[2024] KETAT 943 (KLR)

Stima DT Savings & Credit Co-operative Society Limited v Commissioner of Legal Services & Board Coordination (Tax Appeal E158 of 2023) [2024] KETAT 943 (KLR) (12 July 2024) (Judgment)

Neutral citation: [2024] KETAT 943 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E158 of 2023

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

July 12, 2024

Between

Stima DT Savings & Credit Co-operative Society Limited

Appellant

and

Commissioner of Legal Services & Board Coordination

Respondent

Judgment

BACKGROUND 1. The Appellant is a saving and credit society registered under the Co-operative Societies Act Cap 490 of Laws of Kenya and Licensed by Sacco Societies Regulatory Authority (SASRA) to carry out deposit-taking business.

2. The Respondent is a principal officer appointed under and in accordance with Section 13 of the Kenya Revenue Authority Act, the Authority is charged with the responsibility of among others, assessment, collection, accounting, and the general administration of tax revenue on behalf of the Government of Kenya.

3. The Respondent issued the Appellant with a notice of assessment for excise duty for period 2017-2021 vide a letter dated 23rd December 2022. The Appellant objected to the tax assessment on 20th January 2023. Consequently, the Respondent issued the Appellant with its Objection Decision vide a letter dated 10th March 2023.

4. The Appellant being dissatisfied with the Review Decision, lodged this Appeal vide Notice of Appeal dated and filed on 6th day of April 2023.

The Appeal 5. The Appellant filed Memorandum of Appeal dated and filed on 20th April 2023. The memorandum raises the following grounds of appeal:a.That during the period under review, there was full compliance with the tax provisions under the Excise Duty Act, 2015. The Appellant charged excise duty on all ‘other fees’ and ‘commissions’ and paid the tax to the Respondent by the due date. The demand for payment of additional taxes is excessive and is not supported by facts.b.That the assessment is mainly on interest charged by the Appellant to the members. The Respondent has not taken into account provisions under Part IlI of the First Schedule of the Excise Duty Act, 2015 which defines the term “Other fees” to exclude interest charged by financial institutions.c.That the Objection Decision disregards the nature of transactions as reflected in the financial statements and supporting documents such as the loan forms which clearly denotes what the members were paying, for is interest.d.That contrary to facts, the Respondent seeks to re-characterise bridging loan interest to fees. Bridging loan is offered as a product and arise where a member has sought monies to clear an existing or a higher loan. In the financial accounts, the amount is recognised as interest. Members are charged interest which is exempt from excise duty.e.That contrary to facts, the Respondent seek to re-characterise Interest on boosting deposits to fees. Boosting loan is a loan product meant to ease the access to funds required to help members boost their deposits and the need to protect the members from predatory lenders.f.That contrary to facts, the Respondent seek to reclassify deferred appraisal interest (interest on seed loan) to fees. This is interest charged to cater for the risk associated with lending and is recognised over the term of the loan.g.That contrary to facts, the Respondent seeks to subject interest on salary transfers to double taxation as this had already been brought to charge and the Excise Duty remitted and accounted for to the Commissioner.h.That contrary to facts, the Respondent seeks to subject Cheque Book application fee to double taxation as this had already been brought to charge and the Excise Duty remitted and accounted for to the Commissioner.i.That contrary to fact and law, the Respondent seeks to subject interest on Sacco re-joining to Excise Duty, this is a subscription/joining fee for a member and therefore not a financial service chargeable to Excise Duty.

The Appellant’s Case 6. The Appellant’s case is premised on its;i.Statement of Facts dated and filed on 20th April 2023 together with the documents annexed thereto; and,ii.Written submissions dated and filed on 5th January 2024.

7. The Appellant states that the Respondent conducted an audit of the books, records and accounts of the Appellant relating to Excise Duty for the years of income 2017 to 2021. The audit involved a review of the Appellant’s tax affairs and the scope of the review covered Excise Duty.

