[1985] KECA 84 (KLR)

IN THE COURT OF APPEAL AT NAIROBI

(Coram: Madan, Hancox JJA & Platt Ag JA )

CIVIL APPEAL NO 19 OF 1981

COMMISSIONER OF INCOME TAX...........APPELLANT

AND

MENON..................................................................RESPONDENT

(Appeal from the High Court at Nairobi, Wilkinson-Guillemard J)

RULING

April 4, 1985, Hancox JAdelivered the following Ruling.

The respondent taxpayer was assessed at shs 4,750,408 for the 1975 year of income, to which the income tax authorities added penalties of Kshs 1,312,448, making shs 6,062,856 for that year. He appealed against that assessment to the local committee for the Nairobi area under the provisions of section 86(1)(b) of the Income Tax Act, chapter 470 of the Laws of Kenya, contending that the amount charged was not taxable as it represented a receipt by way of capital.

His case was that it represented a loan made to him by the former East African Community for the purposes of the construction of a godown in Maidstone Road, Nairobi, which the community proposed to lease from the taxpayer. The Principal Assessor, however, decided that the sum charged to tax was received as income, inasmuch as it represented rent paid by the community for the godown. Moreover, as there was no provision for the apportionment of the amount said to represent rental income over different years, the whole sum was assessed to tax in the year of its receipt, namely 1975.

On March 28, 1979, the local committee confirmed the assessment. The taxpayer appealed to the High Court and on May 19, 1980, Wilkinson- Guillemard J, allowed the appeal, held that the sum in question was a capital, and not an income, receipt and ordered that it be excluded from the assessment. The formal document extracted, reflecting the judge’s decision, was headed “order” and was issued on March 18, 1981.

From that decision the Commissioner of Income Tax has sought to appeal to this court, but he has been met by an objection that the appeal does not lie under the relevant legislation and is therefore incompetent. Mr Gautama, on behalf of the taxpayer, has submitted that the intended appeal is in reality a third appeal, for which there is no provision either under the Income tax Act or the Civil Procedure Act. The decision cited by Gautama in support of his argument were Kassam v Virpal(1946) 13 EACA 35, Sanga v Baya[1973] EA 312 Munene v Republic[1978] KLR 105, and Anarita Karimi Njeru v RepublicCriminal Appeal No 4 of 1979 (unreported). All these authorities were concerned with the competency of an appeal to this court or its predecessor, but, in my view, none of them is of great assistance in determining the question raised by the respondent in this instant appeal.

The first of those cases related to a finding, after inquiry, by the Rent Control Board in which it was held that as an appeal statutorily lay either to the then Supreme Court or to the resident magistrate, both the second appeal to the Supreme Court and the purported appeal to the Court of Appeal were incompetent. The second case concerned an appeal from the district magistrate to the resident magistrate and thence to the High Court. It was held that on the wording of the relevant sections in the Civil Procedure Act and their marginal notes the legislature had not intended to confer the right of a third appeal to the Court of Appeal.

The third case, Munene v Republic, which was an appeal by a medical practitioner against his erasure from the professional register, turned on the wording of section 361 of the Criminal Procedure Code, which provided for an appeal to this court on matter of law, the question of whether there had been unreasonable delay in the appeal to the High Court being a question in law. This decision, by a majority of the court, was heavily criticised in the Njerucase almost a year later, which was itself a majority decision. The Attorney-General, appearing in person in the instant appeal, drew our attention to page 34 of the majority judgment in the Njerucase which emphasized that which had already been reiterated in Munene‘scase, namely that in the absence of statutory provision conferring it no right of appeal exists, and that no such right had existed in Munene’scase, either under the Medical Practitioners and Dentists Act, Cap 253, itself, or by reference in that Act to the Civil or Criminal Procedure Codes. Mr Gautama also emphasized certain aspects of both these last decisions, and in particular that at page 108 of the report in Munene’scase it is stated, in relation to section 3(1) of the Judicature Act:

“It is well established that there is no right of appeal apart from statute, either it is expressly granted by statutory authority or it is not. There is no right of appeal by mere implication or by inference. There is also no right of appeal, save to the extent hereafter stated, when it is expressly prohibited in the instance of statutes which enact that on appeal to it the decision of the High Court shall be final and shall not be subject to further appeal, as is the case, for example, under section 15 of the Landlord and Tenant (Shops, Hotel and Catering Establishments) Act.”

I respectfully adopt and follow those words in relation to this case.

Accordingly, bearing in mind the foregoing, and the provisions of section 68 of the Constitution, which the Attorney-General contrasted with section 64 in relation to the High Court, and which provides that this court shall have such jurisdiction in relation to appeals from that court as may be conferred by law, I now turn to examine the relevant legislation, past and present, to which Mr Gautama, in particular, drew our attention, in order to ascertain if there is any statutory provision providing for an appeal to this court from a decision of the High Court in an income tax appeal.

