[2023] KETAT 155 (KLR)

Thmk Enterprises Ltd v Commisioner Of Domsetic Taxes (Appeal 745 of 2021) [2023] KETAT 155 (KLR) (17 March 2023) (Judgment)

Neutral citation: [2023] KETAT 155 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Appeal 745 of 2021

RM Mutuma, Chair, RO Oluoch, EN Njeru, D.K Ngala & EK Cheluget, Members

March 17, 2023

Between

Thmk Enterprises Ltd

Appellant

and

Commisioner Of Domsetic Taxes

Respondent

Judgment

Background 1. The Appellant is a limited liability company duly incorporated under the Companies Act of the laws of Kenya and its principle activity is selling and maintaining software.

2. The Respondent is a principle appointed under Section 13 of the Kenya Revenue Authority Act, 1995. Under Section 5 (1) of the Act, the Kenya Revenue Authority is an agency of the Government for the collection and receipt of all tax revenue. Further, under Section 5(2) of the Act with respect to the performance of its functions under subsection (1), the Authority is mandated to administer and enforce all provisions of the written laws as set out in Part 1 & 2 of the First Schedule to the Act for the purposes of assessing, collecting and accounting for all revenues in accordance with those laws.

3. The Respondent carried out a review of the Appellant’s business for the years 2018 and 2019 and thereafter issued the Respondent with a demand notice dated the 21st July 2021 of Kshs 5,291,000. 18 inclusive of penalties and interest; and withholding tax of Kshs 6,721,355. 00 inclusive of penalties and interest. The total assessment was Kshs 12,012,355. 00

4. The Appellant lodged an objection on the 20th August 2021 stating that its income in 2018 and 2019 was accrued and derived from Uganda and was thus not subject to tax in Kenya.

5. The Respondent reviewed the objection in light of the documents provided and thereafter issued an objection decision on the 5th October 2021 amending the assessments as follows:- Assessment Figures Re-assessmentFigures

Withholding Tax Kshs 6,721,355 Kshs 3,705,685

Income Tax Kshs 5,291,000. 18 Kshs 4,199,207

Total Kshs 12,012,355 Kshs 7,904,892

6. The Appellant was aggrieved by the objection decision and it commenced an appeal process before the Tribunal vide its Notice of Appeal dated the 2nd November 2021.

The Appeal 7. The Appellant filed its Memorandum of Appeal with Tribunal dated and filed on 17th November 2021, and set out the following grounds of appeal;a.That the Respondent erred in law and fact by confirming an assessment on income that was not accrued in or derived from Kenya.b.That the Respondent erred in law and fact by confirming an assessment on withholding tax on income that was not accrued in or derived from Kenya.c.That the Respondent erred in law and in fact by making a finding that the Appellant being a resident any foreign income is deemed to have accrued and derived from Kenya.d.That the Respondent erred in law and acted ultra vires the provisions of the Tax Procedures Act and income Tax Act by raising tax assessments relating to foreign income not accrued or derived from Kenya.e.That the Respondent erred in fact and in law by not considering the deductibles and expenses for the year 2019 before making tax assessment on income.f.That the Respondent erred in law by placing a tax liability on withholding taxes on commissions and consultants’ fees contrary to the agreements between the Appellant and Consultants.

8. By reason of the grounds aforesaid the Appellant prayed that the Tribunal allow the Appeal and set aside the Respondent’s objection decision.

The Appellant’s Case 9. The Appellant has set out its case in the Statement of Facts dated and filed on the 17th November 2021 and its written submissions and bundle of authorities both filed on the 9th November 2022, wherein it stated as follows:

On 2018 and 2019 Assessments 10. That the first contract the Appellant signed with Crown Beverages Limited (CBL) was dated 11th January 2018 and the works for that year was done in Kampala from where the consultant was stationed as shown in the contract between the parties.

11. It was engaged by Crown Beverages Limited a limited liability company established in Uganda under the Uganda Laws (herein referred to as “CBL”) to provide consultancy services. All the works done in Kampala – Uganda and the Appellant was stationed in Uganda for the entire duration.