Interest on Bridging Loans 8. According to the Appellant, the Respondent sought to charge excise duty on interest on bridging loans earned by the Appellant during the period under audit on the basis that they are fees and not interest. The Appellant disputed this position on the grounds that, compensation derived from Bridging loans is interest and not fees.

9. The Appellant relied on the decision in Cape Brandy Syndicate vs. 1. R. Commissioners [1921] 1KB when he stated that:“in a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”

10. The Appellant also relied on Scott vs. Russell (Inspector of Taxes) [1948] 2 All ER Lord Simonds expressed as follows:“there is a maxim in Income tax law which, though it may sometimes be over-stressed, yet ought not to be forgotten. It is that the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax upon him.”

11. The Appellant stated that while the Excise Duty Act does not define interest, the Black’s Law dictionary defines it as“The compensation fixed by agreement or allowed by law for the use or detention of money, or for the loss of money by one who is entitled to its use; the amount owed to a lender in return for the use of borrowed money."

12. Further, the Appellant relied on the Halsbury’s Laws of England which defines interest as: -“The return or compensation for the use or retention by one person of a sum of money belonging to or owed to another.”

13. Further, the Appellant cited Collin’s dictionary which defines interest as:“A charge for the use of credit or borrowed money, such a charge expressed as a percentage per unit of the sum borrowed or used.”

14. Finally, the Appellant relied on Oxford's dictionary which defines interest as:“Money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt.”

15. The Appellant relied on the case of National Bank of Kenya vs. Commissioner of Domestic Taxes (Income Tax Appeal E155 & 533 of 2020 (Consolidated)) [2022] eKLR where the High Court stated that:“it is crystal clear that interest is the compensation paid in consideration of using someone else’s money. Or put differently, it is the consideration that is paid for keeping someone out of the use of his money. It is payable both when a lender lends money to a borrower or an institution takes a deposit from a depositor and puts it for its own use.”

16. The Appellant averred that the Bridging loan was introduced by the Sacco to cater for the members who wish to clear their existing loans either with the Sacco or other financial institutions to enable them to apply for a loan of higher amount to meet their financial needs.

17. According to the Appellant, the members are allowed to either clear the existing loan in cash or request the Sacco to assist in this regard. Members may opt to borrow from other institutions including shylocks and bring the cash to the Sacco to clear the loan balance. The Appellant averred that where the members borrow the said amounts from other institutions, then they would pay interest on the amount advanced.

18. The Appellant maintained that interest on bridging loans is interest in form and manner since it is the compensation paid in consideration of keeping the Appellant’s funds away. It stated that Interest is not subject to Excise Duty since it is not a fee in accordance with Part I of the First Schedule to the Excise Duty Act which defines other fees as: “Other fees” includes any fees, charged or commissions charged by financial institutions relating to their licenced activities, but does not include interest on loan or return on loan, or an insurance premium or premium based on related commissions.” Consequently, the Appellant averred that the Respondent erred in law and in fact by computing Excise Duty on bridging interest which is not excisable.

Interest on Boosting Loans 19. The Appellant disagreed with the Respondent's attempt to charge excise duty on interest on boosting loans earned during the period under audit of Kshs. 44,957,128. 00. Whereas the Respondent argued that interest on boosting of deposits are fees, not interest, the Appellant contended that the compensation received from boosting loans constitutes interest, not fees. It argued that the Appellant's members are able to borrow a loan equivalent to three, four or five times their deposits depending on the loan product. According to the Appellant, there are instances where a member may seek to borrow more than what they would ordinarily qualify for based on their deposits.

20. To access higher loan products, the Appellant stated that the member is expected to top up their deposits to meet the set criteria which can be achieved through bringing in funds from external sources and depositing in the member’s account thus increasing their share deposits. According to the Appellant, the externally sourced funds may be sourced from loans by other financial and quasi financial institutions or from other sources. These loans would attract an interest expense while the funds drawn from other sources would have the element of opportunity cost of the foregone investment alternative. The Appellant averred that the Sacco developed the boosting loan product to ease the access to funds required to help members boost their deposits and the need to protect the members from predatory lenders. It argued that Interest is levied on this loan product, giving rise to interest on boosting of deposits.

