[2025] KETAT 44 (KLR)

Turkana Hardware & Construction Limited v Commissioner of Legal Services and Board Coordination (Tax Appeal E881 of 2024) [2025] KETAT 44 (KLR) (24 January 2025) (Ruling)

Neutral citation: [2025] KETAT 44 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal E881 of 2024

RO Oluoch, Chair, G Ogaga & Cynthia B. Mayaka, Members

January 24, 2025

Between

Turkana Hardware & Construction Limited

Applicant

and

Commissioner of Legal Services and Board Coordination

Respondent

Ruling

1. The Appellant filed a Notice of Motion application dated 7th August 2024 and filed on the even date seeking for the following Order: -a.That this Honourable Tribunal be pleased to grant leave for the Appellant to file late Appeal.

2. The application which was supported by an Affidavit sworn by Andrew Lodio Epuno, the Appellant’s Managing Director and Chief Executive Officer, on 7th day of August 2024, is premised on the following grounds: -a.That the Appellant lead director was adversely sick and hospitalized.b.That the Appellant will highly be prejudiced unless this application is granted.c.That the Respondent will suffer no prejudice as the application seeks to allow the Appellant an opportunity to file late appeal.d.That the application be allowed in the interest of justice.e.That the Appellant was unable to appeal and file on time the Statement of Facts and Memorandum of Appeal due to long sickness.f.That the Appellant herein will greatly be prejudiced if the matter proceeds in its current state.

3. The Respondent opposed the application through a Replying Affidavit sworn by Samuel Ngatia, an officer of the Respondent, on the 20th August 2024 and filed on the even date citing the following as the grounds for opposing the application: -a.That the Respondent issued its Objection decision on 6th December 2023 confirming the payment of total tax liability of Kshs. 5,108,438. 00. b.That the Appellant did not appeal to the Tribunal within thirty (30) days of issuing the Objection decision as required and only sought to file the instant application on 7th August 2024 (More than 9 Months/ 277 days ).c.That such a delay is very inordinate and the Appellant needs to fully explain the same and not just a few days of the delay.d.That a perusal of the attached documents does not explain the whereabouts of the Appellant from January 2024 to 7th August 2024 which is over 8 months, when they moved the Tribunal.e.That explaining his whereabouts in December 2023 and part of January 2024 is not sufficient for any equitable remedy to be issued in his favor.f.That the Appellant only provided an explanation which covers the Months of December 2023 and early January 2024. That it does not explain where the lead director was in February, March, April, May, June, July, and August since he has been well from 10th January 2024 based on his documentation.g.That no credible reason has been advanced by the Appellant to warrant extension of time to file appeal as provided at Section 13(4) of the Tax Appeals Tribunal Act.h.That the Appellant lacks a reasonable reason why this Appeal has been filed more than nine months late.i.That an application of this nature requires an Appellant to prove a reasonable cause.j.That the application as filed is incompetent, bad in law, fatally defective and is an abuse of this Honorable Tribunal’s process.k.That the application is an afterthought and a delay tactic by the Appellant meant to delay the recovery of the taxes which have long crystallized and the Appeal has only been triggered by enforcement measures.l.That further the Appellant being an active trading company files monthly returns hence every month it filed its return by login into iTax it saw and ignored the Objection decision for over 9 months.m.That the application has not met the threshold as provided under Section 13(3) and (4) of the Tax Appeal's Tribunal Act which give the circumstances under which extension of time may be granted and the same should be dismissed.n.That it is evident that the only reason the Appellnt failed to comply with the statutory timelines is an error on their part.o.That the Appellant’s delay in bringing the application is inordinate and unreasonable and as such this application is an abuse of the court’s process.p.That the Appellant has not demonstrated it deserves favourable discretion of this Honourable Tribunal and the application should be dismissed with costs to the Respondent.

Analysis and Findings 4. In compliance with the directions of the Tribunal to the effect that the application was to be canvassed by way of written submissions, the Respondent filed its submissions dated 29th August 2024 and while the Appellant did not file any submissions the Tribunal has duly considered the Affidavits filed on the part of both parties and the written submissions of the Respondent in arriving at its determination in this Ruling.

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

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

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

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

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

a. Whether there is a reasonable cause for the delay 10. In considering what constitutes as a reasonable reason for delay, the court in Balwant Singh v Jagdish Singh & Ors (Civil Appeal No.1166 of 2006), held that: -“The test is whether or not a cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention.”

11. The statutory timelines and provisions to file an appeal have been clearly set out in the Tax Appeal Tribunal Act. Section 13 of the Act provides as follows with regard to the statutory timelines in commencing an appeal process:-“(1)A notice of appeal to the Tribunal shall—(a)be in writing;(b)be submitted to the Tribunal within thirty days upon receipt of the decision of the Commissioner.(2)The appellant shall, within fourteen days from the date of filing the notice of appeal, submit enough copies, as may be advised by the Tribunal, of—(a)a memorandum of appeal;(b)statements of facts; and(c)the tax decision.”

