https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/163

Wamuri Ltd v Commissioner of Domestic Taxes (Tax Appeal E588 of 2025) [2026] KETAT 163 (KLR) (13 July 2026) (Judgment) Neutral citation: [2026] KETAT 163 (KLR) Republic of Kenya In the Tax Appeal Tribunal Tax Appeal E588 of 2025 RM Mutuma, Chair, T Vikiru, G Ogaga & JM Malla, Members July 13, 2026 Between Wamuri Limited Appellant and Commissioner of Domestic Taxes Respondent Judgment Background 1.The Appellant is a private limited company and is in the business of letting out residential units. 2.The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 of Kenya’s Laws. 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 and 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 vide a letter dated 3rd September 2024 issued upon the Appellant an audit verification notice informing it of its intention to verify declarations in line with Section 59 (1) of the Tax Procedure Act Cap 469B (TPA). 4.The Respondent vide a letter dated 12th March 2025 issued the Appellant with its audit report findings raising additional assessments for the period 2019 to 2023 with respect to PAYE, Corporation Tax, Value Added Tax and Withholding Tax amounting to Kshs. 69,750,460 inclusive of interest and penalties. 5.The Appellant dissatisfied with the audit findings lodged an objection vide a letter dated 27th March 2025. 6.The Respondent on 21st May 2025 issued its Objection Decision fully rejecting the objection and confirming the taxes as assessed. 7.Dissatisfied with the Objection Decision, the Appellant filed this Appeal vide a notice appeal dated 5th June 2025. The Appeal 8.The Appellant lodged memorandum of appeal dated 5th June 2025 and filed on 9th June 2025 raising the following grounds of appeal:a.That the Respondent erred in fact and law by disallowing management fees claimed in the year of income 2019 and inadvertently described as commission in the Income Tax Company Return, which was an expense incurred wholly and exclusively in the generation of income.b.That the Respondent erred in fact and law by failing to review the rent collection agency agreement entered into by the Appellant and Hearth and Home Limited on 15th February 2016 under paragraph 6 (i) which provided for the payment of management fees collected in the current year to be paid in the subsequent year and after completion of the audit by the appointed external auditor.c.That the Respondent erred in fact and law by not accepting that the withholding certificate which represented the 2019 management fees was that of 2020 with management fees of Kshs 2,740,000 relating to the year of income 2019.d.That the Respondent erred in fact and law by confirming the corporation tax additional assessment without due regard to the rent collection agency agreement signed between the Appellant and Hearth and Home Limited or the Appellant's objection letter dated 27th March 2025.e.That the Respondent erred in fact and law by failing to consider the Appellant's VAT reconciliation as contained in part C of the objection letter and went ahead and confirmed the whole assessment without giving credit to the amount of VAT amounting to Kshs 7,184,807 paid on monthly basis during the years 2023, 2024, and 2025 and supported by the tax ledger.f.That the Respondent erred in fact and law by not accepting the explanation that the directors invested in treasury bonds amounting to Kshs 76,400,000 on behalf of the company as advised by Equity Bank.g.That the Respondent erred in fact and law by not accepting that the treasury bonds invested in by directors were on behalf of the company and had been eventually transferred back to the company.h.That the Respondent erred in fact and law by failing to review the bank statements of the company and of the directors which were provided to show how the money flowed from company into the directors account and into the purchase of treasury bonds which were then transferred back to the company.i.That the Respondent erred in fact and law by disregarding the taxes paid by the director on behalf of the company amounting to Kshs 12,688,624 which ought to be deducted from the drawings.j.That the Respondent erred in facts and law by treating drawings as director's fees/emoluments and charging them to PAYE tax without considering that these withdrawals were not claimed in the financial statements as expenses and hence cannot be treated as directors' salaries.k.That the Respondent erred in facts and law by subjecting withdrawals by the directors to PAYE tax which is double taxation since the expense had not been claimed in the income statement of the company and hence the corporation tax had already been suffered by the appellant on account of not claiming the withdrawals in the financial statements as per the provision of section 15 of the Income Tax Act Cap 470 (ITA). The Appellant’s Case 9.The Appellant put in a statement of facts dated 5th June 2025 and filed on 9th June 2025. 