https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/122

Milestone Games Ltd v Commissioner of Legal Services & Board Cordination & 2 others (Tax Appeal E172 of 2026) [2026] KETAT 122 (KLR) (Appeals) (26 June 2026) (Ruling) Neutral citation: [2026] KETAT 122 (KLR) Republic of Kenya In the Tax Appeal Tribunal Appeals Tax Appeal E172 of 2026 RM Mutuma, Chair, JM Malla, G Ogaga & T Vikiru, Members June 26, 2026 Between Milestone Games Limited Applicant and Commissioner Of Legal Services & Board Cordination 1st Respondent Commissioner Large & Medium Taxpayers 2nd Respondent Commissioner of Domestic Taxes 3rd Respondent Ruling 1.The Applicant vide a Notice of Motion dated 4th May, 2026 and filed under a Certificate of urgency on even date sought the following Orders:a.Spentb.That an injunction be issued against the Respondent, its officers, agents and/or servants restraining them from demanding from the Appellant any excise duty to the tune of Kshs 1,011,230,716 and Withholding Tax to the tune of Kshs 462,991 on winnings or whatever amount allegedly owing as excise duty and withholding tax on winnings from the Appellant and or issuing agency notices to the Appellant's bankers and or to Safaricom Ltd, Airtel Networks Ltd and or any other Telcos to recover the said alleged withholding tax and excise duty pending the hearing and determination of prayer 4 hereof.c.That pending the hearing and determination of prayer 4 hereof the operation of any agency notices issued by the Respondents to the Appellant's bankers and or to Safaricom Ltd, Airtel Networks Ltd and or any other Telco and/or any execution or tax recovery process against the Appellant be stayed.d.That an injunction be issued against the Respondent, its officers, agents and/or servants restraining them from demanding from the Appellant any excise duty to the tune of Kshs 1,011,230,716 and Withholding Tax to the tune of Kshs 462,991 on winnings or whatever amount allegedly owing as excise duty and withholding tax on winnings from the Appellant and or issuing agency notices to the Appellant's bankers and or to Safaricom Ltd, Airtel Networks Ltd and or any other Telco to recover the said alleged withholding tax and excise duty pending the hearing and determination of the Appeal herein.e.That an order do issue that Safaricom PLC and Ecobank Kenya Limited be joined as Interested Parties to this proceedings as Interested Parties pending the hearing and determination of the Appeal herein.f.That in the in the interim the Interested Parties to wit: Safaricom PLC and Ecobank Kenya Limited be directed not to comply with or enforce the Agency Notice dated 30th April,2026 pending the hearing and determination of this Appeal.g.That the costs of this application be borne by the Respondent. 2.The Application was supported by a sworn affidavit of Robert Macharia, the Applicant’s Corporation secretary dated 4th May, 2026 and filed on even date wherein the Applicant cited the following grounds:a.That on 29th September 2025 the Respondents issued to the Appellant an assessment of alleged withholding tax of Kshs 1,011,230,716 and Withholding Tax to the tune of Kshs 462,991.b.That the assessment aforesaid was for withholding tax and exercise duty allegedly owing from the Appellant for the period between June 2023 and February 2024.c.That the issue of withholding tax and exercise duty in question was also the subject of a past assessment notice by the Respondent dated 12th September 2023 which culminated in proceedings before this Tribunal via Appeal Number TAT E873 of 2023 which rendered its decision on 22nd November 2024 as follows:“1.The Tribunal having established that the Respondents did not provide evidence indicating that the orders In Kakamega Constitutional Petition number E016 of 2023 had been varied or set aside, that is to say the letters dated 29th August 2023, 30th August 2023, 8th September 2023 and the objection Decision dated 3rd November 2023 were all issued in contempt of court orders and the same cannot be allowed to stand. In fact, any action taken or any action based on those letters is null and void2.That under the prevailing circumstances, the Tribunal finds that the Respondents erred in issuing their objection decision while the court orders were in place and prohibiting both parties herein from making deduction of 12.5% relating to Excise Duty.3.Consequently, the Tribunal finds that the Appellant's appeal to be merited, thus succeeds.”d.That being dissatisfied by the assessment dated 29th September 2023, the Appellant lodged its notice of objection to the said assessment on or about 9th October 2025 disputing that any withholding tax or excise duty was owing from it.e.That Section 51(11) of the Tax Procedures Act provides that where the