12. It paid the consultants fees and the consultants’ upkeep in Kampala for theentire duration of the works as shown in the table below.Year 2018 AssessmentThmk Enterprises Limited - - -

Year Ended 31 December 2018 - - -

Consultants Fees - - -

Name OfConsultant Contracts 2018 ContractTotal Kes Total

Usd Rate In Kes - -

Raja Sekhar Bittu Support 1,950. 00 102. 5702 200,011. 89

Obula Reddy Support 7,800. 00 102. 5702 800,047. 56

Kiran Gholap Support 8,400. 00 102. 5702 861,589. 68

Dennis Langat Support 9,000. 00 102. 5702 923,131. 80

Andrew Shikuku Support 9,600. 00 102. 5702 984,673. 92

Alinda Antony Support 600. 00 102. 5702 61,542. 12

Edwin Mwangi Support 5,850. 00 102. 5702 600,035. 67

43,200. 00

4,431,032. 64

13. That it paid for commissions and data management systems for carrying out the Appellant’s obligations under the contract while stationed in Kampala for the year 2019 as shown in the table below.Year 2019 AssessmentThmk Enterprises Limited

Year Ended 31 December 2019

Consultants Fees

Name of Consultant 2019 Contracts By Type Total Kes Total

Usd Rate In Kes

Obula Reddy Support 1,950. 00 101. 5847 198,090. 17

Re-implementation 40,398. 00 101. 5847 4,103,818. 71

Kiran Gholap Support 2,100. 00 101. 5847 213,327. 87

Re-implementation 79,530. 00 101. 5847 4,103,818. 71

Dennis Langat Support 2,250. 00 101. 5847 228,565. 58

Re-implementation 18,462. 00 101. 5847 1,875,456. 73

Andrew Shikuku Support 2,400. 00 101. 5847 243,803. 28

Re-implementation 18,462. 00 101. 5847 1,875,456. 73

Alinda Antony Re-implementation 17,310. 00 101. 5847 1,758,431. 16

Edwin Mwangi Support 1,950. 00 101. 5847 198,090. 17

Re-implementation 23,076. 00 101. 5847 2,344,168. 54

218,274. 00

22,173,298. 81

14. That its auditor did not factor in all the expenses it incurred in performing its obligations under the contract and the returns as filed did not reflect the true position of the Appellant.

On Income not accrued in or derived from Kenya 15. The Appellant argued under this head that whereas Section 3(1) of the ITA provides that:“Subject to and in accordance with, this Act, a tax to be known as income tax shall be charged for each year of income upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya”

16. The Courts in Kenya defined the phrase “accrued in or was derived from Kenya.” In the case of The Commissioner of Income Tax versus Mabati Rolling Mills Limited (2012) eKLR, where the Court found that,“The contract between the supplier and the Respondent was entered into in Japan and the goods were sold and delivered in Japan. Section 10 (c ) of the Act stipulates that where a resident person makes a payment to any person in respect of interest the amount thereof shall be deemed to be income which accrued in or was derived from Kenya. However, one of the provisos to that Section is that the Section shall not apply unless the payment is incurred in the production of income accrued in or derived from Kenya or in connection with business carried on in whole or in part in Kenya.”

17. It also cited the case of Motaku Shipping Agencies Limited versus The Commissioner of Income Tax (2014) eKLR, Where the Learned Judge held that:“payment for management or professional fee is only chargeable to tax if the same accrued in or was derived from Kenya (Section 3 of the Income Tax Act). A payment in respect of management or professional fees is deemed to accrue or derive in Kenya only when the payment is made by a resident person or a person having a permanent establishment in Kenya (Section 10 of the Income Tax Act). In my view, since the payments in issue were made by the vessel owners who were non-resident persons not having a permanent establishment in Kenya, the same were not chargeable to income tax even if the payments were made to persons based in Kenya.”

18. The Appellant posited that the Respondent erred in its objection decision when it failed to consider or give reasons why it concluded that income was derived in Kenya whereas all the contracts were done and performed in Uganda. The contract was also governed by Ugandan Laws and incase of any dispute, Arbitration was to be conducted in Kampala-Uganda while applying the Ugandan law.

19. The Appellant stated that the Respondent relied on a non-existent provision in the Consultant Contracts in holding that WHT was payable in Kenya. This action was tantamount to rewriting the contracts.

20. In its view, the Respondent should not be permitted to impose conditions as to the manner in which the express and clear provisions of the contract between the Appellant and the consultants should be construed. It cited the case of Primasosa Flowers Limited versus – The Commissioner of Income Tax (2017) eKLR to support this position, where the Learned Judge in allowing the appeal by Primarosa held;‘A basic principle of the common law… is that the parties are free to determine for themselves what primary obligations they will accept.’

