[2024] KETAT 1451 (KLR)

Gateway Innovations Limited v Commissioner of Legal Services & Board Coordination (Tax Appeal E582 of 2024) [2024] KETAT 1451 (KLR) (11 October 2024) (Ruling)

Neutral citation: [2024] KETAT 1451 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E582 of 2024

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

October 11, 2024

Between

Gateway Innovations Limited

Appellant

and

Commissioner of Legal Services & Board Coordination

Respondent

Ruling

Background 1. The Appellant moved the Tribunal vide a Notice of Motion Application dated 2nd August 2024 and filed under a Certificate of Urgency dated on even date seeking the following Orders:i.Spent.ii.That there be a stay of execution of the decision of the Respondent delivered on 30th April 2024 pending the hearing and determination of this application of the Appeal.iii.That temporary injunction be issued restraining the Respondent from enforcing the agency notice dated 27th May 2024 served upon Kenya Ports Authority for the sum of Ksh 39,848,367. 00. iv.That in the alternate, there be a stay of the Respondent’s agency notice dated 27th May 2024 pending hearing and determination of this application and appeal.v.That the Tribunal be pleased to give all necessary and consequential directions.vi.That cost of this Application be provided for.

2. The Application was supported by a Sworn Affidavit dated and filed on 2nd August 2024 by Mohammed Abdulrahman Mohammed, the Appellant’s Accountant, on the following grounds:i.That the Respondent issued an objection decision dated 30th April 2024 confirming Ksh 37,199,257. 00 as taxes due and payable for the 2020 and 2021 review period notwithstanding the Appellant’s payment of Ksh 7,000,000. 00 being part of the undisputed taxes.ii.That despite the Appellant being within timelines for filing an Appeal, the Respondent issued agency notice on 27th May 2024 in bad faith which was countered by the Appellant’s Appeal filed on 30th May 2024. iii.That the Respondent’s tabulation was contrary to Appellant’s audited report and disputed.iv.That having filed a valid Appeal, it was trite that the agency notice ought to be lifted which the Respondent has failed to honour despite numerous follow-ups.v.That the Appeal herein has been admitted for alternative dispute resolution and there was likelihood of the dispute being resolved and a consent being filed and recorded.vi.That the facts and circumstances of the case has appreciable chances of success and if the agency notice was not stayed pending hearing and determination of the Appeal, the Appellant was apprehensive that the same would render the Appellant’s effort in vain while rendering the Appeal nugatory and a mere academic venture.vii.That it was in the interest of justice that orders sought be issued as the Appellant stood to suffer irreparable damage and it was out of caution that the Appellant was seeking the Tribunal’s protection from any unlawful actions orchestrated by the Respondent.viii.That the Respondent would not suffer any prejudice if this application was allowed and that the Appellant had demonstrated a prima facie case with high probability of success.

Response To The Application 3. The Respondent upon being served with the Application filed an opposing Replying Affidavit sworn by Abdillah Mohamed Ali, an officer of the Respondent dated and filed on 9th August 2024 citing the following as the grounds:i.That the Appellant was seeking a stay of execution of its decision dated 30th April 2024 and lifting of agency notice dated 27th May 2024 over which the Tribunal has discretion as provided for under Section 18 of Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) but the Appellant did not annex the agency notice in the Application herein and that the Application herein was an abuse of the court process as it failed to meet the legal threshold provided for under Section 18 of TATA.ii.That the Appellant lodged two Appeals against two objection decisions i.e. the current Appeal No. E582 of 2024 dated 30th April 2024 and TAT No. E832 of 2024 dated 4th August 2024 with the latter Appeal accompanied by an application to file an appeal out of time as well as lifting of agency notices and was at the Tribunal awaiting determination.iii.That whereas the Appellant was seeking lift of agency notice in Appeal No. E832 of 2024 which was in relation to taxes amounting to Ksh 39,756,346. 96, the current appeal was in relation to taxes amounting to Ksh 37,199,258. 31 pursuant to objection decision dated 30th April 2024 a clear indication that tax amounts for this appeal and the ones under the agency notices were different.iv.That it was clear the Appellant had various taxes due as highlighted in their 22nd May 2024 letter wherein the Appellant requested for a payment plan for undisputed taxes in order to facilitate lifting of agency notice at Kenya Ports Authority which did not include the current period as the Respondent was aware of the disputed taxes and that was why it was awaiting the due process before the Tribunal.v.That the agency notice was based on other taxes due from the Appellant both assessed by the Respondent and also from self-assessments and as admitted by the Appellant that it made payments of Ksh. 7,000,000. 00 which was part of some preconditions of payment plan that the Appellant failed to fulfil necessitating placing of agency notices.vi.That the Appellant herein was purporting to consolidate two matters with different objection decisions for different periods and was clearly seeking to deceive the Tribunal to have agency notices properly placed lifted thereby compromising the collection of taxes by the Respondent.vii.That the Appellant had demonstrated a lack of interest in settling taxes due despite being accorded several opportunities to be heard and there was imminent danger of loss of revenue by the Government f enforcement measures were stayed.viii.That the money demanded herein belong to the public good and the Respondent was responsible for collecting it pursuant to Section 32(1) of the Tax Procedures Act, CAP 469B of the Laws of Kenya (hereinafter “TPA”) which provide that a tax payable by a person under a tax law shall be a debt due to the Government and shall be payable to the Commissioner. Thus, it would be wrong for the Tribunal to interfere with the Respondent’s objection in its compliance enforcement.ix.That the Tribunal should dismiss the appeal with costs.

