[2025] KETAT 181 (KLR)

Manchester Outfitters Limited v Commissioner of Domestic Taxes; Kenya Commercial Bank Limited & another (Interested Parties) (Tax Appeal E843 of 2023) [2025] KETAT 181 (KLR) (28 February 2025) (Judgment)

Neutral citation: [2025] KETAT 181 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E843 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, G Ogaga & AK Kiprotich, Members

February 28, 2025

Between

Manchester Outfitters Limited

Appellant

and

Commissioner of Domestic Taxes

Respondent

and

Kenya Commercial Bank Limited

Interested Party

Diamond Trust Bank Limited

Interested Party

Judgment

Background 1. The Appellant is a limited liability company incorporated in Kenya under the provisions of the Companies Act.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, and the Authority is charged with the responsibility of among others, assessment, collection, accounting and the general administration of tax revenue on behalf of the Government of Kenya.

3. The 1st Interested Party is a bank duly registered as such under the provisions of the Banking Act pursuant to the license issued to it by the Central Bank of Kenya.

4. The 2nd Interested Party is a bank duly registered as such under the provisions of the Banking Act pursuant to the license issued to it by the Central Bank of Kenya.

5. The Appellant being dissatisfied with the issuance of the agency notices issued on 20th November, 2023 filed the instant Appeal dated 22nd November, 2023 before this Honorable Tribunal for determination.

The Appeal 6. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal dated and filed on 22nd November, 2023:i.That the Respondent erred in law and fact in purporting to issue the agency notice dated 20th November, 2023 under Section 42 of the Tax Procedures Act, 2015 - hereinafter "the notice"- for the sum of Kshs. 30,440,789. 00 on account of outstanding VAT when it knew or ought to have known that the said amount was disputed.ii.That the Respondent erred in law and fact in issuing the agency notice for Kshs.30,440,789. 00 against the Appellant when it knew or ought to have known that pursuant to its letter dated the 18th of April 2023, it had confirmed to the Appellant, based on the Rulings of this Tribunal delivered on the 14th April 2023 in TAT Case No. 741 and 742 of 2021 that the Appellant’s total understanding VAT liability was Kshs. 13,815,477. 00. iii.That the Respondent erred in law and fact in issuing the agency notice when it knew or ought to have known that pursuant to its letter dated the 18th of April 2023, the Appellant had agreed with the Respondent's proposal that it pays the outstanding VAT liability by way of eighteen (18) monthly installments.iv.That the Respondent erred in law and fact in issuing the agency notice when it knew or ought to have known that by way of its Debt Payment Installment Agreement dated the 8th May, 2023, it had accepted the Appellant's proposal to settle the outstanding VAT amount of Kshs. 13,815,477. 00 by way of 18 equal monthly installments of Kshs. 773,083. 00 each with the 1st installment of Kshs. 800. 000. 00 having been paid on the 6th May, 2023. v.That the Respondent erred in law and fact in issuing the agency notice when it knew or ought to have known that the Appellant, in compliance with the Debt Payment Installment Agreement dated 8th May, 2023, had already commenced the payment of the agreed installments and in fact has as at the time of the filing this Appeal paid the installments for the months of May to November 2023. vi.That the Respondent erred in law and fact in issuing the agency notice when it knew or ought to have known that the Appellant had by way of its letter dated the 22nd May, 2023 protested the Respondent's attempt, by way of its letter of the same date, to review the Appellant's VAT liability to Kshs. 34,133,130. 00, a figure which was later reviewed upwards to Kshs. 48,236,876 in yet another letter by the Respondent dated the 23rd of May 2023. vii.That the Respondent erred in law and fact in issuing the agency notice on the 20th November, 2023 when it had only communicated its decision dated 29th May, 2023 to the Appellant on the 20th November, 2023 and, therefore, did not give the Appellant adequate time to respond or appeal against the same.viii.That the agency notice was therefore issued in bad faith and in breach of the Appellant's legitimate expectation of fair administrative action. The agency notice was also issued in breach of the provisions of the Tax Procedures Act.ix.That the Respondent, having confirmed to the Appellant by way of its letter dated 18th April, 2023 that the Appellant's VAT obligation was Kshs. 13,815,477. 00 and pursuant to the said confirmation entered into the Debt Payment Installment Agreement dated the 8th May, 2023 is now estopped from resiling from the Agreement because the Appellant, in reliance on the said confirmation and agreement has already acted on the same by commencing the payment of the installments as agreed.

