[2021] KEHC 20 (KLR)

Osiro v Commissioner of Investigations and Enforcement (Miscellaneous Application E505 of 2021) [2021] KEHC 20 (KLR) (Commercial and Tax) (10 September 2021) (Ruling)

Neutral citation number: [2021] KEHC 20 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

September 10, 2021

DAS Majanja, J

Miscellaneous Application No. E505 of 2021

Between

Stephen Ogaga Osiro

Appellant

and

Commissioner of Investigations and Enforcement

Respondent

(Being an appeal against the judgment of the Tax Appeals Tribunal at Nairobi dated 4th June 2021 in Tax Appeal No. 41 of 2018)

Ruling

1. On 4th June 2021, the Tax Appeals Tribunal (“the Tribunal”) dismissed the Appellant’s appeal and affirmed the Respondent’s (“the Commissioner”) objection decision dated 26th March 2018 in respect of the revised tax assessment of KES 70,785,624. 00 it issued to the Appellant.

2. The Appellant has now filed his appeal against this judgment. He has moved the court by the Notice of Motion dated 19th July 2021 seeking a stay of execution of the judgment pending hearing and determination of the appeal. The application is supported by the grounds set out on its face together with the Appellant’s affidavits sworn on 19th July 2021 and 20th August 2021 respectively. The Commissioner has opposed the application through the Grounds of Opposition dated 11th August 2021.

3. The jurisdiction of the court in dealing with an application for stay of execution pending an appeal is circumscribed and governed by Order 42 Rule 6 (2) of the Civil Procedure Rules. In order to succeed, the applicant must demonstrate substantial loss may result unless the order of stay is made. It must also demonstrate that the application has been brought without undue delay and lastly, the applicant must give such security as the court may order for the due performance of the decree or order as the case may be. Further, the courts have recognised that the power to order stay is discretionary and must be exercised in such a way that the appeal is not rendered nugatory. This discretion, I would add, is based on the facts and circumstances of each case (see Halai & Another v. Thornton & Turpin (1963) Ltd [1990] KLR 365 and Butt v Rent Restriction Tribunal).

4. The Appellant avers that he has a good and arguable appeal with very high chances of success and that if the Commissioner initiates an enforcement action for tax recovery against him, there is a real and imminent risk that the Commissioner will seize his bank accounts and property, as his businesses has been significantly downscaled as a result of the impact of the Covid 19 pandemic, with no indication of recovery in the near future. He contends that he is unable to raise KES 70,785,624. 00 demanded by the Commissioner and that if the execution of the judgment is not stayed, he will suffer great injustice as he will end up paying exorbitant and excessive taxes that are baseless because the tax demanded was determined without taking into consideration all expenses wholly incurred by the Appellant in determining the income in question. The Appellant further depones that there is a high probability that the ongoing ADR process between the parties will yield a much favorable resolution of the matter.

5. The Commissioner submits that it is entitled to enjoy the fruits of its judgment and should be allowed to enforce the Tribunal’s judgment as the Appellant has enjoyed stay of execution since the matter was filed at the Tribunal in 2018. The Commissioner further states that it has the ability to refund the taxes in dispute if this Court finds in favour of the Appellant and it is in the interest of the Appellant to pay the said assessed taxes as the said sum continues to accumulate penalties and interests.

6. However, the Commissioner posits that should this Court be convinced to grant the Appellant stay, then it should direct the him to give the Commissioner security of taxes of 60% of the principal taxes due. The Commissioner adds that the Appellant has not tabled any evidence as proof of its inability to pay the assessed taxes or security for taxes and this Court should order him to pay the security of taxes for him to be granted stay. Further, that the Appellant has not demonstrated that it will suffer irreparable/irremediable harm if the Application is not granted.

7. Having considered the parties’ arguments, I do not think that there is any dispute that the application has been timeously filed. As to whether the Appellant would suffer substantial loss if stay is not granted, the Court of Appeal in Coastal Bottlers Limited v Commissioner of Domestic Taxes NRB CA Civil Application No. 91 of 2008 declined to grant stay after the Applicant failed to place relevant evidence before the court such as its balance sheet of the applicant, from which the court could come to the conclusion that if the applicant was to be compelled to pay the outstanding tax balance, it might be forced out of business. The same can also be said about the Appellant herein; there is no evidence before the court to enable it conclude that his businesses are in dire straits or that they have been considerably downscaled because of the Covid-19 pandemic. In as much as I take judicial notice of the pandemic’s negative effect on business generally, an applicant is still obligated to demonstrate by way of evidence, such as balance sheets, cash flow statements, audited accounts and the likes, detailing their financial position.

8. However, I am inclined to grant an order of stay of execution of the Tribunal’s judgment pending hearing and determination of the appeal but on condition that the Appellant furnishes security in the sum of KES 5,000,000. 00 within Forty-five (45) days in the form of a Bank Guarantee from a reputable Bank and in default of compliance, the order of stay shall stand discharged. The order of stay shall remain in force for a period of one year unless otherwise extended by this court. Costs of the application shall be in the appeal.

DATEDandDELIVEREDatNAIROBIthis10thday of SEPTEMBER 2021. D. S. MAJANJAJUDGEMs Beru instructed by Karen Beru and Company Advocates for the Applicant.Ms Mutai, Advocate instructed by Kenya Revenue Authority for the Commissioner of.