[2024] KETAT 1121 (KLR)

Samaj v Commissioner of Domestic Taxes (Tax Appeal E077 of 2024) [2024] KETAT 1121 (KLR) (1 August 2024) (Judgment)

Neutral citation: [2024] KETAT 1121 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E077 of 2024

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

August 1, 2024

Between

Shree Cutchi Leva Patel Samaj

Appellant

and

Commissioner of Domestic Taxes

Respondent

Judgment

1. The Appellant is a society that was registered in February 1953 under the Societies Act to carry out charitable purposes aimed at furtherance of education, health, relief of public distress, promotion of fraternal relationships and unity among the members, foster opportunities to uplift the social, physical, educational and cultural activities the institutional members and to preach and promote Hindu religion and allied activities among others.

2. The Respondent is established under the Kenya Revenue Authority Act, Cap 469 Laws of Kenya. The Kenya Revenue Authority (“KRA”) is an agency of the Government of Kenya for assessing, collecting, and accounting for all revenue.

3. The Appellant first applied for a Tax Exemption on 2nd August, 2022 vide its letter dated 15th July 2022 which was acknowledged by the Respondent on 2nd August 2022.

4. The Respondent after conducting a compliance check and due diligence on the affairs of the Appellant rejected the application and advised the Appellant to comply with the reasons stated in its rejection notice dated 29th August 2022 and re-submit its application.

5. The Appellant complied and re-submitted its application vide its letter dated 8th May 2023.

6. The Respondent wrote to the Appellant vide its letter dated 19th May 2023, as a follow-up to its letter dated 8th May 2023 seeking a response to its application for tax exemption.

7. After several back and forth, the Appellant finally re-submitted its application to the Respondent on 14th June 2023. According to the Appellant, this final application met all the conditions that had been requested and advised by the Commissioner in compliance with the 1st Schedule, Paragraph 10 of Income Tax Act, CAP 470.

8. The Respondent called for a stakeholder engagement meeting with Appellant and it’s Tax Representatives on 28th September 2023.

9. From the said engagement parties agreed that the Appellant provide to the Respondent documents and information in support to the issues discussed in the meeting pending the Respondent’s approval and grant of the Income Tax Exemption Certificate.

10. Vide its letter dated 30th October 2023, the Appellant submitted to the Respondent the documents and information requested from the meeting of 28th September 2023.

11. Vide its letter dated 28th November 2023 the Appellant wrote to the Respondent a follow up letter on its pending approval for Tax Exemption Certificate.

12. The Respondent issued its decision on 15th December 2023 in which it declined the Appellant’s Application.

13. Dissatisfied with the Respondent’s Decision, the Appellant filed a Notice of Appeal dated and filed on 10th January 2024.

THE APPEAL 14. The Appeal is premised on the following grounds listed in the Memorandum of Appeal dated 24th January 2024 and filed on 25th January 2024 and set out the following grounds of appeal, that: -a.The said decision fails to grant the Application for the Income Tax Exemption under the First Schedule to the Tenth Paragraph and Sections 13 and 14 of the Income Tax Act, Cap 470. b.The Respondent erred in law and fact by declining the Appellant’s Income Tax Exemption Application as the Appellant is an Institution of Public Character Established solely for the purposes of the Relief of Poverty or Distress of the Public, or for the Advancement of Religion and Education.c.The Respondent erred in law and fact in alleging that the Appellant performs similar programs to that of another related entity - Shree Cutchi Leva Patel Charitable Trust.d.The Respondent’s decision on the application violates the Appellant’s constitutional rights to fair administrative action, as it does not disclose the reasons for his actions.e.The Respondent erred in law and fact by not taking into account that the Appellant is an entity to benefit the public in a transparent and accountable manner without restriction or discrimination regardless of the level of charges or fees levied for the services rendered, and which utilizes its assets or income exclusively to carry out the purpose for which the entity was established without conferring a private benefit to an individual.f.The Respondent erred in law and fact by not taking into consideration that the Appellant has invested a substantial amount of its resources, in excess of Kshs. 600 Million over the last five years in accordance with its Published Financial Statements to put up assets in support of education, religion, medical and general alleviation of poverty in accordance with the provisions of the 10th paragraph to the First Schedule of Cap 470 as amended by the Finance Act, 2023. g.The Respondent erred in law and fact by not recognizing the role played by the Appellant while performing its programs to complement the government in its cardinal responsibility in providing public goods and services to its citizens as their rights under the constitution.h.The Respondent erred in law and fact by not accepting the fact that it is not an offense to grant an Income Tax Exemption to the Appellant simply because its other related party has been granted tax exemption though the relationship is at arm’s length, both parties have independent trustees bear different Personal Identification Numbers (PIN) in iTax and publishes independent Public Financial Statements with different registered auditors under the applicable laws. The related entities have different and independent registered offices and that the relationship is purely at arm’s length.

THE APPELLANT’S CASE 15. The Appellant’s case was premised on its;a.Statement of Facts dated 24th January 2024 and filed on 25th January 2024 together with the documents attached thereto;b.Supplementary Statement of Facts filed on 1st February 2024;c.Witness statement of James Ojee Masiro signed, dated and file with the Tribunal on 7th May 2024, and adopted in evidence in chief on the 15th May 2024;d.Written submissions dated and filed on dated 18th March 2024 and filed on 25th March 2024; and,e.Supplementary written submissions dated 17th April 2024 and filed on 18th April 2024.

16. It stated that its principal activity is in the nature of Public Benefit Organization (PBO) in the form of relief of poverty, or distress of the public or for the advancement of religion or education.

17. It averred that it applied for the Income Tax Exemption under the First Schedule to the Tenth paragraph of the Income Tax Act Cap 470 on 15th July 2022.

18. It averred that the Respondent carried out the tax audit to obtain the full information in respect of the income of a person or class of person chargeable to tax and to establish the tax compliance status before the issuance of the Income Tax Exemption Certificate on 30th March 2022 in which the tax realized was Kshs. 14,872,413. 00 and was paid in full.

19. The Appellant averred that it submitted the required documents for the tax exemption application and the duly completed application form with the requirements were submitted on 1st March 2023 and acknowledged on 25th April 2023:

20. It contended that the Respondent declined the Appellant’s Application on 15th December 2023 in spite of the Appellant having made follow-ups for approval of the Application for exemption with various letters one of which is dated 18th April 2023 among others.