12. For a taxpayer who has not met the timelines as provided in the above provision of the law, Section 13(4) of the Tax Appeals Tribunal Act provides the conditions that the taxpayer ought to meet to enable the Tribunal to exercise its discretion to extend time to appeal under Section 13(3) of the Tax. The Section provides as follows: -“(3)The Tribunal may, upon application in writing or through electronic means, extend the time for filing the notice of appeal and for submitting the documents referred to in subsection (2).(4)An extension under subsection (3) may be granted owing to absence from Kenya, or sickness, or other reasonable cause that may have prevented the applicant from giving notice of appeal within the specified period.”

13. Regarding the reasons for the delay, the Appellant stated that its Managing Director/Chief Executive officer was adversely sick and hospitalized. That the Appellant was unable to appeal and file on time the Statement of Facts and Memorandum of Appeal due to long sickness.

14. The Respondent on its part stated that the Appellant only provided an explanation which covers the months of December 2023 and early January 2024. That it does not explain where the lead director was in February, March, April, May, June, July, and August since he has been well from 10th January 2024 based on his documentation. That the Appellant lacks a reasonable reason why this Appeal has been filed more than nine months late.

15. That the application as filed is incompetent, bad in law, fatally defective and is an abuse of this Honorable Tribunal’s process.

16. The Respondent further stated that the application is an afterthought and a delay tactic by the Appellant meant to delay the recovery of the taxes which have long crystallized and the Appeal has only been triggered by enforcement measures. That further, the Appellant being an active trading company files monthly returns hence every month it filed its return by login into iTax it saw and ignored the Objection decision for over 9 months.

17. The Tribunal notes that the Appellant cited illness of its director whom it averred was the Managing Director and Chief Executive office of the business. To support this averment that the director had been unwell, the Appellant attached documents from Notre Dame Medical Centre in Nakuru indicating that its Managing Director, Andrew Lodio, was admitted at the medical centre on 28th December 2023 and discharged on 10th January 2024. The Director was diagnosed with severe pneumonia and Covid-19. The Director’s doctor recommended ongoing specialized care, continued follow-up visits for monitoring respiratory function and overall health.

18. The Objection decision was issued by the Respondent on 6th December 2023 which is about one month prior to the time the Appellant claims and has provided documents to demonstrate that its Managing Director/Chief Executive Officer was unwell.

19. It is the Tribunal’s view that although the actual duration and the level of indisposition could not be determined, based on the evidence adduced, it is persuaded that the Managing Director/Chief Executive Officer had indeed suffered ill health.

20. Consequently, the Tribunal determines that the Appellant had demonstrated reasonable cause for the delay in lodging the Appeal within the statutory period.

b. Whether the Appeal is merited? 21. The Tribunal has considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal’s time, or it is material to the extent that it deserves its day in the Tribunal.

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

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

24. That was also the position held in Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) eKLR where the Court held that:-“on whether the appeal is arguable, it is sufficient if a single bona fide 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.”

25. The Tribunal notes that the Respondent’s decision dated 6th December 2023 confirmed the assessments for Income tax and Value Added Tax. Looking at the Memorandum of Appeal filed by the Appellant on the 7th August, 2024, the Tribunal notes that the Appellant has raised six grounds of Appeal that raise substantive factual and legal issues that require rebuttal by the Respondent.

26. Going by the standards set out in the case of Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) the Tribunal finds that the Appellant has an arguable case which requires to be canvassed and considered on its full merits.

c. Whether there will be prejudice suffered by the Respondent if the extension is granted 27. The courts have held that in considering whether to extend time, due regard must be given to whether the extension will prejudice the opponent. In determining this, the Judge in Patrick Maina Mwangi v Waweru Peter [2015] eKLR quoted the decision in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 in finding that: -“…a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of a procedural default, unless the default causes prejudice to his opponent for which an award of cost cannot compensate…”

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

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

Disposition 30. The Tribunal in the circumstances is persuaded to exercise its discretion in favour of the Appellant and accordingly proceeds to make the following Orders: -i.The application be and is hereby allowed.ii.Leave be and is hereby granted for the Appellant to file its Notice of Appeal, Memorandum of Appeal, Statement of Facts and tax decision out of time.iii.The Appellant’s Notice of Appeal and Appeal documents dated 7th August 2024 and filed on the even date be and are hereby deemed as duly filed and served.iv.The Respondent be and is at liberty to file and serve its response to the Appeal within Thirty (30) days of the date of delivery of this Ruling.v.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 24TH DAY OF JANUARY, 2025. DR RODNEY O. OLUOCH - CHAIRPERSONGLORIA A. OGAGA - MEMBERCYNTHIA B. MAYAKA - MEMBER