Commissioner has not made an objection decision within sixty days from the date that the taxpayer lodged a notice of the objection, the objection shall be allowed.f.That the Respondents did not make any decision on the notice of objection by the Appellant within the 60-day period as provided under Section 51 (11) of the Tax Procedures Act and therefore the objection stood allowed by operation of law.g.That in total and blatant breach of the law the Respondent purported to respond to the Appellant's objection on 5th January 2026 which was way outside the time limit provided by the law. As such no tax is owing from the Appellant.h.That without prejudice to the fact that the Respondents did not render its decision within the time limits provided for under the Tax Procedures Act, as a precautionary measure, the Appellant opted to lodge the current appeal.i.That on 23rd April 2026, in utter breach of the law, the Respondents issued a demand notice to the Appellant for Kshs 1,011,693,707.00 allegedly for tax owing from Kibos Sugar & Allied Industries Ltd. The Appellant does not know who Kibos Sugar & Allied Industries Ltd is and neither is it under any obligation in law to pay taxes on behalf of the said Kibos Sugar & Allied Industries Ltd or for anybody else.j.That in blatant breach of the law and actuated by malice and ulterior motives the Respondents issued Agency Notices on Friday 30th April 2026 at 4.00pm to the Appellant's bankers and all Telcos in the Republic of Kenya.k.That the timing of the issuance of the Agency notices on a Friday at 4.00 pm was meant to deny the Appellant a chance to move to Court/the Tribunal to protect its constitutional rights thereby paralyzing its business operations.l.That in further extension of malice, bad faith and ulterior motives against the Appellant, the Respondent issued agency notices to banking institutions where the Appellant does not even hold accounts with the sole intention of paralyzing the operations of the Appellant.m.That the issuance of the agency notices by the Respondents is in contempt of the orders of this Tribunal made in its judgment of 22nd November 2024 in Appeal Number TAT E873 of 2023.n.The Appellant has always promptly paid all its taxes as evidenced by the Tax Compliance Certificate issued to it by the Respondentso.The Tax Compliance Certificate issued to the Appellant by the Respondent has not been recalled or varied which implies that prima facie no tax is owing from the Appellant. 3.In response to the Application, the Respondent filed its grounds of opposition dated 8th May 2026 stating the following grounds:a.That the Application is fatally defective having been brought before this Tribunal under rules expressly excluded from the Tribunals proceeding by virtue of Section 14 of the Tax Appeals Tribunal.b.That the jurisdiction of this Tribunal is limited to hearing and determination of matters arising from Appealable decisions.c.That the Tribunal does not have jurisdiction to issue injunctive orders.d.That any orders as relates prayers 2,3 and 4 of the application should be limited to Agency Notices issued on 30th April 2026 and should not be left open ended as crafted in the prayers.e.That the Agency Notices dated 30th April 2026 were lifted on 30th April 2026 as such the subject matter of the application has been spent.f.That the Orders for jointer of parties as prayed for in prayer 5 of the application are unnecessary and intended interested parties will serve for purposes in aiding this Tribunal to deliver justice as they are not a party to the issuance of any assessment as against the Appellant/Applicant herein. Further, the Agency Notices having been lifted, the intended interested parties have no role to play in the suit.g.That the Appellant has already obtained orders as for lifting of the Agency Notices dated 30th April 2026 from the High Court in HCJRMISC E064 of 2026. That the present application is therefore a waste of the Tribunal’s time.h.That the Application and any orders sought are improper as against the 3rd Respondent as the office no longer exist by virtue of Sections 13 and 13A of the Kenya Revenue Authority Act.i.That the Amended Notice of Motion dated 4th May 2026 should therefore dismissed as being fatally defective. 