[2024] KETAT 1734 (KLR)

Techsavanna Company Limited v Commissioner of Domestic Taxes (Miscellaneous Tax Appeal E1225 of 2024) [2024] KETAT 1734 (KLR) (11 December 2024) (Ruling)

Neutral citation: [2024] KETAT 1734 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Miscellaneous Tax Appeal E1225 of 2024

CA Muga, Chair, EN Njeru, E Ng'ang'a & SS Ololchike, Members

December 11, 2024

Between

Techsavanna Company Limited

Applicant

and

Commissioner Of Domestic Taxes

Respondent

Ruling

Background 1. The Applicant moved this Tribunal through a Notice of Motion dated 23rd October 2024 and filed on 25th October 2024 seeking the following Orders:a.Spent.b.That the Applicant's Notice of Appeal dated 6th September 2023 be admitted into the record of the Tribunal as having been filed on time.c.That the Applicant be granted an extension of time in order to file a Memorandum of Appeal and Statement of Fact before this Tribunal.d.That the Tribunal be pleased to issue interim orders staying the enforcement of the taxes demanded by the Respondent pending the hearing and determination of the Appeal.e.That this Tribunal be pleased to issue any such orders as it deems just and expedient.f.That the cost of this Application be in the cause.

2. The Application was based on the following grounds as outlined in an Affidavit sworn by the Applicant’s Director, Mr. Jacob Mmasi Shaviya:a.That due to factors beyond its control, the Applicant did not comply with the required timelines to lodge its Appeal documents.b.That the Applicant had appointed Messrs Mark & Co. Associates to act as its tax agent and handle this Appeal in its entirety.c.That even though the aforesaid tax agent duly filed the Notice of Appeal dated 9th September 2023 they did not file the Appeal Documents within the stipulated time as directed by the Tribunal.d.That the Applicant only discovered that its Appeal Documents were not duly lodged upon its Appeal being struck out by the Tribunal in a decision dated 4th October 2024. e.That the aforesaid tax agent had all along misled the Applicant to believe that the Appeal Documents had been duly submitted on time.f.That the Applicant has lodged this Application at the earliest juncture and without undue delay upon discovery of the omission by its agent.g.That the Applicant was apprehensive of enforcement action being taken by the Respondent on account of the Tribunal's recent decision to strike out its Appeal.h.That the Respondent will suffer no prejudice if orders sought herein for extension of time is granted.i.That it was in the interests of justice that the Tribunal grants the orders sought herein.j.That unless this Application was heard on a priority basis and the orders sought herein granted, the Applicant will be highly prejudiced as it is not in a position to pay the assessed taxes which are incorrect and excessive.

3. The Respondent filed its Replying Affidavit on 5th November 2024 wherein it stated as follows:a.That the Judgement in this matter was delivered on 4th October 2024 in favour of the Respondent. The Tribunal found that the Applicant had failed to comply with the provisions of Section 13(3) of the Tax Appeals Tribunal Act, CAP 469A of the Laws of Kenya (hereinafter “TATA”) despite being granted an opportunity to file its appeal within 14 days from 14th September 2023. b.The Applicant’s reason for failure to file the appeal within the timelines was because it was not diligent and ignored the directions that were issued by the Tribunal.c.The Applicant did not demonstrate that it followed up with its tax agent on the progress of the matter. The Applicant’s reason for failure to appeal within the required timelines was an afterthought and flimsy and ought not to be entertained.d.The Applicant was guilty of laches and had been indolent in the disposal of this matter and thus the Tribunal should not come to its aid and that equity should come to the aid of the vigilant and not the indolent as in the present case.e.The Respondent stands to suffer prejudice if the agency notices are lifted unconditionally since it has demonstrated that it followed the laid down procedure in placing the agency notices.f.The Tribunal has the powers to direct that the Applicant to furnish security as a condition for lifting the agency notices in order to balance and protect the interests of both parties.

4. The Tribunal notes that both parties complied with the directions of the Tribunal that the Application be canvassed by way of written submissions. The parties were to file and serve on each other submissions on or before 14th November, 2024. Parties complied. The Applicant filed its written submissions dated 13th November, 2024 on even date whilst the Respondent’s written submissions dated 11th November, 2024 were filed on 12th November, 2024. The Tribunal has considered the said submissions in making its Ruling.