21. Without prejudice to the foregoing, the Appellant averred that even in cases where parties have arranged their affairs in a manner intended to reduce their tax liability, the Revenue Authority has no right to re-write the contract in order to collect more tax. It cited the case of Duke of Westminster v Commissioner of Inland Revenue 19 TC 490, where the Court held,..”Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then however unappreciative the Commissioners of Inland Revenue…he cannot be compelled to pay an increased tax.”

22. The Appellant averred that by applying the operations test, the Appellant’s consultants performed the works in Uganda and were governed by Ugandan laws and as such nothing can be said to be done in Kenya. It accordingly stated that the sums received by the consultants or commissions paid to consultants ought not to be taxed in Kenya as they have not been accrued in or derived from Kenya.

23. The Appellant averred that what should be considered in a case like this one is whether the WHT is lawfully due and payable under the ITA. The Respondent should however not be allowed to assess tax on the basis of a wrongful perception on the construction of the consultants Contracts and commissions when the actual facts expressly stipulate that no tax is payable by the Appellant. It relied on the case Keroche Industries Limited v Kenya Revenue Authority & 5 others (supra) to support this position.

24. The Appellant’s submissions which were largely aligned to its Statement of Facts further asserted that:a.The Respondent did not produce any evidence or rationale to show that its income accrued in Kenya.b.All the payments it received from Uganda’s CBL in regard to this contract was paid to the consultants.c.The Amendment to the TPA which made the payer liable for unremitted WHT was introduced in 2019 when Section 39(a) of the TPA re-introduced. In its view, this implied that it was not under any legal obligation to pay WHT for the consultants in the years 2018 and 2019 because Section 39A which was previously known as Section 35(6) was deleted by the Finance Act of 2016 and only re-introduced by the Finance Act of 2019. d.Its supplementary statement of facts confirm that its expenses add up to Kshs 13,033,776. 00 against an income of Kshs 13,997,355. 00, thereby leaving a balance of Kshs 963,580. 67. 00. Meaning that tax should have been assessed at Kshs 289,074. 20. 00. e.These expenses have not been disputed and should therefore be considered.

Appellant’s prayer 25. By reason of the foregoing submissions and assertions the Appellant prayed that its Appeal be allowed and the Respondent’s objection decision dated the 5th October 2021 be set aside.

Respondent’s Case 26. The Respondent has set out its response to the Appellant’s Appeal in the Statement of Facts dated 16th December, 2021 and filed on 21st December 2021 and the written submissions dated 27th September, 2022 and filed on 28th September 2022.

27. The Respondent averred that Section 56(1) of the Tax Procedure Act places the onus of proof in tax objections on the taxpayer who in this case failed to avail evidence that would support a contrary assessment, or that would have guided the Respondent at arriving at a different objection decision. That the Section provides as follows:‘56(1)In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.’

28. The Respondent stated that:a.The estimated assessments for accounting period 2018 and 2019 were correct because the Appellant did not file income tax returns for the period 2018-2019; contrary to Section 94 and 95 of the Tax Procedures Act. The Section s provide that:“94. Failure to submit tax return or other document1. A person commits an offence if the person without reasonable cause fails to submit a tax return or other document required under a tax law by the due date95. Failure to pay taxA person commits an offence if that person fails to pay tax by the due date.’b.It is the responsibility of any person carrying on business under Section 54A (1) of the ITA to maintain records of all transactions. The relevant Section provides:‘54A(1)A person carrying on a business shall keep records of all receipts and expenses, for goods purchased and sold and accounts, books, deeds, contracts and vouchers which in the opinion of the Commissioner, are adequate for the purpose of computing tax”

29. It was the Respondent’s argument that a resident person in respect of a company is defined under Section 2 of the ITA to include a company incorporated in Kenya. In light of aforesaid, the Appellant is a company incorporated in Kenya, the company is resident in Kenya according to the ITA, as such the total income of the company as per the audited accounts is chargeable to tax pursuant to Section 3(2)(a)(i) as read together with Section 4 (a) of the ITA. Section 3 of the ITA provides that:‘3(1)Subject to, and in accordance with this Act, a tax to be known as income tax shall be charged for each year of income upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya.’