Appellant’s Case 7. The Appellant’s case is premised on the following documents:i.The Appellant’s Statement of Facts dated and filed on 22nd November, 2023 together with the documents attached thereto.ii.The Appellant’s written submissions dated 23rd July, 2024 and filed on 24th July, 2024.

8. That Section 12 of the Tax Appeals Tribunal Act gives the Appellant the right to challenge any decision of the Respondent before this Tribunal.

9. That Section 18 of the said Act gives this Tribunal the jurisdiction to stay the implementation of any decision under review.

10. That by way of a purported agency notice dated 20th November, 2023 the Respondent instructed the Interested Party to deduct the sum of Kshs. 30,440,789. 00 and pay the same to it on account of alleged outstanding VAT pursuant to the decision of this Tribunal in TAT No. 741 and TAT No. 721.

11. That the agency notice has been issued despite the fact that the Respondent, by way of its letter dated the 18th of April 2023, had confirmed to the Appellant that its total outstanding VAT obligation pursuant to the decision of this Tribunal in TAT No. 741 and TAT No. 721 of 2021 is Kshs. 13,815,477. 00.

12. That indeed pursuant to the said confirmation and after discussions and negotiation, the parties herein entered into the Debt Payment Installment Agreement dated the 8th May, 2023 in which the parties herein agreed that the Appellant would settle its outstanding VAT obligation of Kshs. 13,815,477. 00 by way of 18 equal monthly installments of Kshs. 723,088. 00.

13. The Appellant stated that it is instructive to note that the 1st installment of Kshs. 800,000. 00 was paid on the 6th May, 2023 because the Respondent insisted that the Appellant had to make the said payment as a sign of good faith and as a pre-condition to any negotiation on the payment plan.

14. The Appellant further stated it, in compliance with the said Agreement, has since paid the installments for the months of June, July, August, September, October, and November 2023.

15. That the said Agreement has not been varied and or set aside and is therefore still in force. That the decision of the Respondent to issue the agency notice when there is a Debt Payment Installment Agreement in force and which Agreement the Appellant has religiously complied with despite the prevailing harsh economic times has therefore been issued in bad faith, in violation of the provisions of the Tax Procedures Act and in breach of the Appellant's legitimate expectation to fair administrative action.

16. That the agency notice has in the meantime effectively frozen the Appellant's bank accounts with the consequences that the Appellant cannot access or receive funds from its banks and clients and cannot therefore discharge its obligations including the payment of salaries to its 430 staff, suppliers, and for its other obligations.

17. That the urgency of this matter is therefore comprised in the fact that the continued existence of the Appellant as a going concern is in jeopardy unless this Honorable Tribunal intervenes in the manner sought in this application.

18. That the decision of the Respondent violates the Appellant's legitimate expectation to fair administrative action and is in violation of Article 47 of the Constitution as read together with Section 4 of the Fair Administrative Action Act as the same is unlawful, unreasonable and procedurally unfair.

19. That the Fair Administration Action Act applies to the Respondent herein. as was illustrated in the case of CCK v. Royal Media Services Limited (2014/ e-KLR, in which it was held as follows:“The Fair Administrative Action Act applies to State und Non-State Actors and includes any Person. Section 3[1)[c] states the Act applies to any Person, whose action, omission or decision affects the legal rights or interests of any Person to whom such action, omission or decision relates.”