In the course of his submissions the Attorney-General stated that we should confine ourselves within the four corners of the present Income Tax Act for the purpose of ascertaining whether a right of appeal is conferred and that we were not entitled to pay regard to the earlier legislation, which was enacted in the context and circumstances of a large and different entity, namely the partner states of the community. He also referred us to a passage in Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 1 KB 64, which was a case stated by the Special Purposes Commissioners in relation to excess profits duty, in which Rowlatt J said p 71:

“It is urged by Sir William Finlay that in a taxing Act clear words are necessary in order to tax the subject. Too wide and fanciful a construction is often sought to be given to that maxim, which does not mean that words are to be unduly restricted against the Crown, or that there is to be any discrimination against the Crown in those Acts. It simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”

Again, with respect, I accept that proposition. Nevertheless in order to see how the previous right of appeal, which undoubtedly existed under the Community Legislation, was conferred I agree with Mr Gautama that it is necessary to consider the earlier statutes, namely the East African Income Tax (Management) Act 1952 and 1958, the latter of which appeared in the 1970 Revised Edition of the Community Acts as cap 24.

The 1952 Act contained a provision, sub-section (10) of section 78, which even though put in the inverted form:-

“No appeal shall lie from the decision of a judge except on a question of law or of mixed law and fact”,

clearly showed that there was a restricted right of appeal to the East African Court of Appeal. I say this because the definition of the term “judge” in the Interpretation Act, Cap 1, of the Laws of the High Commission, (replaced by the Laws of the Community (Interpretation) Act, 1967 cap 2 of the 1970 revised edition) was a judge of the Supreme Court or of the High Court of any of the territories, so that the only appeal to which subsection (10) could possibly refer was an appeal to the East African Court of Appeal established under The East African Court of Appeal Order in Council, 1921, Article 2 of which provided:-

“A court shall be, and is hereby, constituted, called His Majesty’s Court of Appeal for Eastern Africa”) which shall be a superior court of record and shall, subject to the provisions of this Order, have jurisdiction to hear and determine appeals (including reserved questions of law) from the courts of the said territories in all causes and matters in which under any law for the time being in force in any of the said territories respectively an appeal lies to the Court of Appeal.”

It will be seen that this provision went no further, (save that it referred to three countries) than does section 68 of the Constitution to which the Attorney-General drew an attention, so that the position was exactly the same when the 1952 Income Tax Management Act was passed, inasmuch as a right of appeal had to be expressly granted by statutory authority.

The 1958 Income Tax Management Act reproduced section 78(10) of the 1952 Act as section 113(h), and the only material change I need mention for the purposes of this appeal is that for the first time there is a provision, paragraph (g), which is in similar terms to subsection (3) of section 87 of the present Income Tax Act, upon which the Attorney-General laid great stress towards the end of his submissions. It is as follows:-

“... the decree following the decision of the judge who heard the appeal shall have effect, in relation to the amount of tax payable under the assessment as determined by the judge, as a decree for the payment of such an amount, whether or not the amount of such tax is specified in the decree;

The 1958 Act endured throughout the next decade and a half, during which time Her Majesty’s Court of Appeal for Eastern Africa disappeared and became successively the Eastern Africa Court of Appeal (by the Eastern Africa Court of Appeal Order in Council, 1961, SI 2323 of 1961) the Court of Appeal for Eastern Africa (by the Court of Appeal for Eastern Africa Act 1962) and the Court of Appeal for East Africa (by the Treaty for East African Co-operation Act, [1967] Cap 4 of the Laws of Kenya).

The 1958 Act was replaced as regards Kenya on the 1st January, 1974, by the Kenya Income Tax Act (cap 470). Section 133(2) of this Act provided that the 1958 Act should cease to have the force of law in Kenya with effect from that date. Nevertheless, throughout the intervening period, it is clear from a reading of the volumes of the East African Tax Cases that appeals were constantly being preferred to the Court of Appeal for the time being constituted, from the High Court, without any objection or hindrance, but I have been unable to find any specific statutory provisions conferring a right of appeal other than sections 78(10) of the 1952 Act and 113(h) (which became section 103(h) when it was revised in 1970) of the 1958 Act. These are I said, phrased the right of appeal in an inverted or somewhat negative form. I must also mention here that section 66 of the Civil Procedure Act, formerly Cap 5 of the 1948 Laws of Kenya, has been preserved in Chapter 21 of the present Revised Laws of Kenya and provides for an appeal as of right from the decrees of the High Court to the Court of Appeal.

I do not need to enter into the niceties of the distinction between the terms “court” and “judge’ as they appear in the various statutory provisions, nor to enter into detailed considerations as to whether this is a first, second, or third appeal, (because the other appellate bodies under the 1974 Act are not ‘courts’ in the proper or defined sense of that word) for in my judgment the wording of sub-section (30 of section 87 of the Act is conclusive. It will be observed that the wording is slightly different from that of the former sub-paragraph (g) of section 113 (section 103) of the 1958 Act, inasmuch as it states that:

“An order made by the court “(meaning the High Court)” on an appeal shall have effect ... as a decree ...”

I do not think that on the present wording there can be any room for doubt that an order of the High Court on an appeal from the local committee is thereby statutorily regarded as a decree, and, assuming this to be so it is appealable to this court as of right under section 66 of the Civil Procedure Act.

Mr Gautama sought to persuade us that the words “shall have effect” in the subsection mean that the order of the High Court is regarded as a decree only for the purposes of the enforcement of that order, in other words it is relevant only to the collection of the amount of tax, as determined on appeal by the judge. I do not accept that the word “decree” is to be interpreted in that narrow sense. It cannot be said that the decree referred to in subsection (3) is of the same character as for example the purported decree in Kassam v Virpal(supra). It is in my view to be regarded as a decree in the full sense and is, as much, appealable as of right.

