[2024] KETAT 763 (KLR)

Minet Kenya Insurance Brokers Limited v Commissioner of Domestic Taxes (Tax Appeal 1470 of 2022) [2024] KETAT 763 (KLR) (9 May 2024) (Judgment)

Neutral citation: [2024] KETAT 763 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 1470 of 2022

RM Mutuma, Chair, B Gitari, M Makau, EN Njeru & AM Diriye, Members

May 9, 2024

Between

Minet Kenya Insurance Brokers Limited

Appellant

and

Commissioner Of Domestic Taxes

Respondent

Judgment

Background 1. The Appellant is a private limited liability Company incorporated in Kenya under the Companies Act. Its principal activity is insurance brokerage and is licensed under Section 153 ofTtheInsuranceAct(CAP 487), of the laws of Kenya to act as a broker. In addition, it also offers other services such as actuarial consulting, medical fund management, medical scheme administration, and life and pension administration among others.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, and the Kenya Revenue 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 Finance Act 2020 introduced the Voluntary Tax Disclosure Program ("VTDP"). The VTDP allowed taxpayers to voluntarily disclose their tax liabilities to the Respondent in order to receive a remission of interest and penalties on the disclosed principal tax liability.

The Appeal 4. In order to take advantage of VTDP the Appellant undertook a review of its financial records to determine whether there were any tax liabilities that it wished to disclose under the Voluntary Tax Disclosure Program VTDP.

5. Vide a letter dated 31st December 2021, the Appellant applied through Voluntary Tax Disclosure Program (VTDP) and disclosed an underpayment of Kshs. 152,390,683. 00 being WHT and VAT for the period 2018, 2019 and 2020.

6. Subsequently, following the Respondent’s approval, the Appellant made payment of the principal tax of Kshs. 152,390,683. 00 in December 2021.

7. On 12th August 2022, the Appellant applied for a refund of part of the taxes paid under VTDP amounting to Kshs. 102,869,228. 00 being an overpayment of the taxes disclosed and paid as at 31st December 2021.

8. The Respondent received the application on 18th August 2022 and requested for relevant executed records in order to validate the application.

9. Upon review of the documents submitted by the Appellant, the Respondent issued a letter dated 19th OctoberT2022statingthatit was unable to grant refund of the taxes disclosed and paid under the VTDP as at 31st December 2021.

10. The Appellant being dissatisfied with the Respondent's decision on refund of overpayment of tax in the letter dated 19th October 2022 appealed to the Tribunal.

11. The Appeal is premised on the following grounds as stated in the Memorandum of Appeal dated 2nd December 2022 and filed on 5th December 2022:-a)That the Respondent erred in law and fact by denying the Appellant's refund application contrary to the provisions of Section 47 A of the TPA where the Appellant has a right to apply for offset or refund of overpaid tax.b.That the Respondent misdirected itself and erred in law by failing to correctly apply the rules of statutory interpretation, thereby arriving at the erroneous conclusion that the Appellant's refund application was barred by the provisions of Section 37 D (6) of the Tax Procedures Act.c.That the Respondent misdirected itself and erred in law by erroneously finding that a refund application constituted an Appeal or that the Appellant was barred from appealing, contrary to section 37 D (9) and Section 47 A (13) of the TPA that allow for a taxpayer to appeal a Refund Decision.d.The Respondent's decision to reject the refund application amounts to double taxation which is contrary to the law.

Appellant’s Case 12. The Appellant’s case is premised on its:-a.Statement of Facts datedT2ndDecember2022and filed on 5th December 2022 and the attached bundle of documents;b.Replying Affidavit to the Notice of Preliminary Objection sworn by Walter Koech on the 3rd April 2023 and filed on 14th April 2023;c.Ground of Opposition dated 5th April 2023; and filed on 14th April 2023d.Written submissions dated 26th May 2023 and filed on 29th May 2023.

13. The Appellant stated that the Voluntary Tax Disclosure Program ("VTDP") was enacted in the Tax Procedures Act ("TPA") through the Finance Act, 2020 ("the Act"). The enactment was for the purposes of allowing taxpayers to take advantage of the reliefs offered under the VTDP.

14. The Appellant averred that it undertook a review of its financial records to determine whether there were any liabilities that it wished to disclose.

15. The Appellant stated that from the review it noted that it had accrued network and brand royalty fees for the years of income ended 31st December 2018, 2019, and 2020 in its books but had not accounted for Withholding tax ("WHT") and Value added Tax ("VAT"). The accrual was based on a draft Transfer Pricing (TP) Policy that the Appellant had in place at that time. As the fees were accruals, there was no actual amount that was payable as at the time of accrual.

16. The Appellant averred that in order to take advantage of the VTDP, assessed themselves WHT and VAT on the accrued network and brand royalty fees based on the draft TP Policy. The assumed resulting tax of Kshs. 152,390,683. 00 of the computation of tax remitted to the Respondent in December 2021. Copies of the VTDP application and proof of payment of the tax liability were annexed to the bundle of documents.

17. The Appellant stated that in its VDTP application dated 31st December 2021, it expressly indicated at the third paragraph that these were ‘accruals’, and that there were “ongoing reviews of the Transfer Pricing Policy by relevant Departments”, the application therefore indicated that the TP Policy that was being relied upon was a draftT.

18. The Appellant averred that after the finalization of the TP Policy, it established that the amount that the Appellant had accrued in the books was excessive. Consequently, the excess accrual was reversed in the Appellant's financial statements for 2021 and the Appellant was issued with credit notes and correct invoices by the service providers. Copies of the credit notes and corrected invoices were annexed to the Appellant’s bundle of documents.

19. The Appellant stated that in addition, the reversals of the amounts paid were declared as income to the Appellant in the 2021 year of income and the relevant adjustments made to the Appellant’s Corporate Income Tax (CIT) returns for the year 2021 and CIT paid on the amounts. Subsequently the final tax liability for WHT and VAT under the VTDP and going by the new issued invoices was a liability of Kshs. 49,521,454. 00. Therefore, the excess tax paid in error under the VTDP was Kshs. 102,869,228. 00 as per the tabulations in the table provided by the Appellant in the Statement of Facts.

20. That the Appellant made an application for the refund of the amount paid in error in a letter dated 12th August 2022 pursuant to the provisions of Section 47 A of the TPA. The Appellant further stated that the Respondent acknowledged the application via a letter dated 18th August 2022 and requested for additional documentation in order to enable the Respondent to validate the Appellant’s application. The additional information requested included among others;a.All correspondence between Minet Holdings Africa (Pty) Ltd, Minet (Mauritius) Holdings Ltd and the Appellant with respect to drafting and amendment of the Transfer Pricing Policy;b.Executed 'Master Network Fee Agreement' and executed 'Master Trademark License Agreement'; andc.Bank statements.

21. That the Appellant providedTtheRespondentwiththe information requested and the Respondent proceeded to make a refund decision on the application via a letter dated 19th October 2022 annexed to the Statement of Facts, in which the Respondent held that pursuant to the provisions of Section 37 D (5) and (9) of the TPA which according to the Respondent prohibits refunds and the right to appeal under the VTDP, the Respondent was unable to grant refund of the taxes disclosed.

22. That in the Appellant first ground of appeal it stated that that the Respondent erred in law and fact by denying the Appellant’s refund application contrary to the provisions of Section 47 A of the TPA where the Appellant has a right to apply for offset or refund of overpaid tax.

23. The Appellant reiterated that that its application for the refund of taxes paid in error was anchored in Section 47 A of the Tax Procedures Act ("TPA")- A. refund of tax paid in error and which states as follow;“(1)Where tax has been paid in error, the Commissioner shall, except as otherwise provided in this Act or the relevant tax law, refund such tax.2. In processing a refund under subsection (1), the provisions of section 47(1), (2), (3), (4) and (5) shall apply, with the necessary modifications.2. For the purposes of this section, "tax paid in error'' means any tax paid which the Commissioner is satisfied ought not to have been paid

24. The Appellant further stated that Section 47 (1), (2), (3), (4) and (5) apply to Section 47 A mutatis mutandis. In other words, taxes paid in error can be refunded or offset against the taxpayer's liability after the Respondent ascertains the application by subjecting it to an audit. The Respondent has 90 days to respond to the refund application.