4.The Applicant also filed a Notice of Motion dated 18th May 2026 under certificate of urgency filed on even date supported by an affidavit sworn by Willis Otieno the advocate for the Applicant. The Applicant sought to amend its Notice of motion dated 4th May 2026 on grounds that:a.In drafting the Notice of Motion it inadvertently failed to cite the provisions of the Tax Appeals Act, Tax Appeal Tribunal (Procedure Rules), 2015. That there is need in the interest of justice and fairness to amend the application dated 4th May,2026 to cite the correct provisions of the law.b.The proposed amendment does not introduce a new cause of action, does not prejudice the Respondents and is necessary for lawful and effective determination of the Application already before this Tribunal albeit did not provide for the right provisions of the law.c.The Tribunal do deem the Draft amended Notice of Motion as duly filed and served subject to payment of the requisite fees.d.The Application herein is brought in good faith and in exercise of right to a fair hearing as guaranteed under Article 25 and 50 of the Constitution of Kenya 2010 and that the inadvertent mistake on the part of the advocate not to cite the provisions sought to be cited vide this amendment should not be visited upon the Appellant adversely.e.The amendment will aid the Applicant herein access justice before this Tribunal as enshrined under Article 48 of the Constitution of Kenya 2010.f.This Tribunal has the discretion to judiciously grant leave to the Applicant to amend the Notice of Motion; the amendment herein does not raise new issues as it only seeks to introduce/include the provisions of the law under which it is brought.g.The Application herein is brought without unreasonable delay, that unless orders sought herein are granted, the Applicant's interests and right to a fair hearing on merit may be jeopardized thereby rendering the Application nugatory. 5.In Response to the Application dated 18th May 2026, the Respondent filed a replying affidavit dated and filed on 12th June, 2026 sworn by Dzendere kahindi an officer of the Respondent raising the following grounds in opposition:a.That on 30th April 2026, the Respondents placed Agency Notices on the Appellant seeking to recover taxes. These Agency Notices were immediately lifted on 30th April 2026 before any taxes were recovered.b.That despite there being no active Agency Notices in force, the Appellant still filed a Notice of Motion dated 4th May 2026 seeking inter-alia orders to lift Agency Notices.c.That the Respondents filed Grounds of opposition dated 8th May 2026 in opposition to the Notice of Motion dated 4th May 2026. Parties appeared before the Honourable Tribunal on 22nd May 2026 for hearing where the only the Notice of Motion dated 4th May 2026 was heard and judgement reserved for 29th June 2025. The Appellant was present and did not bring to the attention of the Tribunal of the existence of the application dated 18th May 2026.d.That the Application dated 18th May 2026, seeks in essence to make changes to the Appellant's Application dated 4th May 2026 which the Respondent had raised in its grounds of opposition.e.That in the core of the Application dated 18th May 2026 is to allow the Appellant to litigate by ambush by raising applications on issues that the Tribunal will already apply itself to in its judgement of 29th June 2026.f.That the actions of the Appellant to file an Application after parties have closed pleadings is an abuse of the time of the Tribunal.g.That if the Appellant was inclined to want to make changes to its Application dated 4th May 2026, the proper procedure would be to withdraw the Application dated 4th May 2026 first.h.That the amendments sought to be introduced by this application are improper and do not in any way relate to the injunctive orders sought by the Applicant. That specifically, the Applicant seeks to amend the application to move the Tribunal through inapplicable Sections of the law:i.Sections 13(3) and (4) of the Tax Appeal Tribunal Act relates to extension of time to file an Appeal.ii.Section 15(1) of the Income Tax Act which relates to Deductions Allowable which is unrelated to the orders sought in the Application.iii.Section 51(5) of the Tax Procedures Act as sought to be included relates to parameters for making an objection to amended assessments.iv.Additionally, the Application seeks to include Article 31 and 40 of the Constitution of Kenya whereas the dispute at hand relates to an appealable decision issued by the Respondents and does not in any way infringe or violate on their right to privacy under Article 31 and their right to property under Article 40 of the Constitution of Kenya.i.That the Application is improper and defective as the parties herein had already filed their pleadings and responses together with the written submissions to the Notice of Motion application dated 4th May 2026. That the said Application is prejudicial to the Respondents case since they had already prepared and submitted extensively on this matter whereas the Applicant had an opportunity to lodge such an Application before the pleadings stage closed.j.That the Applicant made an admission that the said Application sought to be amended is incorrect thus