[2024] KETAT 1340 (KLR)

Haneda Limited v Commissioner of Legal Services & Board Coordination (Tax Appeal E599 of 2024) [2024] KETAT 1340 (KLR) (20 September 2024) (Ruling)

Neutral citation: [2024] KETAT 1340 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E599 of 2024

RM Mutuma, Chair, Jephthah Njagi, M Makau, D.K Ngala & T Vikiru, Members

September 20, 2024

Between

Haneda Limited

Applicant

and

Commissioner Oof Legal Services & Board Coordination

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated and filed on 30th May 2024, under certificate of urgency of even date, and supported by an Affidavit sworn by Mwanamwinyi Hassan Mbwana on 31st May 2024, sought the following orders: -a.Spent;b.That the Tribunal be pleased to extend the time allowed for the Applicant to file Notice of Appeal, Memorandum of Appeal, Statement of Facts and all other supporting documents;c.That the Notice of Appeal, Memorandum of Appeal, Statement of Facts both dated 30th May 2024 and filed herewith to be deemed as properly filed and served; and,d.That costs of this Application be provided for.

2. The Application is premised on the following grounds:-a.That the Respondent issued the Appellant/Applicant VAT Additional Assessments on 4th October 2023 for Kshs. 1,024,386. 98;b.That the Appellant objected to the said Assessments on iTax on 26th October 2023;c.That the Appellant provided the Respondent all the supporting documents requested in support of its Objection;d.That the Respondent however rejected the Applicant’s Objection and issued an Objection Invalidation Decision on 9th November 2023 rejecting fully the Appellant's Objection;e.That the Applicant's Accountant Clemence Chambela, CPA who has been in conduct of the Applicant's tax affairs has been indisposed for a very long time rendering him unable to attend to any business;f.That as a result, the Appellant/Applicant was unable to file its Notice of Appeal to the Tribunal within 30 days pursuant to the provisions of the Tax Appeals Tribunal Act and Tax Procedures Act;g.That the Appellant/Applicant is apprehensive that the Respondent is likely to take enforcement measures against the Applicant despite the taxes being disputed;h.That the Appellant/Applicant was unable to lodge an Appeal to this Tribunal against the Respondent’s Objection Decision due to sickness of its duly authorized Accountant;i.That the Appellant/Applicant has an arguable Appeal with high probability of success;j.That the Applicant stands to suffer irreparable loss and damage if the Orders sought in this application are not granted as the Respondent may proceed to enforce an erroneous Assessment;k.That the Appellant's reason for delay in filing the Appeal is not as a result of indolence on its part;l.That the Appellant therefore prays for leave to file the Appeal out of time;m.That it is in the interest of justice and pursuant to Article 159 of the Constitution that this Tribunal ignores procedural technicalities and determines this dispute on merit;n.That I have been advised by the tax agent on record, which advise I believe to be true, that this Tribunal has the powers to extend the time for filing the pleadings as granted by Section 13 (3) and (4) of the Tax Appeals Tribunal Act 2013 and Rule 10 of the Tax Appeals Tribunal Rules 2015; and,o.That it is only fair and in the interest of justice that the Orders sought herein are granted.

3. On 19th June 2024, the Respondent filed its Replying Affidavit dated the same date and sworn by Victor Andambi Chabala in opposition to the Applicant’s Notice of Motion. The Respondent raised the following grounds:-a.That on 4th October 2023, the Respondent issued the Applicant herein with an assessment;b.That the Respondent assessed the Appellant for VAT for the period 2018;c.That consequently, the Applicant herein lodged its Notice of Objection dated 26th October 2023 challenging the assessments in their entirety;d.That from the foregoing, it is evident that the Respondent requested the Applicant for relevant supporting documents but it was unsuccessful;e.That the Respondent issued its decision on 9th November 2023 whereby it confirmed the assessments as demanded;f.That the Respondent issued the decision informed by the reason that the Appellant failed to provide the relevant documentary evidence despite various correspondences with an attempt to get all the required records in support of the Appellant’s objection;g.That the Applicant lodged its Notice of Appeal on 18th June 2024 over 7 months after the statutorily prescribed time for lodging an Appeal contrary to the provisions of Section 13 (1) (b) of the Tax Appeals Tribunal Act. That this delay is not only inordinate but it has also not been satisfactorily explained;h.That the failure to provide a valid reason for the late Appeal does not warrant this Tribunal to exercise its discretion in favour of the Applicant;i.That the Applicant has failed to lay a basis to the satisfaction of the Tribunal for extension of time to file an Appeal;j.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;k.That the Applicant is 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;l.That in the circumstances, it is in the interest of justice that the Tribunal dismisses the Applicant’s Notice of Motion application dated 31st May 2024 to pave way for the Respondent to collect taxes due from the Applicant which are key to the economic development of the Country;m.That the indolence of the Applicant should not bar the Respondent from fulfilling its mandate of collecting taxes that are due and payable; and,n.That the Applicant has failed to satisfy the principles as set out in the case of Nicholas Kiptoo Arap Korir Salat vs. Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR.