21. In its Supplementary Statement of Facts, the Appellant stated that as an afterthought, the Respondent issued it with an electronic Income Tax Exemption Rejection Notice dated 20th January 2024 after the Appellant had lodged its Notice of Intention to Appeal to the tax tribunal on 10th January 2024 wherein the Respondent rejected the Appellant’s application on the ground that Appellant’s Application did not meet the requirement of Paragraph 10 of the First Schedule of the Income Tax Act Cap. 470 in contradiction of its letter dated 15th December 2023 wherein the Respondent acknowledged that Appellant is a charitable organization aimed at furtherance of Education, Health, Relief of public distress, Promotion of fraternal relationships and unity among the members, foster opportunities, to uplift the social, physical, educational and cultural activities to its members and to preach and promote Hindu Religion and allied activities among others.

22. It relied on Paragraph 10 of the First Schedule of the Income Tax Act and the case of in the matter of Rosslyn Academy Tax Appeals Tribunal No 37 of 2018 the Tax Appeals Tribunal and averred that the Appellant made its application on 2nd August 2022 and the Respondent gave its Income Tax Exemption Rejection Notice electronically on 20th January 2024 after a lapse of 537 days, well over one and a half years.

23. It cited Section 51 (11) of the Tax Procedures Act and the following cases and averred that it further issued several letters to the Respondent with Respect to the Income Tax Exemption application which include the following: Letter dated 8th May 2023 ref: JSA/SAMAJ/20230508; Letter dated 19th May 2023 ref: JSA/SAMAJ/20230519; and Letter dated 14th June 2023 under the conclusion paragraph; Letter dated 30th October 2023 ref SCLPS/2023/1030; Letter dated 28th November 2023 ref: SCLPS/2023/1128. The cited cases were:a.Republic vs. Commissioner of Domestic Taxes Ex Parte Fleur Investments Limited [2020] eKLR;b.TAT 127 of 2020, BIC East Africa Ltd vs. Commissioner of Customs & Border Control; and,c.Equity Group Holdings Limited vs. Commissioner of Domestic Taxes [2021] eKLR.

24. It stated that it went an extra mile to seek the Respondent’s indulgence to arrange for a one-on-one stakeholder engagement in order to openly discuss any issues that would hold back the approval and issuance of Income Tax Exemption Certificate.

25. It contended that in view of the above, the Respondent grossly violated its rights to fair administrative action as protected by the Constitution of Kenya 2010.

On whether the Appellant qualifies for the Income Tax Exemption under Paragraph 10 of the First Schedule to the Income Tax Act Cap 470. 26. The Appellant relied on the case of Cape Brandy Syndicate vs. Inland Revenue Commissioner [1921] 1 KB 64 and Paragraph 10 of the First Schedule to the Income Tax Act, Cap 470 and submitted that it is only required to demonstrate that it is of public character and solely established to accomplish any of the four objects under Paragraph 10 of the First Schedule to the Income Tax Act which is the relief of poverty or distress of the public, or for the advancement of religion or education.

27. It asserted that it was irrelevant that it is related to another charitable institution that carries out the same activities as the ones it engages, the strict reading of Paragraph 10 does not suggest an exclusion based on such a parameter and all that is required of the Respondent is to satisfy itself that the Appellant is engaged in those activities too.

28. It reiterated that the Respondent admitted in its Statement of Facts that per the Appellant’s audited accounts, most of their funds were expended in the development of schools and the medical center and thus, the Respondent admitted that the Appellant and met the threshold provided in Paragraph 10 of the First Schedule to the Income Tax Act.

29. It argued that the Respondent misapplied the provisions of Paragraph 10 in denying the Appellant the Income Tax Exemption as there is no limit in law as to how many related institutions are allowed to carry out charitable activities.

On whether the Respondent’s decision was issued out of time. 30. The Appellant submitted that Income Tax Exemption Rejection Notices are decisions under the provision of Section 3 of the Tax Procedures Act whereby the Respondent is mandated to make as an objection to a tax decision under Section 51 of the Tax Procedures Act, 2015.

31. It asserted that the Respondent erred in law and fact as he made an Objection Decision after 60 days from the date the taxpayer lodged an application for tax exemption.

32. It argued that the Respondent cannot sit on the Taxpayer’s Application for exemption forever and purport to issue a decision after 537 days without a legal reprimand by law since the Appellant made its Application on 15th July 2022 and the Respondent issued its income Tax Exemption Rejection Notice electronically on 20th January 2024 in violation of Section 51 (11) of the Tax Procedures Act.

33. It referred to the cases of Republic vs.Commissioner of Domestic Taxes Ex Parte Fleur Investments Limited [2020] eKLR; TAT 127 of 2020, BIC East Africa Ltd vs. Commissioner of Customs & Border Control; and Equity Group Holdings Limited vs. Commissioner of Domestic Taxes [2021] eKLR and maintained that its Application for Income Tax Exemption was deemed to be allowed by operation of the law

On whether the Respondent violated the Appellant's right to fair administrative action protected under the Constitution. 34. The Appellant submitted that the fact that one institution already has tax exemption on the basis of the activities the Appellant is also engaged in is proof that the Appellant was justified in expecting the Respondent to grant its application as well.

35. It contended that the admission by the Respondent that a related party is already enjoying an exemption is proof that denying the Appellant an exemption is discriminatory and affront to Article 47 of the Constitution.

36. It relied on the case of Judicial Service Commission vs. Mbalu Mutava & Another [2015] eKLR Civil Appeal No. 52 of 2014 and urged the Tribunal to declare that the actions of the Respondent are a violation of Article 47 of the Constitution.

37. It reiterated that it satisfied the burden of proof placed on it to demonstrate that it carries out charitable activities by various letters it sent to the Respondent and once it had furnished the same, the burden of proof shifted to the Respondent to demonstrate why the Appellant did not deserve the tax exemption.

38. It relied on the case of Commissioner of Domestic Taxes vs. Trical and Hard Limited (Tax Appeal E146 of 2020) and maintained that it was incumbent upon the Respondent to challenge the Appellant’s documents to come to a conclusion as opposed to those of another organization carrying out charitable activities which the Respondent was not able to do by way of an objective analysis of the evidence provided by the Appellant.

39. It asserted that Income Tax Exemption is not given on a discretionary basis but a right to any person who satisfies the requirements of Paragraph 10 of the First Schedule to the Income Tax Act.

40. It argued that the questions before the Honourable Tribunal wherein if the answers to them were in the affirmative the Tribunal ought to find the Appellant deserving to be issued an Income Tax Exemption Certificate should be as follows:a.Is the Appellant an institution, body of persons, or irrevocable Trust of a public character?b.Is the Appellant established solely for the purposes of the relief of poverty or distress of the public, of for the advancement of religion or education?c.Is the Appellant established in Kenya?d.Is the Appellant’s income expended either in Kenya or in the circumstances in which the expenditure of that income is for the purposes which results in the benefit of the residents of Kenya?e.Does the Appellant utilize its assets or income exclusively to carry out the purpose for which the entity was established?