10.The Appellant averred that the Respondent without due regard to the explanations, clarification and documents provided during audit proceeded to issue an additional assessment vide a letter dated 12th March 2025 amounting to Kshs 1,356,300 for income tax; Kshs 12, 877,020 for VAT, and Kshs 55,432,786 for PAYE inclusive of penalties and interests totalling to Kshs 69,666,106. 11.The Appellant contended that the Respondent in arriving at its objection decision dated 21st May 2025 failed to take into account the Appellant's explanation and supporting documents. Corporation Tax 12.According to the Appellant, the Respondent disallowed management fees amounting to Kshs 2,740,000 in the year 2019 which was an expense wholly and exclusively incurred in the generation of income for that year and should be allowed during the same year. It contended that the rent collection agency agreement provided for the payment of commission/management fees during the subsequent year after the audit. 13.The Appellant argued that the withholding certificate which represented the 2019 management fees/commission was that of 2020 with management fees/commission of Kshs 2,740,000. 14.According to the Appellant, the Respondent did not regard the terms of the rent collection agency agreement and the Appellant's objection letter and hence did not give a correct interpretation of the same. 15.In a response to Respondent’s statement of facts on this issue, the Appellant filed statement dated 21st April 2026. In relation to Income Tax Kshs. 1,356,300, the Appellant stated that it explained that the commissions were monies paid to individuals who get rental tenants for them and the agent that manages their properties. This expense was supported through a rent collection agency agreement and a withholding tax certificate number KRAWHTEON1459921320 dated 20th May 2020 which the Respondent disregarded. 16.It stated that the amount of Kshs 2,740,000 represent commission paid to rent collection agent while the amount of Kshs 696,700 reflected in itax as management fees in 2019 was a combination of Security Kshs 516,700 and Bookkeeping Kshs 180,000 expenses this is well supported by extracts from the 2019 financial statements. It stated that a reconciliation of withholding certificates representing commission paid to the management agent from 2018 to 2023 and financial statement extracts were provided and were allowed by the Respondent except for the year of income 2019. 17.It averred that the withholding tax certificate number KRAWHTEON0323197219 paid on 14th May 2019 with gross amount of Kshs. 3,041,872 and withholding tax of Kshs. 152, 094 which the Respondent relied on in making the objection decision was for 2018 management fees as stipulated in the rent collection agency agreement and in the reconciliation attached. 18.The Appellant argued that it provided a reconciliation of the extract from 2019 financial and itax ledger showing all expenses which were claimed in the year of income 2019 which the Respondent disregarded. 19.The Appellant highlighted that the Respondent did not take into consideration the following documents attached which were provided during audit, during objection and during ADR process in making his objection decision:i.Rent collection agency agreement;ii.Withholding certificate, no: KRAWHTEON1459921320 dated 20th May 2020;iii.Financial statements extract and a detailed reconciliation for years of income from 2018 to 2023; andiv.Extracts of financial statements for the year of 2019 page 12 and itax ledger. VAT 20.In relation to VAT, the Appellant stated that the Respondent did not give credit of the VAT paid on monthly basis in the years of income 2023, 2024 and 2025 amounting to Kshs 7,184,807. 21.In a response to Respondent’s statement of facts on this issue, the Appellant filed statement dated 21st April 2026 wherein it stated that it got a new lease with Vivo energy in September 2023 where it received rent in advance for the years of income 2024, 2025 and 2026. 22.Upon receipt of the new lease the Appellant spread the VAT payable for a period of the three years 2024,2025 and 2026 and that it has been paying the same on monthly basis rather than paying the VAT liability in the year of receipt. 23.The Respondent assessed VAT for the advance rent received in the year of income 2023 amounting to Kshs. 9,579,527 exclusive of interest and penalties to which the Appellant does not object to. However, the Appellant asserted that the Respondent did not consider payments made on monthly basis relating to the advance rent as reflected in KRA ledger. It argued that the payments made to-date amounts to Kshs. 7,079,199. 