justifying filing of this present application.k.That an Application to amend the application cannot cure an incorrectness and defectiveness and the same ought to be dismissed by this Tribunal.l.That the Application amounts to trial by ambush whereby the Applicant waited until the parties submitted on the issues raised before raising a new issue upon realizing the existence of a weakness of their case/application. The Respondent prays that this Tribunal dismisses the Application. Parties Submissions 6.The Tribunal directed that both Applications were to be canvased by way of written submissions. The Applicant filed its written submissions in support of the 4th May 2026 Application on 22nd May 2026 and its written submissions in support of the Application dated 18th May 2026 on 11th June 2026. The Respondent filed its written submissions in opposition to the 4th May 2026 Application on 15th May 2026, it did not file written submissions with regard to the Application dated 18th May 2026. The Tribunal has carefully considered the parties submissions in arriving at the determination hereunder. Analysis And Findings 7.The Applicant moved the Tribunal vide a notice of Motion dated 4th May, 2026 seeking orders to lift the Agency notices dated 30th April, 2026 placed against the Applicant’s bank accounts held at Absa Bank, Kenya Commercial Bank, Eco Bank, Equity Bank, I&M Bank and Telcos; Safaricom and Airtel. That further that the Respondent be restrained from placing Agency notices against the Applicant Bank accounts and its Telco partners pending the hearing and determination of the appeal. 8.The Applicant then filed a subsequent Notice of Motion dated 18th May 2026 seeking to amend the Notice of Motion dated 4th May 2026 in order to state the relevant provisions of the law under which the motion was brought. 9.The Respondent opposed both applications. For good order, the Tribunal will first deal with the Application dated 18th May, 2026 seeking to amend the Notice of Motion dated 4th May 2026 before proceeding to determine the Application of 4th May, 2026. 10.In the Application dated 18th May 2026, the Applicant sought to amend its earlier application to cite the relevant provisions of the law under which it sought to move the Tribunal, the Applicant’s advocate in his affidavit stated that he inadvertently made an error by failing to cite the relevant provisions of the law, that the mistake should not be visited upon the Applicant adversely. He further stated that the amendment does not seek to introduce new cause of action and it will therefore not prejudice the Respondent. 11.The Applicant relied on the Court of Appeal case of Central Kenya Ltd v Trust Bank Ltd & 5 Others [2000} eKLR, which authoritatively stated:'A party is allowed to make such amendments as may be necessary for determining the real question in controversy or to avoid multiplicity of suits provided there has been no undue delay, no new or inconsistent cause of action is introduced, no vested interest or accrued legal right is affected and the amendment can be allowed without injustice to the other side." 12.The Respondent opposed the Application dated 18th May 2026 on grounds that it had already lifted the impugned agency notices hence the orders sought would be in vain. The Respondent argued further that the Application was brought late when the hearing of the Application of 4th May 2026 had been conducted and the matter reserved for judgement. 13.The Tribunal’s power to entertain application for amendment of pleadings in a matter before it is provided for under Rule 21 of the Tax Appeals Tribunal (Procedure) Rules 2015. Specifically, rule 21 provides as follows:“21.Amendment of pleadings A party may at any time before the closure of the case, orally apply to amend its pleadings and the Tribunal may, at its discretion, allow such application on such terms and conditions including granting leave to the other party to amend its pleadings provided the amendments do not raise new issues.” 14.The Tribunal perused both applications and noted that the amended Notice of Motion dated 18th May 2026 sought to amend only the citation part of the initial Notice of Motion dated 4th May 2026 to cite the relevant provisions of the law, the substance of Notice of Motion remained the same. 15.Having established that the amendment does not seek to introduce new issues, it is restricted to clarifying the relevant provisions of the law, the same has been brought without undue delay and it does not occasion any prejudice on the Respondent. The Tribunal is persuaded that the amendment will aid the just determination of the matter at hand, the Tribunal is therefore minded to allow the amendment of the Notice of Motion dated 4th May 2026, the amended Notice of Motion dated 18th May 2026 is hereby deemed duly filed and served and will form the basis of the Tribunal’s determination of the substantive application as hereunder. 