Furthermore, there was, as has been conceded, a right of appeal to this Court under the former legislation, and is it to be said that, without any apparent reason, that right has been taken away from the subject (even though the Commissioner of Income Tax happens to be the appellant in this instant case there is no reason, as Rowlatt, J said, to restrict the words unduly as against him) by the 1974 legislation? I am sure that cannot have been the intention behind the 1974 Act

. In reinforcement of my view, if such were needed, I come to section 93 of the 1974 Act. It will be observed that subsections (1) and (2) thereof refer to different situation, the first to appeals to the local committee, (or, as the case may be, to the Tribunal), and to appeals under section 86 (meaning appeals therefrom to the High Court) on the one hand, and the second to appeals from the High Court on the other hand. Section 93 reproduces much of the former section 119 (section 109) of the 1958 Act. But its importance is this: it provides that in the case of an appeal from the High Court the due date of payment of whatever is found due to an appeal shall be the same as if it had been finally determined by the (High) Court, and there follow consequential provision for refunds to, or further payments by, the taxpayer, depending on the decision of the Court of Appeal. That is the only way in which that subsection can be read, and in my opinion it also provides the answer to Mr Gautama’s point regarding the finality of the assessment under section 88. The right of appeal to this court does not alter the finality of the assessment, whether that finality is achieved by an appeal to the High Court or by an appeal to this court. It is not to be equated with the finality of an appeal.

Furthermore if, contrary to the foregoing, the legislature had intended to cut down rights of appeal by the 1974 Act, I would have suspected to see a provision on the lines of the proviso to section 15(4) of the Landlord and Tenant (Shops, Hotels and Catering Establishments Act (cap 301) which states:-

“Provided that the decision of the High Court on any appeal under this Act shall be final and shall not be subject to further appeal.”

or, indeed, of section 71A(2) of the Civil Procedure Act, as follows:

“An appeal under this section shall be final.”

I would finally observe that I do not regard the word “judge” as an overhang from the previous legislation, but as a necessary corollary of the order made by the court, in that it is as a result of the determination by the judge that the order of the court is made.

For these reasons there exists in my judgment a right of appeal from the High Court to this court which is expressly conferred by statute.

I would therefore dismiss the objection of the taxpayer that this appeal is incompetent, [with costs].

Madan JA.This appeal arrived in the following circumstances. The respondent (taxpayer) was assessed by the Commissioner of Income Tax for the year of income 1975. The taxpayer appealed under section 86(1) (b) of the Income Tax Act (cap 470) (Act), to the local committee against the assessment on the ground that the amount charged was not income but a capital receipt. The local committee confirmed the assessment.

The taxpayer being dissatisfied with the decision of the local committee appealed under section 86(2) of the Act to the court, ie the High Court as defined in section 2(1) of the Act. The court allowed the appeal and ordered the assessment to be amended by excluding therefrom the capital receipt. The Commissioner has appealed against the decision of the High Court.

On the first occasion in court Mr Gautama for the taxpayer raised a preliminary objection that this being a third appeal it was incompetent and did not lie. Senior State Counsel Gray, then appearing for the Commissioner, while agreeing that there was no express right of appeal under the Act, and that he relied on section 72(1) of the Civil Procedure Act (cap 21) was granted an adjournment upon his stating that he had no forewarning of the preliminary objection to be raised, and that he was taken completely by surprise.

The Attorney-General now appears in person.

The principle that is accepted is that there is no right of appeal except as may be conferred by statute. Proceeding from there Mr Gautama submitted that the appeal to the local committee was the first appeal and the appeal to the High Court was the second appeal; that part X of the Act which is a completely comprehensive code dealing with “Objections, Appeals and Relief from Mistakes”, makes no provision for a third appeal to the Court of Appeal, that in fact there is no provision at all for any further appeal anywhere else. He referred to section 88(1) of the Act which provides that where an assessment has been determined on appeal, as in this instance by the High Court, it shall be final and conclusive for the purposes of the Act. The substance of Mr Gautama’s argument was that there is no room for any further appellate action thereafter.

The Attorney-General submitted that a local committee is not a court for the purposes of appeal. It is a reference to an “appellate body” as stated in:

“s. 87(1): In this section, “appellate body” means the Court, the Tribunal or a “local committee” and “Court” means the High Court (section 2(1))

The Attorney-General drew a distinction between what he referred to as the courts “proper” and “tribunals”, the court proper being entrenched in the Constitution. He said the subordinate courts are established by Parliament; their procedure is regulated either by the Civil Procedure Act or the Criminal Procedure Code (cap 75). The Attorney-General said the subordinate courts ought not to be confused with tribunals of an administrative nature like a local committee which have special jurisdiction. He continued that the High Court though an appellate body is not a subordinate court.

The word “appeal” to a local committee should not be taken to mean appeal in the manner of the ordinary practice but as a reference to an administrative tribunal that; this is also indicated by rule 20 of the Income Tax (appeals to the High Court) rules which inter alia provides that the procedure relating to civil suits before the court shall not apply to an appeal to a local committee. Therefore, the High Court is the court of first instance for the purposes of appeal and the appeal to it is the first appeal. Although section 87(3) does not confer a right of appeal but the order made by the High Court on appeal to it has effect as a decree from which an appeal lies, as also envisaged in section 93(2) of the Act, and the appeal can lie to this court only. It would be a second not third appeal. The Attorney-General also thus seemed to concede that no third appeal lies under the Act, and he must have had in mind appeal from the decree of the High Court under section 66 of the Civil Procedure Act, which is set out hereafter.