24.It asserted that the balance of VAT outstanding as at 31st March 2026 is Kshs. 2,500,328 and that the assessment should be amended to reflect this balance. The Appellant pointed out that it is making monthly payments of Kshs. 500,000 and the balance shall be extinguished in the next five (5) months. 25.The Appellant therefore, requested the Tribunal to order the respondent to give credit to monthly payments made to date as reflected in the KRA Ledger. PAYE 26.In relation to this issue, the Appellant stated that the directors resolved to invest in treasury bonds with the advance rent received in September 2023. 27.It asserted that the directors invested in treasury bonds amounting to Kshs 76,400,000 on behalf of the company in their own names as advised by equity bank. Having realized that the treasury bands had been erroneously registered in the names of the directors, they transferred the treasury bonds back to the company. 28.The Appellant asserted that the directors paid taxes on behalf of the company amounting to Kshs 12,688,624 in the years of income 2020, 2021, 2022 and 2023 which ought to be reduced from the withdrawals. 29.According to the Appellant, the drawings being treated as director's fees/emoluments and subjected to PAYE were not claimed as expenses in the income statements of the company. It argued that subjecting the directors' withdrawals to PAYE tax is double taxation since the withdrawals were not claimed as an expense and hence the taxable income of the company was not reduced and corporation tax was paid on the basis of the unadjusted income of the company. 30.In a response to Respondent’s statement of facts on this issue, the Appellant filed statement dated 21st April 2026, the Appellant stated that its director does not refute to have made withdrawals from the Appellant’s bank account amounting to Kshs. 136,577,811; However, the Appellant stated that the Respondent disregarded all explanations, or evidence provided to him in making the objection decision as follows:a.That one of the directors, Mr. Maina Kamau, paid for expenses from his personal account on behalf of the Appellant. These expenses were taxes inform of VAT and installment taxes amounting to Kshs. 12,688,624. His personal bank statement and payment slips were provided, during the audit, during the objection and even during this appeal where those payments have been highlighted. The it asserted that Respondent should deduct this amount from the withdrawals.b.The Appellant had further resolved that the rent received in advance in September 2023 amounting to Kshs 76,400,000 to be invested in treasury bonds. This was done through the directors’ personal accounts and later transferred to the Appellant.c.The Appellant argued that the Respondent disregarded the following documents which were submitted to him while making his objection decision:i.Director’s personal bank statement;ii.Director’s resolution;iii.Statement from central bank showing the bonds in the name of director’s;iv.Statement from central bank showing the bonds in the appellant’s name;v.The appellant’s 2024 audited accounts showing the bonds in the balance sheet; 31.It stated that the balance of the withdrawals amounted to Kshs 47,489,187. The Respondent invoked section 5(2) (a) by treating the above drawings as emoluments/salary/directors’ fees and subjected the same to PAYE without due regard to the provision of Section 15 (1) of ITA which provides that where expenses wholly and exclusively incurred in the production of income are allowable against chargeable income. 32.The Appellant contended that the Respondent cannot be allowed to have double tax benefit by charging income under section 5 (2) (a) and disregarding the same under the provision of section 15 (1) of the ITA. 33.The Appellant also contended that the Respondent treated the above as directors’ fees/ salary/emoluments and subjected the same to PAYE and but did not allow the same in the income statement as an expense for purposes of corporation tax which the Appellant has already paid. The Appellant maintained that this amounts to double taxation as the Respondent would be collecting from both the credit side and debit side of the bank statement inform of corporation tax and PAYE respectively without allowing the withdrawals as an expense. Appellant’s Written Submissions 34.The Appellant filed written submissions dated 5th May 2026 wherein it submitted that the commissions paid to rent collection agents, Hearth and Home Limited, as per rent collection agency agreement are allowable against rent income; that VAT payments made relating to commercial rent received in advance in September 2023 from Vivo Energy Limited and spread over the period of lease i.e January 2024 to December 2026 should be credited against the VAT liability computed by the Respondent. 