20. That the said amounts of Kshs. 30,440. 789. 00 that the Respondent issued agency notices against the Appellant and went ahead to instruct the Interested Parties herein to deduct from their accounts held with the Appellant herein the said amounts were disputed, a fact which was well within the Respondent's knowledge.

21. That pursuant to its letter dated the 18th of April 2023, the Respondent indeed confirmed to the Appellant, based on the Ruling of this Tribunal delivered on the 14th April, 2023 in TAT Case No. 741 and 742 of 2021 that the Appellant's total outstanding VAT liability was Kshs.13,815,477. 00.

22. That the Respondent was therefore effectively estopped from again purporting to issue an entirely different assessment with which it would proceed to issue agency notices, albeit unlawfully and illegally and further intend to deduct the said amounts from the Appellant's bank accounts.

23. That the Respondent made a proposal to the Appellant for payment of outstanding VAT obligations. totaling to a tune of Kshs. 13,815,477. 00 by way of eighteen (18) equal monthly installments. That the Appellant accepted the said proposal and commenced payments. That therefore the Respondent should not be allowed to renege on the said Agreement.

24. That the Court of Appeal, in Judicial Service Commission of Kenya v. Mbalu Mutava & Another/2015/e-KLR, concluded as follows;“That unlike the right to fair hearing under the common law, the right to fair administrative action is wide in scope as it encompasses several duties: the duty to act expeditiously: duty to act fairly: duty to act lawfully; duty to act reasonably: and in specified cases, duty to give written reasons for the decision. The Appellant’s herein were denied the right to fair administrative action, which entails substantive justice. rather than procedural justice.”

25. That when the Respondent informed the Appellant by way of its letter dated 18th April, 2023 and confirmed the same in the Meeting held on the 28th April, 2023, the Appellant legitimately believed that all the interest and penalties on the outstanding VAT amount had been waived hence the figure of Kshs. 13,815,477. 00.

26. That the doctrine of legitimate expectation was well enumerated in the case of Jane Kiongo & 15 others v Laikipia University & 6 others (2019/ eKLR, in which the Trial Court stated as follows:“Legitimate expectation is based on legitimate representation made by an authority which has power to make such representation that certain actions will be done in a particular way without any qualification. Such representation gives rise to legitimate expectation and the authority or institution is thus bound by that representation.”

27. That this principle was well stated by the Supreme Court of Canada in Canada in Attorney General v. Mavi, 2011/2 S.C.R.504, thus:“(68)Where a government official makes representations within the scope of his or her authority to an individual about an administrative process that the government will follow, and the representations said to give rise to the legitimate expectations are clear, unambiguous and unqualified, the government may be held to its word, provided the representations are procedural in nature and do not conflict with the decision maker's statutory duty. Proof of reliance is not a requisite.”

28. That the Respondent is therefore bound by the terms of the Debt Payment Installment Agreement and should not therefore be allowed to dodge and or renege from the terms of the said Agreement.

29. That the said agency notices, for Kshs, 30. 440. 789. 00. ,were thus issued in bad faith, in violation of the provisions of the Tax Procedures Act and in breach of the Appellant's legitimate expectation to fair administrative action.

30. The Appellant urged the Tribunal to be guided by the case of Jane Kiongo & 15 others v Laikipia University & 6 others /2019/ eKLR, in which the Court indeed held that the Respondent’s actions of attempting to force the Petitioners to register and undertake courses that were marked as exempted on account of credit transfers were in violation of their legitimate expectation, as is similar herein, and thus declare the said actions null and void.

31. The Appellant further invited the Tribunal to be guided by the case of Stanley Munga Githunguri v Republic /1985/eKLR, a locus classicus case on the doctrine of legitimate expectation, in which the Court therein indeed held that as much as it did not have jurisdiction to bar an individual from being prosecuted. That it offered the much needed guidance indicating that where an administrative body in charge of instituting and undertaking prosecutions had expressly stated its intention not to charge an individual it would be an infringement of that individual's rights for the said body to go behind their back and proceed to charge the said individual who placed reliance on their communication that they would not charge him or her.

