as to costs.

34. It is so Ordered.

DATED AND DELIVERED AT NAIROBI ON THIS 17TH DAY OF JANUARY, 2025. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERELISHAH N. NJERU - MEMBEREUNICE N. NG’ANG’A - MEMBEROLOLCHIKE S. SPENCER - MEMBER