Parties Submissions. 4. Although the Tribunal had directed the parties to prepare and serve submissions on each other, it was only the Respondent that filed its written submissions.

5. The Respondent submitted that:-a.The delay of seven months was inordinate and inexcusable;b.The Appellant has not provided a reasonable reason for delay to lodge an Appeal to the satisfaction of the Tribunal;c.The reasons adduced are not sufficient;d.The Respondent herein will be prejudiced if the Orders sought are granted since enforcement has already commenced; and,e.The Appellant herein delayed in lodging the instant Application despite having full knowledge of the existence of the of the Objection Decision.

6. The Respondent relied on the following cases:-a.Utalii Transport Company Limited & 3 Others vs. Nic Bank Limited & Another [2014] eKLR.b.Nicholas Kiptoo Arap Korir Salat vs. Independent Electoral and Boundaries Commission & Others [2014] eKLR.c.Gatirau Peter Munya vs. Dickson Mwenda Kithinji & 2 Others [2014] eKLR.d.Centre For Rights Education and Awareness (Creaw) & Another vs. Speaker of The National Assembly & 2 Others [2017] eKLR.

Analysis and Findings 7. The Application is primarily praying to the Tribunal for extension of time to file an Appeal out of time.

8. It is not in contetion that the power to expand time for filing an Appeal before this Tribunal is donated under Section 13 (3) and 13 (4) of the Tax Appeals Tribunal Act, 2013, and rules made thereunder. The Sections provide as follows:-“(3).The Tribunal may, upon application in writing, extend the time for filing the Notice of Appeal and for submitting the documents referred to in subsection (2).(4)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 filing the notice of appeal or submitting the documents within the specified period.”

9. Thus, the power to extend time is discretionary and it is not be granted as of right to the Applicant.

10. The Courts in determining whether to expand time, have in the past considered a number of factors, as discussed in the case of Leo Sila Mutiso vs. Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997 where the Judge held that:-“It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated that in general the matters which this court takes into account in deciding whether to grant an extension of time are, first the length of the delay, secondly the reasons for the delay, thirdly (possibly) the chances of the appeal succeeding if the application is granted and fourthly the degree of prejudice to the respondent if the application is granted.”

11. The Tribunal, guided by the principles set out in the case of Leo Sila Mutiso vs. Rose Hellen Wangari Mwangi, Civil Application Nai. 251 of 1997, Wasike vs. Swala [1984] KLR and Section 13 of the Tax Appeals Tribunal Act 2013 used the following criteria to consider the Application;a.The length of delay in filing the application.b.Reasons for the delay in filing the application.c.The chances of the Appeal succeeding.d.Whether there will be prejudice suffered by the Respondent if the extension is granted.

a. The length of delay in filing the application. 12. The Respondent submitted that the Applicant lodged its objection to the assessments on 26th October 2023. That the objection was however not supported by any documents in contravention of Section 51 (3) of the TPA.

13. The Respondent then issued its Objection Decision on 9th November 2023 stating that the Applicant did not provide supporting documentation.

14. The Applicant lodged its Notice of Appeal on 18th June 2024. The Respondent submitted that this was seven months after the statutorily prescribed time for lodging an appeal contrary to the provisions of section 13(1)(b) of the Tax Appeals Tribunal Act. That this delay is not only inordinate but it has also not been satisfactorily explained.