41. In its Supplementary submissions dated 17th April 2024, the Appellant submitted that it is of a public character established to accomplish relief of poverty, distress of the public, the advancement of religion and education pursuant to paragraph 10 of the First Schedule to the Income Tax Act.

On whether the Appellant supplied the Respondent with the requisite information 42. The Appellant submitted that it satisfied the legal burden of proof as placed upon it to demonstrate that it indeed carries out charitable purposes by submitting the following documents to the Respondent vide various correspondence as stated in its Statement of Facts which are:a.Certificate of Registrationb.Copy of its Constitutionc.Letter from government officiald.Impact Assessment Reporte.Photographic evidence of its programmesf.Financial statements for the last three yearsg.Tax compliance certificateh.List of Beneficiaries.

43. It was the Respondent’s witness testimony that the Appellant is a member-based institution that is not of a public character whose programmes were only to the benefit of a certain part of the community and not the public.

44. The Appellant witness however testified that the Appellant is a member based institution that is not of a public character whose programmes were only to the benefit of a certain part of the community and not the public is not true since under clause 2 of the Appellant’s Constitution on the AIMS & OBJECTIVES apart from fostering opportunities to uplift the social, physical, educational and cultural activities of the Institution member, the Appellant’s programmes under aim and objectives number (b) to (i) are all to the public.

45. The Appellant produced a letter dated 10th June 2022 from the Ministry of Interior and National Government Co-ordination which stated that amongst other activities the Appellant is involved in social activities such as paying school fees to needy students in secondary and Colleges.

46. The Appellant also stated that it provided several relief foods to different members of the public during the COVID-19 pandemic and that the Bank payments mentioned by the Respondent as one of grounds for declining the Appellant’s application was explained exhaustively under the Accrual vs Cash Accounting & Reporting Concept to the Respondent that full list of Donors, beneficiaries and Projects funded by the Appellant were provided in full.

47. It asserted that the Respondent’s conduct of raising aspersions to the legality of aims and objects of the Appellant’s constitution with the regards to the public nature of the entity is ultra vires the Respondent’s powers as such is a reserve of the Registrar of Societies.

48. The Appellant submitted that it is involved in the advancement of all the programs listed in paragraph 10 of the First Schedule to the Income Tax Act even though the same does not provide that an entity must perform all the 4 programs for it to be eligible for exemption.

49. It contended that in declining its application for a tax exemption, the Respondent made allegations in its Decision of 15th December 2023 that the Appellant was not able to demonstrate and justify its eligibility for tax exemption apart from indicating that the Appellant’s assets were used for public benefit.

50. It argued in contrast to the Respondent’s allegation that it failed to submit a complete payout analysis for payments made from all bank accounts from the three years preceding the application, it first applied for tax exemption on 1st August 2022 vide a letter dated 15th July 2022 and acknowledged by the Respondent on 2nd August 2022 and after, the Respondent conducted a compliance check of its affairs rejecting the Application advising the Appellant to comply with the reasons stated in the rejection of 29th August 2022 and resubmit its application.

51. It maintained that it complied and re-submitted its application vide its letter of 8th May 2023 and vide a letter of 19th May 2023, it wrote to the Respondent to follow-up and sought a response from the Respondent to its Application for tax exemption.

52. It asserted that after several back and forth, it re-submitted its application to the Respondent on 14th June 2023 which met all the conditions requested and advised by the Respondent.

53. It reiterated that it submitted documentation and information vide its letters of 8th May 2023, 14th June 2023, 30th October 2023, and 28th November 2023 and the Respondent called for a stakeholder meeting with it and its representatives on 28th September 2023.

54. It contended that from the engagement with the Respondent, the parties agreed that the Appellant should provide documents and information in support of the issues discussed in the meeting pending the approval and grant of the exemption.

55. It maintained that through its letter dated 30th October 2023, it submitted to the Respondent documents and information requested which was followed by a letter from the Respondent requesting a stakeholder meeting with the Appellant dated 28th September 2023.

56. It contended that via its letter dated 28th November 2023, it wrote to the Respondent asking for the Respondent’s pending approval for tax exemption therefore prompting the Respondent to issue a decision on 15th December 2023.

57. The Appellant submitted that having submitted the above documents, the Appellant effectively discharged its evidential burden as imposed on it by the Section 56 (1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, 2015.

On whether the Respondent’s Decision dated 15th December 2023 was time barred 58. The Appellant Submitted that having issued its application on 15th July 2022, the Respondent issued its Income Tax Exemption Rejection Notice electronically on 20th January 2024, 537 days later after reminding the Respondent through its letter dated 28th November 2023 to issue its decision.

59. It cited Paragraph 10 (B) of the First Schedule to the Income Tax Act and argued that the Respondent was mandated by law to issue a decision on the Appellant’s Application that was re-submitted on 14th June 2023 within 60 days but it issued its decision on 15th December 2023, more than 5 months late and thus its application for Income Tax Exemption was deemed to have been allowed by operation of the law.

Whether the Appellant is a member-based institution that is not of a public character 60. The Appellant relied on Paragraph 10 of the First Schedule to the Income Tax Act as amended by the Finance Act of 2023 and the paragraph 1 (e), (f), and (h) of the aims and objectives in its constitution and submitted that a “Public institution” is defined by the manner in which it utilizes its assets and income in executing the 4 pillars cited in Paragraph 10 of the First Schedule to the Income Tax Act, Cap 470 and its constitution should be read in whole and not selectively by the Respondent.

61. It argued that the Respondent’s allegations that it is a member-based institution that is not of a public character whose programs are only to benefit a certain part of the community and not the public are misleading since under clause 2 of the Aims and Objectives in its constitution, in addition to fostering opportunities to uplift social, physical, educational and cultural activities of the institution, its programs are to the public as per objective (b) to (i).

62. It reiterated that in a letter dated 10th June 2022, the Ministry of Interior and National Government Coordination confirmed that amongst other activities the Appellant is involved in social activities like paying school fees to needy students in secondary school and colleges.

63. It added that, during the COVID - 19 pandemic, it provided several food items to different members of the public.

64. The Appellant’s witness Mr. JAMES OJEE MASIRO testified that an entity is qualified to a tax exemption if it is able to demonstrate that it performs or undertakes any of the four pillars provided for under paragraph 10 of the First Schedule to the Income Tax Act. The said pillars are that the entity should have been established for the advancement of the following to the public: -a.Religionb.Educationc.Healthd.Relief of distress or poverty

65. The witness testified that the applicable law for the present matter is First Schedule to the 10th Paragraph of the Income Tax Act, cap 470 which provides as follows; -“Subject to section 26, the income of an institution, body of persons or irrevocable trust, of a public character established solely for the purposes of the relief of poverty or distress of the public, or for the advancement of religion or education—a.Established in Kenya; orb.Whose regional headquarters is situated in Kenya,In so far as the Commissioner is satisfied that the income is to be expended either in Kenya or in the circumstances in which the expenditure of that income is for the purposes which result in the benefit of the residents of Kenya...”