35.The Appellant also submitted that the taxes paid by the director on behalf of the Appellant should be deducted from the director’s drawings in determining the taxable drawings of the director and hence should not attract PAYE. 36.It also submitted that the purchase of the treasury bonds through the directors account and subsequently transferred to the Appellant should not be treated as emolument to directors and therefore should not be subjected to PAYE. 37.The Appellant submitted that the balance of withdrawals which have not been claimed as an expense in the income statement of the Appellant should not be subjected to PAYE payable by the director on the basis that this would amount to charging tax on both debit and credits. It relied on the case of Afya X-ray Centre v Commissioner of Domestic Tax Appeal Number 70 of 2017 where this Honourable Tribunal was of the view that collecting tax from both debit and credit side of the bank statement with regard to PAYE all while not allowing it as an expense for purposes of corporation tax is double taxation and the taxpayer should not be overburdened all in the name of tax collection. 38.It cited the case of Commissioner of Investigation v Traneshvi Limited to submit that whereas the burden of proof lies on the Appellant, the burden shifts to the Respondent to demonstrate the decision was justified. The Appellant’s Prayers 39.The Appellant prayed that this Appeal be allowed; that the assessment dated 12th March 2025 be set aside; and that the costs be awarded to the Appellant. The Respondent’s Case 40.The Respondent relied on its Statement of facts dated and filed on 29th September 2025. Income Tax 41.The Respondent averred that it conducted a verification of the expenses claimed in the accounts and was noted that the Appellant had claimed commissions expense in the accounts. The Appellant explained that the commissions were monies paid to individuals who get rental tenants. According to the Respondent, this expense was unsupported and thus disallowed. 42.The Respondent also stated that it disallowed the commissions claimed by the Appellant as they were unsupported. 43.It averred that it reviewed the Income Tax returns filed on i-Tax and noted that in the year of income claimed the Appellant commissions of Kshs 2,740,000 and management fees of Kshs. 696,700. 44.The Respondent contended that upon reviewing the Withholding certificate provided and the iTax ledger and noted that the Appellant had paid Withholding Income Tax of Kshs 152,094 with Invoice gross amount of Kshs. 3,041,872. According to the Respondent, the Appellant did not provide the reconciliation of the management claimed in the Income Tax returns and the Managements fees claimed in his audited financial statements. Value Added Tax 45.With regard to VAT, the Respondent averred that the Appellant got a new lease with VIVO energy in August 2023. The Respondent noted that the company did not charge VAT as provided for under Section 12 of the VAT Act 2013. 46.According to the Respondent, the highest sales determined in the sales comparison for year 2023 was from the Income as per Gross Sales as per the Withholding Tax Certificates. It averred that this was the amount charged to VAT. 47.It contended that it charged to tax the undeclared commercial lease rental received in the month of August 2023 as per Section 12 of the Value Added Tax Act Cap 476 (VATA). 48.The Respondent also stated that it reviewed the i-Tax ledger for the VAT declared in the period 2024 and 2025 which were not covered for the declarations made by the taxpayer. It noted that the Appellant received Kshs. 6,000,000 in January 2024 and Kshs. 6,000,000 in January 2025. The Respondent stated that the commercial rent received in January 2024 was not declared in the VAT return in contravention of Section 12 of the VATA. 49.The Respondent pointed out that the Commercial rent received in January 2025 was declared correctly as Per Section 12 of the VATA. It stated that the declaration made in the year 2024 and 2025 ought to be aligned with Section 12 of the VATA so as to reconcile with the lease rental received. 50.According to the Respondent, the Appellant had already received the rent in advance, which meant that the payment was received and the commercial rent ought to have been declared. PAYE 51.On this issue, the Respondent stated that audit on PAYE was to verify and check whether all payments and benefits paid to the directors and employees were correctly treated. The Respondent averred that it noted that the Appellant’s directors made drawings from the company for personal expenditure. 