https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/224

 REPUBLIC OF KENYA IN THE TRIBUNAL OF KENYA AT NAIROBI COUNTY COURT NAME: TAX APPEALS TRIBUNAL CASE NUMBER: TATC/E374/2025 RYNUS NJIRU KINJA VS KENYA REVENUE AUTHORITY JUDGMENT # BACKGROUND 1. The Appellant is operating a sole proprietor business within the Republic of Kenya and collects and resells drums sourced from informal traders. 2. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 and 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws. 3. The Respondent raised VAT additional assessment for Kshs. 26,482,401.1 4. The Appellant on 21st January 2025 objected the assessments through late objection and on 4th February 2025 the Commissioner accepted late objection and requested the supporting documents of the objection. 5. The Respondent having considered the objection, issued an Objection decision dated 20th March 2025. 6. Dissatisfied by the Respondent’s decision, the Appellant filed this Appeal vide the Notice of appeal dated and filed 18th April 2025. # THE APPEAL 1. The Appeal is premised on the Memorandum of Appeal filed on 18th April 2025. The memorandum raised the following grounds of appeal: 1. That the Commissioner erred in law and facts by contravening Section 13(5) of Value Added Tax Act, 2013 charging VAT on disbursement to a third party as an agent of his client. 2. The commissioner did not consider the appellant plea on the records requested when the appellant explained that the records got lost through fire in the office he was. 3. The commissioner erred in law and fact by considering repeated withholding certificate on one invoice leading to double charging of VAT. # THE APPELLANT’S CASE 1. In support of the Appeal, the Appellant relied on its Statement of facts filed on 18th April, 2025. 2. The Appellant stated that the Commissioner erred in law and fact by charging VAT on disbursement to a third party where the Appellant acted as an agent of a client, contrary to Section 13(5) of the Value Added Tax Act, 2013. 3. The Appellant stated that Section 13(5) provides that in calculating the value of services for VAT purposes, incidental costs incurred by the supplier in the course of making the supply shall be included; however, where the Commissioner is satisfied that the supplier has merely made a disbursement to a third party as an agent of the client, such disbursement shall be excluded from the taxable value. 4. The Appellant stated that from the bank statements and other supporting documents, he collects drums from small scale traders who do not issue invoices or receipts for the drums collected. The Appellant stated that the principal sends money to the proprietors, who in turn pay the small scale traders through M-Pesa or cash, and that the small scale traders do not have documentation and therefore cannot issue receipts or invoices. 5. The Appellant stated that for the principal to make payment, supporting documents are required, and in this case the Appellant issues a receipt for drums delivered. 6. The Appellant stated that the Commissioner has treated these receipts as sales by the Appellant, thereby attracting VAT, which in his view is incorrect as he was acting on behalf of the principal. 7. The Appellant stated that the principal, being a VAT withholding agent, is required to withhold 2% on all payments made and that the principal withheld VAT on all payments, including payments made to the Appellant for acting on his behalf, and that this is what triggered the Commissioner to raise an additional assessment. 8. The Appellant stated that he lost his records when his office was destroyed by fire, which made it difficult to provide all documents requested by the Commissioner and that he would provide supporting documents to confirm the loss of records due to the fire, and further stated that other records for the year 2024 were taken by his accountant who was responsible for filing VAT returns, and efforts are being made to trace her to recover the documents. 9. The Appellant stated that in the list provided by the Commissioner relating to withholding certificates used to raise the additional assessment, some withholding certificates were repeated for the same invoice and that he would provide a reconciliation list matching the withholding certificates to the relevant invoices to clarify the discrepancies. # Appellant’s Prayers 1. The Appellant prayed for the following reliefs: 2. That the Tribunal dismiss the Objection decision 3. That the Tribunal allows the objection as the assessment lacks merit and cannot be supported. # THE RESPONDENT’S CASE **PRELIMINARY OBJECTION** 1. The Respondent raised a Preliminary objection on a point of law challenging the competence of the purported Amended Memorandum of Appeal and Statement of Facts dated 22nd September 2025. The Respondent contended that the said amended pleadings were invalid, null and void ab initio for having been filed in contravention of the mandatory provisions of Section 13(2)(c) of the Tax Appeals Tribunal Act, 2013. However, the Tribunal has perused the documents filed by the Appellant and has cited the Objection decision dated 20th March 2025. 