Appellant’s Prayers 32. The Appellant prayed for orders that:i.The agency notice dated 20th November, 2023 be quashed and all its intended consequences be set aside.ii.The Tribunal makes a declaration that the Respondent is bound by the terms of the Debt Payment Instalment Agreement dated 8th May, 2023. iii.The Tribunal be pleased to issue such further orders as it shall deem fit and just in the unique circumstances of this case.iv.That the cost of this Appeal be provided for.

Respondent’s Case 33. The Respondent’s case is premised on the following documents:i.Its Statement of Facts dated 19th December, 2023 and filed on 22nd December, 2023 together with the documents attached thereto.ii.Its written submissions dated 29th July, 2024 and filed on 31st July, 2024.

34. That on 15th November, 2019, the Respondent issued VAT assessment notices to the Appellant covering the period January to May 2019 for Kshs. 4,605,156. 00.

35. That between 10th to 18th May, 2021, the Respondent raised another VAT assessment with taxes amounting to Kshs. 21,996,091. 52 covering 22 months between June 2016 and February 2020.

36. That on 29th September, 2020, the Appellant filed a late objection application on the first assessment.

37. The Respondent stated that on 15th September, 2021, it issued a notice to the Appellant informing it that the objection on first assessment was not valid due to lack of supporting documents as guided under Section 51(3)(c) of the TPA.

38. That further, on 24th September, 2021, the Respondent granted the Appellant more time to provide supporting documents for the second assessment.

39. The Respondent averred that on 5th October, 2021, it issued agency notices to the Appellant's bankers to enforce collection of assessed tax liability under the first assessment as there was valid objection challenging its assessment and the taxes therefore became due and owing.

40. That the Appellant appealed to the High Court on 12th October, 2021.

41. That in its Ruling the High Court directed that the matter be referred to the Tax Appeals Tribunal for determination.

42. That subsequently, the Appellant filed two Appeals at the Tribunal being TAT Appeal No. 741 of 2021 and TAT Appeal No. 721 of 2021 which were heard and determined and orders issued in the Tribunal's Judgement issued on 14th April, 2023 dismissing the Appeals.

43. That in relation to the Judgements issued by the Tribunal, the Respondent issued a demand letter for arrears amounting to Kshs. 13,815,477. 00 vide a letter dated 18th April, 2023.

44. The Respondent submitted that the parties negotiated on the first assessment and a payment plan was signed on 11th May 2023. That despite the payment plan being signed, the Appellant defaulted in making the instalment payment for the month of September 2023.

45. That the Respondent, vide a letter dated 22nd May, 2023, wrote to the Appellant stating that the Appellant's cumulative debt was Kshs. 41,612,988. 00 and proceeded to issue a summary of the two assessments highlighting how the computations for the two assessments were made.

46. That in addition, the Appellant was informed that based on the magnitude of the total taxes due and owing, the current payment plan was not tenable and as such there was need to revise the plan upwards. The Appellant was then directed to issue a proposal by 25th May, 2023 which it failed to.

47. The Respondent averred that the Appellant sent a letter dated 22nd May, 2023 in response to the Respondent’s letter dated 22nd May, 2023 stating, inter alia, that there was a payment plan for taxes amounting to Kshs. 13,815,770. 00 and further argued that the revision of the taxes to Kshs. 41,612,988. 00 was made in error.

48. That subsequently, the Respondent's Medium Taxpayer's Office on 23rd May, 2023 issued a demand for tax arrears amounting to Kshs. 48,236,876. 00 for the period June 2016 to April 2023 and advised the Appellant to settle the arrears.

49. That the Respondent vide a letter dated 29th May, 2023, wrote to the Appellant with regard to taxes due and owing amounting to Kshs. 41,612,988. 00.

50. The Respondent submitted that the Appellant neither responded to the Respondent’s letter of 29th May 2023 nor did it provide a revised payment plan for the total taxes due and owing prompting the Respondent to issue agency notices for the taxes which were due and owing less the paid amounting to Kshs. 30,440,798. 00.

