[2024] KETAT 1075 (KLR)

Eco-Energy East Africa Limited v Commissioner of Domestic Taxes (Tax Appeal 278 of 2023) [2024] KETAT 1075 (KLR) (5 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1075 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 278 of 2023

E.N Wafula, Chair, E Ng'ang'a, M Makau, EN Njeru & AK Kiprotich, Members

July 5, 2024

Between

Eco-Energy East Africa Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Appellant vide a Notice of Motion application dated 9th May, 2024 filed under a Certificate of urgency on the even date sought for the following Orders:-a.Spentb.Spentc.This onourable HonourableHonourable Tribunal be pleased to review and or vary the Orders made in the Judgment dated 3rd may, 2024 specifically, the order in Paragraph 95(b) (iii) which upholds a PAYE assessment in the sum of Kshs.243,507,570. 00 on the Director.d.The costs of this application be in cause.

2. The application which is supported by an affidavit sworn by Osman Burhan Saed, a Director of the Appellant, on the 9th day of May, 2024 is premised on the following grounds:-a.That this Honourable Tribunal entered Judgment on 3rd May, 2024 partially against the Appellant which Judgment contains an error on the part of the Tribunal.b.That in Paragraph 5 of the Judgment, the Honourable Tribunal rightfully established that the Respondent issued assessment orders for the years 2015, 2016, 2017 and 2018 and 2019 for Corporate tax dated 25th November, 2022. The Respondent also issued VAT assessment orders for the years 2015, 2019 and 2020 dated 22nd December, 2022 and also issued PAYE assessments for the years 2016, 2017, 2018 and 2019 dated 25th November, 2022. c.That the PAYE assessments comprised of a sum of kshs243,507,570. 00 spread across the years 2014 to 2020. d.That Further the Honourable Tribunal noted in Paragraph 22 of its Judgment that the Appellant was relying on Section 31(4) of the Tax Procedures Act in arguing that the assessments for the period 2014, 2015 and 2016 were beyond the Five(5) years limit stipulated by law.e.That in its analysis and findings, the Honourable Tribunal went at great lengths to discuss whether the 2014, 2015, 2016 and 2017 assessments were statutorily time barred being one of the issued it outlined for determination.f.That in Paragraphs 69 to 78, the Honourable Tribunal outlined its findings and noted specifically in Paragraph 77 that the Respondent had not adduced evidence to demonstrate that the Applicant breached section 29(6) or Section 31(4) (a) of the TPA to justify assessments of taxes beyond the five years limit.g.That consequently the Honorable, Tribunal concluded that the Respondent cannot find refuge under the aforementioned Sections to justify the 2014, 2015, 2016 and 2017 assessments.h.That in the circumstances, the Honorable Tribunal found and held, in Paragraph 78 of the Judgment, that the 2014, 2015, 2016 and 2017 tax assessments, being statutorily time barred, were null and void ab initio and ought to be expunged from the objection decision.i.That for further emphasis, on Paragraph 83, the Honourable Tribunal found that the Respondent complied with the provision of the law and thus the Appellant was liable to pay the director’s PAYE assessments only from 1st October, 2017. j.That surprisingly, and despite the above finding, the Tribunal in its decision in Paragraph 95(b)(iii) made an order upholding the director’s PAYE assessment of kshs.243,507,570. 00 which comprises the total assessment for the years 2014, 2015, 2016, 2017, 2018, 2019 and 2020. k.That the inclusion of the expunged assessments in the final order with regards to the director’s PAYE, despite the Tribunal’s accurate finding constitutes a mistake/error apparent on the face of the record.l.That this error has substantial implications on the Appellant/Applicant as it exposes them to potential execution by the Respondent of assessments which were expunged and declared null and void. This will cause substantial harm by condemning the Appellant/Applicant to pay such he sums despite the finding of the Honourable Tribunal.m.That it is justified and necessary for the Honourable Tribunal to review and amend its judgment dated 3rd May, 2024, to correct this manifest error, ensuring that the final orders accurately reflect the Tribunal’s determination by excluding the assessments from 2014 to 2017, which were rightly found to be time-barred and therefore not enforceable.n.That the correction of this error is critical to uphold the principles of fairness and justice, preventing irreparable harm to the Appellant/Applicant by the enforcement of an incorrectly calculated tax obligation.o.That there is a sufficient reason to review, vary and or discharge the said order in the Judgment entered on 3rd May, 2024. p.That unless this Honourable Tribunal grants the orders sought herein the Appellant/Applicant stands to suffer irreparable loss by the enforcement of an incorrectly calculated tax obligation.q.That it is in the best interest of justice that the said orders are granted as the same will not be prejudicial to the Respondent.

3. The Respondent upon being served with the application opposed the application vide the Grounds of Opposition dated 22nd May, 2024 and filed on the even date on the following grounds:-a.That the grounds of the application does not fall within the precepts of a review as provided under the Tax provisions.b.That this Honourable Tribunal lacks the jurisdiction to entertain this application having rendered its Judgment on 3rd May, 2024. c.That the application herein is an appeal disguised as a review application.d.That the application is frivolous, without merit and the same is an utter abuse of the powers of the Tribunal.e.That the application is baseless, inept and not grounded on the law.f.That with such a bare application, the discretion of the Honourable Tribunal cannot be invoked.

Analysis and Findings 4. The parties in compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions filed their respective written submissions that were duly adopted by the Tribunal on the 30th May, 2024. The Tribunal has considered the submissions in arriving at its findings hereinafter.