2. The Respondent further averred that the purported amendments were fatally defective for failure to comply with the statutory procedure governing the filing and amendment of pleadings before the Tribunal. It was the Respondent’s position that such non-compliance rendered the amended documents incompetent and incapable of sustaining the appeal in its current form. 1. Accordingly, the Respondent urged the Tribunal to strike out the purported Amended Memorandum of Appeal and Statement of Facts in their entirety with costs, and to either dismiss the appeal for want of a competent pleading or confine the proceedings to the original pleadings filed in accordance with the law. 2. The Respondent having raised a preliminary objection in its pleadings the Tribunal examined its merit before making further steps. 3. The Respondent indicated that amended pleadings were fatally defective for failure to comply with the statutory procedure governing the filing and amendment of pleadings before the Tribunal. The Respondent argued that the non-compliance rendered the amended documents incompetent and incapable of sustaining the Appeal urging the Tribunal to strike out the purported Amended Memorandum of Appeal and Statement of Facts in their entirety with costs and to either dismiss the Appeal for want of competent pleadings or, in the alternative, confine the proceedings to the original pleadings filed in accordance with the law. 4. The Tribunal has considered the Preliminary Objection and observed that it raised a pure point of law concerning the competence of the amended pleadings and the Appellant’s compliance with the provisions of the Tax Appeals Tribunal Act as in the case of **Mukisa Biscuit Manufacturing Co. Ltd v West** **End Distributors Ltd [1969] EA 696*,*** where the Court held that a preliminary objection consists of a pure point of law which, if argued successfully, may dispose of the suit without the need for the ascertainment of facts. 1. The Tribunal further notes that the Appellant had lodged the Appeal by filing the Notice of Appeal and the accompanying pleadings on 18th April 2025 within the statutory timelines as prescribed under the Act. 2. The Tribunal further observed that the purported Amended Memorandum of Appeal and Statement of Facts dated 22nd September 2025 were filed after the Appeal had been filed and that the Respondent challenged the amendments on the basis that they had not complied with the applicable statutory requirements. 3. The Tribunal noted that the Respondent’s objection was directed specifically at the amended pleadings and not at the original Memorandum of Appeal and Statement of Facts that had properly lodged the Appeal. 1. The Tribunal has considered whether any defect affecting the amended pleadings was sufficient to invalidate the entire Appeal or whether such defect only affected the validity of the impugned amended documents. 2. The Tribunal finds that even if the purported amended pleadings had been improperly filed, the original pleadings remained on record and continued to constitute the basis of the Appeal before the Tribunal as guided in the decision of **D.T. Dobie & Company (Kenya) Ltd v Muchina [1982] KLR 1***,* where the Court emphasized that courts should exercise caution before striking out proceedings and should sustain matters where a cause of action or a competent suit is disclosed. 1. The Tribunal has consequently determined that the purported Amended Memorandum of Appeal and Statement of Facts dated 22nd September 2025 were irregularly filed and could not be relied upon in the proceedings, The Tribunal is guided by the decision in **Nicholas Kiptoo Arap Korir Salat v** **Independent Electoral and Boundaries Commission & 7 Others [2014] eKLR***,* where the Supreme Court held that parties are under an obligation to comply with procedural requirements and that procedural rules are not mere technicalities that can be ignored at will. 1. Consequently, the Tribunal declines the Respondent’s prayer seeking dismissal of the entire Appeal, being satisfied that a competent Appeal remained before it notwithstanding the defect in the amended pleadings. # ISSUE FOR DETERMINATION 1. The Tribunal has considered the parties’ pleadings and submissions, and has identified the following issue for determination; **Whether the Objection** # decision issued on 20th March 2025 was justified. **ANALYSIS AND FINDINGS** 1. Having identified the issues for determination, the Tribunal proceeds to analyse the same as hereunder: - # Whether the Objection decision issued on 20th March 2025 was justified. 1. The Appellant argued that the Respondent erred in law and fact by charging VAT on amounts received as disbursements made on behalf of a principal. The Appellant relied on Section 13(5) of the Value Added Tax Act, 2013 and contended that the amounts received from the principal represented funds advanced for payment to small-scale drum suppliers and therefore did not constitute consideration for taxable supplies. 1. Section 13(5) of the Value Added Tax Act provides that where a supplier merely makes a disbursement to a third party as an agent of the recipient of the supply, such disbursement shall be excluded from the value of the taxable supply. The burden, however, rests upon the Appellant to demonstrate the existence of an agency relationship and to prove that the amounts in question were purely disbursements. 