52.While the Appellant claimed that the directors incurred running expenses for the company from the drawings made from the Appellant, the Respondent asserted that it established that the expenses invoices and proof of how the expenses were paid for by the director (remittances) were not provided. 53.While the Appellant stated that one of the directors, Mr. Maina Kamau, paid for expenses from his personal account on behalf of the Appellant, the Respondent stated that the director's bank statements were not provided to support these payments. 54.The Respondent noted that the directors were making withdrawals for personal expenditure and charged them to tax. 55.The Respondent stated that the accounting principles provides that all credit entries should have a corresponding debit double entry. The drawings noted by the Respondent did not have specific corresponding double entries in the prepared and presented financial statements. It averred that the specific expenses paid by the directors ought to have been accompanied with the primary documents and the proper cash book analysis to evidence them. 56.According to the Respondent, these expenses ought to have been captured and posted in the specific expenses claimed by the Appellant. 57.It argued that the Appellant had further resolved that the rent and taxes received in advance to be invested in treasury bonds by the two directors as trustees of the Company. 58.The Respondent noted that the company being an artificial person who can enter into contracts could have invested in the treasury bonds without necessarily appointing the directors as trustees to invest on their behalf. 59.It stated that a review of the financials provided divulged that the transaction was not recorded in the financials and that no investment had been recorded in the Appellant’s balance sheet. Furthermore, the Respondent stated that there was no trust deed provided to support the resolution referenced above. 60.It contended that the taxes paid on behalf of the Appellant ought to have been recorded as liabilities owed to directors in the balance sheet because the drawings formed part of Directors’ fees/emoluments on account that the financial statements recognized and expensed the cash-flows. It averred that it was only by doing this did the ledgers and subsequent trial balances as well as the balance sheet balanced for the period under review. 61.According to the Respondent, the other withdrawals were not accompanied with the relevant double entry. It noted that these transactions are therefore, unstructured as they did not observe the accounting rules and taxes were not accounted for. 62.The Respondent averred that having determined that the bonds were invested in the directors’ name and the investment not recognized in the financials, together with the absence of a Trust Deed, the taxes paid by the directors on behalf of the company were not recognized as liabilities in the balance sheet and the other expenses were not documented, the drawings made by the directors were unstructured and the same were brought to charge for PAYE purposes. Withholding Tax 63.The Respondent noted that payments made to the various professionals engaged by Appellant were not subjected to Withholding Tax as per Section 35 of the Income Tax Act Cap 470 (ITA) which provides as follows:(3)Subject to subsection (3A), a person shall, upon payment of an amount to a person resident or having a permanent establishment in Kenya in respect of–(f)management or professional fee or training fee, the aggregate value of which is twenty-four thousand shillings or more in a month: Provided that for the purposes of this paragraph, contractual fee within the meaning of "management or professional fee" shall mean payment for work done in respect of building, civil or engineering works;” 64.According to the Respondent, the Appellant did not object to having made payment for the professional services received. 65.The Respondent averred that Withholding Income Tax should be accounted for while the payments are being made as per Section 35 (3) of the Income Tax Act cited above. 66.It argued that the payment made with regard to these services were made in bulk and the amounts paid exceeded Kshs. 24,000 in that month and therefore ought to have been accounted for. 67.The Respondent averred that Section 24 (2) of the Tax Procedures Act Cap 469B (TPA) allows the Commissioner to assess a taxpayer’s liability using any information available. 68.The Respondent argued that it used its best judgement to raise the respective assessment and demanded the taxes therein as per Section 31 of the TPA. 69.The Respondent further averred that the determination of the tax liability depends on submission of necessary records by the Appellant, and that the Appellant herein bears the burden to demonstrate that it has discharged a tax liability. 