51. That Section 24 of the Tax Procedures Act, 2015 allows a taxpayer to submit tax returns in the approved form and manner prescribed by the Respondent but the Respondent is not bound by the information provided therein and can assess for additional taxes based on any other available information.

52. That the payment plan agreed upon was limited to only one assessment and Judgements of the Tribunal issued on 14th April, 2023 in TAT 721/2021 & TAT 741/2021 amounting to Kshs 4,605,156. 00 and Kshs. 9,210,310. 00, respectively.

53. That the Appellant defaulted in paying the installment for the month of September 2023 and as per the Authority's policy, once a taxpayer has entered into a payment plan and defaults in payment, the Respondent is not bound by the existing payment plan and is at liberty to enforce payment of existing taxes.

54. That the Appellant is being economical with the truth as it did receive the Respondent’s letter dated 22nd May, 2023 which it responded to vide a letter dated 22nd May, 2023 from the Appellant’s Counsels on record and which is even attached to the Appellant’s application herein. That as such it is untrue that the Appellant only became aware of the Respondent's request for a revised payment plan at a much later date.

55. That the letter dated 29th May, 2023 by the Respondent was sent to the Appellant using the address provided by the Appellant on i-Tax as had been done for the previous letters sent to the Appellant which in fact reiterated the contents of the letter sent to the Appellant on 22nd May, 2023.

56. That the Respondent was justified in issuing agency notices, as issued on 20th November, 2023 for reasons that:-i.The taxes due and owing by the Appellant were as a result of two assessments as clearly outlined in the Respondent’s letter dated 22nd May, 2023. ii.The payment plan reached between the parties was with reference to the two cases filed before the Tribunal being TAT 721/2021 & TAT 741/2021 whose total tax liability amounts to Kshs. 13,815,477. 00. iii.Although the parties agreed to a payment plan, the Appellant defaulted in making payment for the month of September 2023 a fact which it has not disputed as per the pleadings and attachments filed before the Tribunal.iv.As per the Authority's policy, once a taxpayer defaults in making payment as per an existing payment plan, the Respondent is authorized to enforce payment of all the taxes due and owing.v.Despite the Respondent providing a schedule of the total taxes due and owing by the Appellant, the existing payment plan was not tenable as it only related to one and not both assessments and the Appellant having refused to provide a revised payment plan for the total taxes due and owing, the Respondent was proper in enforcing collection of taxes due and owing.vi.The Respondent's letter dated 29th May, 2023 was indeed sent to the Appellant both physically and via email in the month of May 2023 and the same was again sent to the Appellant in the month of November 2023 upon request and therefore the Appellant is being untruthful on issues of service.

57. The Respondent argued that even though via the letter dated 18th April, 2023 and subsequent payment plan was entered into, the same was solely in reference to taxes which were due and owing as a result of the Appeals before the Tribunal which taxes amounted to Kshs.13,815,477. 00 which are not the only tax liability due and owing by the Appellant a fact which the Appellant was explained to on numerous occasions.

58. That the taxes due and owing by the Appellant less that already paid stands at Kshs.30,440,798. 00; calculations which have over and over again been explained to the Appellant but the Appellant keeps denying the figure and the Appellant having defaulted in making payment for the month of September 2023, the Respondent is not bound by the existing payment plan.

59. That moreover, the Appellant has refused and declined to provide a revised payment plan requested vide letters dated 22nd and 29th May 2023 and as such cannot enjoy equity when it has itself not done equity.

60. That a total of 15 monthly instalments were never honored by the Appellant to date hence the demand for the 1st Instalment of which taxes amounting to Kshs.7,479,858. 00 still remains due and payable.

61. That for the agency notice to be lifted, the Appellant has to provide security for the said taxes in full as the Appellant has declined and refused to provide a revised payment plan.