25. The Appellant stated that Section 47 (1), (2), (3), (4) and (5)- Offset or Refund of overpaid tax states as follows;“1)Where a taxpayer has overpaid a tax under any tax law, the taxpayer may apply to the Commissioner,Tintheprescribed form--a.to offset the overpaid tax against the taxpayer's future tax liabilities; orb.for a refund of the overpaid tax within five years, or six months in the case of value added tax, after the date on which the tax was overpaid.2. The Commissioner shall ascertain and determine an application under subsection (1) within ninety days and where the Commissioner ascertains that there was an overpayment of tax-a.in the case of an application under subsection (1)(a), apply the overpaid tax to such future tax liability; andb.in the case of an application under subsection (1)(b}, refund the overpaid tax within a period of two years from the date of the application.3. Where the Commissioner fails to ascertain and determine an application under subsection (1) within ninety days, the same shall be deemed ascertained and approved.4. The Commissioner may, for purposes of ascertaining the validity of an application under subsection (1), subject the application to an audit.5. Where the application is for a refund of tax under subsection (1)(b), the Commissioner shall apply the overpayment in the following order-a.in payment of any other tax owing by the taxpayer under the specific tax law;b.in payment of a tax owing by the taxpayer under any other tax law; andc.any remainder shall be refunded to the taxpayer.”

26. The Appellant stated that, the Respondent in its letter dated 18th August 2022 acknowledged receipt of the application under Section 47 A of the TPA and in accordance with the provisionsTofSection47(4)of the TPA, requested for additional information in order to enable it to validate the request and that the Respondent’s conduct clearly indicates that it was aware of the basis in law of the application for refund of taxes paid in error and it undertook steps to carry out validation of the request for refund as required by Section 47 (4) of the TPA.

27. The Appellant averred that out of the Respondent’s validation process, the Respondent did not find any reason to deny the Appellant’s claim on the strength of the supporting documents, but only resorted to denying the Appellant application on a perceived technicality on a point of law.

28. The Appellant averred that this was stated the response from the Respondent in its impugned decision dated 19th October 2022 and it acknowledged the Appellant’s position as stated in the said letter as follows;“You have stated in your letter that the amounts accrued by MKIB were based on accruals as opposed to actual amounts expensed (paid out). You further stated that once the Transfer Pricing Policy was finalised, the excessive amounts accrued were reversed resulting in overpayment of taxes. We note however that the Transfer Pricing Policy and attached documents were signed on 5th September 2022 as per Executed 'Master Network Fee Agreement' and executed 'Master Trademark License Agreement' provided. We further observe that the tax was disclosed with full knowledge of the provisions of section 37D and that the Transfer Pricing policy was yet to be finalised."

29. The Appellant stated that indeed it made an application for a refund of the overpayment of taxes paid in error at the earliest opportunity, once the various signatories to the policy were in agreement as to the terms of the policy by way of prior meetings supported by minutes. A copy of the Appellant’s minutes was annexed to the Appellant bundle of documents.

30. The Appellant averred that at the time of signing the Policy, the signatories to the policy were in agreement that virtual or soft copy signatures were not to be accepted, and only hard copyTsignaturesweretobeappended. Accordingly, the document had to be circulated physically around the globe, with the last signature being obtained on 5th September 2022. Therefore, according to the Appellant, its draft TP Policy and a copy of the final TP Policy contained the significant policy changes that affected the prevailing status that resulted into the making of the application for refund.

31. The Appellant submitted that in view of the above facts, the Appellant did apply for the refund before the TP document was fully executed, but this was in view of the fact that the Appellant knew that the signatories had already entered into an agreement to confirm new terms, and had they applied later, it would have amounted to the same thing.

32. The Appellant stated that Section 47 (1) read together with Section 47 A of the TPA provides that a refund application for taxes paid in error can be made under any tax law. By dint of these provisions, a refund application for taxes paid in error can be made under any piece of legislation without reservations including under the VTDP.

33. The Appellant stated that it relied on the doctrine of lex specialis derogate generali, that is, specific law prevails over general law and the Indian Supreme Court case of Commercial Tax Officer, Rajasthan vs. MIS Binani Cement Ltd. & Another quoted by the High Court in M J vs. N K & another [2017] eKLR to argue that Section 47 A is specific law on refund of taxes paid in error and it overrides any other provision that relate to refunds in general.

34. That the Appellant cited the case of Primarosa Flowers Limited vs. Commissioner of Domestic Taxes [2019] eKLR to argue that even if at all there was a conflict in these provisions of law, then it is trite law that where there is ambiguity in tax legislation, then the matter ought to be determined in favor of the taxpayer.

35. The Appellant referred the Tribunal to the case of Keroche Industries Limited vs. Kenya Revenue Authority & 5 others [2007] eKLR where the Court dealt with an issue that taxation cannot taxTbyinferenceoranalogy as any attempt to do so perpetrates an illegality; it is arbitrary and oppressive.

36. The Appellant averred that through its letter of 18th August 2022, the Respondent acknowledged that the Appellant's application for refund of tax paid in error was properly before it, and proceeded to audit so as to ascertain the validity of the application, as per the provisions of Section 47 (4) of the TPA. Therefore, the Appellant submitted that by requesting for further information as per the Respondent’s letter dated 18th August 2022, the Respondent undertook to audit the application. Further the Refund Decision did not challenge the application for refund under Section 47 A nor the figures used by the Appellant.

37. The Appellant stated that the Respondent neither brought to question the validity of the amounts of the newly issued invoices and adjustments to the accounts, and neither did the Respondent raise an issue with the calculations leading up to the correct tax liability of only Kshs. 49,521,454. 00. The Appellant therefore averred that the Respondent does not dispute that Kshs.102,869,228. 00 was tax paid in error.

38. That the Appellant relied on the Court of Appeal decision in David Njenga Ngugi vs. Attorney General [2016] eKLR to argue that the use of the word“shall” under Section 47 A of the Tax Procedure Act, upon determination that the taxes were indeed paid in error the Respondent was under a mandatory obligation to refund the taxes paid in error.

39. The Appellant stated in the second ground of Appeal that the Respondent misdirected itself and erred in law by failing to correctly apply the rules of statutory interpretation, thereby arriving at the erroneous conclusion that the Appellant’s refund application was barred by the provisions of Section 37 D (6) of the Tax Procedures Act.

40. The Appellant averred that there is no bar in law against refund applications.The Respondents refund decision held that it was unable to grant the Appellant's request for refund of the taxes disclosed under Section 37 D of the TPA because among other things Section 37 D (6) of the TPA provides that the Commissioner shall not grant a relief where it shall result in the payment of a refund.

41. Section 37 D (6) states,“(6)Where the Commissioner is satisfied with the facts disclosed in the application under subsection (3), the Commissioner shall grant the relief applied for:Provided that the relief shall not result in the payment of a refund to the person.”

42. The Appellant submitted that a plain reading of Section 37 D (6) of the TPA is to effect the Respondent to review a taxpayer’s disclosure and grant the relief,provided that the relief shall not result in the payment of a refund to the person.The bar on the relief not resulting in a refund applies to the Respondent when considering an application by a taxpayer for remission of interest and penalties.

43. The Appellant submitted that this is in conformity with the principles in the often-cited case of Cape Brandy Syndicate vs. Inland Revenue Commissioners [1920} 1 KB64 as applied in T.M. Bell vs. Commissioner of Income Tax [1960] EALR 224 where Roland J. stated,“.. .in a taxing Act, one has to look at what is clearly said. There is no room for intendment as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used ...”

44. The Appellant averred that nothing in Section 37D (6) of the TPA provides that once a taxpayer had made payment of the principal tax and the remission of interest and penalties granted they are barred from seeking a refund of taxes paid in error. That on the contrary, once there is an overpayment of taxes in error the provisions of Section 4 7 A of the TPA apply. Section 37 D (6) does not exclude the application of the provisions of Section 47 A to the VTOP.

45. The Appellant averred that without prejudice to the above position, even if its application was to be consideredTasarefundresulting from a relief earlier issued, it would not be the refund anticipated by Section 37 D (6) of the TPA that is contrary to the objectives of the VTDP. The purpose of the VTDP is to enable persons who have tax liabilities to disclose the tax liability in exchange for a relief on penalties and interest. These reliefs are granted only upon the payment of the principal tax. This is provided for in Section 37 D (2) which provides that“For purpose of this section, "voluntary tax disclosure programme" means a programme where a person discloses the person's tax liabilities to the Commissioner for the purpose of being granted relief of penalties and interest on the tax disclosed.”