70.The Respondent maintained that the tax assessment issued was properly founded in fact and law, and that the Objection Decision was fair, reasonable, and made in accordance with statutory provisions. Respondent’s Written Submissions 71.The Respondent filed written submissions dated 3rd April 2026 wherein it submitted that the Respondent’s assessments were proper in law; and that the Appellant failed to discharge its burden of proof. 72.It cited the case of Digital Box Limited v Commissioner of Domestic Taxes TAT Appeal No. 115 Of 2017 to support the position that the Respondent is allowed to make a decision based on available information. 73.It relied on the case of Kenya Revenue Authority v Man Diesel & Turbo Se, Kenya [2021] eKLR to submit that the Appellant has a duty in law to demonstrate that the Respondent’s decision is incorrect but the Appellant failed to do so. Respondent’s Prayers 74.The Respondent prayed that the Objection Decision dated 21st May 2025 be upheld; that the assessment be upheld; and that the appeal dismissed with costs. Issues for Determination 75.Having carefully considered the Appeal, the parties’ respective pleadings, the documentary evidence on record and the written submissions, the Tribunal is of the considered view that the following issues arise and fall for determination:a.Whether the Respondent was justified in confirming the corporation tax assessment for the year of income 2019;b.Whether the Respondent was justified in confirming the Value Added Tax assessment;c.Whether the Respondent was justified in confirming the PAYE assessment; andd.Whether the Respondent was justified in confirming the Withholding tax assessment. Analysis and Findings 76.The Tribunal proceeds to analyse and determine each of the issues in turn. a. Whether the Respondent was Justified in Confirming the Corporation Tax Assessment for the Year of Income 2019 77.The Appellant’s case was that the Respondent wrongly disallowed commission/management fees of Kshs 2,740,000 claimed in the year of income 2019, being an expense that it contended was wholly and exclusively incurred in the production of its rental income for that year. The Appellant explained that, under the rent collection agency agreement it entered into with Hearth and Home Limited on 15th February 2016, management fees at the rate of 20% of the total rent collected were payable in the subsequent year and only upon completion of the audit by the appointed external auditor. On that footing, the Appellant maintained that the withholding tax certificate number KRAWHTEON1459921320 dated 20th May 2020 evidenced the commission that related to the 2019 year of income. 78.The Appellant further clarified that the sum of Kshs 696,700 reflected on i-Tax as management fees for 2019 was in fact a combination of security expenses of Kshs 516,700 and bookkeeping expenses of Kshs 180,000, and that the withholding tax certificate number KRAWHTEON0323197219 relied upon by the Respondent, having been paid on 14th May 2019, related to the 2018 management fees and not to the year in dispute. It averred that it had furnished the agency agreement, the withholding tax certificates, extracts of its audited financial statements and a reconciliation covering the years 2018 to 2023, all of which the Respondent disregarded. 79.The Respondent, on the other hand, maintained that the commission expense was unsupported and was therefore properly disallowed. It averred that a review of the income tax returns disclosed commissions of Kshs 2,740,000 and management fees of Kshs 696,700 for the year, but that the Appellant failed to provide a reconciliation of the management fees claimed in the income tax returns against those reflected in its audited financial statements, and that the withholding tax certificate and i-Tax ledger examined did not resolve the discrepancy. 80.The Tribunal has considered the Parties’ contended positions. The governing provision on deduction of expenses for ascertaining taxable income is Section 15(1) of the ITA, which provides: 15.Deductions allowed(1)For the purpose of ascertaining the total income of any person for a year of income there shall, subject to section 16 of this Act, be deducted all expenditure incurred in such year of income which is expenditure wholly and exclusively incurred by him in the production of that income… 81.The complement to that provision is Section 16(1)(a) of the ITA, which excludes from deduction: 16.Deductions not allowed (1)Save as otherwise expressly provided, for the purposes of ascertaining the total income of a person for any year of income, no deduction shall be allowed in respect of—(a)any expenditure or loss which is not wholly and exclusively incurred by him in the production of the income. 