Analysis and Findings 5. The Applicant sought leave to file its appeal out of time. The jurisdiction to hear and determine application of this nature is derived from Section 13(3) of the TATA which provides as follows:“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).”

6. In addition to that, Section 13(4) of TATA provides for grounds upon which the Tribunal may exercise its discretion 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 filing the notice of appeal or submitting the documents within the specified period.’’

7. Rule 10 of the Tax Appeals Tribunal (Procedure) Rules, 2015 (hereinafter referred to as the ‘Rules’) reiterates the foregoing statutory provision in the following terms:“(3)The Tribunal may grant the extension of time if it is satisfied that the Applicant was unable to submit the documents in time for the following reasons –(a)Absence from Kenya;(b)Sickness; or(c)Any other reasonable cause.”

8. It is important to note that under section 13 (3) and Rule 10 of the Rules, the power to extend time is discretionary and not a right to be granted to the Applicant.

9. The Supreme Court in Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 others [2014] eKLR set out general considerations to guide the court in exercising its discretion in cases of this nature. The Court stated as follows:“i.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;ii.A party who seeks for extension of time has the burden of laying a basis to the satisfaction of the court;iii.Whether the court should exercise the discretion to extend time, is a consideration to be made on a case-to-case basis;iv.Whether there is a reasonable reason for the delay. The delay should be explained to the satisfaction of the court;v.Whether there will be any prejudice suffered by the respondents if the extension is granted;vi.Whether the application has been brought without undue delay; andvii.Whether in certain cases, like election petitions, public interest should be a consideration for extending time."

10. The Court in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application No. 251 of 1997 had the following to say about an application for enlargement of time:“It is now settled that the decision whether to extend the time for appealing is essentially discretionary. It is also well stated that in general the matters which this court takes into account in deciding whether to grant an extension of time are, first the length of the delay, secondly the reasons for the delay, thirdly (possibly) the chances of the appeal succeeding if the application is granted and fourthly the degree of prejudice to the respondent if the application is granted.”

11. Further, the Court in the case of Wasike v Swala [1984] KLR 591 provided the hierarchy of the factors to consider when considering an application for enablement of time. It stated thus:“An applicant must now show, in descending scale of importance, the following factors:-a)That there is merit in his appeal.b)That the extension of time to institute and/or file the appeal will not cause undue prejudice to the respondent; andc)That the delay has not been inordinate.”

12. The Tribunal therefore, examined the Application in relation to the foregoing provisions of the law and case law and found as follows :.

a. On whether there is a reasonable cause for the delay. 13. The Tribunal has a duty to find out whether the Applicant established reasonable grounds that led to the delay. This principle was highlighted in the case of National Union of Mineworkers v Council for Mineral Technology [1998] ZALAC 22, wherein the court stated as follows in relation to reasonable cause:‘‘…There is a further principle which is applied and that is that without a reasonable and acceptable explanation for the delay, the prospects of success are immaterial, and without prospects of success, no matter how good the explanation for the delay, an application for condonation should be refused.”

14. The Applicant herein sought leave to file the appeal out of time on ground that it appointed Messrs Mark & Co. Associates to act for the Applicant. The aforesaid tax agent filed the Notice of Appeal dated 9th September 2023 but did not file the Appeal Documents within the stipulated time as directed by the Tribunal. The Appellant alleged that it only discovered that its Appeal Documents were not duly lodged upon its Appeal being struck out by the Tribunal in a decision dated 4th October 2024. The Applicant maintained that its tax agent misled it to believe Appeal Documents had been duly submitted on time.

15. In Markson Karani Muchunku v Joseph Ngari Gituku [2021] eKLR the High Court stated as follows:“where a litigant raises the issue of negligence of counsel, the court will consider doing justice to the parties depending on the circumstances of the case.”

16. The Tribunal notes the following comments of the court in the case of Belinda Muras and 6 Others –Vs- Amos Wainaina [1978] eKLR through which Hon Madan JA (as he then was) outlined what would constitute a mistake:“A mistake is a mistake. It is no less a mistake because it is an unfortunate step. It is no less pardonable because it is committed by senior counsel. Though in the case of junior counsel court might feel compassionate more readily. A blunder on a point of law can be a mistake. The door of justice is not closed because of a mistake has been made by a lawyer of experience who ought to know better. The court may not condone it but ought certainly to do whatever is necessary to rectify if the interest of justice so dictate.”