In a case like this, one would normally look at the provisions of the ordinary municipal legislation of the land, in this instance the Civil Procedure Act, which enacts the framework for appeals to the courts generally. Court is defined in the Civil Procedure Act as the High Court or a subordinate court acting in the exercise of its civil jurisdiction. The heading of part VIII of the Civil Procedure Act is “Appeals to the High Court and Court of Appeal.” Appeals from “other courts” to the High Court are dealt with in the marginal note to section 65. “Appeal from Decree of High Court Second Appeal from the High Court” Section 66 provides:

“66. Except where otherwise expressly provided in this Act, and subject to such provision as to the furnishing of security as may be prescribed, an appeal shall lie from the decrees and from the orders of the High Court to the Court of Appeal”.

The next relevant section is 72 the heading to which reads: “Appeals from Appellate Decrees of the High Court” section 72 enacts:

“72(1) Except where otherwise expressly provided in this Act or by any other law for the time being in force, an appeal shall lie to the Court of Appeal from every decree passed in appeal by the High Court, on any of the following grounds, namely-..”

and sub-paragraph (a), (b) and (c) which follow limit the scope of the appeal to the Court of Appeal to decisions contrary in law or some usage having the force of law, failure to determine some material issue of law or some usage having the force of law, and substantial error or defect in the procedure provided which may possibly have produced error or defect in the decision of the case on the merits.

Two propositions arise. If a local committee is akin to a subordinate court or is like one of the “other courts”, the appeal to it would be the first appeal, the appeal from its decision to the High Court the second appeal, and the appeal therefrom to this court the third appeal.

The second proposition that arises is that the local committee is not a subordinate court or one of the “other courts” but an “appellate body” as defined in the Act, with whatever other status that expression confers upon it, such as, for example, an administrative tribunal suggested by the Attorney-General, thus disassociating it from a subordinate court or one of the “other courts”; then it is plain sailing because the appeal from the decision of the local committee to the High Court is the first appeal, and the appeal therefrom to this court the second appeal. The appeal to this court would not be a third appeal.

I cannot accept that the appeal to the local committee is not an appeal but a reference to an appellate body which is an administrative tribunal. How is the word reference to be written into the Act! A reference to do what, to decide whether the assessment raised by the commissioner ought to be confirmed or not. The sole function of an appeal to a local committee is to decide whether what has been done is right or not. The local committee is not an amorphous body. It is set up by statute. It has a defined status and its powers and procedure are spelt out also under the rules made under the Act. The word appeal is repeatedly used in relation to a local committee in section 86(2), in section 87(2)(a)(ii) and in (d)(e), in section 89(1),(2),(3),(a),(b),(c) and (4), and in the Income Tax (Local Committee) rules in particular in rule 2:

“appeal” means an appeal to a local committee under section 86 or section 89”

The High Court is also dubbed as “appellate body”, nevertheless it retains its status of court.

Whatever else is meant by the definition of a local committee as an appellate body it is a quasi-judicial tribunal bound by the rules of natural justice when carrying out its task of hearing appeals under section 86.

A near example is an appeal to the minister under section 29 of the Land Adjudication Act (cap 284); it cannot be termed a reference.

I will not dwell on Mr Gautama’s argument that under section 88 an assessment finally determined on appeal is final and conclusive for the purposes of the Act. Clearly the object of this provision is to give the assessment fiscal finality for the purpose of collecting the tax. It does not inhibit any other challenge to its validity, nor does or can it overrule the right of appeal to the Court of Appeal expressly given by section 72(1) of the Civil Procedure Act and section 93(2) of the Act.

I am of the view that notwithstanding the decision in Sanga v Baya[1973] EA 312 to which we were referred, a third appeal lies to the Court of Appeal under the provisions of section 72(1) and not, under my thesis, under section 66 of the Civil Procedure Act, as it is an appeal from an appellate decree of the High Court. Conversely it is not expressly provided in the Civil Procedure Act or by any other law for the time being in force that an appeal does not lie to the Court of Appeal. On the contrary, section 93(2) of the Act speaks of lodging an appeal from a decision of the High Court which could only be lodged in this court. There is thus express statutory provision for a third appeal to the Court of Appeal.

However unhappy the language used by the draftsman, section 93(2) cannot be discounted. It is a statutory provision which must be acknowledged and given a meaning in the context in which it appears in the Act to enact for a third appeal to the Court of Appeal. True it does not spell out the scope and the mechanics of the appeal but that is an omission which concerns only the machinery of the appeal. As an appeal coming from a decision of the High Court on appeal to it from a decision of the local committee it could not be wider than on a matter of law or mixed law and fact as is the appeal under section 86(2) of the Act to the High Court from which it emanates. With respect, in my opinion Sanga v Bayawas wrongly decided. The marginal note to section 72(1) which reads

“Second appeal from the High Court” (underlining mine)

was incorrectly read grammatically. It was also confusedly read with the unrelated marginal note to section 71A dealing with appeals from subordinate courts and which correctly stated the position in regard to those appeals accorded as it did with the section itself. The object, the operation and scope of section 71A stopped there. It has no connection with the marginal note to section 72(1) save to indicate progression of appeals from subordinate courts in the former case, and from the High Court to the Court of Appeal in the late case. The marginal note to section 72(1) is under a new heading of part VIII and it speaks about;

“Second appeal from the High Court”

which could be to the Court of Appeal only which is what section 72(1) itself states. The expression “second appeal” is not to be read as a numerical limitation. It means a further or third appeal from the High Court to the Court of Appeal. To read it in the manner it was interpreted in Sanga v Bayamakes section 72(1) utterly unintelligible, and erodes by a marginal note the priceless right of appeal to the Court of Appeal given by a substantive section in the Civil Procedure Act which enacts the municipal law of Kenya in regard to appeals generally. In addition the legislature must be deemed to have been aware of the marginal note to section 72(1) when it later inserted section 93(2) in the Act.

