[2024] KETAT 1062 (KLR)

Silale Moonlight Investment Limited v Commissioner of Domestic Taxes (Miscellaneous Case E176 of 2023) [2024] KETAT 1062 (KLR) (5 July 2024) (Ruling)

Neutral citation: [2024] KETAT 1062 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Case E176 of 2023

E.N Wafula, Chair, E Ng'ang'a, EN Njeru, M Makau & AK Kiprotich, Members

July 5, 2024

Between

Silale Moonlight Investment Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated the 10th November, 2023 that was filed on 16th November 2023 and which was supported by an Affidavit sworn by the Applicant’s Director, Nickson Kareman Epur, on the 8th November, 2023, ought for the following Orders:-i.Spent.ii.That the intended Appellant/Applicant be granted an extension of time with regard to filing Notice of Appeal and Memorandum of Appeal to the Tribunaliii.That the Tribunal do issue an order lifting, vacating and setting aside the Respondent’s Agency Notices Reference Number: P051432765F dated 20th June 2023 issued to Managing Director of Access Bank Kenya PLC requiring them to pay Value Added Tax and Income tax of Kshs.5,567,499. 00 inclusive of interest and penalty pending the full hearing and determination of this application and Appeal herein.iv.That the Tribunal do issue an order restraining the Respondent either by itself, its agents, employees, servants or through any other person at its behest, from issuing any other Agency Notices against the referred Bank Accounts, or any Account held and/or owned by the Appellant/ Applicant in any other company, and/or lift, vacate and set aside any other agency notice issued against any other Bank or other Account owned or held by the Appellant/Applicant in any other company until this application and the main Appeal is heard and determined.v.That the costs of this application be in the cause.vi.That this Tribunal be pleased to issue any such orders as it deems just and expedient.

2. The application is premised on the following grounds:-i.That due to factors beyond the control of the intended Appellant/Applicant missed the statutory deadline for filing the Notice of Appeal/ Memorandum of Appeal to this Tribunal.ii.That the Applicant was ill and was under home care-based remedy for months. That the Applicant learnt of the same after he accessed its emails and iTax ledger.iii.That the intended Appellant/Applicant has approached the Tribunal at the earliest juncture and failure to file the Notice of Appeal within the stipulated timelines is as a result of factors beyond the Applicant’s control as he is located upcountry and was unable to access iTax email and was following up on his health issues.

3. The Applicant stated that the confirmation notice was issued on 9th September 2019 when he was ill and was under home care based remedy for months.

4. That the Respondent will not suffer any prejudice from granting of the orders sought.

Analysis and Findings 5. Although the directions of the Tribunal were to the effect that the application was to be canvassed by way of written submissions, the parties did not file any submissions. Further, the Respondent did not file any response to the application even after being offered the opportunity to do so and therefore this application shall be considered on its merits.

6. The Tribunal is enjoined to determine the length and reason for the delay when considering an application for the extension of time to appeal out of time. The power to extend time is discretionary and unfettered but the same must be exercised judiciously and it is not a right to be granted to the Applicant.

7. The power to expand time for filing an Appeal is donated by Section 13(3) of the Tax Appeals Tribunal Act which provides that:“The Tribunal may, upon application in writing, extend the time for filing the Notice of Appeal and for submitting the documents referred to in subsection (2).”It is therefore a discretionary power and not a right to be granted to the Applicant.

8. In determining whether to extend time, the Tribunal was guided by the decision of the Court in Charles Karanja Kiiru v Charles Githinji Muigwa [2017] eKLR, where the learned Judge stated that:-“It is trite that extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party, at the discretion of the Court”

9. On the criteria of the issues to be considered when granting an extension to file an appeal out of time, the Tribunal referred to the case of Odek, JJ. A in Edith Gichugu Koine vs. Stephen Njagi Thoithi [2014] eKLR, where the Court laid out the factors as thus:-“Nevertheless, it ought to be guided by consideration of factors stated in many previous decisions of this Court including, but not limited to, the period of delay, the reasons for the delay, the degree of prejudice to the respondent if the application is granted, and whether the matter raises issues of public importance, amongst others...”

10. Further, in Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd [2020] eKLR, the court held that:-“The Court considers the length of the delay; the reason for the delay; the chances of success of the intended appeal, and the degree of prejudice that would be occasioned to the respondent if the application is granted.”

11. The Tribunal, guided by the principles as set out in John Kuria v Kelen Wahito, Nairobi Civil Application Nai 19 of 1983 April 10, 1984, referred to by the Judges in the case of Wasike V Swala [1984] KLR 591, Sammy Mwangi Kiriethe & 2 others v Kenya Commercial Bank Ltd (supra) and Section 13 of the Tax Appeals Tribunal Act, 2013 used the following criteria to consider the application.a.Whether there is a reasonable cause for the delay?b.Whether the appeal is merited?c.Whether there will be prejudice suffered by the Respondent if the extension is granted?

a. Whether there is a reasonable cause for the delay 12. In considering what constitutes as a reasonable reason for delay, the court in Balwant Singh v Jagdish Singh & Ors (Civil Appeal No.1166 of 2006), held that: “The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention”.

