[2023] KEHC 26844 (KLR)

Commissioner of Domestic Taxes v Shah T/A Symtiss Trading (Income Tax Appeal E068 of 2023) [2023] KEHC 26844 (KLR) (Commercial and Tax) (30 November 2023) (Ruling)

Neutral citation: [2023] KEHC 26844 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Income Tax Appeal E068 of 2023

A Mabeya, J

November 30, 2023

Between

Commissioner of Domestic Taxes

Applicant

and

Ashok Shah & Mital Shah T/A Symtiss Trading

Respondent

(Being an Appeal from the Judgment of the Honourable Tribunal delivered on 20/1/2023 in TAT No. 82 of 2022)

Ruling

1. On 16/5/2023, the appellant took out a Motion on Notice under Rule 4 of the Tax Appeals Tribunal and Section 32 of the same Act. He sought the extension time within which to lodge an appeal against the judgment of the Tax Appeal’s Tribunal (“the Tribunal”) delivered on 30/1/2023. That the Memorandum of Appeal filed together with the Motion be deemed properly filed and served. There was also a prayer for stay of execution of the impugned judgment.

2. The application was supported by the affidavit of Luyiankha Johnson Shijenje sworn on 16/5/2023. It was averred that the Notice to Appeal was filed on 17/2/2023, within time and the appeal was supposed to be filed on or before 16/3/2023. That counsel reasonably believed that he required the certified copies of the proceedings and the judgment in view of the provisions of rule 5 of the Tax Appeals Tribunal (Appeals to High Court) Rules (“the Rules”) before lodging the appeal.

3. That as at the time of lodging the Motion, the proceedings and judgment of the Tribunal had not yet been supplied and the respondent was threatening to execute the orders of refund by the Tribunal. The defendant swore that the intended appeal was arguable and had high chances of succeeding.

4. The application was opposed vide the replying affidavit of Ashok Shah sworn on 22/5/2023. It was contended that the applicant was sought to file the appeal out of time without any reasonable cause. That no substantial loss to be suffered had been demonstrated. That the application was defective as neither the order sought to be stayed not Memorandum of Appeal was attached to the application.

5. It was further contended that the appeal was sought to be filed without the accompanying documents in terms of Rule 5 of the Rules. That there was no valid appeal upon which the stay could be granted. That the letters requesting for the proceedings from the Tribunal had not been produced. That if a stay is to be granted, the whole amount should be tendered as security.

6. The parties filed their respective submissions dated 30/5/2023 respectively. I have considered those submissions and the respective authorities relied on.

7. This is an application for extension of time within which to file an appeal and for stay of execution. The principles applicable to an application for extension of time are well known. These are the length of delay, the reason for the delay, the chances of the appeal succeeding and the degree of prejudice to be suffered by the respondent if the application is allowed (see Nyaigna Farmers Co-operative Society Ltd VS Ibrahim Nyambane & 3 others (2016) eKLR.

8. As to the length of the delay, the appeal was supposed to be filed by 16/3/2023. The Motion was filed by 16/3/2023. There was a delay of 60 days. This, in my view, was inordinate. I consider any period beyond an additional 30 days required to file an appeal to be inordinate and which require an explanation.

9. On the reason for the delay, it was sworn and submitted by the applicant that its Counsel misread the law. That the advocate reasonably believed that in order to file the appeal, he needed the certified copies of the proceedings and the judgment of the Tribunal. These were applied for but even as at the time of making the present application, the same had not been supplied yet. The respondent submitted that there was no evidence that the said documents had been applied for. That even the record that had been filed was defective as it did not have those documents as required by the law.

10. The right of appeal to this Court from the Tribunal is conferred by Section 32 of the Tax Appeals Tribunal Act (“TAT”). The procedure for lodging such an appeal is provided for under the Rules. On Section 53 of Tax Procedures Act gives this Court the discretion to extend the time fixed by the statute as also does rule 4 of the Rules. The grounds for extension are sickness, absence from Kenya or other reasonable cause.

11. In view of the foregoing, a party is required to lodge an appeal in this Court from a decision of the Tribunal within 30 days of filing and service of a Notice of Appeal. However, this Court has the discretion to extend such period for reason of absence from Kenya, sickness or other reasonable cause. The question therefore is whether the reason advanced by the applicant falls within these grounds.