The strength of Mr Gautama’s objection that the act itself does not give a right of third appeal is also the weakness of the objection. A right of appeal need not be contained in every Act individually. It may exist otherwise generally as indeed it does in the case of a large number of Acts in the municipal law of the land, in this instance the Civil Procedure Act. It was an error to think there is no ordinary legislation relating to third appeals in Kenya as was said in Sanga v Baya.

For these reasons I hold that there is jurisdiction in this court to hear the appeal which is before us.

Finally, we were also referred to Munene[1978] KLR 105. It was followed by NjeruCriminal Appeal No 4 of 1979 (unreported) about a year later. They were both majority decisions of this court – Munene, myself and Law JA, Wambuzi JA dissenting. Njeru, Wicks CJ and Miller Ag JA, Law JA dissenting. Both appeals were heard and decided by judges of appeal of equal status.

The two judges who decided Njeruarrogated to themselves the prerogative to sit on appeal on Muneneand to call it bad law; they said it ought not to be followed. They also said that in Munenetwo completely new concepts were accepted as governing the jurisdiction of this court. The first was that this court will be guided by pure law, and the second that this court will interpret liberally the extent of its jurisdiction.

I have no hesitation in repeating what I held in Munene. I referred to the following passage in the judgment of Lockhart-Smith JA in Sheikh Noordin Gulmohamed v Sheikh Bros Ltd(1951) 18 EACA 42 at page 48, which Spry VP impliedly seems to accept in Sanga v Baya(supra):

“… it must, in my opinion, now be regarded as well settled that once a matter has arrived at an established court by way of appeal, the ordinary legislation dealing with further appeals from that court must be held to apply, unless excluded by special legislation”.

I pointed out in Munenethat Newbold JA referred to the foregoing statement of the law with approval in Cowasjee Dinshaw and Bros (Aden) Ltd v Cowasjee’s Staff Association[1961] EA 436 at page 442. This principle was enunciated earlier by the Privy Council in Secretary of State for India in Council v Chelakani Rana Rao(1916) LR 43 Ind App 152.

As also, earlier still in the speeches of Lord Haldane LC and Lord Atkinson at pages 552 and 553 in National Telephone Co Ltd (in liquidation) v His Majesty’s Postmaster General[1913] AC 546. Njerualso quoted extensively from National Telephone.

The two judges of appeal in Njerusaid that pure law as not defined and they could find no reference to it in the authorities except in the dissenting judgment of Madan JA in Mburu Kinyua v Gachini Tuti, CA No 25 of 1977 (unreported) where it was referred to as “pure justice”.

Alas, the expression pure law was not original with me. It had been used before, for example, in Meenakshi Mills Ltd v Commissioner of Income Tax, 1956 SCR 69 where the Supreme Court of India said:

“(1) When the point for determination is a pure question of law such as construction of a statute or document of tite, the decision of the tribunal is open to reference to the Court under section 66(1)”.

Mulla: Code of Civil Procedure13th Ed 439, 440.

Njerualso referred to the following phrase appearing in my judgment in Munene:

“We will not usurp jurisdiction. We will interpret liberally our jurisdiction”

and said that taken to its logical conclusion it establishes that this Court enjoys absolute jurisdiction, it is not bound by statute or precedent, and exercises a supervisory function over the courts and Parliament. These were assumptions made by the two judges in Njeru; with respect, the last one completely a non-sequitur. Parliament is supreme, I was not being inventive. I have never doubted though that the role ascribed to the court in Muneneby the judges in Njeru, not by me, is not completely novel because it is said to be manifested by the Supreme Court of the United Sates. Njerualso wrongly assumed that Munenesuggested the breaking of legislative limits placed upon the court’s appellate jurisdiction.

1 Halsbury(4th Ed) paragraph 22 page 23 puts the position in its correct perspective:

“Except in times of national emergency, however, the courts will not necessarily be deflected by a subjectively worded formula from determining independently any question of law, or a judicially ascertainable matter of fact, upon which the exercise of a statutory power depends… A provision that an act or order shall be “final” bars any right of appeal but does not exclude the supervisory jurisdiction of the courts.”

I knew at the time of Munene,I still know, that I had no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given. Precisely why I said we will not usurp jurisdiction.

The two decisions in Muneneand Njerupresent a teasing theory an aspect of which is presented in the preface to Robert E Keeton’s text-book: Legal Cause in the Law of Torts (Ohio-University Press)which I have quoted with admiration on a previous occasion also:

“Two yearnings influence development of any legal rule. One is the yearning for a precise rule that serves as an unfailing guide to the judge in making decisions and to the lawyer in predicting them. The other is the yearning for a flexible rule that is most conducive to sensitively administered justice – a rule that never compels bad decisions in the interest of symmetry, elegance, or simplicity. The first yearning is an influence toward particularization of the rule and rigid consistency of application; the second toward generalization and discretionary application. We cannot satisfy both yearnings. We do not satisfy either fully, and perhaps cannot do so because, as is common with antimonies, the relentless pursuit of only one of these polar values is self-defeating”.