21. According to the Appellant, by increasing the member’s deposit account without external cash in-flow, the Sacco suffers an opportunity cost, it would have advanced these funds as a normal loan to its members or invested in other interest earning funds such as Treasury bills and bonds. Therefore, the interest charged by the Appellant on the boosting loan advanced is meant to compensate the Sacco for being kept away from its money and the opportunity cost involved.

22. The Appellant submitted that interest on boosting of deposits is interest in form and manner since it is the compensation paid in consideration of keeping the Appellant’s funds away and there is actual increase in a member’s deposits. It argued that Interest is not subject to Excise Duty since it is not a fee in accordance with Part II of the First Schedule to the Excise Duty Act therefore, the Respondent erred in law and fact by computing Excise Duty on boosting of deposits which is not an excisable stream of income.

Interest deferred on Appraisal 23. The Appellant’s case id that the Respondent assessed and demanded excise duty based on the understanding that Interest deferred on Appraisal is an administration fee recovered upfront from members at the point of loan origination. On the other hand, the Appellant averred that interest on deferred on appraisal refers to interest that is charged on all loan products. The interest is spread over the tenure of the loan. The Appellant argued that the Respondent’s assessment seeks to levy Excise Duty on this item that is classified as ‘interest on seed loan’/interest on loan appraisal in the statement of income.

24. The Appellant argued that Interest on loan appraisal is interest charged to cater for the risk associated with lending and that it is interest on the loan that is applied to all loans. It argued that when the Sacco loans its members it charges this interest upfront so that the loan appear cheap to the members. It argued that the interest is recognized over the duration of the loan, hence interest deferred on loan appraisal. The interest is spread over the loan period and recognized monthly in the statement of income.

25. The Appellant averred that in instances of default by the loanee, this interest is loaded onto the guarantors and collected monthly over the defaulted loan tenure.

26. Based on the above, the Appellant stated that interest on boosting of deposits is interest in form and manner since it is the compensation paid in consideration of keeping the Appellant’s funds away and there is actual increase in a member’s deposits. It argued that Interest is not subject to Excise Duty since it is not a fee in accordance with Part II of the First Schedule to the Excise Duty Act therefore, the Respondent erred in law and fact by computing excise duty on boosting of deposits which is not an excisable stream of income.

Interest on Sacco Re-joining 27. According to the Appellant, the Respondent erroneously confirmed the disputed excise duty assessment on Sacco re-joining on the understanding that this is a charge levied on re-joining. The Appellant disputed this position on the grounds that interest on Sacco re-joining is a subscription/joining fee for members in line with bylaws guiding the association under the principle of voluntary and Open Membership. According to the Appellant, the joining fee is therefore not a financial charge due to excise duty.

28. In addition, the Appellant averred that, a member of the Sacco may opt to exit due to financial constraints or any other reason. In instances where the member opts to re-join the Sacco, the member need not apply and pay entrance fees as a new member would, they are charged a discounted entrance fee Kshs. 2,500. 00 to cater for associated membership costs.

29. To conclude, on this issue, the Appellant stated that the Excise Duty Act provides for levying of excise duty on “other fees” includes any fees, charges or commissions charged by financial institutions relating to their licensed activities. The membership re-joining fee does not relate to the Appellant’s licensed activity and therefore not subject to excise duty.

Cheque Book Application Fee 30. The Appellant’s case is that the Respondent sought to bring to charge Cheque Book Application fee on the grounds that this had not been subjected to Excise Duty. The Appellant disputed this position on the grounds that the fees from Cheque Book application had been subjected to excise duty. The Appellant averred that since this fee had already been brought to charge, taxing it again is tantamount to double taxation.

31. The Appellant cited the case of Raiply Woods (K) Ltd & another vs. Baringo County & 3 others wherein the judge, in respect to double taxation, held that double taxation offends the principle of fair taxation under Article 201 (b) (i) of the Constitution.