46. The Appellant therefore stated that it could not have been the legislature’s objective from the above for the VTDP to attract taxpayers who disclose a tax liability and end up demanding a tax refund.

47. The Appellant while explaining the objective of the VTDP relied on the South African Supreme Court of Appeal in Purveyors South Africa Mine Services (P-ty) Ltd vs. Commissioner for the South African Revenue Services (Pty) Ltd (135/2021) [2021] ZASCA 170 where it held that;“The purpose of the application is designed to ensure that errant taxpayers who are not compliant must come clean, out of their own volition and without any prompting, to make amends in respect of their defaults by informing SARS”

48. The Appellant averred that it is not seeking for a refund of all the taxes it had paid. Instead, the Appellant position is that its tax liability was lower than disclosed due to an error, and as a result taxes were overpaid in error. Therefore, the Respondent is entitled to only Kshs. 49,521,454. 00 that was the actual tax due and there being no actual tax liability for the Kshs. 102,869,228. 00 there was no actual relief granted to the Appellant under the VTDP.

49. The Appellant averred that Tthemomentitnotifiedthe Respondent that the basis on which it made the disclosure had changed and that the amount of tax liability that it had disclosed was in excess of the amount that was due, the issue ceased being one of relief which in law is barred from leading to a refund.

50. The Appellant submitted that Section 37 D therefore no longer applies, as it was not seeking a relief as there was no actual tax liability for the excess amount due. In support of their assertion the Appellant quoted the determination of the Tribunal in its Ruling in the matter of EcartServices Kenya Limited vs. Commissioner of Domestic Taxes Appeal No. 631 of 2021 where the Tribunal stated“That in that regard, there being no principal WHT due and payable by the Applicant, there is then no tax liability on which penalties and interest can be applied.”

51. On the third ground of appeal the Appellant stated that the Respondent misdirected itself and erred in law by erroneously finding that a refund application constituted an Appeal or that the Appellant was barred from appealing, contrary to Section 37 D (9) and Section 47 A (13) of the TPA that allow for a taxpayer to appeal a refund decision.

52. The Appellant stated that in the Respondent’s refund decision, the Respondent held that it was unable to grant the Appellant's request for refund of the taxes disclosed under Section 37 D of the TPA because among other things Section 37 D (9) of the TPA prohibits a person granted relief from seeking any other remedy including the right to appeal with respect to the taxes, penalties and interest remitted by the Respondent.

53. Section 37 D (9) states-“(9)A person granted relief under this section shall not seek any other remedy including the right of appeal with respect to the taxes, penalties and interest remittedTbytheCommissioner.”

54. The Appellant stated that it relied on the Black's law dictionary definition of a “remedy”. It is defined as;“means by which a right is enforced or the violation of a right is prevented, redressed or compensated.”

55. The Appellant averred that enforcement could have been done by the Respondent themselves or can be done by courts of law or through equity.

56. The Appellant stated that a refund application process under the provisions of Section 47 A (1) for a refund of taxes paid in error, leads to an administrative decision of the Respondent and it cannot be equated to the “remedy” that is cited as relief for the purposes of Section 37 D (9) under the VDTP provisions of the TPA.

57. The Appellant cited Section 3 of the TPA which defines a tax decision to include a refund decision.“tax decision” means-e.a refund decision;”

58. The Appellant argued that the provisions of Section 37 D (9) of the TPA were not therefore intended to bar applications such as the Appellant’s refund application for taxes paid in error. Furthermore, through the application for refund of taxes paid in error, the Appellant did not challenge nor wish the Respondent to re-open the terms of the disclosure and settlement agreement with respect to the taxes, penalties and interest remitted. The terms of the settlement agreement remained undisturbed hence the refund application could not be an Appeal.

59. The Appellant cited the South African case of Medtronic International Trading S.A.R.L vs. The Commissioner for SARS where the court held that the provisions of the Tax Act did not prevent a taxpayer from seeking remission of interest under a separate provision of the Tax Act. The judge held that;“Hence, it is my view, ifTremissionrequestsofinterest were not intended to be sought in situations where there was a Voluntary Disclosure Program agreement, either by way of section 187 of the Tax Act or section 39(7) of the VAT Act, the legislature would have set this out succinctly in the provisions regulating the Voluntary Disclosure Program agreement and procedure.”

60. The Appellant submitted that the remedies available to it as a taxpayer include the right to appeal to this Tribunal since a refund decision is a tax decision as defined in Section 47 (3) of the TPA. Further Section 47 (13) of the TPA provides that persons aggrieved by a refund decision of the Respondent can appeal to the Tribunal

61. The Appellant stated that the Respondent therefore erred by relying on Section 37 D (9) of the TPA to invalidate the Appellant’s application on the basis that it deemed it to be an Appeal, and seeks to deny the Appellant's further from pursuing its right to exhaust the legal mechanisms provided to taxpayers to enforce and protect their rights.

62. The Appellant argued in its fourth ground of appeal that the Respondent's decision to reject the refund application amounts to double taxation which is contrary to the law.

63. The Appellant stated that it had already paid CIT on the amounts that relate to the tax paid in error, WHT and VAT on the amount under the VTDP. Consequently, the Appellant averred that the Respondent had subjected the Appellant to double taxation and that double taxation is contrary and offends the principle of a good tax system enshrined under Article 201 (b) (i) of the Constitution of Kenya.

64. The Appellant referred to the decision of the court in Waweru & 3 others (suing as officials of Kitengela Bar Owners Association) & another vs. National Assembly & 2 others where the court commented on the above noting that;“According to Article 201T(b)(i)oneoftheprinciples guiding public finance in this country is that the burden of taxation shall be shared fairly. A system of taxation that lends itself to the possibility of double taxation cannot be said to be fair. Such a system fails the test prescribed in Article 201 (b) (i).”

65. The Appellant argued that in addition to being unconstitutional, double taxation is economically punitive and it relied on in Keroche Industries Limited vs. Kenya Revenue Authority and 5 Others HC Misc. Civil Appl No. 743 of 2006 [2007] eKLR where it was observed that:“It is of course regarded as penal for a person to be taxed twice over in respect of the same matter.”

66. The Appellant submitted that the Respondent has subjected the Appellant to double taxation since the Appellant paid WHT and VAT on the amounts when the Appellant declared its tax liability under VDTP, and at the same time, upon reversal of the excess accruals, the same amount was deemed as income by the Respondent and CIT was paid on the same. This is not only unconstitutional but also punitive to the Appellant. A taxpayer ought not to be made to pay a shilling more than what is their true tax liability.

67. In its submissions the Appellant has identified the following issues for determination by this Honorable Tribunal:a.Whether the Respondent erred in law and fact by failing to acknowledge that taxes had been paid in error and twice on the same income therefore refundable under Section 47 A of the Tax Procedures Act;b.Whether a Refund Decision is appealable to the Tribunal under the Tax Procedures Act, 2015;c.Whether the Appellant's refund application was barred by the provisions of Section 37 D (6) of the Tax Procedures Act;d.Whether the Respondent misdirected itself and erred in law by erroneously finding that a refund application constituted an Appeal; ande.Whether the Respondent'sTdecisiontoreject the Refund Application amounts to double taxation which is contrary to the law.

68. The Appellant proceeded to submit on the above issues as hereunder;

a. Whether the Respondent erred in law and fact by failing to acknowledge that taxes had been paid in error and twice on the same income therefore refundable under Section 47 A of the Tax Procedures Act; 69. The Appellant reiterated in its submissions that it has a right to apply for taxes paid in error under Section 47 A as read with Section 47 of the TPA and it on this basis that it applied for refund of taxes paid in error. That the law anticipates that since taxpayers have an obligation to pay taxes, it is possible for a taxpayer to not only over pay tax, but to also make a payment in error, and the law provides a remedy for that, hence the refund provisions. The provisions of Section 47 A of the TPA were introduced in 2022 to cater for specific instances where taxes are clearly paid as a result of an error separate from the provisions of Section 47 of the TPA which contain the general refund provision.

