[2024] KETAT 1316 (KLR)

Haven Agencies Ltd v Commissioner of Legal Services and Board Coodination (Tax Appeal E604 of 2024) [2024] KETAT 1316 (KLR) (26 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1316 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E604 of 2024

CA Muga, Chair, BK Terer, D.K Ngala, GA Kashindi & SS Ololchike, Members

July 26, 2024

Between

Haven Agencies Ltd

Appellant

and

Commissioner of Legal Services and Board Coodination

Respondent

Ruling

Background 1. The Applicant vide a Notice of Motion Application dated 6th June 2024 and filed under a Certificate of Urgency on even date seeks the following Orders:a.Spent.b.That pending the hearing and determination of this Application, the Tribunal to issue and order temporary restraining the Respondent from taking recovery measures against the Appellant for the confirmed taxes of Kshs 879,000. 93. c.That this Tribunal issue any other and or further orders that it may deem fit or just.

2. The Application which is supported by an Affidavit sworn by George Radol raised the following grounds:a.That the Respondent herein raised Value Added Tax (VAT) amounting to an incremental liability of Kshs 7,512,156. 67. b.That the Appellant aggrieved with these assessments objected via a letter dated 28th April 2020. c.That in various correspondences between the Appellant and the Respondent, the Respondent requested from the Appellant documents in support of its objection Application which the Appellant in good faith provided.d.That on or about 22nd July, 2021 the Respondent communicated its position on the objection application lodged by the Appellant.e.That the decision communicated required the Applicant to settle the Kshs 879,000. 93 confirmed from the tax assessed by the Respondent.f.That the decision communicated required the Appellant to make good on the assessed principal liability of Kshs 879. 000. 93 on account of the objection application falling short of Section 56(1) of the Tax Procedures Act, CAP 469B of Kenyan Laws (hereinafter “TPA”).g.That the failure to adhere to the provisions of Section 17 of the Value Added Tax Act, CAP 476 of Kenya’s Laws (hereinafter “VAT Act”) particularly the settlement of the tax in dispute was on account of the Respondent’s complacency to allow input expenses to arrive at the correct tax position to the Appellant on the outstanding liability.h.That the Appellant wants to take advantage of the amnesty proffered under Section 37E of the TPA upon settling the matter amicably and under the maxims of equity with respect to paying what is due to the Respondent.i.That the Appellant is apprehensive of the imminent agency notices to be issued on its bankers to the grave detriment of its business and the livelihoods of more than 100 employees unless this Tribunal grant the orders prayed for herein.j.That the Respondent was insensitive to the Appellant’s circumstances at the time as recurrent bouts of ill health had incapacitated seamless flow of information. Evidence of the Appellant’s illness will be availed in a supplementary filing.k.That the Appellant had demonstrated discernible good will and resolve to settle the matter amicably and equitably with respect to which is due and payable to the Respondent.l.That the Appellant’s intended Appeal raises several arguable issues that should be canvased before the Tribunal and determined on merit.m.That the Respondent will not suffer any prejudice if the orders prayed herein are granted.n.That it is in the interest of justice and administrative fairness that the orders sought by the Appellant are granted.o.That the Appellant herein beseeches this Tribunal to be materially guided by its previous ruling in Kotile General Contractors Company Limited vs Commissioner of Domestic Taxes (2020) eKLR as the facts are similar and also associate itself with the Court’s line of thought in China Civil Engineering Limited vs Commissioner of Legal Services (2022) eKLR both of which are annexed herewith for the Tribunals ease of reference.