30. The Respondent asserted that Section 4 (a) of the ITA deems worldwide income earned by a resident of Kenya as income accrued or derived from Kenya. The Section provides as follows:‘For the purposes of Section 3(2)(a)(i) –where a business is carried on or exercised partly within and partly outside Kenya by a resident person, the whole of the gains or profits from that business shall be deemed to have accrued in or have been derived from Kenya;’

31. The Respondent submitted that the Appellant admitted that it did not pay any tax in Uganda because the contract between CBL Uganda and Appellant was exclusive of tax and it invoiced CBL Uganda exclusive of tax and CBL did not deduct WHT from payments it made.

32. The respondent took these admissions to mean that the Appellant did not pay any taxes in Uganda because CBL Uganda bore the taxes.

33. The Respondent argued that Section 10 of the ITA provides that payment must be made by a resident person or a person having a permanent establishment in Kenya, and that such payment must be incurred in the production of income accrued in or derived from Kenya or in connection with a business carried on or to be carried on, in whole or in part, in Kenya for a payment of management or professional fee to be deemed to be income which accrued in or was derived from Kenya.

34. Since income accrued by the Appellant was deemed to have been accrued or derived from Kenya, the Respondent stated that the Appellant should have withheld tax on payments of the Commissions and Consultancy fees paid.

35. The Respondent posited that:a.The Appellant provided a list to it without an indication of who was the payee. It was therefore not able to determine whether the payees were residents or non-residents. It is for this reason that it confirmed the WHT as assessed amounting to Kshs 1,490,676. 00b.In the year of income 2018 and 2019, payments made to non-residents consultants who were residents in India and Uganda had their tax reduced by 20% according to the Double Tax Agreements that Kenya has signed with India and EAC countries. The Respondent therefore, amended the assessment by applying the appropriate WHT as contained in the DTA and as follows:Name of Consultant Country of residence 2018Consultancy fees 2019Consultancy fees Total Consultancy fees WHTrate WHT

1. ReddyObula India 800,048 4,301,909 5,101,956 10% 510,196

2. KiranGholap India 861,590 8,292,359 9,153,949 10% 915,395

3. AlindaAnthony Uganda 61,542 1,758,431 1,819,973 15% 272,996

4. DennisLangat Kenya 923,132 2,104,031 3,027,163 5% 151,358

5. Andrew Shikuku Kenya 984,674 3,174,319 4,158,993 5% 207,950

6. EdwinMwangi Kenya 600,036 2,542,259 3,142,294 5% 157,115

Total

4,231,021 22,173,308 26,404,329

2,215,009

On submissions 36. The Respondent filed in its submissions on the 28th September 2022 wherein it proposed the following two issues for determination in this Appeal:

i. Whether the Respondent erred in law and fact by confirming the assessments on income and WHT that was not accrued or derived from Kenya. On Income Tax 37. The Respondent submitted that in the 2019 year of income, the Appellant made an adjustment in its taxable income by capturing Kshs, 13,997,355. 00 as exempt incomes. The reason for this adjustment was because the income was earned in Uganda and was thus a foreign income that is not subject to tax under Section 3(2) (a) (I) of the Income Tax Act CAP 470 of the Laws of Kenya (“ITA”).

38. The Respondent stated that it was of the view that a Kenyan resident is subject to tax on its worldwide income as per Section 4(a) of the ITA. It is for this reason that it subjected the Appellant’s income to Corporation tax and assessed corporate income tax amounting to Kshs. 5,291,000. 18.

39. It supported its position with the case of China Road & Bridge CorporationvCommissioner of Domestic Taxes [2021] eKLR which cited the case of Republic vs Commissioner of Domestic Taxes Large Tax Payer’s Office Ex- Parte Barclays Bank of Kenya Ltd [2012] eKLR in which the court stated as follows:“… in a taxing Act, one has to look at what is clearly said. There is no room for intendment as to a tax. Nothing is to be read in, nothing it to be implied. One can only look fairly at the language used… If a person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be….”

40. It further stated that considering that the Appellant was a company incorporated in Kenya. This means that it is resident in Kenya and as such its income is chargeable to tax at rate of 30% under Section 3(2) (a) (I) as read with Section 4(a) of the ITA.

41. Section 4 (a) of the ITA provides as follows:‘For the purposes of Section 3(2) (a) (1) – where a business is carried on or exercised partly within and partly outside Kenya by a resident person, the whole of the gains or profits from that business shall be deemed to have accrued in or to have been derived from Kenya;’

On Withholding Tax 42. The Respondent submitted that Section 35 of the ITA, provides that a person making a payment to a resident or non-resident in respect of commissions and consultancy fees is required to withhold tax at the appropriate resident or non-resident rate.