Which is preferable – the precise rule or the flexible rule!

Did the Attorney-General incline towards the flexible rule when he exhorted us to treat a local committee as an administrative tribunal!

Some day either the legislature will ponder the issue, or a full bench will grapple with it. We will then know.

Mr Ole Keiwua, Mr Rach, the majority opinion (myself and Hancox, JA) is that the court has jurisdiction to hear the appeal.

Platt Ag JA.The Commissioner of Income Tax brought this appeal from the judgment of Wilkinson-Guillemard, J (as he then was) claiming that a large sum of money should be taxed as income, which the learned judge had held was not so taxable, having been received on capital account. But before the hearing, Mr Satish Gautama took a preliminary objection, namely that this court had no jurisdiction to hear the appeal, its powers having been taken away by the Income Tax Act (cap 470). The Attorney120 General appeared and argued that the court had retained the jurisdiction it had previously employed under The East African Income Tax (Management) Act, 1958 and its predecessor the 1952 Act.

Mr Gautama submitted two general propositions. The first was that the appeal to this the court would amount to a third appeal for which there was no provision in the Civil Procedure Act (cap 21) and, secondly, the Income Tax Act (cap 470) provided a system of appeals which did not include the Court of Appeal. It will be convenient to study the Income Tax Act first, and ascertain what appeals are envisaged by it. (I shall refer to the Income Tax Act as cap 470).

Part X of the Act (cap 470), is headed “Objections Appeals and Relief for Mistakes,” and it is in part that the hierarchy of bodies dealing with appeals is set out. Appeals to the local committee are provided for, while a narrower set of appeals to a tribunal is described. From either of these bodies there lies an appeal to the court, which is defined as the High Court. This is a limited appeal to the local committee which is final; that is an appeal against the Commissioner’s refusal to admit a notice of objection. This hierarchy had existed before cap 470 came into existence on January 1, 1974. The tribunal deals only with the Commissioner’s directions under sections 23 and 24 of the Act cap 470, which can appropriately be described in short as directions dealing with counteracting avoidance and reduction of liability to tax. All other matters and also those set out in section 89 of the Act (cap 470) must go to the local committee. From the decision of the local committee on these matters there lies an appeal to the High Court. It had been customary, in the course of setting out the procedure and powers for the High Court, to state that there could not lie an appeal from its decisions, except on a question of law or mixed law and fact. That will be found in section 103(h) of the 1970 revision of the East African Income Tax (Management) Act (cap 24 of the Community Laws).

In the original 1958 version of that Act, section 78(1) contains that provision; but then proceeds to spell out the appeals to the Court of Appeals and Privy Council … making provisions for tax to be collected as found by the judge, but adjusted up or down according to the decision of those bodies on appeal. There is no appeal to the Privy Council nowadays; but the burden of the preliminary objection is to decide whether an appeal still lies to the Court of Appeal, since section 87 of the present Act (cap 470) which sets out the procedure on appeals to the local committee, tribunal and court, does not contain any provision for a further appeal on a matter of law or mixed law and fact. Indeed, that type of appeal has been assigned to the High Court as section 86(2) explains. Without provision for an appeal from the decision of the High Court, apparently the result of rearranging what is called the “appellate body” in section 87 of the Act (cap 470), and limiting the power of the High Court itself, the basis for the jurisdiction of the Court of Appeal had not been set out. This must have been a deliberate act in the rearrangement because the style of appeal to the Court of Appeal on second appeals is limited to matters of law or mixed law and fact. This type of appeal is now provided for in the appeal to the High Court.

But there is little or no consistent logic in this Act (cap 470). Take for, instance the Income Tax (Appeals to the High Court) rules (LN 105 of 1974 and LN 41 of 1980). Why are statements of facts still being presented to the High Court with documentary evidence annexed? Surely the record of the local committee or tribunal will contain all the evidence, unless additional evidence is to be adduced, on the general principles which have been enunciated to meet that exceptional situation. But more astonishing still is rule 20 which adopts in large measure the procedure for the hearing of cases in civil suits. That is difficult to square with an appeal on law or mixed law and fact. But it is section 93(2) of the Act (cap 470) which is the most curious provision of all. It says:

“Where an appeal has been lodged from a decision of the court then notwithstanding anything contained in any written law and notwithstanding that the assessment has not been finally determined, the due date for the payment of the balance of the tax charged in the assessment shall be that set out in subsection (1) as if the assessment had been finally determined by the Court …”

It is clear now what the problem before this court really is. On the one hand section 86(2) provides for an appeal to the High Court in the form of a final appeal, ie limited to matters of law or mixed law and fact, and no further appeal is provided for in section 87, as the preceeding Acts had provided. As against that there is a tax collecting provision, which envisages an appeal from the court, in which case the due date for payment of the balance of tax charged in the assessment shall be that set out in subsection (1) as if the assessment had been finally determined by the court and then after the appeal this assessment will be revised up or down or left alone according to the result of the appeal.