15. The Tribunal is persuaded by the Ugandan case of Ojara vs. Okwera (Miscellaneous Civil Application-2017/23) [2018] UGHCCD 42 where it was stated that;“An order for enlargement of time to file the appeal should ordinarily be granted unless the applicant is guilty of unexplained and inordinate delay in seeking the indulgence of the Court.”

16. The Tribunal finds that the delay of 7 months is not inordinate and was well explained to the satisfaction of the Tribunal.

b. Reasons for the delay in filing the Application. 17. The Applicant indicated that its Accountant who has been in conduct of the Applicant’s tax affairs was indisposed for a very long time rendering him unable to attend to any business.

18. That as a result of the sickness of the Accountant, the Appellant/Applicant was unable to file its Notice of Appeal to the Tribunal within 30 days pursuant to the provisions of the Tax Appeals Tribunal Act and Tax Procedures Act.

19. The Respondent vehemently opposed the reason of sickness indicating that the medical report provided indicated that the Accountant was only sick for three months and not for a long period of time as stated by the Applicant.

20. The Tribunal has looked at the medical report and is persuaded that the Accountant was sick and although the Respondent submitted that the Appellant should have hired another person, the Tribunal finds that the Applicant’s explanation for the delay in filling the Notice of Appeal late is plausible.

c. Chances of the Appeal Succeeding. 21. 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 before the Tribunal.

22. The test is not whether the case is likely to succeed. Rather, it is whether the case is arguable. This was the finding in the case of Samuel Mwaura Muthumbi vs. 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 Appellant 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.”

23. Similarly, in the case of Kenya Commercial Bank Limited vs. Nicholas Ombija [2009] eKLR it was stated that;“an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

24. This was also the position held in the case of Stanley Kangethe Kinyanjui vs. Tony Keter & others [2013] eKLR where the court held that;“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.”

25. It is not contested that the Respondent issued additional assessments against the Applicant, for which the Applicant objected on 26th October 2023. Subsequently, the Respondent issued an Objection Invalidation Decision on 9th November 2023 on grounds that it was not provided with supporting documents.

26. On the other hand, the Applicant contends that it provided adequate documents to the Respondent and that the Respondent failed to consider them. The Tribunal finds that the Applicant has an arguable case and in the interest of justice, it is only fair to grant it that opportunity.

d. Whether the Respondent will suffer prejudice if the extension is granted. 27. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent.

28. In determining this application, the Tribunal relies on the case of Patrick Maina Mwangi vs. Waweru Peter [2015] eKLR quoted the finding in United Arab Emirates v Abdel Ghafar & Others 1995 IR LR 243 where the Court stated;“…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…”

29. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted.

30. The Applicant averred that it stands to suffer substantial loss and damage, an averment that has not been challenged by the Respondent.

31. Accordingly, the Tribunal did not find anything to demonstrate that the Respondent would suffer irreparable prejudice that cannot be compensated by award of interest or cost if the Application is granted. On the other hand, it is apparent that the Applicant’s recourse to justice lies in this appeal being heard and determined on its merits.

32. Thus, the Applicant would suffer prejudice if it is not granted leave to file its Appeal. The Tribunal is persuaded that the Respondent will still collect the taxes inclusive of penalties and interest should it be found to be due and payable.

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

Disposition 34. Based on the foregoing, the Tribunal finds that the Application has merit and therefore succeeds. Consequently, the Tribunal proceeds to make the following Orders:-a.The Applicant is hereby granted leave to file an Appeal out of time.b.The Notice of Appeal, Memorandum of Appeal and Statement of Facts all dated 30th May 2024 be and are hereby deemed as properly filed and served.c.The Respondent to file and serve its response to the Appeal within 30 days upon being served with the Appeal documents.d.No Orders as to costs.

35. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 20TH DAY OF SEPTEMBER 2024. ROBERT M. MUTUMA - CHAIRMANJEPHTHAH NJAGI - MEMBERMUTISO MAKAU - MEMBERDELILAH K. NGALA - MEMBERDR. TIMOTHY - MEMBERB. VIKIRU - MEMBER