66. It was the witness’s testimony that the word “the income is to be expended” is futuristic since Income Tax Exemption Certificate is normally effective from the date of its issuance, has a life of five years and the Respondent is at liberty to recall it in case of any breach of the law by the exempt entity.

67. The witness testified further that the First Schedule to the 10th Paragraph of the Income Tax Act, cap 470 anticipated that a first time Applicant was yet to expend anything at the time of its application. That’s why the above provision was drafted as such. The compliance to the proviso of First Schedule para 10th of Income Tax Act, cap 470 takes effect from the date the Income Tax Certificate is granted and not prior to the issuance of the Certificate.

68. That further the Respondent in this case subjected the Appellant to illegal, unnecessary rigours of procedures upon receipt of its application for Tax Exemption yet the prior periods for which the Respondent subjected the Appellant extensively for review, returns were filed, books and records audited, assessments raised and taxes paid.

69. It was the witness’s testimony that the Respondent’s action of denying the Appellant a Tax Exemption Certificate despite having audited the Appellant and raising assessments thereof and the Appellant paying taxes is therefore illegal, null and void. The Respondent’s decline to grant the Income Tax Exemption to the Appellant in anticipation is therefore illegal and especially to a first time Applicant.

70. It was Mr James Masiro’s testimony that the Appellant as a first time Applicant needed not to be subjected to the historical and illegal examination and interviews that are not provided for in the Income Tax Exemption Statutes as subjected by the Respondent.

71. It was the Appellant’s case that the Respondent has never published to the public any guidelines, regulations or rules of procedure for operationalisation of First Schedule to the 10th Paragraph of the Income Tax Act, cap 470 to enable compliance by prospective Applicants of Income Tax Exemption Certificate which is in breach of the Appellant’s Constitutional rights.

72. The Appellant averred that in the absence of the above subsidiary legislations, the provisions of the First Schedule to the 10th Paragraph of the Income Tax Act, cap 470 must be interpreted strictly to the letter.

On whether the Appellant utilized its assets and income exclusively to carry out the purpose for which the entity was established. 73. The Appellant submitted that it has invested substantial amounts of resources in excess of over Kshs. 600,000,000 over the last five years in accordance with the published financial statements to put up assets in support of education, religion, medical, and general alleviation of poverty as per paragraph 10 of the First Schedule to the Income Tax Act.

On the relationship between the Appellant and Shree Cutchi Leva Patel Charitable Trust 74. The Respondent, in its decision of 15th December 2023, held that the Appellant was not entitled to a tax exemption on the basis that another institution by the name of Shree Cutchi Leva Patel Charitable Trust was already in existence and enjoyed tax exemption, and that the said institution similarly carried out charitable objects.

75. According to the Appellant’s witness, it is not illegal under the Income Tax Act for related parties to carry out similar activities which are contained in their respective Constitutions so long as those activities are not ultra vires to its aims and objects as contained in its constitution. The Respondent ought to have treated each case independently and on their own merit.

76. It was the witness’s testimony that denying the Appellant Tax Exemption Certificate on the basis of being related to another entity is without legal basis and is tantamount to discrimination in violation of Article 27 of the Constitution.

The Appellant’s prayers. 77. The Appellant prayed for orders that:a.The Appeal be allowed;b.The Respondent’s Decision dated 15th December 2023 be set aside;c.The Appellant’s Application for Income Tax Emption dated 15th July 2022 be allowed; and,d.Any other orders that the Honourable Tax Appeals Tribunal may deem fit.

THE RESPONDENT’S CASE 78. The Respondent’s case is premised on its;a.Statement of Facts dated and filed on 23rd February 2024 together with the documents attached thereto;b.Supplementary Statement of Facts dated and filed on 4th April 2024;c.Witness statement of Margaret Karanja dated and signed on 2nd May 2024, filed with this Tribunal on 3rd May 2024 and adopted in evidence in chief 0n 15th May 2024. d.Written submissions dated 31st May, 2024.

79. It stated that the delay was occasioned by the Appellant and not by Respondent since the application for tax exemption was lodged on 2nd August 2022.

80. It contended that the Appellant indicated that they were involved in: Water Sanitation to the needy community by drilling 9 boreholes in Mwingi Makueni and Machakos County for Kshs 13,345,693, Covid19 Relief for Kshs. 10 Million, Bursary to the poor for Kshs. 20 Million, and Construction of sand dams for Kshs. 2. 5 Million.

81. It explained that during the field inspection tour it sought to know why the projects were included in the financial statements and the Appellant responded that the projects were carried out by the trust but not by the taxpayer.

82. It averred that the summary from the Appellant’s application letter is that not a single project was done by the Appellant hence it was faulty.

83. It stated that on 29th August 2022 it wrote a letter to the Appellant informing them of the rejection of their application for tax exemption due to: the dissolution clause did not meet the requirements of Paragraph 10 of the first schedule of the Income Tax Act. The Appellant was asked to avail a constitution with a revised dissolution clause sanctioned by the Registrar of Societies; the organization holds a huge surplus that forms a cumulative general fund leaving little funds for implementation of programs, and the organization had not provided explanations and support for variances.

84. It averred that on 30th August 2022 the dispute was referred to its Compliance Management Team for compliance tax checks and recommendation for tax exemption due to; over claimed salary expenses under income tax return in comparison with the PAYE returns, the variance between gross turnovers per bank deposit in comparison with the audited financial statements and Income Tax Returns which variances were never addressed by the Appellant.

85. It stated that the Appellant reapplied for tax exemption on 1st March 2023 after its previous Application was rejected through a letter dated 29th August 2022.

86. It added that it requested the Appellant to fill that application and to provide a copy of the agent’s appointment letter through the email dated 7th March 2023 and reminded the Appellant to submit the duly completed application form on 19th April which was sent to them on 7th May.

87. It added that it reminded the Appellant to also provide: a beneficiary listing for all programs run by the taxpayer, Organogram/organizational structure; programs impact report to be received by 26th April 2023.

88. It contended that the form was eventually received on 25th April 2023 and the Appellant’s representative was taken through the form and was asked to make the corrections on the form as below and the revised form was submitted on 9th May 2023 and thus the delay had been on the Appellant’s side as it submitted the form after 63 days since the form was sent to them.

