[2023] KETAT 89 (KLR)

Vectus Kenya Limited v Commissioner of Domestic Taxes (Tax Appeal 275 of 2022) [2023] KETAT 89 (KLR) (10 March 2023) (Ruling)

Neutral citation: [2023] KETAT 89 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tax Appeal 275 of 2022

E.N Wafula, Chair, Cynthia B. Mayaka & A.K Kiprotich, Members

March 10, 2023

Between

Vectus Kenya Limited

Applicant

and

Commissioner of Domestic Taxes

Respondent

Ruling

1. The Applicant vide a Notice of Motion dated the October 7, 2022 filed under certificate of urgency on October 19, 2022 and supported by an Affidavit sworn by Shailesh G Shah, the Director of the Applicant, sought for the following Orders:-i.That leave be granted to the Applicant to file and serve Notice of Appeal out of time.ii.That the Notice of Appeal filed herewith be deemed as properly filed and served upon the Commissioner.iii.That cost be in the course.

2. The application is premised on the following grounds:-i.That the objection decision to which the appeal refers contravenes the mandatory requirement of Section 51(11) of TPA as read together with Section 49 of TPA.ii.That failure to file the Notice of Appeal in time was a result of circumstances contributed to by the Respondent and circumstances beyond the Applicant’s management.iii.That the Applicant’s view was/is that since the objection stands allowed at the end of statutory limitation there was hardly any reason for it to file the Notice of Appeal.iv.That the intended Notice of Appeal is therefore to allow Appeal against the objection decision which is contrary to Section 51(11) of TPA

3. The Respondent opposed the application through a Replying Affidavit sworn by Anthony Omollo, an officer of the Respondent, on the November 1, 2022 and filed on the same date. The grounds of opposition as highlighted in the Affidavit were as follows:-i.That the Applicant is misleading this Tribunal by alleging that the Respondent purported to reject the Objection on the July 26, 2022 which was blatantly out of the mandatory statutory period for the action.ii.That the Respondent states that the Applicant’s Objection was never rejected on the July 26, 2022. The Respondent rightly puts that the Objection was invalidated on March 4, 2021 in accordance with Section 51(4) of the TPA which provides that;'Where the Commissioner has determined that a notice of objection lodged by a taxpayer has not been validly lodged, the Commissioner shall immediately notify the taxpayer in writing that the objection has not been validly lodged.'iii.That the Respondent avers that upon receipt of the Objection application, it unsuccessfully requested the Applicant to avail documents in support of its Objection application.iv.That following the failure by the Applicant to avail the said documents, the Respondent issued a Notice of Invalidity to the lodged objection and advised the Applicant that unless it furnishes the Commissioner with supporting documents, its objection would be rendered invalid and the assessment shall be confirmed.v.That despite receiving the above notice, the Applicant failed to avail the documents and on March 4, 2021, the Respondent invalidated the objection application.vi.That in the penultimate paragraph of the invalidation decision, the Respondent duly notified the Applicant of its right to appeal to the Tax Appeals Tribunal as per Section 52 of the TPA.vii.That the Applicant did not appeal the decision to the Tribunal within thirty days of the decision as required and only sought to file the instant application on the October 7, 2022 more than one and a half years which is approximately 567 days later.viii.That the Applicant has not given the reason to warrant extension of time to file an appeal as provided at Section 13(4) of the Tax Appeals Tribunal Act and the attempt by the Applicant to blame the Respondent for its own failure is an abuse of the court’s process.ix.That there is no valid reason in the said application, neither is it based on any law thus, not a right upon which one should be granted leave to lodge an appeal out of time.x.That the Applicant herein is obligated to give satisfactory reasons for delay to invoke the discretion of this Tribunal.xi.That the Applicant’s application is an afterthought and has been brought in bad faith since the Applicant claims that the same is not proper in law.xii.That the Respondent will suffer great prejudice if the application is granted as this will delay collection of taxes which is the main mandate of the Respondent, hence delayed service to all Kenyan Citizens.xiii.That the intended appeal lacks merit as the taxes in question were allowed for failure of the Applicant to provide relevant supporting documents for consideration by the Respondent and to show that the decision of the Respondent is wrong.xiv.That the Applicant has therefore not demonstrated in any way that it has an arguable appeal with any chances of success.xv.That the Applicant has not met the established threshold for the Tribunal to exercise its discretion in granting leave to file appeal out of time and as a result this Tribunal should dismiss the application with costs.

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 on November 11, 2022. The Tribunal has duly considered the written submissions in arriving at its determination in this Ruling.

Analysis and Findings 5. The Applicant’s application is primarily praying to the Tribunal for extension of time to file an appeal out of time.