43. Section 10 of the ITA: - Deems the payments liable to WHT to be income accrued in or derived from Kenya. The Section provides as follows:“(1)For the purposes of this Act, where a resident person or a person having a permanent establishment in Kenya makes a payment to any other person in respect of-a.A management or professional fee or training fee;b.…c.…The amount thereof shall be deemed to be income which accrued in or was derived from Kenya.”Provided that-(i)This subjection shall not apply unless the payment is incurred in the production of income accrued in or derived from Kenya or in connection with a business carried on or to be carried on, in whole or in part, in Kenya.”

44. The Respondent submitted that Section 10 of the Income Tax Act deems as income payment by every resident person, or a person having permanent establishment in Kenya in respect of the items specified thereunder.

45. That the subject payments were made by the Appellant who is a resident for purposes of the Income Tax Act and therefore, the payments are deemed to be income which accrued in or was derived in Kenya and that the Appellant was thus under obligation, pursuant to Section 35 of the Income Tax Act, to withhold and remit to the Respondent a percentage of such payments; and that the taxpayer is liable to pay taxes as per the requirements of Section 35 of the Income Tax Act.ii.Whether the Respondent erred in law by placing a tax liability on withholding taxes on commissions and consultant fees contrary to the agreement between the Appellant and consultants

46. It was the Respondent’s contention that:a.The Appellant provided a list without an indication of who was the payee. The Commissioner was thus unbale to determine whether the payees were residents or non-residents.b.In the year of income 2018 and 2019, payments were made to resident and non-resident consultants. The non-residents were residents in India and Uganda. It therefore, did not err in its assessment because it reduced the non-residents tax liability as per the DTA between Kenya India and the EAC Community.

Respondent’s Prayers 47. The Respondent prayer was that this Tribunal:a.Upholds the Respondent’s objection decision.b.Finds that the assessed tax amounting to Kshs 7,904,892. 00 was proper in law.c.Be pleased to dismiss this appeal costs to the Respondent.

Isssues for Determination 48. The Tribunal having considered the pleadings, evidence adduced and submissions made by the parties, is of the considered view that the Appeal herein distils into one issue for determination on whether the Respondent was justified in issuing its objection decision dated the 5th October 2021.

Analysis and Determination 49. The provisions of the ITA that would help the Tribunal to address this issue include the following:i.Section 3(1) of the which states as follows in regards to charging of tax:Subject to and in accordance with, this Act, a tax to be known as income tax shall be charged for each year of income upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya”ii.Section 3(2) (a) of the ITA states as follows regarding income upon which tax is charged:Subject to this Act, income upon which tax is chargeable under this Act is income in respect of -a.gains or profits from –i.a business, for whatever period of time carried on;ii.employment or services renderediii.a right granted to another person for use or occupation of property”iii.Section 4(a) of the ITA states as follows regarding income business that is partly carried out in and outside Kenya:“For the purposes of Section 3(2)(a)(i)-a.where a business is carried on or exercised partly within and partly outside Kenya by a resident person, the whole of the gains or profits from that business shall be deemed to have accrued in or to have been derived from Kenya”

On Income tax 50. When read together, Section 3(1) and 3(2) (a) of the ITA imply that income tax shall be charged:a.Both on residents and non-resident in regards to income which accrued in or was derived from Kenyab.On gains/profits from services rendered, business, employment services rendered and a right of use by businesses that that are carried out partly in Kenya and partly outside Kenya.

51. Section 3(1) and 3(2)(a) of the ITA means that these charging provision shall come into effect as against the Appellant if the profits or gains realized from the services that the it offers falls under any of the 2 identified areas from where income could be deemed to have been accrued or was derived from Kenya.

52. The income in relation to this Appeal was derived from Uganda and it also accrued in Uganda. This is clear from the contract and consultancy agreement provided by the Appellant which show that the consultancy work that is the subject of the Appeal was conducted exclusively in Uganda and the payment for the services offered emanated from Uganda.

53. From the pleadings it is clear that the Appellant is a Kenyan resident by dint of its incorporation in Kenya. It is also domiciled in Kenya from where it carries out the business of selling and maintaining software. This consultancy service can be said to be carried out partly in Kenya from where it is resident and also receives the commissions payments from CBL; and Uganda from where it offers the actual consultancy services.