70. The Appellant submitted that it was also aware that any taxes paid in error would be refunded under Section 47 A of the TPA and referred to its Board Resolution where it was stated that“That once the Transfer Pricing Policy is finalised and signed off, any differences in the amounts payable as taxes to KRA and the actual amount paid above (KES 152,390,683/-) be claimed as Tax Credits as and when the same is established”

71. The Appellant submitted that, from the Statement of Facts of the Respondent, it is notable that the Respondent does not deny that indeed the Appellant paid taxes in error and that contrary to the Respondent’s assertions, the Appellant applied for refund based on finalized TP Policy. As at the point the Appellant lodged the application for refund of taxes paid in error, the TP Policy was in its final and approved form sinceTithadreceivedtherelevant internal approvals. That as an internal document, it was applied by the Appellant to guide its operations. It was only signed in September 2022 once the relevant signatories were reachable during the next board meeting that followed the internal approval, but for all intents and purposes, its final approval gave clarity to the Appellant on the issue of accruals.

72. The Appellant submitted that as further proof that the Master Network Fee and Master Trademark License Agreement relied on by the Appellant was operational at the time of lodging the refund application, the document had an effective date of 1st January 2018 despite being signed in September 2022.

73. The Appellant referred the Tribunal to take judicial notice of the fact that there were restrictions related to the Corvid - 19 pandemic during the period that the TP was undergoing finalization and it hampered its execution.

74. The Appellant submitted that in response to the Respondent allegations in paragraph 13 (b) & (i) to (p) of its Statement of Facts which stated that the declaration of the income in the tax returns for 2021 was contrary to Sections 15 and 16 of the Income Tax Act and that the Appellant should have amended the returns for the years 2018, 2019, 2020 which the reversals relate to, the Appellant stated that despite the Respondents assertions, Income Tax has already been paid on the amounts reversed.

75. The Appellant further submitted that the Respondent had not offered to refund the tax paid hence its position does not change the fact that tax has been paid on the amounts reversed and therefore the rejection of the refund application means that taxes were paid twice in respect of the same amount. Furthermore, the treatment of the income reversed has no bearing on the application for refund of taxes in error under Section 47 A of the TPA as the treatment of the income is subject to Sections 15 and 16 of the Income Tax Act, an entirely different legislation. Therefore,Ttheassertionsmade by the Respondent are merely intended to muddy the waters and distract the Tribunal from the injustice that will be suffered by the Appellant through the denial of the refund.

76. The Appellant reiterated that upon realizing that the amounts accrued and expensed in relation to brand royalty and network fees in the years 2018, 2019 and 2020 were excessive once the TP Policy had been finalized, the Appellant reversed the accruals in the 2021 Corporate Income Tax (CIT) return. The result of the reversals of the accruals was that the amounts crystalized income for the Appellant amounting to Kshs. 291,701,851. 00 in the year 2021 financial year. By recognizing the income of Kshs. 291,701,851. 00, the Appellant paid Income Tax amounting to Kshs. 87,510,555. 00.

77. The Appellant argued that after noting that it had paid CIT on the amounts that relate to the tax paid in error, which was the subject of the VTDP disclosure for which WHT and VAT was accounted for and paid, it submitted that it had suffered great injustice as a result of paying taxes twice on the same income.

78. In view of the foregoing, the Appellant submitted that it had paid tax twice on the same income and therefore, needs a remedy as of right given that double taxation is unconstitutional and economically punitive. For that reason, the Appellant seeks this Honorable Tribunal’s intervention in recovering the amounts of tax paid in error as is provided for under Section 47 A of the TPA for the sustainability of their business and future tax compliance.

Whether a Refund Decision is appealable to the Tribunal under the Tax Procedures Act, 2015; 79. The Appellant submitted that it made an application for the refund of taxes paid in error pursuant to Section 47 A of the TPA and therefore the decision of the Respondent on an application under Section 47 A of the TPA is made under the ambit of the provisions of Section 47 of the TPA that deals with refunds.

80. The Appellant submitted thatTitreliedonSection47 (13) of the TPA which provides that a decision made pursuant to Section 47 of the TPA can be appealed to the Honorable Tribunal to submit that a refund decision is appealable to the Tribunal.

81. That Section 47 of the TPA is the substantive section of the law on refunds, therefore if there are any other provisions that are contrary or create any ambiguity in the law, then Section 47 (13) of the TPA would be the correct section to be applied as it is in taxpayer's favour.

82. The Appellant further relied on the case of Mount Kenya Bottlers Ltd & 3 others vs. Attorney General & 3 others [2019] eKLR where it was stated that in taxing statutes, if at all the law is ambiguous, it ought to be interpreted in favour of the taxpayer.

83. The Appellant submitted that the provisions of Section 47 (13) of the TPA were introduced through the Finance Act 2022 and that the provisions of the new section contradicted the provisions Section 2 of the TPA which defines, a “tax decision” to include a refund decision against which an objection must be lodged before filing the Appeal.

84. The Appellant argued that the amendment to Section 47 of the TPA to introduce Section 47 (13) of the TPA therefore created an ambiguity in law as no corresponding amendment was made to Section 2 of the TPA to delete “refund decision” from the definition of a “tax decision”.

85. The Appellant submitted that it is always presumed that the latter amendment would have taken into consideration the earlier provisions. An ambiguity was therefore created and as per the rules of interpretation of tax laws, any ambiguity must be interpreted in favour of the Appellant as held by the court in the case quoted above.

86. The Appellant stated therefore that under the circumstances, it should be found that the Appellant did not offend the provisions of the TPA by directly appealing the negative refund decisionTtotheTribunal.

87. The Appellant also submitted that the Respondent’s assertion in the Preliminary Objection is insincere in its assertion that it should have objected to the Refund Decision as it has in several cases advised taxpayers the opposite.

c. Whether the Appellant's refund application was barred by the provisions of Section 37D (6) of the Tax Procedures Act; 88. The Appellant submitted that the Respondent failed to correctly apply the rules of statutory interpretation, thereby arriving at the erroneous conclusion that the Appellant's refund application was barred by the provisions of Section 37 D (6) of the Tax Procedures Act.

89. The Appellant argued that Section 37 D (6) of the TPA only bars refunds arising from a taxpayer having received the benefits of a relief.

90. The Appellant submitted that the words of the Section 37 D (6) of the TPA above clearly and unambiguously specify that:a.There must be an application under Sub-Section 3 i.e., a VTDP application.b.The application must disclose all facts, and if satisfied of the facts disclosed the Commissioner shall grant a relief.c.The relief granted should not result in a refund.

91. The Appellant relied in the case of James Arthur T. Dubongco, vs. Commission on Audit, Respondent. G.R. No. 237813. 5th March 2019, the court held observed that;“A cardinal rule in statutory construction is that when the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. There is only room for application. As the provisions are clear, plain, and free from ambiguity, they must be given their literal meaning and applied without attempted interpretation.”

92. The Appellant submitted that there are many instances through which various taxpayers find themselves in a tax refund position and that the law under Section 47 and 47 A intends for a taxpayerTwithoverpaidtax to be refunded. Therefore, if at all the provisions under VTDP create ambiguity as to the right of a taxpayer to be refunded their overpaid taxes or taxes paid in error, then the ambiguity ought to be determined in favour of the taxpayer as submitted herein before.

93. The Appellant stated that the Respondent's assertion in paragraph 13 (ii) (c) of the Respondent's Statement of Facts that Section 37 D of the TPA prohibits a taxpayer from seeking a refund of tax already paid is a misapprehension of the law as the relevant portion of Section 37 D (6) clearly states that “the relief shall not result in the payment of a refund to the person”. The Appellant submitted that when a taxpayer errors in a self-declaration, the Respondent, as a tax administrator is duty bound to aid the taxpayer to pay only the correct taxes that are due in the law. That even under the VDTP provisions, the Respondent had a duty to guide the Appellant to only pay its true tax obligations.

94. The Appellant relied on the case of Republic vs. Commissioner of Domestic Taxes (Large Taxpayers Office) Ex-Parle Unilever Tea Kenya Limited [2017] eKLR which adopted the position in Jafferali Alibhai vs. Commissioner of Income Tax [1961] EA 610, Kanjee Naranjee vs. Income Tax Commissioner [1964] EA 257) where it was held that;“any tax imposed on a subject is dictated by the terms of legislation and taxing authority must satisfy itself that the transaction fits within the definition of the statute.'”