17. The Tribunal notes that though both quoted precedents are in relation to the advocate-client relationship, the same principle could apply to the relationship between a tax agent and its client as outlined in the present circumstances. The Tribunal delivered its Judgment on 4th October 2024 wherein the appeal was struck put on basis that the Applicant failed to comply with the Tribunal’s directions with regard to filing of the appeal documents.

18. The Tribunal notes the argument by the Applicant that the tax agent failed to file the appeal within time, the Tribunal is of the view that the mistake of an agent should not be visited upon a taxpayer unless the taxpayer is an abettor.

b. On whether the delay was inordinate. 19. The Tribunal is of the view that the Applicant had the obligation of establishing that the delay was not inordinate and that even if the delay was inordinate, the Applicant ought to explain satisfactorily the reasons for such an inordinate delay. In the case of Joseph Odide Walome v David Mbadi Akello [2022] eKLR, the Court stated as follows:‘‘where a party is aggrieved and wishes to pursue an appeal, it would be fair to exercise discretion in his favour and especially where the delay in filing the appeal is not inordinate or even if the delay is inordinate, it is explained to the satisfaction of the court and the adverse party will not be prejudiced in any way.’

20. The Tribunal notes that in the instant case, the Judgement was delivered on 4th October 2024. The Applicant filed the Application on 25th October 2024 and accordingly the Tribunal’s finding is that the delay is not inordinate.

c. On whether there is merit in the Appeal. 21. In the case of Stanley Kangethe Kinyanjui v Tony Keter and others (2013) eKLR, the Court had the following to say about this issue:“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.”

22. In the case of Samuel Mwaura Muthumbi v Josephine Wanjiru Ngungi & Another (2018) eKLR the court opined as follows:“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 Applicant 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.”

23. This Tribunal, having established that there was an arguable case, granted leave to the Applicant to file its Appeal out of time but the Applicant squandered that opportunity. The Tribunal is of the view that if it has to give the Appellant a second chance, then the remedy would be to reinstate the TAT No. E932 of 2023 Techsavanna Co. Ltd v Commissioner of Domestic Taxes.

d. On whether the Respondent will be prejudiced if time is enlarged. 24. In Edith Gichungu Koine v Stephen Njagi Thoithi [2014] eKLR the court held as follows:‘…the degree of prejudice to Respondent if the application is granted should be considered.’’ This has been affirmed in multiple case laws including in Nicholas Kiptoo Arap Korir Salat v Independent Electoral and Boundaries Commission & 7 others [2014] eKLR (supra).

25. Consequently, the Tribunal has a duty to evaluate whether the Respondent may suffer prejudice if the Applicant is allowed to file an appeal out of time. The Tribunal is of the view that the Respondent will not be prejudiced if leave is granted since the Respondent will still recover the taxes should the appeal fail.

26. On the basis of the foregoing analysis, the Tribunal is persuaded to grant leave to the Applicant to file the appeal documents out of time.

Disposition 27. The upshot of the foregoing is the Tribunal’s finding that this Application is merited and accordingly proceeds to make the following Orders:a.The Judgement delivered on 4th October 2024 in respect of TAT No. E932 of 2023- Techsavanna Co. Ltd vs Commissioner of Domestic Taxes be and is hereby set aside.b.The Applicant’s record of Appeal filed on filed on 18th December 2023 is hereby deemed as having been duly filed and served.c.The Respondent’s Statement of Facts dated 18th January 2024 and filed on 19th January 2024 together with their written submissions dated and filed on 2nd August 2024 are hereby deemed as duly filed and served.d.The execution of any agency notices issued be and are hereby stayed pending delivery of the Judgment.e.No orders as to costs.

28. It is so Ordered.

DATED AND DELIVERED AT NAIROBI THIS 11TH DAY OF DECEMBER, 2024. ………………………………….CHRISTINE A. MUGA CHAIRPERSON………………………….. …………….……………..ELISHAH N. NJERU MEMBER……………..…………….EUNICE N. NG’ANG’A. MEMBEROLOLCHIKE S. SPENCER. MEMBER