[2023] KETAT 160 (KLR)

Jin Le Enterprises Co Limited v Commissioner Domestic Taxes (Appeal 1476 of 2022) [2023] KETAT 160 (KLR) (10 March 2023) (Ruling)

Neutral citation: [2023] KETAT 160 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 1476 of 2022

E.N Wafula, Chair, AK Kiprotich, RO Oluoch, EN Njeru & Cynthia B. Mayaka, Members

March 10, 2023

Between

Jin Le Enterprises Co Limited

Applicant

and

The Commissioner Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion application dated November 18, 2022 filed under a Certificate of Urgency on the December 6, 2022 sought for the following Orders:a.Spent.b.That Honourable Tribunal do and hereby extends time to the Applicant to file a Notice of Appeal against the Respondent’s decision of June 22, 2022. c.That upon filing of the Notice of Appeal, the Applicant do file the Memorandum of Appeal, Statement of Facts and all supporting within 14 days thereof;d.That pending the hearing and determination of this application, the Respondent be and is hereby restrained from issuing further agency notices against the bankers and or other creditors of the Applicant.e.Pending the hearing and determination of the intended appeal, the Respondent be and is hereby restrained from recovering any the tax amounts subject of the intended appeal;

2. The application which is supported by an Affidavit sworn by Jiao Hailong, a representative of the Applicant, on the 18th day of November, 2022 is based on the following grounds:a.That due to factors beyond its control, the Applicant missed the statutory deadline for filing the Notice of Appeal to this Honourable Tribunal because of the following factors:i.That its Director was unwell.ii.That its Director had been diagnosed with a medical condition that required urgent medical attention and was unaware that an Objection Decision had been issued by the Respondent on June 22, 2022 and was therefore not in a position to engage or procure representation for an Appeal.iii.That immediately upon becoming aware of the said Objection, the Applicant wrote to the Commissioner requesting for leave to file an Appeal out of time.iv.That it was guided to engage appropriate representation to file an appeal and the present application.b.That it approached this Honourable Tribunal at the earliest possible juncture and the failure to file the Notice of Appeal within time was a result of justifiable factors beyond its control.c.That its appeal has a high probability of success based on plausible and conceivably persuasive facts and law that support its case.d.That the appeal would be rendered nugatory if the orders sought in this application are not granted.e.That its appeal raises substantive issues which ought to be canvassed at the full hearing.f.That the Respondent will not suffer any prejudice from the grant of the Orders sought herein.g.That if the alleged tax due is confirmed upon hearing and determination of appeal, the Respondent will be entitled to defend the appeal and thereafter recover the tax in full including interest and penalties accrued;h.That the Applicant will suffer irreparable damage if the application is not allowed.as it would be condemned to pay a tax of Kshs 880,000. 00 without a chance to be heard on merit despite the fact that it has all the supporting documents to prove that the input was exempted from VAT;i.That its right to property and right to be heard will be violated if the orders sought herein are not granted.j.That it has satisfied the principles required for the orders sought as was laid down in the Supreme of Court of case of Nicholas Kiptoo Arap Korir salat V Independent Electoral and Boundaries Commissions & 7 others(2014) eKLR :