95. The Appellant also cited Article 210 of the Constitution of Kenya 2010 which provides that no tax may be imposed, waived or varied except as provided by legislation and submitted that the rejection of a refund for a tax collected or retained without the authority of law would be unconstitutional.

96. The Appellant also cited the Indian case of Union of India and Others vs. I.T.C. Limited it was held that;“just as an assesse (taxpayer)Tcannotbepermitted to evade payment of rightful tax, the authority which recovers the tax without any authority of law cannot be permitted to retain the said amount.”

97. It is the Appellant’s argument that in such cases, there is an obligation on the part of the authority to refund the excess tax recovered from a taxpayer in error.

98. The Appellant challenged the Respondent’s assertion in its statement of facts where it alleged that the application for refund of taxes paid under VTDP as per Section 37 D of TPA is tantamount to reopening the terms of the disclosure and settlement agreement with respect to the taxes remitted.

99. The Appellant submitted that it is a well-established principle of law of contract that due and proper recognition is given to the bargain struck between contracting parties. A party who agrees to payment of a debt cannot escape the obligation unless the agreement was induced by misrepresentation, error or fraud or some other recognised ground of repudiation

100. The Appellant relied on the case Sapra Studio vs. Kenya National Properties Limited [1985] eKLR in which the court relied on Bell vs. Lever Bros [1932] AC 1 in holding that: -“The common mistaken assumption of both parties was as to the existence of a fact which formed an essential and integral element of the subject matter of the agreement, and I think it was sufficient fundamental to avoid the contract.”

101. Therefore, the VDTP agreement between the Respondent and the Appellant is a contract bound by the common law provisions allowing for the repudiation of a contract where there is misrepresentation, error or fraud. The tax disclosure and payment of the tax liability was made erroneously and therefore that vitiates the terms of the contract.

d. Whether the Respondent's decision to reject the Refund Application amounts to double taxation which is contrary to the law; 102. The Appellant submits thatTtheRespondenthassubjected it to double taxation.

103. The Appellant reiterated that double taxation is contrary and offends the principle of a good tax system enshrined under Article 201 (b) (i) of the Constitution of Kenya 2010.

104. The Appellant cited the case of Waweru & 3 others (suing as officials of Kitengela Bar Owners Association) & another vs. National Assembly & 2 others where the court commented on the above noting that: -“According to Article 201 (b) (i) one of the principles guiding public finance in this country is that the burden of taxation shall be shared fairly. A system of taxation that lends itself to the possibility of double taxation cannot be said to be fair. Such a system fails the test prescribed in Article 201 (b) (i)."

105. In view of the foregoing, the Appellant submitted that it has paid tax twice on the monies paid out in error and therefore, is in need of a remedy given that double taxation is unconstitutional and economically punitive. For that reason, the Appellant seeks this Honorable Tribunal’s intervention in recovering the amounts of tax paid in error as is provided for under Section 47 A of the TPA for the sustainability of its business and future tax compliance.

Appellant’s Prayers 106. Appellant’s prayed to the Tribunal, that:i.This Appeal is allowed;ii.The Respondent's refund decision dated 19th October 2022 be vacated and set aside in its entirety in favor of an order that the Appellant has a valid refund claim for taxes paid in error, which claim ought to be processed in accordance with Section 47 A of the TPA; andiii.Any other orders that the Tribunal may deem fit.

Respondent’s Case 107. The Respondent’s case is premisedTonits:a.Statement of Facts and Preliminary Objection both dated 29th December 2022b.Written Submissions dated 22nd September 2023 and filed on same day.

108. The Respondent stated that on or about 12th August 2022, the Appellant applied for a refund of taxes paid under VTDP.

109. The Respondent averred that on or about 17th August 2022, the Appellant vide email, shared what it termed as final version of Master Network Fee and Master Trademark License Agreements only that was awaiting signature but there was no effective date and the Respondent noted that at the provision of the signed agreements were still revised.

110. The Respondent stated that on 18th August 2022, it replied to the application requesting for relevant executed records in order to validate the application.

111. The Respondent averred that on 7th September 2022, the Appellant shared the signed agreements Master Network Fee Agreement and Master Trademark License Agreement whose signature date was 5th September 2022, which according to the Respondent, indicated a retrospective effective date as 1st January 2018.

112. The Respondent stated that after review of the provided documents by the Appellant, the Respondent issued its verdict on the application of refund by the Appellant on 19th October 2022, rejecting the refund application.

113. The Respondent averred that it raised a Preliminary Objection on the basis that the Appellant being dissatisfied by the Respondent's decision did not object to the decision but appealed to the Tax Appeal Tribunal (TAT) on 2nd December 2022.

114. The Respondent stated that the Appeal is premature and fatally defective for offending the exhaustion doctrine as there have been no objection to the decision complained of andTasubsequentObjection decision liable for Appeal before this Honorable Tribunal.

115. That the Respondent in its Statement of Facts refuted the allegation that it erred in law and fact in denying the Appellant’s refund application contrary to Section 47 A of the Tax Procedure Act arguing that the application for refund was premised on Section 37 D (6) which does not allow refunds and Appeals.

116. The Respondent stated that it is in agreement with the Appellant that it disclosed what it believed to be the true WHT and VAT liability at the time. However, a point of departure arises when the purported revised amount is still based on draft agreements (Master Network Fee and Master Trademark License Agreements).

117. The Respondent averred that however, on various occasions the Appellant alluded to having finalized its TP Policy, but it was unable to produce the executed TP Policy on request. That on review of the draft unsigned Network Fee and Trade License Fee agreements availed compared with the executed drafts provided on 7th September 2022, it was clear that there were amendments to the draft contrary to Appellant’s claim that they had been finalised.

118. The Respondent averred that the Appellant relied on the said draft agreements to declare undisclosed taxes, WHT and reverse VAT, which have been in force from January 2018, to file its tax returns for the years 2018, 2019 and 2020 and the Respondent therefore had no reason to believe that there was any deviation or any significant changes to warrant the rejection of disclosed WHT and Reverse VAT declared.

119. The Respondent stated that on 27th June 2022, the Appellant declared in its tax returns for the year of income 2021, the reversals for the years 2018, 2019 and 2020 which is contrary to Sections 15 and 16 of the Income Tax Act, CAP 470.

120. The Respondent further stated that the Appellant did not apply the provisions of Section 31 of the TPA Tandifitdiditwouldnot have benefited from the remission of interest and penalties of the taxes due in the years of income 2018,2019 and 2020, which had been disclosed under VTDP.

121. The Respondent stated that it would have been entitled to an additional Kshs. 87,882,140. 00 relating to the years of income 2018, 2019 and 2020, had the Appellant followed due process, and that the Respondent would have been entitled to more than Kshs. 49,521,454. 00 contrary to the Appellant’s claim.

122. The Respondent averred that the Appellant made a business decision to disregard the provisions of the law and the procedures therein.

123. The Respondent stated that the TP Policy and related agreements were finalized and signed after the filing of 2021 tax returns. The payment of balance of tax was made in April 2022, the filing done in June 2022, while the final TP Policy and related agreements were issued in August 2022 and September 2022, respectively.

124. The Respondent averred that the Appellant applied for tax refund using the same draft of the TP Policy and unsigned agreements (Master Network Fee and Master Trademark License Agreements). The signing and execution of the two key agreements was done on 6th September 2022 and shared to the Respondent on 7th September 2022.

125. The Respondent stated that before the Appellant applied for tax refund, it filed a tax return in June 2022 which is way before the executed/signed agreement was issued. It therefore means that the executed TP Policy and agreements signed in September 2022 did not play any role in Appellant’s decision to seek for a tax refund.

126. The Respondent reiterated that there could have been a difference if the amendments made by the Appellant were done after signing and execution of the Agreements and TP Policy.

127. The Respondent stated that the Appellant has a right under the law to seek for a tax refund and that refundToftaxpaidinerrorare processed under Section 47 A. However, the Respondent is not obligated to refund the Appellant if the application is not supported by law. The Respondent averred that in arriving at the decision to reject the refund application, it relied upon the laws that govern both the VTDP and tax refunds.