Response to the Application 3. The Respondent upon being served with the Application filed a Replying Affidavit sworn by Sadia Salo, an officer of the Respondent dated 19th June 2024 and filed on even date citing the following as its grounds of opposition:a.That the orders sought by the Appellant should not be granted by this Tribunal as they are an abuse of the Court process and the Appellant is undeserving of the same for the following reasons.b.That the Respondent issued additional assessment for Value Added Tax (VAT) for the period January 2018 to May 2018 in the sum of Kshs 7,512, 156. 67. c.That the Respondent thereafter allowed input VAT of Kshs 6,633, 155. 74 and disallowed input of Kshs 879,000. 93. d.That the Appellant subsequently filed an objection against the additional assessments on 28th April, 2020. That the Appellant made an application on 6th June 2024 seeking the Tribunal to temporarily restrain the Respondent from taking recovery measures for the outstanding taxes of Kshs 879,000. 93. e.That the Application is fatally defective and should be struck out for offending Order 42 Rule 6 of the Civil Procedure Rules. That the Applicant appears to act on speculation and not on real danger.f.That the Applicant has not demonstrated any actual threat .g.That the Court does not act on speculation but actual breach. The court is asked not to grant orders based on speculation.h.That the Appellant averred that should the Respondent issue agency notices against it, the Appellant stood to suffer great prejudice.i.That the Appellant admitted that there are no agency notices issued as at now and therefore no actual threat.j.That the Application is therefore unattainable in law as the Court cannot be made to predict a future breach.k.That the Application is premature in law, misconceived, incompetent and abuse of courts time.l.That the Appellant has failed to satisfy the principles as set out in the case of Butt vs Rent Restriction Tribunal (1979) eKLR.m.That based on the foregoing, the instant Application is devoid of merit, is misconceived, fatally defective and is a gross abuse of court process and ought to be struck out with costs.

Respondent’s Submissions 4. In its submissions dated 19th June, 2024 and filed on even date, the Respondent submitted on the following two issues:(a)Whether stay of execution orders can be based on speculation.

5. The Respondent averred that this Application was premature since s no Agency Notice had been issued against the Appellant and that the Appellant appeared to act on speculation and not on actual threat.

6. It was the Respondent’s submission that the Appellant had not demonstrated any actual threat and was forcing the Tribunal to predict a future breach. The Respondent relied on Sections 107 and 109 of the Evidence Act, Cap 80 Laws of Kenya (hereinafter “Evidence Act”) which provide as follows:“107(1)Whoever desires any court to give judgement as to any legal right or liability dependent on the existence of facts which he asserts must prove that these facts exist.(2)When a person is bound to prove the existence of any fact it is said that the burden of proof is on that person”109The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person”.

7. The Respondent therefore submitted that the courts do not operate on mere suspicions and speculations but are guided by evidence bearing in mind that the burden is always with the person alleging and that in this case, the Appellant failed to prove that the Respondent had undertaken any agency notice or enforcement action.

8. The Respondent relied on the case of John Harun Mwau & 3 others vs Attorney General & 2 others wherein it was stated that the jurisdiction of the High Court is not be exercised for academic purposes in speculative and hypothetical circumstances.

9. It further submitted and relied on the averments of the Supreme Court in Miguna Miguna vs Lufthasa Group & 7 others wherein the Petitioner had sought to quash “a Red Alert” which was never brought to Court and the court stated that: -“A perusal of the Petitioners annexed documentation divulges that whereas the existence of a red alert advisory is claimed, there is no evidence to support this claim. The 3rd, 4th and 7th Respondents in their replying affidavit have averred that the purported advisory does not exist. They have deponed that they have no intention of denying the Petitioners/Applicant entry into Kenya. With the averment of paragraph a of the Replying Affidavit this court being a court of law would have expected the Petitioner/Applicant to adduce evidence to confirm the existence of the Red Alerts or the intention to issue such on alert by the Respondent. The Petitioners case is founded on the apprehension that history will repeat itself without evidence being adduced in support. The court cannot rely on speculations to grant the sought orders.”

(b) Whether the Appellant has met the prerequisite conditions for grant of stay of execution pending appeal. 10. The Respondent submitted that the principles upon which the court may grant stay of execution of orders are well stipulated in Order 42 Rule 6 of the Civil Procedures Rules which states thus;“No order of stay of execution shall be made under sub rule (1) unless-a)The court is satisfied that substantial loss may result to the applicant unless the order is made and that the application has been made without unreasonable delayb)Such security as the court orders for the due performance of such decree or order as may ultimately be binding on him has been given by the Applicant.”