32. The Appellant argued that in confirming the disputed tax assessment, the Respondent disenfranchised the Appellant by subjecting them to double taxation on already taxed income.

Interest on Salary Transfers 33. According to the Appellant, the Respondent erroneously confirmed the disputed Excise Duty assessment on salary transfers on the basis that the Appellant had not charged and remitted excise duty on salary transfers. The Appellant averred that excise duty on salary transfers was deducted and remitted and that subjecting the same to excise duty amounts to double taxation. Therefore, the Appellant argued that in confirming the disputed tax assessment, the Respondent disenfranchised the Appellant by subjecting them to double taxation on already taxed income.

34. The Appellant relied in its written submissions dated and filed 5th January 2024 wherein the Appellant identified four issues for determination.i.Whether the Respondent erred in law and fact by seeking to re-characterise bridging loan interest to fees;ii.Whether the Respondent erred in law and fact by seeking to re-characterise interest on boosting of deposits to fees;iii.Whether the Respondent erred in law and in fact by demanding for Excise Duty relating to interest on Sacco re-joining; and,iv.Whether the Respondent erred in law and fact by seeking to re-characterise interest deferred on appraisal to fees.

35. The Appellant relied on a number of case laws including National Bank of Kenya vs. Commissioner of Domestic Taxes (Income Tax Appeal E155 & 533 0f 2020 (Consolidated)) [2022]; Commissioner of Domestic Taxes vs. Key Microfinance Bank Limited (Tax Appeal E031 of 2022) [2023], and Prime BankLimited vs. The Commissioner of Domestic Taxes (Tax Appeal No 210 of 2019) which reaffirmed the definition of the term interest.

36. Apart from the above, the Tribunal notes that all facts in the Appellant’s written submissions are the same as the contents of the Statement of Facts.

Appellant’s Prayers 37. The Appellant urges this Honourable Tribunal to make orders that:a.The decision contained in the Respondent’s letter dated 10th March 2023 demanding Excise duty tax of Kshs. 356,832,071. 00 inclusive of related penalties and interest be vacated;b.This Appeal be allowed;c.The excise duty liability and returns be amended to reflect the correct tax position; and,d.The costs of and incidental to this Appeal be awarded to the Appellant.

Respondent’s Case 38. The Respondent’s case is premised on its;a.Statement of Facts dated 17th May 2023 and filed on 19th May 2023 together with the documents attached thereto; and,b.Written submissions dated and filed on 18th January 2024.

39. The Respondent contended that the Appellant was established to serve employees of the then East African Power & Lighting Company but currently draws members from individuals in employment from all sectors, businesses, persons, groups, and corporates. The Appellant’s principal activity is to provide members with a haven for savings, avail affordable credit to members and return impressive dividends.

40. The Respondent conducted an audit on the Appellant’s tax affairs for the period 2017 to 2021 in line with Section 5, Paragraph 4 of Part II and Part lll of the First Schedule of the Excise Duty Act, 2015 and raised additional assessments for a principal excise duty sum of Kshs. 322,860,959. 00, being additional excise duty. The Respondent contended that the audit conducted on the books of the Appellant was necessitated by the fact that the Appellant had some “other non-interest incomes” which ought to have been subjected to excise duty.

41. According to the Respondent, the additional excise duty assessments were issued on 23rd December 2022 and subsequent assessments were raised on iTax on 19th and 20th January 2023. The assessments were based on variances established after reconciliation between excise duty payable on eligible fees against the actual excise duty levied and remitted to the Respondent for various charges/fees. The Appellant objected to the assessments followed by issuance of the Objection Decision dated 10th March 2023. The Appellant was aggrieved by the decision hence this Appeal.