62. That Section 59 of the Tax Procedures Act also touches on production of records requiring the Appellant to produce and furnish information for examination relating to its tax liability which the Appellant failed to adhere to.

63. That in issuing the agency notices, the Respondent relied on information that was available to it as well as its best judgement as provided for in Section 24 and 31 of the Tax Procedures Act.

64. The Respondent stated that the Appellant herein has failed to discharge its burden of proof to demonstrate that the Respondent's tax decision was incorrect as provided for in Section 56 of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act.

65. That the agency notices were properly issued and should be upheld by this Honourable Tribunal.

66. That in Dryer & Dryer Limited vs. Commissioner of Domestic Taxes TAT Appeal No. 139 of 2020 [2021] eKLR, the Tribunal addressed the validity of an objection in respect of failure to produce documents despite several reminders.

67. That in Pearson vs. Belcher (CH.M Inspector of Taxes) Tax Cases Volume 38 referred to by Justice D.S. Majanja in PZ Cussons East Africa Limited vs. Kenya Revenue Authority (2013) eKLR to the extent that:“where there is an assessment made by the Additional Commissioner upon the Appellant; it is perfectly settled by cases such as Norman Vs. Galder 267C 293, that the onus is upon the Appellant to show that the assessment made upon him is excessive and incorrect and of course he has completely failed to do. That is sufficient to dispose of the appeal, which I accordingly dismiss with costs.57. ........the Appellant in the present appeal has manifestly failed to discharge such an onerous burden of proof placed squarely on it....”

68. That whereas the agency notices were lifted in this matter, the next question one asks then is what the net effect of the same is considering that the Appellant's Appeal is entirely anchored on the said agency notices.

69. That this then reverts the parties to the position they were in when the Tribunal issued its Judgment in TAT Appeal No. 721 of 2021 Manchester Outfitters Limited vs. Commissioner of Domestic Taxes where the Honourable Tribunal determined the issues of the demanded taxes and in which a Judgment was delivered on 14th April, 2023 dismissing the Appeal.

70. That in its Judgment, the Tribunal, inter alia, observed that:-“i)That there was no valid objection, it follows that there is no valid Appeal as there is no Appealable decision to anchor this Appeal and it is thus not meritorious.ii)As per the Notice of Objection Invalidation, the summary is given showing the months and years assessed. The total figure of Kshs.21,996,091 confirming that the two assessments were separate and were dealt with differently by the Respondent.iii)The Tribunal agrees with the Respondent in this respect and finds that the Appellant's Appeal is not validly lodged in respect of the invalidation of the Objection issued on 18th June 2021. The Appeal is therefore invalid as there is no decision for the Appeal to be based on.”

71. That additionally, the agency notices issued in this matter having been lifted, the matter was spent and overtaken by events and as such the Appellant ought to have withdrawn the Appeal as filed before the Tribunal as by lifting the agency notices, the Commissioner did not also determine that the taxes due and payable had been dispensed with.

72. That those taxes are still due and payable and the Appellant should either proceed on and make payment of all the taxes due and owing failure to which the Respondent will again proceed and enforce the payment of the said taxes. That the ball is therefore in the Appellant's court.

73. That the Appellant having not appealed the Judgement of the Tribunal issued on 14th April, 2024, the resultant taxes are due and owing and the Respondent is therefore justified in enforcing the collection of taxes due and owing as provided for in Section 42 of the Tax Procedures Act.

74. The Respondent submitted that it has demonstrated before this Tribunal what was considered in arriving at the assessment and subsequently the objection decision which are within the law. That moreover, the Respondent has explained in detail reasons why and its findings and prays that the Tribunal upholds the tax demand as well as its tax decision.

Respondent’s Prayers 75. The Respondent prayed for orders that:i.The Respondent's agency notices issued on 20th November, 2023 seeking enforcement of Kshs. 34,133,130. 00 being VAT be deemed as proper and in conformity with the provisions of the law.ii.That this Appeal be dismissed with costs to the Respondent for being devoid of merit.