11. What amounts to substantial loss was set out in the case of James Wangalwa & Another vs Agnes Naliaka Cheseto Misc Application No.42 of 2011(2012) eKLR wherein the court stated as follows:“Substantial loss is what has to be prevented by preserving the status quo because such loss would render the appeal nugatory”

12. The Respondent further relied on the judgement of Platt JA in the case of Shell Limited vs Kibiru and another (1986) KLR 410 as cited in Jamii Bora Bank Limited & Another vs Samuel Wambugu Ndirangu (2021) eKLR whereby the learned judge made the following observations as pertains to substantial loss:“The Application for stay made in the High Court failed because the gist of the conditions set out in Order XL1 Rule 4 (now order 42 Rule 6(2) of the Civil Procedure Rules was not met there was no evidence of substantial loss to the applicant...”The judge further observed;“It is usually a good rule to see if Order XL1 Rule 4 of the Civil Procedures Rule can be substantiated If there is no evidence of substantial loss to the applicant, it would be a rare case when an appeal would be rendered nugatory by some other event. Substantial loss in its various forms is the cornerstone of both jurisdictions for granting stay. That is what has to be prevented. Therefore, without this evidence, it is difficult to see why the respondents should be kept out of their money..”

13. The principles to be considered in determining whether to grant or refuse a stay of execution pending appeal were enunciated in Butt vs Rent Restriction Tribunal (1979) eKLR wherein the Court of Appeal stated as follows:“(a)The power of the court to grant or refuse an application for a stay or refuse an application for a stay of execution is discretionary and the discretion should be exercised in such a way as not to prevent an appeal.(b)Secondly, the general principle in granting or refusing a stay is if there is no other overwhelming hindrance, a stay must be granted so that an appeal may not be rendered nugatory should the appeal court reverse the judge’s discretion.(c)Thirdly, a judge should not refuse a stay if there are good grounds for granting it merely because, in his opinion, a better remedy may become available to the applicant at the end of the proceedings.(d)Finally, the court in exercising its discretion whether to grant or refuse an application for stay will consider the special circumstances and its unique requirements.”

14. In light of the foregoing, and noting that the application was based on speculation, the Respondent submitted that the Appellant had not satisfied the prerequisite conditions as set out in the Civil Procedures Rules and as in the case of Butt vs Rent Restrictions Tribunal. As such, it was the Respondent’s considered opinion that the Tribunal should decline the Orders sought.

15. The Respondent submitted in conclusion that the Appellant’s Motion dated 6th June 2024 lacked merit and the orders sought therein unwarranted and the same should be dismissed with costs to the Respondent.

Analysis and Findings 16. In its Application the Appellant sought orders for the Tribunal to temporarily restrain the Respondent from taking recovery measures against it for the confirmed taxes of Kshs 879,000. 93.

17. The Tribunal notes that the Respondent issued its objection decision vide a letter dated 22nd July 2021 confirming the assessment of Kshs 879,000. 93. Between 22nd July 2021 and 6thJune,2024. Section 13(1)(b) of the Tax Appeals Tribunal Act, CAP 469A (hereinafter “TATA”) stipulates what a taxpayer ought to do if aggrieved by the Respondent’s objection decision and the timelines within which to act. It provides as follows:“(1)A notice of appeal to the Tribunal shall –(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner….”

18. The Appellant had the option of paying the entire tax demanded in the assessment or lodging an Appeal at the Tribunal. It chose to lodge an Appeal.

19. However, through this Application, the Appellant is inviting the Tribunal to get into the Respondent’s mind to determine what action it may take, without producing the evidence of the action that the Respondent has taken. The Tribunal does not accept that invitation. The Appellant’s application is therefore based on mere speculation and the Tribunal is persuaded by the following holding in the the Supreme Court in Miguna Miguna vs Lufthasa Group & 7 others:“The Petitioners case is founded on the apprehension that history will repeat itself without evidence being adduced in support. The court cannot rely on speculations to grant the sought orders.”

20. The Tribunal can only arbitrate on a decision or action that has materialized not one that is anticipated. Accordingly, the Tribunal lacks jurisdiction to entertain this Application.

Disposition 21. The upshot of the foregoing, is the Tribunal’s finding that the Application lacks merit and it accordingly proceeds to make the following Orders:a.The Application be and is hereby dismissed.b.No orders as to costs.

22. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JULY, 2024. CHRISTINE A. MUGA - CHAIRPERSONBONIFACE K. TERER - MEMBERDELILAH K. NGALA - MEMBERGEORGE KASHINDI - MEMBEROLOLCHIKE S. SPENCER - MEMBER