2. The Appellant collected drums from small-scale traders who did not issue invoices or receipts and that the principal remitted funds which were subsequently paid to the traders through cash or M-Pesa and indicated that he merely issued receipts to the principal to support payments made. 3. The Tribunal notes that the Appellant did not produce an agency agreement, contractual documents, payment schedules, M-Pesa statements, bank records, or any documentary evidence demonstrating that the amounts received constituted disbursements made on behalf of the principal. Mere assertions that one acted as an agent are insufficient to establish an agency relationship for tax purposes. 4. In **Republic v Kenya Revenue Authority Ex Parte Shake Distributors Limited [2012] eKLR**, the Court held that a taxpayer bears the responsibility of proving the factual basis upon which tax relief or exemption is claimed. Similarly, in **Commissioner of Domestic Taxes v Total Kenya Limited [2018] eKLR,** the Court emphasized that exemptions and exclusions from taxation must be strictly proved by the taxpayer seeking to rely on them. 1. The Appellant further contended that records requested by the Respondent had been lost in a fire incident and that some records had been taken away by the accountant who had been filing the VAT returns. 2. The Tribunal observes that while loss of records may present practical difficulties, Section 23 of the Tax Procedures Act imposes upon every taxpayer the obligation to maintain and preserve tax records for at least five years. The Appellant did not produce evidence of the alleged fire incident such as police abstracts, fire reports, insurance claims, photographs, or any other independent documentation to substantiate the loss of records. 3. In the Tribunals recent judgement, **TAT Appeal No. E193 Of 2025 – Dadia And Sons Limited Vs Commissioner Of Domestic Taxes**, It observed; *“ The Tribunal places significant weight on the internal disciplinary action* *taken by the Appellant, including the dismissal of the said accountant for, inter alia, fraudulent issuance of ETR receipts to unknown entities, unlawful claiming of input VAT amounting to Kshs. 10,491,540.00 from Sori Agro Processing and Technologies Limited without authority, and deliberate concealment of Respondent’s correspondence.* *This is further corroborated by the Appellant’s report to the police, the auditor’s independent report confirming fictitious sales and purchases, and the affidavit evidence of the Appellant’s director”* 1. In the Dadia case (supra), the Tribunal accepted the Appellants explanation because there was independent corroborated evidence against the accountant, in the present Appeal, no comparable evidence has been adduced to support the alleged fire or the alleged disappearance of records by the accountant. 2. The Court in **Tatu City Limited v Commissioner of Domestic Taxes [2020] eKLR** reiterated that statutory record-keeping obligations remain with the taxpayer and cannot be shifted to third parties such as accountants or agents. 1. The Appellant also argued that some withholding VAT certificates had been duplicated, thereby resulting in double taxation. The Appellant indicated that a reconciliation would be provided to demonstrate the alleged duplication however the Tribunal notes that the Appellant did not place before the Tribunal the alleged reconciliation, the duplicated withholding certificates, or invoice matching schedules capable of demonstrating the alleged duplication. Allegations of double taxation or duplicated assessments must be supported by documentary evidence. 2. In **Commissioner of Investigations and Enforcement v Pearl Industries Limited [2021] eKLR**, the Court affirmed that the burden lies upon the taxpayer to provide sufficient evidence to rebut an assessment and to demonstrate the specific errors committed by the Commissioner. 1. Section 56(1) of the Tax Procedures Act provides that in any proceedings concerning a tax decision, the burden shall be on the taxpayer to prove that the tax decision is incorrect. Similarly, Section 30 of the Tax Appeals Tribunal Act places the burden upon the appellant to prove that the assessment or decision is excessive or erroneous. 2. The Tribunal finds that although the Appellant raised several grounds challenging the Objection decision, those grounds remained largely unsupported by documentary evidence. The Appellant failed to establish the existence of an agency arrangement, failed to substantiate the alleged loss of records, failed to demonstrate the accountant’s involvement through independent evidence, and failed to provide the promised reconciliation of withholding certificates. 1. Consequently, the Tribunal finds that the Appellant did not discharge its statutory burden of proof required under Section 56(1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act. 2. Accordingly, the Tribunal finds that the Objection Decision issued by the Respondent on 20th March 2025 was properly founded and therefore justified. # FINAL DECISION 1. The upshot of the foregoing is that the Appeal lacks merit and the Tribunal proceeds to make the following Orders: 2. The Appeal be and is hereby dismissed. 3. The Objection Decision dated 20 th March 2025 be and is hereby upheld. 4. Each party shall bear its own costs. 5. It is so ordered # DATED AND DELIVERED AT NAIROBI THIS 27TH DAY OF JULY, 2026 SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. EUNICE NJERI NGANGA HON. BONIFACE KIBIY TERER HON. SANKALE SPENCER OLOLCHIKE** **HON. BILLY GRAHAM OKUMU MIJUNGU** Tax Appeals Tribunal Tribunal Date: 2026-07-27 12:09:37