89. It averred that in its letter dated 26th May 2023 the Appellant was informed that the Respondent was unable to process their application as there were matters that had not been addressed and a revised application was received on 14th June 2023.

90. It stated that it held a physical meeting on 5th June 2023 with the Appellant’s tax agent representative and the Appellant’s accountant and they were taken through the areas that had not been complied with in the application form after which an inspection was held on 30th June 2023 and the Respondent took the Appellant and their representative through the areas that were not fully filled in the application form.

91. It averred that the case was submitted to HO for review on 9th August 2023 before the Appellant complied and filled the application form correctly as the Appellant sought the intervention of the Respondent.

92. It contended that in the letter from the tax representative received on 31st August 2023, they requested for a stakeholder’s engagement which was held on 28th September 2023 (Shree Cutchi Leva Patel Samaj and Shree Cutchi Leva Patel Charitable Trust) where their tax representatives and the KRA exemption team attended and action points arising from the meeting which were shared with the Appellant.

93. It averred that the Appellant failed to respond on the action points comprehensively and when one of the trustees was asked to give his final remarks during the stakeholder engagement, he said that they had been instructed by their representatives not to talk. That was not in good faith as the meeting was to enlighten the Appellant on the actual programs, they carried out in the last 3 years.

94. It contended that there was no evidence to support relief of poverty, relief of public distress, advancement of religion and advancement of education.

95. In its Supplementary Statement of Facts dated 4th April 2024, the Respondent further stated as follows.

96. It stated that a copy of the Appellant’s constitution shows that the organization is a society created to serve their members and not the public and as it was reviewing the Appellant’s Application for exemption, it identified over 640 transactions from the Appellant’s bank statements which the appellant needed to provide explanations of.

97. It averred that the Appellant’s agents responded to the same by a one-paged payout analysis and failed to provide the information on the payments as requested from the bank statements and requested them to fill in the details of the payee and purpose for the payment

98. It asserted that the expenditure analysis from the Appellant’s bank statements is important as it provides a vivid and true nature of the operations and activities of an organization and to ensure compliance with the provision to paragraph 10 of the First Schedule to the Income Tax Act.

99. It averred that the exemption under the Income Tax Act is not granted in perpetuity and they have a periodic timeline to expire in order to allow the Respondent to review the applicable law and material time on the exemptions.

100. It contended that it has a mandate under Paragraph 10 of the First Schedule to deny or revoke any application where there is none-conformity with the law.

101. It reiterated that the law on an application for an exemption per Paragraph 10 of the First Schedule to the Income Tax Act as read together with Section 13 of the Income Tax Act does not provide for timelines to reject or allow the Application.

102. It asserted that the Application for an exemption always follows an in-depth audit into the affairs of the Applicant and might in most instances result in site visits to the Applicant’s premises.

103. It stated that the Appellant’s Appeal filed through the Notice of Appeal dated 10th January 2024 is against the Respondent’s Decision dated 15th December 2023 after the Appellant lodged the Application for an exemption on 14th June 2023.

104. It relied on Section 13 (1) and Paragraph 10 of the First Schedule to the Income Tax Act and contended that the Respondent must be satisfied that the taxpayer meets the criteria under the law and added that it had corresponded and held meetings with the Appellants.

105. The Respondent’s filed a Witness Statement of Margaret Karanja dated 2nd May 2024 who provided the chronology of events as follows:a.The Appellant made an application for an exemption received on 14th April 2023. b.On 19th April 2023, the Respondent wrote to the Appellant requesting it to avail records vital to ensure compliance with the Applicable law for scrutiny. The documents availed included:i.The beneficiaries listing on all programs run by the organization.ii.The organization’s structure.iii.The programs impact report.c.On 25th April 2023, having reviewed the Application and annexures availed, it requested the Appellant to make a specific correction in the Application by providing information including:i.The summary of the company’s operations.ii.Beneficiary listing on all programs.iii.Outstanding liabilities of the organization.iv.Ensuring that the contradictions between the Application and the Appellant’s audited accounts are corrected.d.Through a letter dated 8th May 2023, the Appellant provided some of the information sought.e.The Respondent, through a letter dated 26th May 2023 informed the Appellant of the missing information which despite the many reminders had remained pending hence frustrating the review process.f.The Appellant re-submitted a new Application for exemption dated 14th June 2023 for a review by the Respondent.g.The Respondent on 30th June 2023 carried out a field inspection at the Appellant’s location in Shree Cutchi Leva Patel Samaj Hall, Nairobi West to ascertain the correctness of the information submitted in the Application form.h.Following the field inspection, the Respondent wrote to the Appellant on 12th July 2023 wherein a consensus on the minutes of the field inspection was shared for the Appellant to confirm that the issue raised had been captured.i.The analysis team prepared the field report on 9th August 2023 for the head office recommending that there was need for the Appellant to align records properly to report what institution runs separately from those run by its special purpose vehicle after it did not receive information from the Appellant.j.Having not received any clarification, the Respondent called for a meeting on 28th September 2023 wherein the Appellant was given action points on pending issues including:i.The clarification on the duplication of the activities of the charitable trust and the Appellant. Wherein it had been established that the activities claimed by the Appellant and the charitable trust were found to be the same.ii.The Appellant was to provide a tabular analysis of the payout which was supposed to have the date, payee, the amount, and the purpose.iii.The Appellant was to provide the schedule of assets of charitable trust and the Appellantiv.The Appellant was to provide a full disclosure on the relationship between the Appellant and Cutchu Gujarat Hindu Union which was operating a school within the Appellant’s Nairobi West premises; and,v.The Appellant was also requested to take steps to clear the outstanding tax liability for the years 2015, 2017, 2018, and 2019. k.On 4th October 2023, the Respondent wrote the Appellant requesting the information sought in the meeting of 28th September 2023. l.On 30th October 2023, the Appellant wrote the Respondent stating that the organization was separate and should be considered separately. They however failed again to address the issue raised nor provide the information sought especially as to the nature of the payouts which is critical in establishing the true nature of the organization.m.Despite not providing the information sought the Appellant wrote on 28th November 2023 claiming that they provided the information and needed the application approved.n.On the same date, 28th November 2023, the Respondent wrote back to the Appellant informing them that the Applications were being considered despite the slow, passed mode of delivery for the clarification sought from the Appellant.o.The Respondent on 30th November 2023 wrote to the Appellant informing them that having not received the information of the listed payments despite the several reminders and engagements, it shall proceed to consider the Application on the basis of the information received.p.On 15th December 2023 the Respondent proceeded to reject the Application on the grounds that it failed to demonstrate the eligibility of the exemption.