4. On 8th August 2024, the Tribunal directed the matter to canvassed by way of written submissions and granted the Appellant orders to file a further replying affidavit. Neither parties’ submissions nor Appellant’s further replying affidavit was on record.

Analysis And Findings 5. The Tribunal notes that the Appellant herein was seeking the Tribunal orders to stay execution of decision delivered by the Respondent on 30th April 2024 as well as temporary injunction restraining the Respondent from enforcing the agency notice dated 27th May 2024 for Ksh 39,848,367. 00 served upon the Kenya Ports Authority pending hearing and determination of the instant Appeal. The same was contested by the Respondent who insisted that the Application herein was bereft of the threshold as couched under Section 18 of TATA and that the Appellant had lodged to simultaneous Appeals against two different objection decisions.

6. The Tribunal notes that the Appellant was specific in its prayers that it was seeking a stay of execution of the decision rendered on 30th April 2024 but it was the Respondent who introduced the fact that there was an Appeal the decision dated 4th August 2024 which was before the Tribunal as a different matter. The Tribunal will proceed to address the matter that was placed properly before it by the Appellant dated 30th April 2024 whose objection by the Appellant was lodged within timelines on 30th May 2024 and was preceded by the Respondent’s agency notice dated 27th May 2024. The Tribunal notes that Section 51(2) of the TPA provides as follows:“(2)A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.”

7. The Tribunal notes that the Appellant’s Application was seeking for hearing and determination of their Appeal against the Respondent’s decision dated 30th April 2024. The Tribunal notes that Section 3 of the TPA provides that an objection decision is an appealable decision. Similarly, Section 18 of TATA extends to the Tribunal powers to make an order staying or otherwise affecting the operation or implementing of the decision under review such as lifting of agency notices issued by the Respondent.

8. The Tribunal notes that the both parties already have in place a payment plan for other taxes owing which the Appellant had already paid part of it. However, the Respondent in their rebuttals to the Application did not demonstrate that there will be any prejudice that could not be compensated by an award of penalties and interests on any principal tax ultimately found to be due and payable by the Appellant. The Tribunal therefore finds that the Respondent will not suffer prejudice since it will still be able to collect the taxes plus interest and penalties should the Appellant be found to be at fault. Accordingly, the Tribunal finds that the Respondent will not suffer prejudice if the agency notice dated 27th May, 2024 is lifted.

Disposition 9. The upshot of the foregoing is that the Tribunal finds that the Application was merited and accordingly proceeds to make the following Orders:a.The Application be and is hereby allowed.b.The Agency Notice, dated 27th May,2024 be and is hereby lifted unconditionally.c.No orders as to costs.

10. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 11TH DAY OF OCTOBER, 2024. CHRISTINE A. MUGACHAIRPERSONBONIFACE K. TERERMEMBERELISHAH N. NJERUMEMBEREUNICE N. N’GANG’AMEMBEROLOLCHIKE S. SPENCERMEMBER