13. The statutory timelines and provisions to file an appeal have been clearly set out in the Tax Appeal Tribunal Act. Section 13 (3) of the Tax Appeals Tribunal Act provides as follows with regard to the statutory timelines in commencing an appeal process:-“A notice of appeal to the Tribunal shall—(a)be in writing;(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)a memorandum of appeal;(b)statement of facts; and(c)the tax decision.”

14. For a taxpayer who has not met the timelines as provided in the above provision of the law, Section 13(4) of the Tax Appeals Tribunal Act provides the conditions that the taxpayer ought to meet to enable the Tribunal to exercise its discretion to extend time to appeal. The Section provides as follows;“An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from giving notice of appeal within the specified period.”

15. Regarding the reasons for delay, the Applicant stated that its director suffered ill health at the time the confirmation assessment was issued. That he was ill and was under home care-based remedy for months. That the Applicant learnt of the objection decision after he accessed its emails and iTax ledger.

16. To support its averment that the director had been unwell, the Appellant attached a letter from a medical facility in Eldoret dated 7th September 2019 indicating the director was at some point in 2019 under medical treatment.

17. The Tribunal was of the view that although the actual duration and level of indisposition could not be determined, based on the evidence adduced, the Tribunal was persuaded that the director had indeed been suffering ill health.

18. Consequently, the Tribunal determined that the Applicant had demonstrated reasonable cause for delay.

a. Whether the appeal is merited? 19. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal’s time, or it was material to the extent that it deserved its day in the Tribunal.

20. The test is not whether the case is likely to succeed. Rather, it is whether the case is arguable. This was the finding in Samuel Mwaura Muthumbi V Josephine Wanjiru Ngungi & Another (2018) eKLR where the court stated that:-“Looking at the draft Memorandum of Appeal filed, I am unable to say that the intended Appeal is in arguable. Of course, all the Applicants have to show at this stage is arguability- not high probability of success. At this point the Applicant is not required to persuade the Appellate court that the intended or filed appeal has a high probability of success. All one is required to demonstrate is the arguability of the Appeal, a demonstration that the Appellant has plausible grounds of either facts or law to overturn the original verdict. The Applicants have easily met that standard. I believe that the Applicant has discharged this burden.”

21. The Tribunal was further guided by the findings of the court in Kenya Commercial Bank Limited Vs Nicholas Ombija (2009) eKLR where it was held that:“An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court.”

22. Similarly, in Kenya Commercial Bank Limited Vs Nicholas Obija (2009) eKLR it was stated that “an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court” that was also the position held in Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) eKLR where the court held that “on whether the appeal is arguable, it is sufficient if a single bonafide ground of appeal is raised, .. an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court: one which is not frivolous.”

23. The Tribunal noted that the Respondent’s decision dated 9th September 2019 confirmed the assessments for Income tax. Looking at the draft Memorandum of Appeal by the Applicant, the Tribunal noted that the Applicant had raised two grounds of Appeal that required rebuttal by the Respondent. Going by the standards set out in the Stanley Kangethe Kinyanjui Vs Tony Keter & others case the Tribunal finds that the Applicant had an arguable case which required to be canvassed and considered on its full merits.

a. Whether there will be prejudice suffered by the Respondent if the extension is granted? 24. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the Judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the finding in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in finding that:“…….a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate………”

25. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted. However, having found that the subject matter was arguable, it is the view of the Tribunal that the Applicant’s recourse to justice now lies in an appeal to the Tribunal. Thus, the Applicant would suffer prejudice if it is not granted leave to file its appeal. The Respondent on the other had will not suffer prejudice since it will still be able to collect the taxes plus interest and penalties should the Applicant be found to be at fault.

26. The Tribunal therefore finds that the Respondent will not suffer prejudice if the extension is granted.

Disposition 27. Based on the foregoing analysis, the Tribunal finds that the application is merited and accordingly proceeds to make the following Orders:i.The application be and is hereby allowed.ii.Leave be and is hereby granted for the Applicant to file its Notice of Appeal, Memorandum of Appeal and Statement of Facts out of time.iii.The Applicant to file and serve a Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision within Fifteen (15) days of the date of delivery of this Ruling.iv.The Respondent to file and serve its response to the Appeal within 30 days of the date of being served with the Appeal documents.v.The Agency Notice dated 20th June, 2023 issued to Access Bank Kenya PLC requiring it to pay the Respondent the sum of Kshs 5,567,499. 00 as tax owing by the Applicant be and is hereby unconditionally lifted.vi.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF JULY, 2024. ERIC NYONGESA WAFULACHAIRMANEUNICE NG’ANG’A ELISHAH N. NJERUMEMBER MEMBERMUTISO MAKAU ABRAHAM K. KIPROTICHMEMBER MEMBERRULING - MISC NO. E176 OF 2023 SILALE MOONLIGHT INVESTMENT LTD VS. COMMISSIONER OF DOMESTIC TAXES Page 9