5. The Appellant has sought orders for the review of the Judgment delivered by the Tribunal on the 3rd day of May, 2024 on the basis of an error or mistake apparent on the face of the record. That the Judgment contains orders which are contradictory to the findings, analysis and holding of the Honourable Tribunal.

6. The Tribunal’s powers to review its own Judgment are immortalized under Section 29A of the Tax Appeals Tribunal Act. The Section provides as thus:-(1)a person aggrieved by a decree or an order from which no appeal has been preferred from the Tribunal to the High Court, may apply for review of the decree or the order within seven days from the date the decree or order was made by the Tribunal.(2)Applications for review of decree or orders under subsection (1) may be made –a.upon the discovery of new or important matter or evidence which after the exercise of due diligence, was not within the knowledge of the applicant or could not be produced by the applicant at the time when the decree was passed or the order was made;b.on account of some mistake or error apparent on the face of the record; orc.for any other sufficient reason.” (Emphasis added)

7. The Tribunal observes that the application was filed timeously in compliance with Section 29A(1) of the Tax Appeals Tribunal Act and is thus properly before the Tribunal for its appropriate determination on its proper merits.

8. The Appellant’s submissions are to the effect that the Orders issued by the Tribunal under Paragraph 95(b)(iii) are inconsistent with its findings and holding under Paragraphs 78 and 83 of the Judgment delivered on the 3rd day of May, 2024.

9. The orders issued by the Tribunal under Paragraphs 95(b)(iii) of its Judgment are in the following terms:-“The Director PAYE assessment in the sum of Kshs 243,507,570. 00 be and is hereby upheld.”

10. To determine whether such orders as issued by the Tribunal are incongruous or inconsistent with the findings of the Tribunal as regards the PAYE tax liability on the part of the Director for the Appellant it is necessary to look at the specific and express wordings of Paragraphs 78 and 83 of the Judgment as contended by the Appellant.

11. The Tribunal made findings on the identified legal issue as to whether the 2014, 2015, 2016 and 2017 assessments are statutorily time barred under Paragraph 78 of the Judgment in the following words:-“Under the circumstances, the Tribunal finds and holds that 2014, 2015, 2016 and 2017 tax assessments being statutory time barred are therefore null and void ab initio, ought ot be expunged from the objection decision and are hereby expunged.” (Emphasis added)

12. The Tribunal while making a finding on the identified issue of whether the Respondent’s objection decision was justified observed under Paragraph 83 of the Judgment as follows:-“The Tribunal has noted that the Respondent complied with the provision of the law and thus the Appellant was liable to pay the Director’sPAYEassessments from 1stOctober, 2017. ” (Emphasis added)

13. It is manifestly clear on the face of the record of the Judgment as delivered by the Tribunal on 3rd May, 2024 that the Tribunal made an unequivocal finding to the effect that the tax assessment issued to the Appellant in relation to Corporation tax, Withholding tax and PAYE for the years 2014, 2015, 2016 and 2017 were statutory time barred. The Tribunal further determined that the Appellant was liable with regard to the PAYE tax assessment in relation to the period commencing from 1st October, 2017.

14. With regard to review of Judgments on the basis of an error or mistake apparent on the record the Tribunal is guided by the holding of Mativo. J in Bethuel Omondi Okal vs. Managing Director KPLC & Co. [2017] eKLR while upholding the decision in National Bank of Kenya Ltd vs. Ndungu Njau (1996) KLR 469 (CAK) at page 381 as follows:-“A review may be granted whenever the Court considers that it is necessary to correct an apparent error or omission on the part of the court. The error or omission must be self-evident and should not require an elaborate argument to be established.”

15. It is clear that the final order issued by the Tribunal under Paragraph 95 (b)(iii) was incongruous with the findings of the Tribunal and this apparent error on the part of the Tribunal is borne out by a pedestrian reading of Paragraphs 78 and 83 of the Judgment delivered by the Tribunal on the 3rd day of May, 2024.

Disposition 16. In the circumstances the Tribunal finds that the Judgment delivered by the Tribunal on the 3rd day of May, 2024 is hereby reviewed and the entirety of the Orders as issued shall accordingly read as follows:-a.The Appeal be and is hereby partially allowed.b.The Respondent’s Objection decision dated 22nd February, 2023 be and is hereby varied as follows:-i.The tax assessment in respect of the Corporation tax for the 2014 to 2016 years of income and the VAT for 2016 be and are hereby set aside and excluded from the tax assessments.ii.The Withholding tax assessment in the sum of kshs.209,515. 00 be and is hereby upheld.iii.The Director PAYE assessment for the 2014, 2015, 2016 to 30th September, 2017 be and are hereby set aside.iv.The Corporation tax assessment for the 2017 to 2020 years of income be and is hereby upheld subject to the Respondent undertaking a re-computation to determine the appropriate amounts payable within Thirty (30) days of the date of delivery of the Judgment.v.The Director PAYE assessments for the period running from 1st October, 2017 to the year 2020 be and is hereby upheld subject to the Respondent undertaking on re-computation to determine the appropriate amount payable in respect of the year 2017 within Thirty days of the date of delivery of this Ruling.vi.Each party to bear its own costs.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF JULY, 2024. ERIC NYONGESA WAFULA - CHAIRMANEUNICE N. NG’ANG’A - MEMBERMUTISO MAKAU - MEMBERELISHAH N. NJERU - MEMBERABRAHAM K. KIPROTICH - MEMBER