106. The Respondent further stated that from the chronology of events, there was no delay on the Respondent’s part in issuing the decision as the Appellant refused to provide critical information requested by the Respondent.

107. The Respondent asserted that the issue of sixty days timelines is upon meeting the conditions under Paragraph 10 of the First Schedule to the Income Tax Act.

108. The Respondent reiterated that the Appellant, having even at this Appeal refused to provide the information on the payout amongst other information sought, cannot claim any delay on the Respondent’s part.

109. It averred that the Appellant’s constitution governing it states that it is a member-based institution that is not of public character and the aims and objectives are summarized as promoting the welfare of members and managing the assets of the institution.

110. The Respondent relied on the Appellant’s Constitution and contended that the Appellant failed to substantively explain whom the payments were made to in order to ensure compliance with its constitution.

111. It reiterated that its field inspection had ascertained several non-compliance as the benefits were only to ascertain part of the community and not the public.

112. It maintained that, having considered all the documents and information provided, and from the findings from the meetings, it observed that:a.The Appellant carried out further education, health, relief of public distress among the members and not the public;b.The Appellant had a Charitable Trust which claimed to undertake the same actions for which the Appellant had sought exemption;c.The impact report submitted confirmed that the activities claimed by the Appellant were also the same claimed to be undertaken by the Charitable Trust which is a separate entity;d.The Appellant was unable to provide charitable programs and activities that they had carried out for the last three years;e.The Appellant’s audited accounts for 2019 showed that the Appellant had expended most funds for the development of schools and the medical center which are run by the Charitable Trust and Gujarati Union and had been done prior to 2019. f.The Appellant also failed to submit a complete payout analysis despite the several reminders and the Respondent having identified the over 640 questionable payouts for which the reasons for the payments was never provided.

113. It stated that it was within its administrative powers to reject the Application as it was evident the gains from the business were not being expended solely as provided under Paragraph 10 and further the Appellant had not complied with the requirements for the exemption.

114. The Respondent filed its written submissions and raised the following issues for determination:i.Whether the decision dated 15th December, 2024 is an appealable decision; and,ii.Whether the Appellant met the criteria to exemption to Income Tax under part 1, Paragraph 10 of the 1st Schedule to the Income Tax Act, CAP 470.

On whether the decision dated 15th December, 2024 is an appealable decision. 115. It was the Respondent’s submission that the Tribunal did not have jurisdiction to determine this matter.

116. The Respondent further relied on the case of Tax Appeals Tribunal No. 1545 Of 2022 - Saleh Mohammed Trust vs. Commissioner of Domestic Taxes where the Tribunal held that: -“The Taxpayer's Appeal was not based on an appealable decision as defined under Section 3 of the Tax Procedures Act and therefore there was no valid appeal before the Tribunal.”

117. The Respondent submitted that the Tribunal lacked the requisite jurisdiction to hear and determine this matter. They relied on the case of Owners of The Motor Vessel “Lillian S” vs. Caltex Oil (Kenya) Ltd [1989] eKLR wherein Justice Nyarangi, (as he then was) stated as follows: -“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 down tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction."

118. The Respondent submitted that the Tribunal held in the above decisions that the Respondent’s rejecting of the Applicant’s application for exemption to Income Tax does not constitute an appealable decision as envisaged under Section 3 of the Tax Procedures Act.

119. The Respondent urged the Tribunal to down its tools as was held in the celebrated case of Owners of the Motor Vessel “Lillian S” vs. Caltex Oil (Kenya) Ltd.On whether the Appellant met the criteria to exemption to Income Tax under part 1, Paragraph 10 of the 1st Schedule to the Income Tax Act, CAP 470

120. The Respondent reiterated its case as stated in its Statement of Facts dated 23rd February and its supplementary Statement of Facts dated 4th April 2024.

121. It stated that the Appellant’s Appeal filed through the Notice of Appeal dated 10th January 2024 is against the Respondent’s Decision dated 15th December 2023 after the Appellant lodged the Application for an exemption on 14th June 2023.

122. It relied on Section 13 (1) and Paragraph 10 of the First Schedule to the Income Tax Act and submitted that the Respondent must be satisfied that the taxpayer meets the criteria under the law.

123. The Respondent further submitted that it has a mandate under Paragraph 10 of the First Schedule to deny or revoke any application where there is none-conformity with the law as it did with the Appellant’s case.

Respondent’s prayers 124. The Respondent prayed for the Tribunal to find that:a.The Respondent’s Decision issued on 15th December 2023 is valid and uphold the same; and,b.The Appeal be dismissed with costs.

Issues for Determination 125. After perusing the Memorandum of Appeal and parties’ Statements of Facts, Witness Statements, and the Appellant’s submissions and gleaning through the documentation attached therewith, the Tribunal finds the following to be the issues for determination:i.Whether the decision dated 15th December 2023 is an appealable decision;ii.Whether the Respondent’s decision was issued out of time;iii.Whether the Appellant is of a public character established solely for the purposes of the relief of poverty or distress of the public, or for the advancement of religion or education; and,iv.Whether the Appellant utilized its assets or income exclusively either in Kenya or in the benefit of the residents of Kenya.

Analysis and Findings 126. The Tribunal wishes to analyze the issue as hereunder.

i. Whether the decision dated 15th December 2023 is an appealable decision; 127. It was the Respondent’s submission that the Tribunal did not have jurisdiction to determine this matter. The Respondent referred the Tribunal to its previous decisions in Tax Appeal No. E298 of 2023-CPF Trust Fund vs. Commissioner of Domestic Taxes where Judgement was delivered on 3rd May, 2024 and Tax Appeal No. 1545 of 2022 – Saleh Mohamed Trust vs. Commissioner of Domestic Taxes where judgement was delivered on 10th November 2023.

128. Tribunal had held in the above decisions that the Respondent’s rejecting of the Applicant’s application for exemption to Income Tax does not constitute an appealable decision as envisaged under Section 3 of the Tax Procedures Act.

129. The Respondent urged the Tribunal to down its tools as was held in the celebrated case of Owners of the Motor Vessel “Lillian S” vs. Caltex Oil (Kenya) Ltd.

130. The Tribunal notes that it derives its jurisdiction from Section 12 of the Tax Appeals Tribunal Act which states:“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.”

131. Section 52 (1) of the Tax Procedures Act also confers jurisdiction to the Tribunal. The Tribunal has the right to entertain an appeal on an appealable decision. The said section provides:“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, 2013. ”

132. The Tax Procedures Act defines an appealable decision to mean: “an objection decision and any other decision made under a tax law other than— a tax decision; or a decision made in the course of making a tax decision;”

133. Further, Section 51 of the TPA provides an internal mechanism for review of a decision by the Respondent and provides as follows regarding objections to decisions by the Respondent; -“(1)A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.(2)A taxpayer who disputes a tax decision may lodge a notice of objection to the decision, in writing, with the Commissioner within thirty days of being notified of the decision.”