128. The Respondent refuted the allegation that it misdirected itself, erred in law by failing to correctly apply the rules of statutory interpretation, thereby arriving at the conclusion that the Appellant's application is barred by the provisions of Section 37 D (6) of TPA.

129. The Respondent also refuted the allegation that the it misdirected itself and erred in law by erroneously finding that a refund application constituted an appeal or that the Appellant was barred from appealing, contrary to Sections 37 D (9) and 47 A (13) of TPA.

130. The Respondent stated that the application for refund of taxes paid under VTDP as per Section 37 D of TPA is tantamount to reopening the terms of the disclosure and settlement agreement with respect to the taxes remitted. Section 37 D of TPA did not envisage such actions.

131. The Respondent averred that the provisions of Section 37 D (9) and Section 47 A (1) of TPA are independent. That tax paid under VDTP as per Section 37 D cannot be equated as tax paid in error as purported by the Appellant. The provisions of Section 47 and 47 A of TPA do not apply in this case.

132. That while the Respondent agreed with the Court’s decision in the case of Medtronic International Trading S.A.R.L vs. the Commissioner of SARS, it does not take away the merits of each case. For the case at hand, provisions of Section 37 D supersede all other Sections.

133. The Respondent refuted the allegation that the Respondent’s decision to reject the refund application amounts to double taxation which is contrary to the law and if the Appellant neededTtodoamendmentoftax returns, Section 31 of TPA is available.

134. The Respondent averred that Sections 15 and 16 of ITA require that each income is recognized in the years they are earned and expenses in the years they are incurred. Therefore, the Appellant recognition of the expenses incurred in the prior years (2018, 2019 & 2020) in the year 2021 is erroneous.

135. The Respondent averred that in rejecting the refund application, it did not result in double taxation since it was done in accordance with the tax law. The Appellant is entitled to amend tax returns where it deem necessary.

136. The Respondent submitted that it is opposed to the Appeal as stated in the Statement of Facts and the Notice of Preliminary Objection dated 29th December 2022. The issue in question is whether the Tribunal has jurisdiction to hear and determine the Appeal.

137. The Respondent submitted that the Preliminary Objection raised questions of law, and the most pertinent one is that of jurisdiction of the Tribunal and the procedure one ought to take when challenging a decision made under a tax law.

138. The Respondent submitted that the mandate of the Tribunal as stipulated under Section 3 of the Tax Appeals Tribunals Act is undisputed. However, the interpretation of the extent that The Tribunal can exercise its powers when faced with conflict between two provisions of law is in dispute.

139. The Respondent stated that all laws governing revenue in the Republic of Kenya are subject to the provision of Chapter Twelve of the Constitution of Kenya 2010. These laws have effect because they have the blessing of the Constitution, and that is why there is the principle of presumption of Constitutionality upon every law that is enacted by Parliament, until the contrary is proved. In this case, we have a limb of the Constitution referred to as the Tax Procedures ActTNo.9of2015. Section2 of the Tax Procedures Act sets down the object and purpose of the Act as follows: -“Object and purpose of the Act(1)The object and purpose of this Act is to provide uniform procedures fora)consistency and efficiency in the administration of tax laws;(b)facilitation of tax compliance by taxpayers; and (c) effective and efficient collection of tax.(2)Unless a tax law specifies a procedure that is unique to the administration of a tax thereunder, the procedures provided for under this Act shall apply.(3)This Act shall be interpreted to promote the object of the Act."

140. The Respondent further submitted that of further importance to this case is a crucial definition that appears in the interpretation Section of the Tax Procedures Act. Section 3 gives the definition of an "appealable decision" in the following terms: -“appealable decision” means an objection decision and any other decision made under a tax law other than-a.a tax decision; orb.a decision made in the course of making a tax decision"

142. The Respondent submitted that from the provisions of the TPA, it can be deduced that the only reason why an "appealable decision" is distinguished from a "tax decision" is because both have distinct processes of challenging each within the Tax Procedures Act.

143. Further the Respondent submitted that, prior to the enactment of the Finance Act 2020, the first line of challenging a "tax decision" was by lodging an objection notice. Therefore, a "tax decision" is meant to graduate to an“appealable decision" before being lodged at the Tribunal, otherwise it was held to be premature. T

144. The Respondent submitted that the question of jurisdiction herein arises from the confusion that was created when the Finance Act of 2020 introduced new Sections under Section 37 D and 47 A. In the Instance case, an application was made by the Appellant to the Respondent subject to the provision of Section 37 D of the TPA. The impugned Section provides as follows:“(1)There is established a programme to be known as the Voluntary Tax Disclosure Programme which shall be for a period of three years with effect from the 1st January, 2021. (2)For purpose of this section, "voluntary tax disclosure programme" means a programme where a person discloses the person's tax liabilities to the Commissioner for the purpose of being granted relief of penalties and interest on the tax disclosed.3. A person with a tax liability may apply to the Commissioner for relief in the prescribed form with respect to tax liabilities that accrued within a period of five years prior to the 1st July, 2020. 4.A person granted relief under this section- (a) shall not be prosecuted with respect to the tax liability disclosed under this section .......”

145. The Respondent further submitted that the Appellant subject to the provision of Section 37 D voluntarily applied to disclose its tax liability arising from accruals of management fees from the year 2018-2020. That under paragraph 3. three of the said application, the Appellant stated that the tabulations were a true representation of the existing management fees accruals. In addition, the Respondent reviewed the same and after validating the information granted the relief sought by the Appellant in accordance with Section 37 D (6) which provide as follows:“(6)Where the Commissioner is satisfied with the facts disclosed in the application under subsectionT(3),theCommissioner shall grant the relief applied fo1·; Provided that the relief shall not result in the payment of a refund to the person.”Of utmost importance is that that under Section 37D (9)“A person granted relief under this section shall not seek any other remedy including the right to appeal with respect to the taxes. penalties and interest remitted by the Commissioner.”

146. The Respondent submitted that, the provisions of Section 37 D of the TPA is premised on give and take basis to benefit both the Appellant and the Respondent. Subject to subsection 5 of the impugned Section 37 D, an application brought herein is presumed to be voluntary and free from any errors or mistakes.

147. In addition, the Respondent submitted that Section 37 D (4) of the TPA provides that;“(4)A person granted relief under this section-(a)shall not be prosecuted with respect to the tax liability disclosed under this section; and .......”

148. The Respondent posited that from the above provisions it is clear that once relief is granted, the Respondent is barred/precluded from prosecuting any matter with respect to the tax liability. Therefore, the Appellant due to its selfishness has tried to deviate from what it sowed thus violating the principle of legitimate expectation to comply, with the provisions of the law.

149. The Respondent cited the case in Rich Productions Ltd. vs. Kenya Pipeline Company &aiup; Another, Petition No. 173 of 2014 where it was stated that;“The reason why the Constitution and the law establish different institutions and mechanism for dispute resolution in different sectors is to ensure that such disputes as may arise are resolved by those with the technical competence and the jurisdiction to deal with them. While the court retains the inherent and wide jurisdiction under Article 165 to supervise ... such supervision is limited inTvariousrespects,which I need not go into here. Suffice to say that it (the court) cannot exercise such jurisdiction in circumstances where parties before it seeks to avoid mechanisms and processes provided by law. and convert the issues in dispute into constitutional issues when it is not.”

150. The Respondent posited that the Appellant herein is mischievously trying to seek refuge under the provision of Section 47A of the TPA by claiming it has a right to seek refund as quoted extensively by the Appellant in its Statement of Facts and submissions.

151. The Respondent submitted that Section 47A of the TPA does not apply in this case because the matter herein relates to tax liabilities which were disclosed voluntarily subject to Section 37 D of the TPA and which the Appellant acknowledged that they were true representation of the management fees accruals.

152. The Respondent further submitted that it complied with all the procedures set under Section 37D before granting the relief and the Respondent further cited the case of George Owino Mulanya & 4 Others vs. Achieng Odonga & another [2017] eKLR, the court stated that:“Whenever an Act of Parliament has provided for a clear procedure or mechanism for redress, the same ought to be strictly followed.”