It was generally agreed that an appeal is a matter which must be provided for in legislation. Without words in a statute granting an appeal, there is no appeal. There is nothing inherent in any given system of appeals, that a further appeal which had existed previously, must still be there by implication. The absence of any provision for an appeal to the Court of Appeal simply means that Parliament has decided that Income Tax appeals must end at the High Court, as Mr Gautama pointed out.

That conclusion was attacked by the Attorney-General, at first, by an attempt to limit the inquiry into the meaning the Act (cap 470) to the terms of that Act alone. In principle that is wrong, with respect, in case of uncertainty. It is one of the canons of statutory construction that a court may look into the historical setting of an Act to ascertain the problem with which the Act in question has been designed to deal. It is clear that section 87(3) for instance has included in it a concept from previous legislation, and indeed it is out of place. It says that

“An order made by the court on an appeal shall have effect, in relation to the amount of tax payable under the assessment as determined by the judge, as a decree for the payment of that amount, whether or not the amount of tax is specified in the decree.” (underlining mine).

That can be compared with section 103 in the 1970 revision.

“103 In every appeal to a judge under section 101 the following provisions apply ..

“(g) the decree following the decision of the judge who heard the appeal shall have effect, in relation to the amount of tax payable under the assessment as determined by the judge, as a decree for the payment of such an amount, whether or not the amount of such tax is specified in the decree ..”

The old appeal lay to a “judge”; the present section 87 provides for an appeal to the Court, and it is an anachronism to insert the idea of an assessment as determined by a judge. But this is more in the nature of a solecism than a fundamental mistake; and the out-of-place phrase does no mischief.

The second attack is that it makes no difference that no proper provision for an appeal to the Court of Appeal is to be found in section 87, because section 93 envisages an appeal, and the main provision is to be found in section 72 of the Civil Procedure Act. I should pause here to examine section 93 of the Act (cap 470). It falls in part XI “Collection, Recovery and Repayment of Tax”. The scheme in section 92(2) for repayment seems to be based first on an assessment (other than a provisional assessment), and the payment is to be made by September 30; or later, within 30 days from the service of a notice of such assessment, which service was effected after August 31. Then provisional assessments are provided for. Then, the position is dealt with when objections have been given, in which case despite the fact that the assessment has not been finally determined (as provided for in section 88), if the tax is due and payable under section 92(2), so much of the tax as is not in dispute shall be due and payable under section 92(2), and the balance in accordance with section 93. In order to find out what tax is not in dispute, one must look at section 92(8). It will be the amount claimed in an objection, or the amount claimed in the memorandum of appeal when notice of appeal has been given. The concept is that, if the Commissioner were to amend the assessment either in accordance with the objection, or the memorandum, then that amount of tax would not be in dispute. The balance of tax in section 93 is then calculated.

First, there is the case where there is agreement to amend the assessment as provided in section 85(2) of the Act. Payment is to be made within 30 days of the date of service of the notice given by the Commissioner in that sub-section. Then there are the cases under section 85(3) where the tax-payer refuses to accept the Commissioner’s amendment, or the Commissioner refuses to amend at all. If despite that, there is no appeal, then the tax-payer must pay within 30 days of the notice issued by the Commissioner under section 85(3).

What is left is the case of appeals. Obviously there will be none from the notice issued under section 85(2) because there will have been agreement between tax-payer and Commissioner. Appeals will emanate from the disagreements in section 85(3). Hence the opening of section 86(1) ––

“A person who has been served with a notice under section 85(3) may:-”

(a) appeal to the Tribunal in certain circumstances, (b) appeal to the local committee. Section 86(2) makes provision for appeal to the High Court. What payment provisions are there in the case of appeal? Section 93(1)(c) says in a case where the assessment has been finally determined by a decision on appeal, then one looks to see if the result of the appeal has made any amendment to the assessment, as emerges from section 85(3). If there is no change, the taxpayer pays within 30 days of the service of the notice given under section 87(2)(e). If there is an amendment, the taxpayer pays within 30 days of the service of the notice given under section 87(2)(f).

These notices, are given by the “appellate body” defined in section 87 as the Court, the Tribunal or a Local Committee. Section 87 represents a compendium of powers exercised in the same way by each component of the appellate body, even though there are two steps. Having followed the payment provisions first from cases of agreement, to cases of disagreement but no appeal, we are now about to observe what payments are to be made after the first tier of appeals to the Tribunal or local committee, but no further appeal to the High Court; and then after the appeal to the High Court. Unfortunately, section 93(1)(c) becomes obscure, because it relies on the concept of assessment being finally determined by a decision on appeal. Which appeal is that? The first tier or the second tier appeal? What we need to know is what the position is after the tribunal’s decision or local committee’s decision, without further appeal to the court, and then what the position is after an appeal is taken to the court. We look in vain for such methodical progress. Section 88(1) deals with finality of assessment. That is not actually a concept related to the process of tax collection. It is a matter of stating whether or not the commissioner can make an additional assessment; whether he can reopen an assessment after an appeal, or whether the assessment after an appeal is final and conclusive; and when fraud or gross or willful neglect will allow him to reopen an assessment. Section 88(1) does have this important effect, however, of following the process of finalizing assessments, through the stages of agreement under section 85(2); (ii) at the stage of no agreement but no appeal in section 85(3); and (iii) when the assessment had been finally determined on appeal.