134. Section 51 (8) of the TPA provides as follows in relation to the Respondent’s response to a taxpayer’s objection;“Where a notice of objection has been validly lodged within time, the Commissioner shall consider the objection and decide either to allow the objection in whole or in part, or disallow it, and Commissioner's decision shall be referred to as an "objection decision.”

135. The Tribunal has gleaned through the Judgement in Tax Appeal No. E298 OF 2023-CPF Trust Fund vs. Commissioner of Domestic Taxes and established that the Respondent’s letter dated 15th March, 2022 rejecting the Appellant’s application for tax exemption and asking the Appellant to resubmit it’s application was a decision made in the course of making a tax decision and not an Appealable Decision whereas the Respondent’s letter dated 15th December, 2023 in the present Appeal is an Appealable Decision since the Appellant had exhausted all the administrative mechanisms as to its application for tax exemption.

136. The Tribunal notes that the Appellant first made its application for tax exemption in the year 2022 and have exchanged several correspondences with the Respondent including physical meetings and as such the only remedy that was available to the Appellant is to appeal to this Tribunal.

137. The Tribunal therefore finds that this appeal is properly before it and proceeds to determine the other issues as framed herein above.

ii. Whether the Respondent’s decision dated 15th December, 2023 was issued out of time 138. The Appellant submitted that it first applied for a Tax Exemption on 2nd August 2022 vide its letter dated 15th July 2022 which was acknowledged by the Respondent on 2nd August 2022.

139. That the Respondent rejected the application after conducting a compliance check and due diligence on the affairs of the Appellant and advised the Appellant to comply with the reasons stated in its rejection notice dated 29th August 2022 and re-submit its application.

140. The Appellant complied and re-submitted its application vide its letter dated 8th May 2023 and wrote a letter dated 19th May 2023, to the Respondent as a follow-up to its letter dated 8th May 2023 seeking a response to its application for tax exemption.

141. It was the Respondent’s case that after several back and forth, the Appellant finally re-submitted its application to the Respondent on 14th June 2023. According to the Appellant, this final application met all the conditions that had been requested and advised by the Respondent in compliance with the First Schedule, Paragraph 10 of Income Tax Act. Whereupon the Respondent called for a stakeholder engagement meeting with Appellant and it’s tax representatives on 28th September 2023.

142. From the said engagement parties agreed that the Appellant provide to the Respondent documents and information in support to the issues discussed in the meeting pending the Appellant’s approval and grant of the Income Tax Exemption Certificate.

143. Vide its letter dated 30th October, 2023, the Appellant submitted to the Respondent the documents and information.

144. The Appellant wrote a follow up letter dated 28th November 2023 to the Respondent on its pending approval for Tax Exemption Certificate after which the Respondent issued the its decision on 15th December 2023.

145. It is the Appellant’s position that Income Tax Exemption Rejection Notice is a tax decision under the provision of Section 3 of the Tax Procedures Act which the Respondent is mandated to a make a decision on under the First Schedule, Part 1 of Paragraph 10 of the Income Tax Act, proviso B.

146. It was the Appellant’s contention that having made its final application for tax exemption that met all the requirements on 14th June 2023 the Respondent was late in issuing its Income Tax Exemption Rejection Notice, on 15th December 2023 which was later confirmed electronically on 20th January 2024 outside the statutory timelines of 60 days and in violation of First Schedule, Part 1 of the paragraph 10 of the Income Tax Act, proviso “B” (supra).

147. It was the Appellant’s submission that its application for Income Tax Exemption was deemed to be allowed by the operation of the law.

148. The Appellant relied on the case of Republic vs. Commissioner of Domestic Taxes Ex Parte Flern Investments Limited [2020] eKLR where the Honorable Judge John M Mativo (as he was then) held that:“I find backing in Republic Vs Commissioner of customs Services Ex-Parte Uniliver Kenya Limited in which the Court stated that if the Commissioner does not render a decision within the stipulated period, the Objection is deemed as allowed by operation of the Law. The Act requires that where the Commissioner has not made an Objection Decision within 60 days from the date the Tax payer Ledged the Notice of the Objection, the Objection decision shall be allowed. This means the issues that the taxpayer had raised in the Objection will be accepted.”

149. In the Case TAT 127 of 2020, BIC East Africa Ltd vs. Commissioner of Customs Control, the Tribunal held that;“Additionally the Tribunal finds the Respondent’s late Response to Review Application to be in gross violation of Section 229 (5) of EACCMA 2004 which stipulates that Where the Respondent had not Communicated his or her decision within the specified time of 30 days, the review application shall be deemed to have been allowed by the Respondent to contextualize this, as of the 7th June 2019 the Appellant’s review application was deemed allowed meaning that it had no tax liability in the eyes of the Law. It also meant that the appellant was well within its right to apply for a refund of the taxes paid earlier under protest. Our resolve in this regard is further converted in light of the fact that Section 229 (4) & (5) of the EACCMA are cushioned in mandatory terms, hence the Respondent was not allowed to extend the same Timelines. (See Associated Battery Manufacturers Ltd versus Respondent of Customs Services TAT Appeal No. 1 of 2015).”

150. In response to whether the Respondent issued its decision late, the Respondent argued that its decision was not late as it needed to review the Appellant’s operations to ascertain that they are still in compliance with the applicable law at the material time on the exemption.

151. The High Court in emphasizing the strict application of statutory timelines had this to say in Equity Group Holding Limited vs. Commissioner of Domestic Taxes 2021 (eKLR): -“As a statutory edict is not Procedural Technicality, it’s Law which must be complied with. Parliament in its wisdom expressly and in Mandatory terms provided …………. ”

152. The Tribunal has reviewed the Parties’ arguments and is of the view that the Appellant having submitted its final application on 14th June 2023 the Respondent ought to have issued a decision within 60 days that is on or before 13th August 2023 pursuant to the provisions of First Schedule, Part 1 of paragraph 10 of the Income Tax Act.