153. The Respondent submitted that from the above arguments the Appeal herein is not merited because it was lodged in bad faith and in total abuse of the TAT process and to substantiate its claim it cited the case where the learned Hon. Justice Mvrita in the case of Godfrey Paul Oictjtoyi vs. Rabil Olaka & Another (Petition No 457 Of 2015) quotes from an Indian Supreme Court decision in his paragraph 71 as follows ;“This Court must view with disfavor any attempt by a litigant to abuse the process. The sanctity of the judicial process will be seriously eroded if such attempts are not dealt withTfirmly.Alitigantwhotakes liberties with the truth or with the procedures of the Court should be left of no doubt about the consequences to follow. Others should not venture along the same path in the hope or on a misplaced expectation of judicial leniency."

154. At any rate, it should in no way be lost that Section 47 A of TPA deals with refund of taxes paid erroneously while Section 37 D of the TPA strictly deals with taxes disclosed under the VTDP which is the case herein.

Respondent’s Prayers 155. The Respondent prayed that the Appeal be dismissed while relying on Sections 37 (D), 47 and 47 A of the Tax Procedures Act, 2015.

Issues For Determination 156. The Tribunal upon due consideration of the pleadings of the parties is of the considered view that the following issues falls for determination:a.Whether the Appeal is competent before the Tribunalb.Whether the Appellant is entitled to refund?

Analysis And Determination 157. The Tribunal shall analyze the issues as herein under;

a. Whether the Appeal is competent before the Tribunal 158. The Tribunal notes that at the onset of this Appeal the Respondent raised a Preliminary Objection as part of its Statement of Facts stating that the Appeal is defective on the following groundsa.The Appellant did not object to the letter dated 19th October 2022 and subsequently there is no “objection decision” to be challenged.b.The Appellant has grounded the Appeal on Section 47 A of the TPA yet the background of Ttherefundapplication,which is the subject of the Appeal, is a tax disclosure on VTDP as provided under Section 37 D of the TPA.

159. The Appellant responded to the Preliminary Objection filed on 14th April 2023, stating in the Grounds of Opposition thata.The Preliminary Objection is in itself also defective as the Respondent should have raised a Notice of Preliminary Objection separate from the Statement of Facts.b.The Appellant further maintains that the Preliminary Objection is also misplaced as its refund application for overpaid tax is based on Section 47 A of the Tax Procedures Act.

160. During the mention of the Appeal on 25th April 2023 the Tribunal took note of the Preliminary Objection and directed that the same would be dealt with substantively in the Appeal and subsequently in the Judgement.

161. The Tribunal notes that an objection to the jurisdiction of the Tribunal has been cited as one of the Preliminary Objections that consists a point of law. Indeed, the locus classicus case on the question of jurisdiction is the celebrated case of Owners of the Motor Vessel “Lillian S” (supra) where the Court held:“Jurisdiction is everything. Without it, a Court has no power to make one more step. Where a Court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A Court of Law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”

162. The Tribunal transcripts that the effect of the Preliminary Objection is to deny the Tribunal the power to further deal with the Appeal as per the authority cited above. Therefore, the Tribunal will proceed to first deal with the preliminary objection before delving in the other matter relating to the refund of overpaid tax as argued in the appeal

163. The Tribunal notes that RespondentTrefundofoverpaid tax decision dated 19th August 2022 not to refund overpaid taxes paid by the Appellant under Section 37D of the now repealed Voluntary Tax Declaration Program 2020 amounting to Kshs 102,869,229. 00 is the crux of this Appeal.

164. The Tribunal notes that there is no assessment by the Respondent. This is a self-assessment by the Appellant of unpaid taxes relating to WHT and VAT for the period 2018,2019 and 2020, carried out in order to take advantage of the VTDP 2020 and as stated in its letter dated 31st December 2021 as follows“Pursuant to Section 37D of the TPA 2015 “we” Minet Kenya Insurance Brokers Ltd wish to declare undisclosed tax liabilities arising from management fees accrued in the period 2018, 2019 and 2020” The taxes paid and in dispute are tabulated below

Taxes Paid- VDTP-2020 Taxes due as per the Appellant Assessment Refund claimed

Tax

Section 37D of TPA

2015

Section 47A of TPA 2015

Kshs Kshs Kshs

WHT 68,837,571. 00 27,878,943. 00 40,958,628. 00

VAT 83,553,111. 00 21,642,510. 00 61,910,601. 00

Total 152,390,682. 00 49,521,453. 00 102,869,229. 00 165. The Tribunal appreciates that both the Appellant and the Respondent agree that there were taxes not paid for the period 2018 2019 and 2020. The dispute is whether the taxes paid are refundable and under what Sections of the various tax laws are the taxes refundable.

166. The Tribunal notes that both the Appellant and the Respondent have argued their case exhaustively, and have gone to great extent to provide explanations and counter claims and quote the relevant authorities relating to the process of refund of overpaid taxesTintheirStatementofFacts and Submissions. Of significance are the contents of the VDTP application letter dated 31st December 2021 in which the Appellant stated that the taxes were based on “accruals”, and that there were 'ongoing reviews’ of the Transfer Pricing Policy by relevant Departments.

167. The Tribunal also notes that the “error” was identified by the Appellant after adjustments were made based on the “final” and not a ‘draft’ Transfer Pricing Policy and executed 'Master Network Fee Agreement and Executed 'Master Trademark License Agreement', documents which are attached to its Statement of Facts, and on which the accruals were based on. These internal documents though of great significance to the Appellant in their application for VTDP existed from January 2018 but were not signed until August/September 2022.

168. The Tribunal notes that the Appellant on one hand states that the Appeal is governed by Section by 47 A of TPA which not only allows for refund but also provides for appeals to the Tribunal if the Appellant is not satisfied with a refund decision by the Respondent and that therefore the Respondent’s letter dated 19th October 2022 is an appealable decision under Section 47A (13) of TPA.

169. On the other hand, the Respondent refutes the Appellant’s allegation and states that the letter dated 19th October 2022 is not an appealable decision and the Appellant ought to have lodged an Objection with the Respondent before filing the Appeal in the Tribunal. Further that the Appeal, as presented by the Appellant, is premised on Section 37 D (9) of TPA which bars anyone who is seeking relief under VTDP from seeking refund or appeal to the Tribunal.

170. Therefore, the first issue before the Tribunal and as raised by the Respondent in the Preliminary Objection, is to determine whether the letter of the Respondent dated 19th October 2022 withTtheheadingApplication for Refund of Overpaid Tax is an appealable decision before the Tribunal.

171. The Tribunal notes that under Section 12 of the Tax Appeals Tribunal Act, No. 40 of Laws of Kenya, the Appellant is at liberty to lodge an appeal. The Section states as follows: -“A person who disputes the decision of the Commissioner on any matter arising under the provisions of any tax law may, subject to the provisions of the relevant tax law, upon giving notice in writing to the Commissioner, appeal to the Tribunal…”

172. The word “Appeal” in Tax Appeals Tribunal Act No. 40 of 2013 therefore means an Appeal to the Tribunal against a decision of the Commissioner under any of the tax laws. Further Section 3 of TPA 2015 states that an "appealable decision” means an Objection decision and any other decision made under a tax law other than –a.a tax decision; orb.a decision made in the course of making a tax decision;

173. The Tribunal further notes that under Section 3 of TPA a “tax decision” means;(a)an assessment;(b)a determination under section 17 (2) of the amount of tax payable or that will become payable by a taxpayer;(c)a determination of the amount that a tax representative, appointed person, director or controlling member is liable for under section 15, section 17 and section 18;(d)a decision on an application by a self-assessment taxpayer under section 31(2);(e)a refund decision;(f)a decision under section 48 requiring repayment of a refund; or(g)a demand for a penalty;

174. The Tribunal further notesTthatSection52(1)ofthe Tax Procedure Act 2015 states as follows:“(1)A person who is dissatisfied with an appealable decision may appeal the decision to the Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act.”

175. The Tribunal therefore notes that the Appeal before it is restricted by Section 52(1) to appealable decisions and the “appealable decision” presented before the Tribunal is the letter dated 19th October 2022 and the letter states clearly “Application for Refund of Overpaid Tax”. The Tribunal cannot exercise jurisdiction on anything outside the remit of Section 52 (1) of the Tax Procedure Act.

176. However, the Tribunal concurs with the Appellant that after Section 47 of TPA was repealed in the Finance Act of 2022, Section 47 (13) of the TPA was introduced and it states that a decision by the Respondent relating to refund of overpaid taxes is an appealable decision before the Tribunal. Therefore, from this amendment the letter dated 19th October 2022 is an appealable decision which means that the Appeal is properly before the Tribunal.