It is this last subsection which illustrates again the obscurity of thought of the draughtsman with which we are now especially dealing. The implication is that there will be two stages of finality, first, if the appeal to the Tribunal or local committee ends the process without a further appeal to the High Court; the second is when these first appeals are not the end of the process and there is a further appeal to the High Court. That will finally decide what the assessment should be. So when section 88(1) says that the assessment has been finally decided on appeal that is sufficient for its purposes, but it is not good enough for collection purposes. There should be provision in section 93(1)(c) for the case of final determination by the tribunal or local committee because no further appeal to the Court has been taken, and then when there has been a final determination by the court. But there will be some overlapping of notices. The tribunal and local committee will each issue a notice under either section 87(2)(e) or 87(2)(f) and the Court will do the same. The appellate judgment of the High Court results in a decree. That is accepted to be the position in section 93(1)(c) – there is final assessment after an appeal decision and if no amendment is necessary a notice under section 87(2)(e) is issued; if there is an amendment a notice under section 87(2)(f) is issued.

It follows that there will be either final assessment as a result of the decision in first appeal or after the second appeal to the High Court. But it will be observed that there cannot be final assessment after first appeal if a second appeal is taken. In the latter case there can only be final assessment after an appeal to the court has been determined. Payment after the first notice under section 87(2)(e) or section 87(2)(f) will be postponed until a second notice from the court under one of those same sections has been served. That leads to the attack on section 93(2) of the Act.

It cannot stand close scrutiny. Section 93(1)(c) has accepted that final assessment is bound up with notices given by the Appellate Body in section 87(2)(e) or 87(2)(f). Supposing that there is a further appeal to the Court of Appeal under section 93(2), can there ever be a case, as section 93(2) suggests, of

“notwithstanding that the assessment has not been finally determined”.

The answer is simple. There is no such case. The appellate body has finally decided with the decision of the High Court. The only case where the Appellate Body has not finally decided is where the first tier – the Tribunal or local committee have decided, but there is the further appeal to the High Court. When that court has decided the appellate body finally acts under section 87(2)(e) or section 87(2)(f) and then there is final assessment. What section 93(1)(c) ought to have provided for, was the case of final decision by the tribunal or local committee, no further appeal being taken, and the position when the appeal has been lodged to the High Court, tax to be paid on the decision of the Tribunal or local committee and adjusted after the decision of the High Court. Section 93(2) in cap 470 is merely a slavish repetition of section 109(3) in the 1970 revision where an appeal had been provided to the Court of Appeal in section 103(b) in that Act, or section 119(3) of the 1958 Act, again where provision for appeal to the Court of Appeal had been made earlier in section 113(h) of that Act; and the provisions in section 84(3) of the 1952 Act which relate back to the full-blooded appeal provisions in section 18(10) and (11).

The result is inescapable. The provisions of section 93(2) cannot be logically applied. At least one must hold that there is never a case where the assessment has not been finally determined by the High Court, before an appeal can be lodged to the Court of Appeal. It is also a case of failing to provide for the position between the two tiers of the appellate body. But the main attack must be that it has lost its lynch pin, the provision for an appeal to the Court of Appeal. That provision for the further appeal clothes the predecessors of section 93(2) with meaning and sense. Without it, section 93(2) only envisages the doubtful possibility of an appeal; it does not provide, for one.

For these reasons, the proponents of a third appeal to the Court of Appeal seek refuge in section 72 of the Civil Procedure Act. If the provision is not in the Income Tax Act (cap 470) itself, perhaps the default can be made good by section 72. Mr Gautama urged the court to reject that proposal since the court cannot entertain third appeals. The Attorney- General described the first appeals to the Tribunal or local committee as merely administrative. The first real appellate decision, he said, is that of the High Court, with a second appeal to this Court. There was no dispute about the principle that the Civil Procedure Act does not permit a third appeal to this court. At least we were not asked to overrule Sanga v Baya [1973] EA 312 where that principle was laid down. Although the marginal notes and section 72 are in fact not in tune, it would be unwise to depart from that decision without a proper application to do so, and close argument upon the working of that provision, which though illogical, might still have been best interpreted as it was in that case. Yet I acknowledge the force of Madan JA’s views upon section 72.

It will be observed that Sanga v Bayawas decided well before the Act (cap 470) was brought into operation on January 1, 1974. It follows that the state of the law was known to the draughtsman, who dreamed up the idea of the “appellate body”. That concept now defeats the argument of the learned attorney. The procedure and powers are exactly the same in all three component parts. One cannot find a difference in operation between the three component parts, except that the court is an established judicial body. But the local committee and Tribunal can act no differently in practice. It is therefore clear that the first appeal is to the Tribunal and local committee; the second to the High Court and the third would be to this Court. Section 72 as interpreted by Sanga v Baya, does not provide for such a third appeal. Therefore the result is that there is no jurisdiction in this court to hear this appeal. It is a result which rightly favours the taxpayer against the ambiguity of this tax legislation.

It was nevertheless heartening to hear the learned Attorney-General support this Court. Perhaps it would be pardonable to admit, that as these matters are often extremely complex, one can only hope that the learned Attorney- General will see that the gap is filled up.

I would uphold the preliminary objection and dismiss the appeal with costs to the respondent.

Dated and delivered at Nairobi this 4th April, 1985.

C.B MADAN

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JUDGE OF APPEAL

A.R.W HANCOX

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JUDGE OF APPEAL

H.G PLATT

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AG. JUDGE OF APPEAL

I certify that this is a true copy of the original.

DEPUTY REGISTRAR