16.Tribunal noted that the Applicant filed an Appeal at the Tribunal on 16th February, 2026 challenging the Respondent’s decision of 5th January, 2026. The Tribunal has perused the Applicant’s Memorandum of Appeal and is persuaded that the Applicant has an arguable Appeal which ought to be heard and determined on its merits. 17.The Tribunal has discretion under Section 18 of the Tax Appeals Tribunal Act to secure the effectiveness of any proceedings before it and more particularly in averting the rendering of any appeal proceedings before it superfluous. The Section provides as follows:-“Where an appeal against a tax decision has been filed under this Act, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision under review as it considers appropriate for the purposes of securing the effectiveness of the proceedings and determination of the Appeal.” 18.The Applicant having filed an Appeal before the Tribunal, its application is deserving of consideration in view of the safeguards provided by Section 18 of TATA above, the import being preserving the effectiveness of the intended Appeal. The question that follows is whether there is a basis for granting the orders sought, that is, orders lifting the impugned Agency notices. 19.The Tribunal is clothed with the jurisdiction to deal with an application of this nature as guided under Section 42 of the Tax Procedures Act which provides as follows:-“(14)(14)The Commissioner shall not issue a notice under this section unless—a.the taxpayer has defaulted in paying an instalment under section 33(2);b.the Commissioner has raised an assessment and the taxpayer has not objected to or challenged the validity of the assessment within the prescribed period;c.the taxpayer has not appealed against an assessment specified in an objection decision within the prescribed timelines;d.the taxpayer has made a self-assessment and submitted a return but has not paid the taxes due before the due date lapsed; ore.the taxpayer has not appealed against an assessment specified in a decision of the Tribunal or court.” 20.It follows that, once a taxpayer has lodged its Appeal before the Tribunal relating to a dispute on assessed taxes, the Respondent is prohibited by law from issuance of Agency Notices as mechanisms in recovery of the disputed taxes. 21.From the material before the Tribunal, the Respondent issued an objection decision dated 5th January, 2026. The Applicant filed an Appeal against the Respondent’s objection decision on 16th February, 2026. Despite there being an active Appeal, the Respondent issued an Agency notice to the Applicant’s bankers and Telco partners 30th April, 2026. 22.Whereas the Respondent argues that it has since lifted the Agency notices and that the application has been overtaken by events, the Tribunal notes that the Respondent in its letter states that the agency notices are suspended as opposed to being lifted as it claims herein. The Tribunal affirms that institution of recovery measures ought to be done in strict compliance with the law hence the same cannot be left to the Respondent to whimsically institute and lift agency notices as it so wishes. It must only do so within the bounds of the law. The purposes of Section 42 (14) of the TPA is to alleviate the concerns of potential challenges in demanding and enforcement of demands whilst the dispute is under adjudication, and without necessarily placing prejudice on any of the parties. 23.Particularly Section 42 (14) (e) provides that where an Appeal has been filed, the Respondent ought not proceed with recovery measures until the dispute is determined. In the instant Application, the Tribunal is persuaded that it is in the interest of justice to preserve the effectiveness of the intended Appeal. 24.The Tribunal, on a balance of convenience finds that the Applicant has advanced sufficient grounds to warrant the Tribunal to interfere with the enforcement process and holds the Appellant’s application as merited. Disposition 25.Given the foregoing, the application has merit and the Tribunal accordingly proceeds to make the following Orders:-a.The Application be and is hereby allowed.b.The Agency notices issued by the Respondent on 30th April, 2026 to the Applicant’s bankers and Telco partners be and are hereby lifted unconditionally.c.No orders as to costs. 26.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF JUNE 2026.........................................ROBERT M. MUTUMACHAIRMAN........................................JIMMY M. MALLA. GLORIA A. OGAGAMEMBER MEMBER........................................DR. TIMOTHY VIKIRUMEMBER