42. In response to grounds 1, 4, 5 and 6 of the Memorandum of Appeal, Respondent contended that the audit of the period 2017- 2021 confirmed some of the issues which the High Court ruled against the Appellant in the case of Commissioner of Domestic Taxes vs. Stima Cooperative Savings & Credit Society Limited (Tax Appeal E090 of 2021) [2022] KEHC 12993(KLR) (Civ) (26 August 2022) and stated as follows:“bridging loans, appraisal, boosting deposits, and a deferred appraisal are Just but fees that are christened interest and are not interest strictu sensu. They are not exempt from Excise Duty.”

43. The Respondent contended that in Commissioner of Domestic Taxes vs. Stima Cooperative Savings & Credit Society Limited (Supra), the Court held that the following charges are not exempt from excise duty: - i Interest on bridging loans (ground 4); Interest on boosting deposits (ground 5); and Interest deferred on appraisal (ground 6). Going by this decision, the Respondent maintained that it is crystal clear that the Appellant has continuously repeated the same mistakes. Therefore, Respondent argued that the grounds of objection in the memorandum of appeal are not only incorrect but also misleading.

44. In response to ground 2 of the Appellant’s Memorandum of Appeal, the Respondent stated that Section 5 of the Excise Duty Act 2015 read together with Part lII of the First Schedule to the same Act were applied in arriving at the Objection Decision.

45. In response to ground 3 of the Appellant’s Memorandum of Appeal, the Respondent stated that there was only one instance where the Appellant presented a sample of loan application form and members statement and the issue was dropped. Therefore, the Respondent argued that this ground of appeal is general and lacks merit.

46. In response to ground 7 of the Appellant’s Memorandum of Appeal, the Respondent maintained that the Appellant was unable to match the amount of excise duty paid as per the provided payment slips with the amount payable as per the revenue streams in the corresponding trial balances. Due to lack of a proper reconciliation and demonstration that excise duty was charged and remitted, the Respondent rejected the Appellant’s objection and proceeded to confirm the assessment.

47. In response to ground 8 of the Appellant’s Memorandum of Appeal, the Respondent averred that the Appellant’s Ground of Objection 2. 1.7 in its Notice of Objection Application titled “Cheque Book Application Fee” stated as follows, “The KRA has demanded Excise tax on this item based on the wrong understanding that it is a fee charged by the Sacco for cheque book application...” The Respondent argued that it was guided by the Tribunal's judgement in TAT No. 266 of 2019 Guardian Bank Limited vs. Commissioner of Legal Services and Board Coordination where the Tribunal held that: -“Charges levied by the Appellant in the nature of cheque printing services are liable to a charge to excise duty.”

48. In further response to ground 8 of the Appellant’s Memorandum of Appeal, the Respondent stated that the Appellant in an email later confirmed as follows: -“Please note that the Sacco has been charging and accounting for Excise Duty on Cheque Book application fee from October 2018. ”

49. It is the Respondent’s case that a shift in the Appellant’s position at that advanced stage raised doubts about the Appellant’s understanding of its operations. According to the Respondent, the response and confession on this particular revenue stream is a clear indication that the Appellant mischaracterizes fees income as interest income in their books of accounts. Further, the Respondent noted that the Appellant was unable to match the amount of excise duty paid as per the provided payments slips with the amount payable as per the revenue streams in the corresponding trial balances.

50. In response to ground 9 of the Appellant’s Memorandum of Appeal, the Respondent’s asserted that Section 5 read together with Part II of the First Schedule to the Excise Duty Act 2015 indicates that “other fees” subject to Excise Duty has been described as including any fees related to the licensed activities of the financial institution. Consequently, the Respondent stated that the Sacco re-joining charge/ fee is a fee related to the Appellant's licensed activities and thus subject to excise duty.

51. Apart from the foregoing, the Respondent asserted that the Kenyan tax system is a self-assessment system where a taxpayer assesses itself and makes payments to KRA. All one requires is to acquire a KRA PIN and access the iTax system for one to file their returns for purposes of Excise Duty. The Respondent also stated that the Appellant was accorded the opportunity to file their returns and only thereafter the Respondent proceed under Section 31 of the Tax Procedures Act to review the Appellant’s self-assessment returns. Upon conclusion of the review it was discovered that there were some areas where there were omissions or taxes which were underpaid.