Issues for Determination 76. The Tribunal notes that subsequent to filing the Appeal, in the parties’ submissions, the Appellant did not raise the issue of agency notices while the Respondent confirmed that the agency notices were lifted. Additionally, the Tribunal took judicial notice that the agency notices that precipitated this Appeal were lifted by this Tribunal on 28th November, 2023.

77. As a result of the lifting of the agency notices in this Appeal, eight (8) out of nine (9) grounds in the Appellant’s Memorandum of Appeal were resolved and therefore the Appeal is substantively spent leaving a singular issue for the Tribunal’s determination which is:

Whether the Appellant is entitled to an order of declaration on the enforcement of the Debt Installment Payment Agreement. Analysis and Findings 78. The Tribunal having established the issue falling for its determination, proceeds to analyse it as hereunder.

79. The Tribunal has reviewed the parties’ pleadings and notes that the Respondent informed the Appellant vide a letter dated 18th April, 2023 that taxes relating to two Appeals ruled in favor of the Respondent were due and payable.

80. The Appellant responded by a letter dated 25th April, 2023 stating that it was willing to pay the demanded amount over 18 monthly instalments and by the same letter enclosed a payment registration slip to demonstrate its commitment to settle the taxes.

81. Thereafter the parties executed the Debt Payment Instalment Agreement dated 8th May, 2023 which depicted 18 instalment payments amounting to Kshs. 723,083 for each month other than the last month where the agreed instalment amount was Kshs. 723,066. 00.

82. That while the principal tax for the first matter was Kshs. 4,605,156. 00 and the second assessment had a principal tax due of Kshs. 9,210,310. 00, the Respondent wrote a letter to the Appellant on 22nd May, 2023 stating that the Appellant’s cumulative debt was Kshs. 41,612,988. 00.

83. Additionally, on 23rd May, 2023 the Respondent wrote another letter to the Appellant stating that it owed Kshs. 48,236,876. 00 in tax arrears.

84. On 28th May, 2023, the Appellant responded to the Respondent stating that the confirmed tax obligation was Kshs. 13,815,477. 00 as per its letter to the Appellant dated 18th April, 2023 which precipitated the execution of the installment payment agreement.

85. The Respondent replied on 29th May, 2023 and stated that it had combined two tax matters ruled by the Tribunal and hence the request for a revised payment plan.

86. The Tribunal has confirmed that as per the Respondent’s letter dated 18th April, 2023 demanding tax due from the Appellant as a result of the Tribunal’s Judgments, the amounts that the Respondent confirmed as owing were as follows:i.TAT Case No. 721 of 2021 - Kshs. 4,605,156. 00ii.TAT Case No. 741 of 2021 - Kshs. 9,210,310. 00

87. The Tribunal has further confirmed that the Appellant provided payment slips showing payments of the agreed installments as follows:i.On 25th April, 2023, a receipt showing payment amounting to Kshs. 800,000. 00ii.On 19th June, 2023; a receipt showing payment amounting to Kshs. 723,083. 00iii.On 21st July, 2023; August, 2023 a receipt showing payment amounting to Kshs. 723,083. 00iv.On 22nd August, 2023; a receipt showing payment amounting to Kshs. 723,083. 00v.On 23rd September, 2023; a receipt showing payment amounting to Kshs. 723,083. 00vi.On 23rd October, 2023; a receipt showing payment amounting to Kshs. 723,083. 00

88. It is manifest therefore from the parties’ pleadings that the Appellant made 5 installment payments to the Respondent between June 2023 and October 2023.

89. The Tribunal has additionally established that the current Appeal was lodged on 22nd November, 2023 while the disputed agency notices were issued on 20th November, 2023. The Tribunal therefore confirmed that the decision that the Appellant brought to the Tribunal as the basis for its Appeal is the agency notices dated 20th November, 2023 which demanded taxes over and above the amounts confirmed by the Respondent from the Appellant’s bankers.

