https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/86

REPUBLIC OF KENYA IN THE TAX APPEALS TRIBUNAL AT NAIROBI TAT APPEAL NO E806 OF 2025 TEMPTATIONS GELATERIA LLP...................................................... …....……APPELLANT -VS- COMMISSIONER FOR LEGAL SERVICES & BOARD COORDINATION…...RESPONDENT JUDGMENT BACKGROUND 1. The Appellant is a limited liability partnership (LLP) registered in Kenya and whose principal activity is provision of accommodation and food services. 2. The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act. The Kenya Revenue Authority is an agency of the Government of Kenya mandated with the duty of collection and receipting of all tax revenue, and the administration and enforcement of all tax laws set out in parts 1 & 2 of the First Schedule to the Act, including assessing, collecting, and accounting for all tax revenues in accordance with those laws. Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 1 of 11 3. On 3rd April 2025, the Respondent issued the Appellant with default VAT assessments for the period November 2023 to February 2025 of Kshs. 5,109,632.00, to which the Appellant filed its objection. 4. On 25th June 2025, the Respondent issued its Objection Decision, allowing the Appellant’s objections against the default assessment and upholding the Appellant’s self-assessment of Kshs. 1,900,089.57 inclusive of penalty and interests. 5. The Appellant then lodged this Appeal vide its Notice of Appeal dated 24th July, 2025. THE APPEAL 6. The Appeal is premised on the Appellant’s Memorandum of Appeal dated 24th July, 2025 raising the following grounds of appeal: - a. The Respondent erred in law and fact by grossly exaggerating the computation of expected sales. b. The Respondent erred in law and in fact by misapplying Section 3(1) of the Income Tax Act as to what constitutes income in arriving at its assessment. c. The Respondent erred in law and in fact by disallowing expenses which were wholly and exclusively incurred in making the income in violation of Section 15 of the Income Tax Act (cap. 470). d. The Respondent erred in law and in fact by failing to credit input tax against the output tax in violation of Section 17 of the Value Added Tax Act, 2013. Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 2 of 11 e. The Respondent erred in fact and in law by assessing and determining that taxes were payable for car benefit without laying a legal and factual basis for such assessment. f. The Respondent erred in law and fact by disregarding the supporting information and documents provided by the Appellant in making its decision. g. The Respondent’s actions have amounted to gross violation of Article 47 of the Constitution of Kenya, which guarantees the Appellant the right to a fair administrative action that is reasonable and procedurally fair. APPELLANT’S CASE 7. The Appellant’s case is based on its Statement of Facts dated 24 th July 2025. The Appellant also filed its Written Submissions dated 4th May, 2026 urging that its Appeal be allowed. 8. The Appellant averred that sometime in the month of December, 2023 when it tried to file its VAT returns for the month of November 2023 on iTax platform, it realized that its PIN was under review for VAT compliance irregularities and had been placed under a special table, thereby preventing it from filing any returns. 9. The Appellant further averred that by a letter dated 20th December 2023, it wrote to the Respondent requesting clarification as to the reason for placing its PIN under the said special table and requesting removal therefrom in order that it may file its VAT returns, but the Respondent never responded. Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 3 of 11 10. It is the Appellant’s contention that in the month of January 2025, it logged onto its account on iTax to file its returns, but it was unable to do so as the Respondent had not removed it from the special table. The Appellant continued to liaise with the Respondent, visiting its officers severally to request clarification as to why its PIN had been placed under the special table, to no avail. 11. The Appellant stated that, by way of several emails sent between 3rd April 2025 and 2nd May 2025, the Respondent issued the Appellant with several Payment Default Notices for VAT obligations between November 2023 and February 2025. 12. The Appellant contended that the Respondent erred in law and fact by disallowing the Appellant’s claim for input tax against the provisions of Section 17 of the VAT Act, 2013 despite the Appellant having supported the purchases during the objection stage. 13. The Appellant further contended that additional VAT assessments can only arise from a reconciliation variance from mismatching invoices or missing invoices, none of which has been demonstrated, but cannot arise from non-existent sales deduced by the Commissioner from a banking analysis test. 14. The Appellant averred that the Respondent erred in law and in fact by disallowing expenses which were wholly and exclusively incurred in making the income, in violation of Section 15 of the Income Tax Act (Cap 470). 15. The Appellant stated that it is only costs incurred wholly or exclusively in the production of income of a person that are tax deductible. The basic accounting concept requires that expenses that Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 4 of 11 are incurred in an accounting period should be matched with the revenue earned during that period. Therefore, it is unacceptable and wrong for the Respondent to only elect to charge tax on revenues without considering the corresponding costs. Appellant’s Prayers 16. The Appellant prayed to the Tribunal for the following orders: - a) The Appeal be allowed with costs to the Appellant. b) The Respondent’s Objection Decision dated 25th June 2025 be set aside in its entirety. c) Any other orders that the Tribunal may deem fit. RESPONDENT’S CASE 17. In opposition to the Appeal, the Respondent filed its Statement of Facts dated 18th August, 2025 and Written Submissions dated 16th March, 2026. The Respondent also filed its Notice of Preliminary Objection dated 18th August, 2025. 18. In its Statement of Facts, the Respondent averred that it refutes each and every allegation by the Appellant and pleaded that it issued default assessments as a result of the Appellant’s failure to file VAT returns for the months of November 2023 to February 2025 contrary to provisions of Section 44(1) of the VAT Act, 2013 as read together with Section 24(1) of the Tax Procedures Act, 2015. 