52. According to the Respondent, pursuant to Article 47 of the Constitution and Section 51 of the Tax Procedures Act, the Respondent engaged the Appellant at every stage of the process up to when the Objection Decision was issued. The Respondent alleged that the Appellant was requested to avail documents, records and any other information for purposes of verifying the self-assessment and that the Appellant was notified in writing of the gaps that were identified that led to tax liability and requested to respond to the issues arising.

53. Finally, the Respondent relied on Section 59 of the Tax Procedures Act which provides that the onus is on the Appellant to produce records for the purposes of obtaining full information in respect of the Appellant’s tax liability. The Respondent also relied on Section 30 of the Tax Appeals Tribunal Act and Section 56 of the Tax Procedures Act to assert that the Appellant failed to discharge the burden of proof.

54. The Respondent put in its written submissions wherein it raised an issue for determination as follows;Whether excise duty should be charged on interest on bridging loan; Interest on boosting of deposits; Interest deferred on appraisal; and Interest on SACCO re-joining fees.

55. The Respondent submitted that it was also guided by High Court decision in Commissioner of Domestic Taxes vs. Stima Cooperative Savings & Credit Society Limited (Tax Appeal E090 of 2021) [2022] KEHC 12993 (KLR) which dealt with similar issues to the ones in this case.

56. The Respondent submitted that since the Excise Duty Act does not define the word “interest” the Court was guided by previous decisions such as Republic vs. Kenya Revenue Authority ex parte Bata Shoe Company (Kenya) Limited (2014) which stated that the general rule is that tax laws are to be construed strictly. That is the plain and literal meaning should be used.

57. Further, the Respondent relied on Commissioner of Domestic Taxes vs. National Bank of Kenya (2022) eKLR where the court stated that“From the foregoing, it is crystal clear that interest is the compensation paid in consideration of using someone else’s money. Or put differently, it is the consideration that is paid for keeping someone out of the use of his money. It is payable both when a lender lends money to a borrower or a lender takes a deposit from a depositor.”

58. Finally, the Respondent relied on Section 30 of the Tax Appeals Tribunal Act and Section 56 of the Tax Procedures Act to submit that the Appellant failed to discharge the burden of proof.

Respondent’s prayers 59. The Respondent prayed that the Tribunal be pleased to find that:a.The Appellant’s Appeal lacks merit and should be dismissed;b.The Objection Decision dated 10th March 2023 be upheld; and,c.The Respondent be awarded costs of the Appeal.

Issues For Determination 60. The Tribunal having considered the Memorandum of Appeal, the parties’ Statements of Facts, and submissions, puts forth the following issues for determination:i.Whether the Respondent erred in charging excise duty on interest on bridging loan; Interest on boosting of deposits; Interest deferred on appraisal; and Interest on SACCO re-joining fees; and,ii.Whether charging Excise Duty on Salary transfers and on Cheque book application fee amounts to double taxation.

Analysis And Findings 61. The Tribunal having identified the issues for determination, shall analyse the same as herein under;

i. Whether the Respondent erred in charging excise duty on interest on bridging loan; Interest on boosting of deposits; Interest deferred on appraisal; and Interest on SACCO re-joining fees; 62. The Appellant claimed that interest on bridging loan; Interest on boosting of deposits; Interest deferred on appraisal; and Interest on SACCO re-joining fees are not subject to excise duty since they are not fees in accordance with Part Il of the First Schedule to the Excise Duty Act. On the other hand, the Respondent maintained that these are not interest therefore, are subject to taxation under Excise Duty Act.

63. Section 5 (1) of the Excise Duty Act imposes excise duty on excisable goods and services supplied in Kenya by a licensed person. Under Section 5 (2) of the Excise Duty Act, excise duty is charged at the rate specified in the First Schedule for the excisable goods or services in force at the time the liability arises. Paragraph 4 of Part II of the first schedule to the Excise Duty Act provides that,“Excise duty on other fees charged by financial institutions shall be twenty percent of their excisable value.’’