90. It is not in dispute that the Tribunal issued Judgments for the matters that precipitated the agency notices to enforce collection. These matters, TAT Appeals 721 of 2021 and 741 of 2021, were ruled in favor of the Respondent and therefore the Respondent was within its rights to collect the taxes. However, it is noteworthy that the said taxes amounted to Kshs. 13,815,477. 00 as confirmed by the Respondent vide its letter dated 18th April, 2023.

91. The Appellant has proved that it made payments of the agreed instalments between June 2023 and October, 2023. However, the Respondent in its Statement of Facts averred that the Appellant did not make the payment for the month of September, 2023 and hence its enforcement action by way of agency notices.

92. The Tribunal has confirmed that the Appellant made the payment for September, 2023 and therefore the Respondent erred in stating that the Appellant did not make the said payment. Further, this payment made in September, 2023 was in compliance with the parties’ Debt Payment Instalment Agreement.

93. Section 33 of the Tax Procedures Act provides as follows regarding extension of time to pay tax:“(1)A taxpayer may apply in writing to the Commissioner for an extension of time to pay a tax due under a tax law.(2)When a taxpayer applies for an extension the Commissioner may, if the Commissioner is satisfied that there is reasonable cause—(a)grant the taxpayer an extension of time for payment of the tax; or(b)require the taxpayer to pay the tax in such instalments as the Commissioner may determine.(3)The Commissioner shall notify the taxpayer in writing of the decision regarding the application for extension of time, within 30 days of receiving the application for extension of time.(4)Where a taxpayer who has been permitted to pay a tax by instalments under subsection (2) defaults in the payment of an instalment, the whole balance of the tax outstanding at the time of default shall become immediately payable.(5)Despite being granted an extension of time to pay a tax or permission to pay a tax due by instalments by the Commissioner, a taxpayer shall be liable for any late payment interest arising from the original date the tax was due for payment.” (Emphasis added)

94. The Tribunal notes that the Appellant neither reneged on the Agreement nor failed to pay the installment for September 2023 as alleged by the Respondent. However, Section 33(5) of the Tax Procedures Act as laid out above provides that an extension to pay tax in installments does not absolve a taxpayer from any late payment interest arising from the original date the tax was due for payment.

95. Further, while the Appellant averred that the Respondent increased the taxes due from it, and the amount demanded was higher than the amount depicted in the Debt Payment Instalment Agreement, the Tribunal notes that the Respondent provided schedules of tax in arrears amounting to Kshs. 48,236,876. 00 on 23rd May, 2023 and Kshs. 41,612,988. 00 on 22nd and 29th May, 2023.

96. The Tribunal notes that to the extent that the Debt Payment Instalment Agreement encompassed Kshs. 13,815,477. 00 principal taxes that were the subject of the two Appeals, TAT Appeal No. 721 of 2021 and TAT Appeal No. 741 of 2021 determined by the Tribunal; the Appellant ought to have subjected the additional amounts demanded by the Respondent to a separate objection and Appeal process.

97. Further, based on the documents filed with this Appeal, the Tribunal is unable to delineate the interest arising from the taxes due from the two Appeals from the additional tax arrears that the Respondent raised. Additionally, the Tribunal, due to lack of full evidence, was unable to determine whether the agreement was fully discharged,

98. As a result of the foregoing, the Tribunal is of the considered view that the Appellant is not entitled to an order of declaration on the enforcement of the Debt Installment Payment Agreement as such an order would contravene Section 33(5) of the Tax Procedures Act, 2015.

Final Decision 99. The upshot of the foregoing analysis is that the Tribunal finds that the Appeal is not merited and accordingly proceeds to make the following Orders:-a.The Appeal be and is hereby dismissed.b.Each Party to bear its own costs.

100. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 28TH DAY OF FEBRUARY, 2025ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA - MEMBERDR. RODNEY O. OLUOCH - MEMBERGLORIA A. OGAGA - MEMBERABRAHAM K. KIPROTICH - MEMBER