54. This assertion is supported by article 2. 4 of the contract signed between the Appellant and CBL which provides that the fees arising from the contract shall be paid to the Appellant who shall in turn pay its consultant employees who are based in Uganda.

55. It is for this reason that the Tribunal finds and holds that the Appellant’s business was indeed partly carried out in Kenya mainly as a Kenyan resident and the supplier of the paid-up consultancy services in Uganda. It was also partly carried out in Uganda where the actual consultancy services were offered. This set of facts bring it within the ambit of Section 4(a) of the ITA.

56. Meaning that the gains or profits that it earns from its consultancy services in Uganda shall be deemed to have accrued in or to have been derived from Kenya. The income arising thereof is thus liable to tax under Section 3(1) and 3(2)(a) of the ITA.

57. The decision of the Superior Court in Motaku Shipping agencies Ltd vs Commissioner of Domestic Taxes [2014)eKLR which has extensively been quoted by the Appellant does not apply to this Appeal because in Motaku shipping case (supra) the relationship between the Motaku and the vessel owners was that of agent and Principal. In this case the relationship between the Appellant and the CBL does not amount to a principal and agent relationship. It is instead a relationship between a service provider and a customer/the consumer of services.

58. On the issue of deduction that were not considered for the year 2019, the Tribunal holds that the Appellant failed to discharge its burden of proof under Section 56(1) of the TPA. The Commissioner was therefore within its right to disallow the affected deduction or expenditures because the Appellant had not provided evidence to show that those expenses were related to foreign income that was earned in Uganda.

59. The Appellant ought to have brought tangible evidence to persuade the Tribunal that this was not the case. This was not done and therefore the Respondent’s decision in regard to these expenditures is therefore upheld.

On withholding tax 60. Section 35(6) of the ITA which provided that a taxpayer could be held liable for failure to withhold tax on payment was repealed in 2016. This position held fort until 2019 when this provision was re-introduced as Section 39A of the TPA by the Finance Act No. 23 of 2019. It reads as follows in regards to Penalty for failure to deduct or withhold tax:“39A.Penalty for failure to deduct or withhold taxWhere a person who is required under a tax law to deduct or withhold tax and remit the tax to the Commissioner fails to do so, the provisions of this Act relating to the collection and recovery of tax, and the payment of penalties and interest thereon, shall apply to the collection and recovery of that tax not deducted or withheld as if it were tax due and payable by that person and the due date for the payment shall be the date on which the amount of tax should have been remitted to the Commissioner”

61. Section 1 of the Finance Act No. 23 of 2019 states as follows in regard to the commencement date of the Finance Act:“1)This Act may be cited as the Finance Act, 2019, and shall come into operation, or be deemed to have come into operation, as follows —a.Section s 7, 8,10 14 and 49, on the 1st January, 2020; andb.all other Section s, on the assent”

62. Based on the above provision regarding the commencement date of the Finance Act 2019 it is apparent that Section 39A into the came into effect on the date of assent of the Act which was on the 7th of November 2019.

63. The Respondent therefore in erred when it penalized the Appellant for failure to remit WHT for the period between 1st January 2018 and 6th November 2019. There is a maxim of income tax law, which though it may sometimes be overstressed 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 tax upon him. It is necessary that this maxim should on occasion be reasserted and this is such an occasion. The Statute removed the Appellant from the ambit of the WHT charge . The Respondent should thus not be allowed to employ craft or innovation to bring the Appellant within the tax bracket from where it has been lawfully exempted by Statute.

Final Decision 64. In the light of the foregoing analysis the Tribunal finds that the Appeal is partially merited and accordingly proceeds to make the following Orders;a.The Appeal succeeds partially.b.The Respondent‘s objection decision dated the 5th of October 2021 related to Corporation tax amounting to Kshs 4,199,207. 00 be and is hereby upheld.c.The Respondent‘s objection decision dated the 5th of October 2021 related to Withholding tax for the financial period 1st January 2018 to 6th November 2019 be is hereby set aside.d.Each party to bear its own costs.

65. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 17TH DAY OF MARCH, 2023. ROBERT M. MUTUMA ........................CHAIRPERSONRODNEY O. OLUOCH............................ MEMBERELISHA NJERU.................................. MEMBERDELILAH K. NGALA ............................. MEMBEREDWIN K. CHELUGET ..............................MEMBER