12. An appeal to this Court is effected by lodging a Memorandum in terms of rule 3 of the Rules. Under Rule 5, a Memorandum of Appeal is required to contain an index of all the documents supporting the appeal and be accompanied by a copy of the decision of the Tribunal and the Notice of Appeal.

13. According to the appellant, his advocate reasonably believed that he required a certified copy of the proceedings and judgment in order to lodge the appeal. That was a wrong interpretation of Rule 5 of the Rules. All that is required is the documents required for the appeal, (which are in the possession of the parties) the decision being appealed against and the notice of appeal only.

14. In this Court’s view, all that a party requires is the Memorandum of Appeal, the Notice of Appeal, copy of the decision and all other documents produced at the Tribunal. The proceedings may not be relevant unless the party needs to refer to them at the hearing of the appeal. In my view, since proceedings take time to be supplied, these can be filed later through a supplementary record.

15. In view of the foregoing, it was unnecessary for the advocate for the applicant to wait for the certified copies of proceedings and judgment to be supplied before lodging the appeal. Counsel’s need to familiarize themselves with the procedures applicable to each court. It is appeals to the Court of Appeal that are strict on certification of the judgment, ruling, decree or orders appealed against. That’s not the case with appeals from the Tribunal to this Court.

16. Be that as it may, it is possible for a legal advisor to make a wrong interpretation of the law and lead to a loss on the part of litigant. That is possible and where a genuine mistake like that occurs, I think the court will be more willing to excuse the mistake if no violence will be meted out on the opposite party’s rights. To my mind the reason advanced by the applicant is reasonable cause and I accept it.

17. The other ground is the likelihood of the appeal succeeding. The appellant cited that the Tribunal knew that the subject tax amounting to Kshs. 51 million had been spent and/or utilized by the respondent through credit adjustment vouchers issued by the appellant yet it ordered that the same be refunded to the respondent within 90 days. The respondent on the other hand argued that the appellant’s appeal cannot succeed as the respondent’s appeal was allowed by operation of law as the appellant had failed to respond to its objection in time.

18. In my view, those are arguable issues in the appeal. Whether, where an objection is not responded to within time and the appeal succeeds, the Tribunal can order a refund where none has been claimed in accordance with the law. Further, there is an issue of public interest in that, it is claimed that the respondent has already expended the sum of Kshs. 51million by way of credit adjustment, yet there is an order that a similar amount be paid to it. It is in such scenarios that the Court has to require a hearing to ascertain the rights of the respective parties. In my view, the appeal is arguable.

19. Finally, on the prejudice to be suffered by the respondent, none was alleged. All that was stated was that there would be a delay in enjoyment of the fruits of its judgment. That may be so but the respondent did not deny the positive allegation that it had already enjoyed Credit Adjustment Vouchers on the VAT and that the orders of the Tribunal for the refund of Kshs. 51million would possibly amount to unjust enrichment. No prejudice in my view would be suffered.

20. As for stay of execution, the principles are well known. They are set out under order 42 rule 6 and in the case of Kenya Shell Vs Benjamin Karuya Kabiru & Anor (1986) eKLR. Substantial loss must be demonstrated, security be offered and the application be made timeously.

21. The application was not made timeously. There was a delay of 60 days which this Court has noted to be inordinate.

22. On substantial loss, it was alleged and not denied that the order to refund Kshs. 51million within 90 days would amount to double payment, the respondent having already utilized the same through credit adjustment vouchers effected by the appellant. There was no averment by the respondents that they would be capable of refunding the same, if the appeal ultimately succeeds. That is neither here nor there where an issue of double payment has been alleged and not denied.

23. On security, that is an important consideration in an application for stay. See KimanivsCommissioner of Domestic Taxes (2022) KEHC 10192 (KLR). In the present case however, notwithstanding that the appellant is the Government’s Statutory Authority that collects Revenue and is capable of paying the said amount at any time it is required to do so, the issue of unreported, unchallenged and undenied allegation that the amount has already been utilized and will amount to double payment or unjust enrichment militates against orders of any security.

24. Accordingly, I find the application dated 16/5/2023 to be meritorious. The same is allowed in terms of prayers Nos. 2, 3, 4 and 6 of the Motion.However, the costs of the application are awarded to the respondent in any event capped at Kshs. 10,000/=.It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 30TH DAY OF NOVEMBER, 2023. A. MABEYA, FCIArbJUDGE