19. The Respondent stated that the Appellant objected to the default assessments and requested to the allowed to claim input VAT incurred in making the taxable supplies assessed. The Appellant was given an opportunity to submit its assessments. The Appellant availed Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 5 of 11 the self-assessment returns in excel format, sales ledgers, purchase ledgers and supporting documents. 20. The Respondent contended that it reviewed the documents availed and agreed with the Appellant, having noted that the Appellant maintained proper records for its operations and transactions. 21. The Respondent asserted that it noted that the supplies made by the Appellant were taxable and were declared in its self-assessed VAT returns in line with Section 5(1) of the VAT Act, 2013. Input VAT was properly supported and met the deductibility criteria set under Section 17 of the VAT Act, 2013. 22. The Respondent submitted that it adopted the Appellant’s self- assessment and that it took the place of the Respondent’s default assessments. Thus, the Appellant is essentially objecting against its own assessments. 23. The Respondent contended that the Appellant admitted the taxes and the same is due for collection as per Section 52 of the Tax Procedures Act. The Appellant brought forth the assessments on its own, which were wholly adopted by the Respondent, and the taxes in question were agreed by both parties. 24. In conclusion, the Respondent averred that the Tribunal does not have jurisdiction to hear and determine the matter until the undisputed taxes are paid or a payment plan is in place between the Appellant and the Respondent, as raised in the Notice of Preliminary Objection dated 18th August, 2025 and filed in the Tribunal. Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 6 of 11 25. In its Written Submissions dated 16th March, 2026, the Respondent urged that the Tribunal lacks jurisdiction and the Appeal is not valid ab initio as the Appellant had failed to pay undisputed taxes and, in any case, that the Appellant had not supported its objection. Respondent’s Prayers 26. The Respondent prayed to the Tribunal that the Appellant’s Appeal be dismissed with costs. ISSUES FOR DETERMINATION 27. The Tribunal having considered the parties' pleadings, submissions, and documents filed before it is of the view that the following issues fall for its determination: - i. Whether the Appeal is valid. ii. Whether the Respondent’s Objection Decision dated 25th June 2025 is Proper and Justified. ANALYSIS AND DETERMINATION (i) Whether the Appeal is valid. 28. The instant Appeal is premised on the Respondent’s Objection Decision dated 25th June 2025, which vacated its default VAT assessments and upheld the Appellant’s self VAT assessment of Kshs. 1,900,089.57 inclusive of penalties and interest. Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 7 of 11 29. The Respondent additionally filed its Notice of Preliminary Objection dated 18th August 2025, urging that the Appeal be struck out on the following grounds: - a. The Appeal is contrary to the provisions of Section 52(2) of the Tax Procedures Act, 2015. b. The Notice of Appeal to the Tribunal relating to an assessment is only valid if the Appellant has paid the tax not in dispute. c. The Respondent adopted the assessments brought forth by the Appellant. The taxes subject to the case are undisputed. d. The Tax Appeals Tribunal therefore lacks the jurisdiction to hear and determine the matter. 30. As the Preliminary Objection raises the question of jurisdiction, the Tribunal shall proceed to determine it before delving into other issues for determination. 31. The Respondent contended that the Tribunal lacks jurisdiction to determine this Appeal as it was filed contrary to Section 52(2) of the Tax Procedures Act, 2015. Section 52(2) of the TPA provides for the filing of appealable decisions in the following terms: - Appeal of appealable decision to the Tribunal (1)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 (Cap. 469A). (2)A notice of appeal to the Tribunal relating to an assessment shall be valid if the taxpayer has paid the tax not in dispute or entered into an arrangement with the Commissioner to pay the tax not in dispute under Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 8 of 11 the assessment . at the time of lodging the notice (emphasis added) 32. The Tribunal notes that the Notice of Appeal dated 24th July, 2025 filed by the Appellant specifically disputes the Respondent’s Objection Decision dated 25th June, 2025, which is on record. The said Objection Decision vacated the Respondent’s default assessments and adopted the Appellant’s self-assessments for VAT. There is nothing on record to show that the self-assessments have been disputed and or amended by either the Appellant or the Respondent. Accordingly, the self-assessed tax became undisputed tax as confirmed in the Objection Decision dated 25th June, 2025. 33. In the circumstances, the Tribunal finds and holds that the Appellant ought to have complied with the provisions of Section 52(2) of the TPA before filing its Notice of Appeal. Thus, the Notice of Appeal dated 24th July, 2025, as presently filed, is invalid, and the Tribunal does not have jurisdiction to hear and determine this Appeal. 34. In Owners of the Motor Vessel “Lillian S” -vs- Caltex Oil (Kenya) Ltd [1989] eKLR, the Court of Appeal determined the question of importance of jurisdiction in the following terms: - I think that it is reasonably plain that a question of jurisdiction ought to be raised at the earliest opportunity and the court seized of the matter is then obliged to decide the issue right away on the material before it. 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 Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 9 of 11 matter before it the moment it holds the opinion that it is without jurisdiction. 35. Having determined that the Tribunal lacks jurisdiction to determine the instant Appeal, we see no reason to delve into the other issue for determination. DISPOSITION 36. The upshot of the foregoing analysis is that the Tribunal find and holds that it lacks jurisdiction to determine the instant Appeal and proceeds to issue the following orders: - a. The Appeal is hereby struck out. b. Each Party is to bear its own costs. 37. It is so ordered. DATED and DELIVERED at NAIROBI this ………26th ...……. Day of …… June..…… 2026 ..........................………………………. DR. RODNEY ODHIAMBO OLUOCH CHAIRPERSON Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 10 of 11 .…..….……………………. ..…. ………………………. ABDULLAHI DIRIYE MEMBER DR. ERICK KOMOLO MEMBER Judgment TAT No. E806 of 2025 – Temptations Gelateria LLP -vs- Commissioner for Legal Services & Board Coordination Page 11 of 11