64. Paragraph C of Part III of the first schedule to the Excise Duty Act defines “other fees” to;“include any fees, charges or commissions charged by financial institutions relating to their licensed activities, but does not include interest on loan or return on loan or any share of profit or an insurance premium or premium based or related commissions specified in the Insurance Act or regulations made thereunder.’’

65. This issue was addressed by the High Court in Commissioner of Domestic Taxes vs. Stima Cooperative Savings & Credit Society Limited (Tax Appeal E090 of 2021) [2022] KEHC 12993 (KLR) (Commercial and Tax) (26 August 2022) where the Court found that charges for bridging loans, appraisal, boosting deposits and deferred on appraisal are not interests and are not exempt from excise duty. The court stated that,“obviously, these charges are just but fees that is christened ‘interest’ and are not interest strictu sensu. They are not exempt from excise duty.’’

66. The Appellant herein being the Respondent in Commissioner of Domestic Taxes vs. Stima Cooperative Savings & Credit Society Limited (Supra), should have known that this Tribunal cannot contradict the decision made by the High Court. The facts in this Appeal and the facts in the said High Court decision are the same, the law is the same and the parties are the same. The decision can only be the same in observance of the doctrine of stare decisis.

67. Consequently, the Tribunal finds that the Respondent did not err in charging excise duty on interest on bridging loan; Interest on boosting of deposits; Interest deferred on appraisal; and Interest on SACCO re-joining fees.

ii. Whether charging Excise Duty on Salary transfers and on Cheque book application fee amounts to double taxation. 68. The Appellant in its Memorandum of Appeal and Statement of Facts stated that the Respondent erroneously confirmed the disputed excise duty assessment on salary transfers on the basis that the Appellant had not charged and remitted excise duty on salary transfers. It also stated that the Respondent sought to bring to charge Cheque Book Application fee on the grounds that this had not been subjected to excise duty. The Appellant argued that this would lead to double taxation as excise duty on these items had already been paid. The Appellant referred the Tribunal to annexure xii and annexure xiii as evidence confirming excise duty charge and payment. The Tribunal examine the two annexures and notes that Annexure xii contains cheque book application fees and savings accounts. Annexure xiii contains Fosa prime accounts. From the foregoing, the Tribunal has not sighted evidence confirming payment of excise duty therefore, the issue on double taxation is unsubstantiated.

69. It also important to note that the Appellant did not address these two issues in its written submissions because the two issues fizzled out. Perhaps the Appellant became inattentive to them after the Respondent filed its response to the said issues. The consequence is that the Appellant has failed to discharge its burden of proof as it has failed to prove that the Responded erred in its assessments.

70. The High Court in Darwine Wholesalers Limited vs. Commissioner of Investigations and Enforcement (Income Tax Appeal E051 of 2021) [2023] KEHC 23537 (KLR) held as follows:“Under section 59 of the TPA and section 43 of the VAT Act the Commissioner is expressly empowered to ask for additional information to ascertain the tax chargeable. This legal position is in consonance with section 107 and 112 of the Evidence in that the balance of proof lies with the party with the knowledge of facts. Further section 30 of the Tax Appeals Tribunal Act (TATA) and section 56 of the TPA imposes the burden of proof on the tax payer to prove that an assessment was wrong or that it was excessive.’

71. The Tribunal finds that the Appellant failed to discharge its burden of proof.

Determination 72. The upshot to the foregoing is that the Tribunal finds and holds that the Appeal lack merit and consequently makes the following orders; -a.The Appeal be and is hereby dismissed;b.The Objection Decision dated 10th March 2023 is hereby upheld; andc.Each party to bear its own cost.

73. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 12TH DAY OF JULY 2024ROBERT M. MUTUMA - CHAIRMANELISHAH N. NJERU - MEMBERMUTISO MAKAU - MEMBERBERNADETTE M. GITARI - MEMBERABDULLAHI DIRIYE - MEMBER