153. The Tribunal has hereinabove held that the Respondent’s letter dated 15th December 2023 was issued out of time and therefore the Appellant’s Application for Exemption deemed to have allowed by operation of the law.

iii. Whether the Appellant is of a public character established solely for the purposes of the relief of poverty or distress of the public, or for the advancement of religion or education. 154. The presiding findings notwithstanding, the Tribunal will proceed to analyse the remaining issues as follows:

155. In the First Schedule, Part 1, to the 10th Paragraph of Income Tax Act, cap 470 provides as follows; -“Subject to section 26, the income of an institution, body of persons or irrevocable trust, of a public character established solely for the purposes of the relief of poverty or distress of the public, or for the advancement of religion or education—c.Established in Kenya; ord.Whose regional headquarters is situated in Kenya,In so far as the Commissioner is satisfied that the income is to be expended either in Kenya or in the circumstances in which the expenditure of that income is for the purposes which result in the benefit of the residents of Kenya;Provided that any such income which consists of gains or profits from a business shall not be exempt from tax unless such gains or profits are applied solely to such purposes and either—i.such business is carried on in the course of the actual execution of such purposes;ii.the work in connexion with such business is mainly carried on by beneficiaries under such purposes; oriii.such gains or profits consist of rents (including premiums or any similar consideration in the nature of rent) received from the leasing or letting of land and any chattels leased or let therewith; and provided further that an exemption under this paragraph—A.shall be valid for a period of five years but may be revoked by the Commissioner for any just cause; andB.shall, where an applicant has complied with all the requirements of this paragraph, be issued within sixty days of the lodging of the application.Provided further that in this paragraph, “institution, body of persons or irrevocable trust, of a public character” means an entity established to benefit the public in a transparent and accountable manner without restriction or discrimination without the level of charges or fees levied for the services rendered and which utilises its assets or income exclusively to carry out the purpose for which the entity was established without conferring a private benefit to an individual.”

156. The Tribunal notes that for an entity to qualify for an Income Tax Exemption it must be able to demonstrate that it performs or undertakes any of the four pillars provided for under First Schedule, Part 1 of paragraph 10 of the Income Tax Act.

157. The said pillars are that the entity should have been established for the advancement of the following to the public: -a.Religion.b.Education.c.Health.d.Relief of distress or poverty.

158. The Tribunal agrees with the Appellant that a tax exemption applicant is only required to demonstrate that it is of public character and solely established to accomplish any of the four objects that are stipulated under paragraph 10 of the First Schedule to the Income Tax Act which are the relief of poverty or distress of the public, or for the advancement of religion or education.

159. The Respondent contended that there was no evidence to support relief of poverty, relief of public distress, advancement of religion and advancement of education from the Appellant.

160. The Respondent’s witness Ms. Margaret Karanja testified that the Appellant is a member-based institution that is not of a public character whose programmes were only to the benefit of a certain part of the community and not the public.

161. The Respondent’s witness further testified that it undertook a field inspection of some of the Appellant’s facilities jointly with the Appellant’s representatives and come up with a Field Inspection Report. However, the Respondent’s witness confirmed in her testimony that the said report was not attached or filed together with its pleadings before the Tribunal.

162. The Tribunal was not able to interrogate the contents of the alleged Field Inspection Report to appreciate its contents.

163. It was the Respondent’s witness further testimony that during the said field inspection the team visited; Shree Cutchi Lava Patel Samaj School at Nairobi West, Shree Cutchi Leva Patel Samaj Clinic situated at Nairobi West and Shree Cutchi Lava Patel Samaj Social Hall situated in Nairobi West in order to ascertain whether the Appellant is indeed of a public character established solely for the purposes of the relief of poverty or distress of the public, or for the advancement of religion or education.

164. On cross examination the Respondent’s witness testified that indeed the field inspection report confirmed that the Appellant’s activities are involved in the advancement of education to the public at its Shree Cutchi Lava Patel School at Nairobi West, relief of distress to the public at its Shree Cutchi Leva Patel Hospital situated at Nairobi West and sporting activities and religious activities e.g. Diwali and Hindu marriage ceremonies at its Social Hall.

165. It was the Respondent’s further testimony that the above facilities were open to the public and not to a certain part of the community as earlier alleged in its decision dated 15th December 2023.

166. From the arguments presented by both parties, the Tribunal notes that it is not in dispute that the Appellant was able to discharge its burden of proof to the effect that it is of a public character established solely for the purposes of the relief of poverty or distress of the public, or for the advancement of religion or education.

iv. Whether the Appellant utilized its assets or income exclusively either in Kenya or in the benefit of the residents of Kenya. 167. It was the Respondent’s contention that while reviewing the Appellant’s Application for exemption, it identified over 640 transactions from the Appellant’s bank statements which the appellant needed to provide explanations for and the Appellant’s agents responded through a one-paged payout analysis and failed to provide the information on the payments from the bank statements.

168. The Respondent stated that upon interrogation of the Appellant’s financial statements for the years ended 31st December 2019 to 31st December 2021 it established that the Appellant expended its income on the following activities:a)Business and cottage fair;b)25 Years Anniversary Expenses;c)Ladies Wing;d)Diwali Expenses;e)Donations & Gifts;f)Easter Festival of Friendship;g)Karibu Rapid Response;h)Library;i)Medical Relief;j)Other medical activities;k)Meeting & food expenses;l)Samooh Lagnostav;m)Sports and Youth activities; and,n)Academic and cultural.

169. The Respondent’s witness further testified that the Appellant is not involved in any activities that are beneficial to persons not residents in Kenya or outside Kenya.

170. The Tribunal has noted that the Respondent averment that indeed the Appellant’s funds were expended in the development of schools and the medical center.

171. It was the Appellant’s submission that this is a confirmation that it expended its income exclusively to the benefit of the residents of Kenya.

172. The Tribunal has had a look at the provision of First Schedule, Part 1 of Paragraph 10 of the Income Tax Act and has not sited any provision which prescribes the manner in which the paragraph 10 pillars should be carried out for purposes of qualifying for Income Tax Exemption.

173. The law merely requires an applicant for tax exemption to have utilized its assets or income exclusively in the advancement of the four pillars programs provided under First Schedule, Part 1 of Paragraph 10 of the Income Tax Act.

174. It is therefore the Tribunal’s finding that Appellant expended its assets or income exclusively in Kenya and to the benefit of the residents of Kenya as provided for First Schedule, Part 1 of Paragraph 10 of the Income Tax Act.

Final Determination 175. The upshot to the foregoing is that the Appeal herein is merited and the Tribunal consequently makes the following orders; -a.The Appeal be and is hereby allowed;b.The Respondent’s Exemption Decision dated 15th December 2023 be and is hereby set aside;c.The Respondent to issue the Appellant with an Exemption certificate within sixty (60) days of the delivery of this judgement; and,d.No orders as to costs.

176. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 1ST DAY OF AUGUST 2024. ROBERT M. MUTUMA - CHAIRMANABDULLAHI DIRIYE - MEMBERELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBERBERNADETTE GITARI - MEMBER