3. The Respondent objected to the application through a Replying Affidavit sworn by Victor Chabala, an Advocate with the Respondent, on December 8, 2022 and filed on the same date in which it stated that:-a.The Applicant acknowledged in Paragraph 2 of its application that it was aware of the tax assessment of Kshs 5,110,266. 00 made by the Respondent on October 4, 2021b.The Applicant also acknowledged that it was issued with the Assessment Order on October 4, 2021 via iTax and that it was also notified that the due date of payment was November 3, 2021. c.The Applicant was advised it had the right to lodge an objection against the Commissioner’s decision within 30 days from the date of receipt but the Applicant did not exercise that right within the provided statutory time.d.the Applicant acknowledged in Paragraph 3 of its application that it had lodged a late objection to the assessment on May 23, 2022, which was, almost eight (8) months, after the tax assessment was issued.e.The medical document relied on by the Applicant from Juja Medical Clinic was dated May 31, 2022. It only granted the Director three (3) days sick off only.f.The Applicant acknowledged in Paragraph 4 of its application that the Respondent communicated the impugned objection decision disallowing its objection on the June 22, 2022. g.The Respondent informed the Applicant that its objection application had failed because it had not complied with the provisions of Section 51(7) of the Tax Procedures Act.h.The Applicant had agreed to pay the tax due by instalment as shown in the agreement duly signed by the Applicant’s Managing Director dated July 15, 2022. i.The said agreement provided that failure to comply with any of the terms and conditions of the agreement would result in debt recovery by the Respondent as provided in Section 42 of the Tax Procedures Act.j.The Applicant’s late objection did not meet the requirements of Section 51(7) of the tax Procedures Act which provides that a taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of objection and provide sufficient reasons with supporting evidence.k.The Applicant has not provided any reason to warrant extension of time to file an appeal out of time as provided at Section 13(4) of the Tax Appeals Tribunal Act.

4. The Respondent filed its written submissions dated 15th of December 2022 where it submitted that:a.The Applicant’s late objection was lodged without providing any reasons contrary to Section 51(6) and (7) of the Tax Procedures Act which states that:“(6)A taxpayer may apply in writing to the Commissioner for an extension of time to lodge a notice of objection. 7. The Commissioner shall consider and may allow an application under subsection (6) if-a.the taxpayer was prevented from lodging the notice of objection within the period specified in subsection (2) because of an absence from Kenya, sickness or other reasonable cause; andb.the taxpayer did not unreasonably delay in lodging the notice of objection.”

b.The Tribunal had previously held in Valley Drillers and General Contractors Limited Vs Commissioner of Domestic Taxes , that an invalidation of an objection decision implies that there is no objection decision upon which the Applicant can base its appeal to the Tribunal.c.The High Court held in Income Tax Appeal No 31 of 2017 Commissioner of Domestic taxes vs Mayfair Insurance Company Limited (2017) eKLR that:“Time, in other words, is not to be extended as a matter of right. Each case is to be viewed sui generisand on its own circumstances and facts. The starting point is that the Applicant ought to advance sufficient and reasonable grounds for any delay on its part.”d.The Applicant was aware of the Respondent’s decision because it was sent to its iTax portal.e.The Respondent invoked Section 74(1) (c) of the Tax Procedures Act which states as follows: -“74. Service of notices by the Commissioner1. Except as otherwise provided in a tax law, a notice or other document required to be served on, or given to, a person by the Commissioner under a tax law may be served on, or given to, a person by the Commissioner under a tax law may be served or given by-a.delivering it to the person or the person’s tax representative;b.leaving it at, or sending it by post to, the person’s usual or last known place of business or residence; orc.transmitting it in electronic form.”f.That based on the foregoing, it was incumbent upon the Applicant to regularly check its iTax account to check for any communication from the Respondent.g.The Respondent affirmed that the period of almost 6 months delay was an inordinate delay.

Analysis And Findings 5. The Applicant’s application is for extension of time to file an appeal out of time.The power to expand time for filing an Appeal is a discretionary power that is donated to the Tribunal under Section 13(3) of the Tax Appeals Tribunal Actwhich provides that:“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).”

6. In determining whether to extend time, the Tribunal is guided by the superior court decision in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated that:“It is trite that extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party, at the discretion of the Court”

7. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the superior Courts have also held that apart from considering the reason for the delay under Section 13(3) and 13(4) of the Tax Appeals Tribunal Act, the Tribunal ought to also consider whether the Applicant’s delay in filing the application for extension of time was inordinate, the prejudice likely to be suffered by the Respondent if the application is allowed and the chances of success of the intended appeal. This position was affirmed in the following cases:a.Sammy Mwangi Kiriethe & amp; 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held:“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and thedegree of prejudice that would be occasioned to the respondent if the application is granted.”b.Stecol Corporation Limited v Susan Awuor Mudemb [ 2021] e KLR , where Justice Aburili stated that :“It suffices to comment that a court of law should be hesitant at closing the door to the corridors of justice prior to a litigant being heard on his complaintThe judge stated further that:‘Courts have over time excused parties where such delay is not inordinate as is in this case and even in cases where there is inordinate delay, depending on the circumstances of each case and reasons for the delay, courts have accorded parties an opportunity to be heard on appeal.’c.Wasike V Swala [1984] KLR 591 where the Court stated the hierarchy of factors to consider when considering an application for extension of time when it stated that:“an applicant must now show, in descending scale of importance, the following factors: -a.That there is merit in his appeal.b.That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent.d.Edith Gichugu Koine vs Stephen Njagi Thoithi[2014] e KLR, where the Court of Appeal laid out the factors thus:“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

a. Whether there is merit in the appeal 8. A merited appeal does not mean that it should necessarily succeed rather it is arguable. The Tribunal was guided on this issue in the case of Kiu & another v Khaemba & 3 others (Civil Appeal (Application) E270 of 2021) [2021] KECA 3 18 (KLR) (17 December 2021) (Ruling) where it was held that:“In law, an arguable appeal/intended appeal is one that need not succeed but one that warrants the court’s interrogation on the one hand and the courts invitation to the opposite party to respond thereto.”

9. The Tribunal has gleaned through the Applicant’s 6 grounds of appeal as espoused in its Memorandum of Appeal filed on the December 6, 2022. The issues raised by the Applicant touch on the interpretation and application of the law. They also touch on contested issues of facts that can only be resolved by an independent arbiter.

10. As such, the Tribunal finds that there is an arguable Appeal and the same has triable issues that can only be gleaned at an evidentiary hearing before it.

b. Whether the orders sought will cause any prejudice to the Respondent. 11. The Respondent did not demonstrate how it would suffer prejudice if the prayer for an extension of time was granted. The Appellant on the other hand asserted that it will suffer prejudice because it would unfairly be compelled to pay tax that was not due to the Commissioner.

12. It further submitted that there will be no prejudice suffered by the Respondent since if the Appeal fails, the Respondent can still proceed and recover the taxes due to it.

13. Considering that the Respondent has failed to exhibit the prejudice it shall suffer if this application is granted the Tribunal holds that the grant of the orders sought herein shall not prejudice the Respondent in any way.

c. Whether the delay was inordinate 14. Both parties to this application agree that the delay in filing the appeal was for a period of about 4 months. The Tribunal is of the view that the delay was not inordinate.

15. In the Circumstances, the Tribunal therefore finds that the application was brought without undue delay

16. Based on the foregoing, the Tribunal holds that the Applicant’s application has merit because it has complied with the minimum requirements that were prescribed in the above cited cases of Sammy Mwangi Kiriethe & amp; 2 others v Kenya Commercial Bank Ltd[2020] eKLR,Stecol Corporation L imited v Susan Awuor Mudemb [2021] eKLR and Edith Gichugu Koine vs Stephen N j agi T hoithi [ 2014 ] eKLR.

Disposition 17. Accordingly, the Tribunal finds that the application has merit and proceeds to make the following orders:i.The Applicant be and is hereby granted leave to file an Appeal out of time.ii.The Applicant to file and serve its Notice of Appeal, Memorandum of Appeal, Statement of Facts and Tax Decision within Fifteen (15) days of the date of delivery of this Rulingiii.The Respondent to file its response to the Appeal within the statutory period upon being served with the appeal documents.iv.No orders as to costs.

DATED AND DELIVERED AT NAIROBI ON THIS 10TH DAY OF MARCH, 2023. ...............ERIC N. WAFULACHAIRMAN...............ABRAHAM KIPROTICHMEMBER...............RODNEY ODHIAMBOMEMBER...............ELISHAH NJERUMEMBER...............CYNTHIA MAYAKAMEMBER