6. The power to expand time for filing an Appeal is donated by Section 13(3) of the Tax Appeals Tribunal Act which provides that:-'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).'It is therefore a discretionary power and not a right to be granted to the Applicant.

7. In determining whether to expand time, courts have in the past considered a number of factors. These factors were discussed in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai 251 of 1997 where the judge held that:'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.'

8. The court in Wasike V Swala [1984] KLR 591 provided the hierarchy of the factors to consider when it stated that:'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.

9. The Tribunal, guided by the principles set out in Leo Sila Mutiso vs Rose Hellen Wangari Mwangi, Civil Application Nai 251 of 1997, Wasike V Swala [1984] KLR 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.The merits of the complained action.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. Regarding delay, the Respondent contended that the Applicant was misleading the Tribunal by alleging that the Respondent purported to reject the Objection on the July 26, 2022 which was blatantly out of the mandatory statutory period for the action.

11. The Respondent stated that the Applicant’s Objection was never rejected on the July 26, 2022 but that the objection was invalidated on March 4, 2021 in accordance with Section 51(4) of the TPA

12. From the documents availed by the Applicant, the Tribunal noted that the Applicant wished to appeal against the Respondent’s Confirmation Assessment Notice dated July 26, 2022. The Applicant attached the said Confirmation Assessment Notice dated July 26, 2022 together with its Notice of Appeal dated September 26, 2022 citing the same.

13. From the foregoing evidence that there was a Confirmation Assessment Notice dated July 26, 2022 it follows therefore that the Applicant ought to have filed its Notice of Appeal on or before August 25, 2022. This application was filed on October 19, 2022 which is less than two months later.

14. It was the view of the Tribunal that the delay of less than two months was not inordinate.

b. Merits of the Complained action 15. The Tribunal considered whether the matter under dispute was frivolous to the extent that it would be a waste of the Tribunal time, or it was material to the extent that it deserved its day in the Tribunal.

16. 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.'

17. The Tribunal was 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.'

18. Similarly, in Kenya Commercial Bank Limited Vs Nicholas Obija (2009) eKLR it was stated that 'an arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the court' 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 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.'

19. Regarding the merits of the Appeal, the Tribunal noted that the Confirmation Assessment Notice was for the sum of Kshs 2,171,910. 45 which the Applicant wished to appeal against. In addition, the Applicant had laid out in its draft Memorandum of Appeal filed with this application four grounds of Appeal. With the disclosed grounds of appeal that raises issues touching on the legal validity of the Respondent’s decision, it was the view of the Tribunal that the subject matter of the suit is a matter that would ordinarily merit a day at the Tribunal.

20. Going by the finding in the case of Stanley Kangethe Kinyanjui Vs Tony Keter & others (2013) eKLR cited above, the Tribunal finds that the dispute is not frivolous and therefore should be heard on its merits.

c. Whether the Respondent will suffer prejudice if the extension is granted. 21. 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 finding in United Arab Emirates V Abdel Ghafar & Others 1995 IR LR 243 to the effect 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.'

22. The test, therefore, as set out in the case above is whether the Respondent will suffer irreparable prejudice if the application is granted.

23. Although the Respondent had stated that it will suffer great prejudice if the application is granted as this would delay collection of taxes, the Tribunal did not find anything to demonstrate how the Respondent would suffer irreparable prejudice that cannot be compensated by an award of penalty and interest on any amount subsequently found due and payable in taxes by the Respondent.

24. It was the view of the Tribunal that the Appellant’s recourse to justice lies in an appeal to the Tribunal. Thus, the Appellant would suffer prejudice if it is not granted leave to file its appeal. In any event, the Respondent would still collect the taxes inclusive of penalties and interest should it be found to be due and payable.

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

Disposition 26. Based on the foregoing, the Tribunal finds that the application has merit and proceeds to make the following orders:i.The Applicant be and is hereby granted leave to file an Appeal out of time.ii.The Notice of Appeal dated September 26, 2022 and filed on October 19, 2022 be and is hereby deemed as duly filed and served.iii.The Appellant to file and serve its Memorandum of Appeal, Statement of Facts and Tax Decision within Fifteen (15) days of the date of delivery of this Rulingiv.The Respondent to file and serve its response to the appeal within the statutory period upon being served with the appeal documents.v.No orders as to costs.

DATED AND DELIVERED AT NAIROBI THIS 10TH DAY OF MARCH, 2023. ………………………….ERIC N. WAFULACHAIRMAN………………………………CYNTHIA B. MAYAKAMEMBER…………………………..ABRAHAM KIPROTICHMEMBER