177. On the second issue raised in the Preliminary Objection relating to what Section of the law the refund can be made the Tribunal notes that Section 47 A (3) states that for the purposes of this Section,“tax paid in error” means any tax paid which the Commissioner is satisfied ought not to have been paid”

178. The Tribunal notes that from the chronology of events that this Appeal is premised on the Appellant’s letter of 31st December 2021 where the Appellant stated as follows;“The above tabulation gives a true representation of the existing management fee accruals existing in the Minet Kenya books of accounts as at the current date and a full disclosure of the relevant Income Tax, Withholding Tax & VAT on imported Tservices.Nofurtheraccruals have been made due to “ongoing reviews” of the transfer pricing policy by relevant departments”

179. The Tribunal further notes that in the same letter the Appellant requested that the Respondent approves the application to allow the Appellant to make the payment. The request stated in part as follows;“Having made the above voluntary disclosure, we hereby request you to approve our application and grant the company relief of penalties and interest arising from the above tax heads”

180. The Respondent went ahead and approved the taxes disclosed by the Appellant under Section 37 D of TPA 2020 waived the interest and penalties due to the Respondent and the Appellant paid the taxes due as at 31st December 2021.

181. Subsequently, the Tribunal notes, the Appellant contended that there was an overpayment of taxes paid under VTDP and in a letter dated 12th August 2022 sent an application to the Respondent requesting for refund of overpaid taxes under Section 47A of the TPA. The letter reads in part as follows,“Minet Kenya Insurance Brokers Limited ("MKIB", "the Company") hereby applies for a refund of overpaid withholding tax ("WHT") and Value Added Tax ("VAT") amounting to KES 102,869,228 paid in error to the Kenya Revenue Authority ("KRA") under the Voluntary Tax Disclosure Programme ("VTDP"). The WHT and VAT related to the years of income ended 31 December 2018, 2019 and 2020. This application is made pursuant to Section 47A of the Tax Procedures Act ("TPA").

182. Section 47A.of the TPA, states that:-“(1)Where tax has been paid in error, the Commissioner shall, except as otherwise provided in this Act or the relevant tax law, refund such tax.2. In processing a refund under subsection (1), the provisions of section 47(1), (2), (3), (4) and (5) shall apply, with the necessary modifications.3. For the purposes of Tthissection,“taxpaidinerror” means any tax paid which the Commissioner is satisfied ought not to have been paid.”

183. The Tribunal notes that in the Appellant’s pleadings it stated that there are many instances where the Respondent has referred taxpayers to the Tribunal on matters relating to refund of taxes especially after the repeal and replacement of Section 47 of Tax Procedures Act with the new Section 47(13) which states that;“A person aggrieved by a decision of the Commissioner under this section may appeal to the Tribunal within thirty days after being notified of the decision."

184. The Tribunal notes that in the Respondent’s reply to the Appellant application for refund of overpaid tax via a letter dated 19th October 2022, the Respondent stated that pursuant to the provisions of Section 37 D (5) and (9) of the TPA which prohibits refunds and the right to appeal under the VTDP, the Respondent is unable to grant refund of the taxes disclosed. The Respondent letter on the application for refund of overpaid tax stated in part as follows:-“The finance Act 2020 amended the Tax Procedures Act 2015 (TPA) by introducing Section 37D, the Voluntary Tax Disclosure Programme, Section 37D of the TPA.”

185. Further the Respondent stated in the same letter that;“We note however that the Transfer Pricing Policy and attached documents were signed on 5th September 2022 as per Executed 'Master Network Fee Agreement and executed 'Master Trademark License Agreement provided. We further observed that the tax was disclosed 'With full knowledge of the provisions of Section 37 D and that the Transfer Pricing policy was yet to be finalised. Further, we note that the Commissioner granted full relief of penalty and interest based on the application”.

186. The Tribunal further notes that the Respondent referred to Section 37 D of TPA, 2015 which provides that T“an application shall be voluntary and disclose all material facts and that the commissioner shall grant the relief applied for, provided that the relief shall not result in the payment of a refund to the person”.

187. In addition, the Tribunal notes that Section 37 D (9) provides that;“A person granted relief under this section shall not seek any other remedy including the right to appeal with respect to the taxes, penalties and interest remitted by the Commissioner. Therefore, based on the foregoing, the Respondent stated that it was unable to grant refund of the taxes disclosed under Section 37 D of the TPA”

188. Therefore, from the above provision, it is clear that once relief is granted under VTDP, the Respondent is barred/precluded from refunds or prosecuting any matter with respect to the tax liability. The Respondent quoted Rich Productions Ltd. vs. Kenya Pipeline Company &aiup; Another, Petition No. 173 of 2014 where it was stated that;“The reason why the Constitution and the law establish different institutions and mechanism for dispute resolution in different sectors is to ensure that such disputes as may arise are resolved by those with the technical competence and the jurisdiction to deal with them. While the court retains the inherent and wide jurisdiction under Article 165 to supervise ... such supervision is limited in various respects, which I need not go into here. Suffice to say that it (the court) cannot exercise such jurisdiction in circumstances where parties before it seeks to avoid mechanisms and processes provided by law, and convert the issues in dispute into constitutional issues when it is not.”

189. The Tribunal transcripts that the Respondent having reviewed the contents of the Appellant’s letter of 12th August 2022, the email correspondences thereafter and the documents submittedTbytheAppellant,the Respondent was unable to grant the refund requested as stated in its letter dated 19th October 2022, stating that since the overpaid taxes were paid under the VTDP there was no provision for refund. The Respondent quoted Section 37 D (5) of TPA 2015 which provides that an application shall be voluntary and disclose all material facts and that the Commissioner shall grant the relief applied for, provided that the relief shall not result in the payment of a refund to the person.

190. Further the Tribunal notes that the Respondent quoted Section 37D (9) which provides that:-“A person granted relief under this section shall not seek any other remedy including the right to appeal with respect to the, taxes, penalties and interest remitted by the Commissioner”. Therefore, based on the foregoing, the Respondent is unable to grant refund of the taxes disclosed under Section, 37D of the TPA”

191. The Tribunal therefore agrees with the Respondent that Section 47 A of TPA deals with refund of taxes paid erroneously while Section 37 D VTDP 2020 strictly deals with taxes disclosed under the VTDP which is the case herein and the Tribunal therefore has no mandate to deal with cases that relate to VTDP.

192. The Tribunal concludes that Section 37 D of the TPA established clear mechanism for addressing the dispute and therefore agrees with the findings of the celebrated case of Owners of the Motor Vessel "Lillian S" Caltex Oil (Kenya) Ltd [1989] eKLR, wherein Nyarangi JA, held that;“Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation· of proceedings pending other evidence.”

193. The Tribunal also refers to the case of Mukisa Biscuits Manufacturing Ltd vs West End Distributors (1969) EA 696 which is an authority on the issue of what constitutes a preliminary objection and where their Lordships observed as thus:-“----a preliminary objectionTconsistsofapoint of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit.”

194. Further in the same case Sir Charles Newbold, P. stated that:-“a preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion. The improper raising of preliminary objections does nothing but unnecessarily increase costs and on occasion, confuse the issue, and this improper practice should stop”.

195. The Tribunal therefore finds that the letter dated 19th October 2022 is an appealable decision before the Tribunal. However the Tribunal has no jurisdiction to determine the issue of the refund of the overpaid tax as the same has already been decided under Section 37D (9) of the TPA VTDP as was amended by the Finance Act of 2020.

196. In view of the above findings the Tribunal shall not delve on the other issue of determination as the same has been rendered moot.

Final Decision 197. In view of the foregoing analysis, the Tribunal finds that the Appeal is incompetent and unsustainable in law and accordingly proceeds to make the following Orders:a.The Appeal be and is hereby struck out.b.Each party to bear its own costs.

198. It is so ordered.

DATED and DELIVERED at NAIROBI this 9th day of May , 2024ROBERT M.MUTUMACHAIRPERSONBERNADETTE M. GITARIMEMBERMUTISO MAKAUMEMBERELISHAH N. NJERUMEMBERMOHAMED A. DIRIYEMEMBER