82.It follows from the joint reading of Sections 15(1) and 16(1)(a) of the ITA that, to earn the deduction, a taxpayer must establish two matters: first, that the expenditure was in fact incurred; and secondly, that it was incurred wholly and exclusively in the production of the income. The obligation to demonstrate these matters is buttressed by the record keeping duty imposed by Section 54A(1) of the ITA, which provides:54A.Keeping of records of receipts, expenses, etc.(1)A person carrying on a business shall keep records of all receipts and expenses, 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. 83.Applying these provisions to the evidence before it, the Tribunal observes that the Appellant relied principally on the rent collection agency agreement, the withholding tax certificates and extracts of its audited accounts. Paragraph 6 of the agency agreement provided that the management fees would be paid at 20% of the total rent collected in the subsequent year and after completion of the external audit, and that 5% of the fees would be withheld and remitted to the Kenya Revenue Authority. While that agreement establishes the contractual basis and timing of the fees, it does not, of itself, prove that the specific sum of Kshs 2,740,000 was computed in accordance with its terms, was actually paid to the agent in respect of the 2019 year of income, and bore the attendant withholding tax. 84.The Tribunal further notes that audited financial statements are secondary and not primary documents. Standing alone, and unaccompanied by underlying primary records such as commission schedules, invoices, receipts or a clear reconciliation tying the withholding tax certificates to the disputed commission, they are insufficient to discharge the evidential burden. The absence of such corroborative documents made it impossible to verify whether the certificates produced in fact related to the 2019 commission, or whether the correct taxes had been withheld and remitted. In these circumstances the Appellant’s explanation, however plausible, was not substantiated to the standard the ITA requires. 85.This position accords with that of the High Court in Leah Njeri Njiru v Commissioner of Investigations and Enforcement, Kenya Revenue Authority & another [2021] KEHC 8118 (KLR), where the Court, addressing Sections 15(1) and 54A(1) of the ITA, held:“The only way the Commissioner could have allowed deductions of expenses as per section 15(1) of the ITA is if they were supported to its satisfaction. This is in line with section 54A(1) of ITA…” 86.Therefore, the Tribunal finds that the Appellant did not discharge the burden of proving that the disallowed commission expense of Kshs 2,740,000 was wholly and exclusively incurred in the production of its 2019 income or that it was adequately supported by primary records. Accordingly, the Tribunal finds that the Respondent was justified in Confirming the Corporation tax assessment for the year of income 2019. b. Whether the Respondent was Justified in Confirming the Value Added Tax assessment 87.The Appellant’s case on this issue was that the Respondent failed to give it credit for the VAT it had paid on a monthly basis in the years 2023, 2024 and 2025, amounting to Kshs 7,184,807. The Appellant explained that, upon obtaining a new lease with Vivo Energy in September 2023 under which rent was received in advance for the years 2024, 2025 and 2026, it elected to spread the resulting VAT over the lease period and to remit it monthly rather than in the year of receipt. It did not object to the VAT of Kshs 9,579,527 assessed on the advance rent received in 2023, but asked that the monthly payments already made, as reflected in the KRA ledger, be credited against the assessed liability. 88.The Respondent’s case was that the Appellant obtained the new commercial lease with Vivo Energy and received the rent in advance, but did not account for output VAT on the undeclared commercial rent as required by Section 12 of the VATA. It maintained that, the rent having been received, the VAT fell due and the commercial rent ought to have been declared in the relevant period. 89.The Tribunal has considered the rival arguments, and at the outset, finds that it is necessary to delimit the scope of the assessment under appeal. The assessment confirmed by the Objection Decision covered the period 2019 to 2023. The years 2024 and 2025 fell outside the period assessed and are not properly before the Tribunal. It follows that the Tribunal is unable to make any determination in respect of VAT said to arise in 2024 and 2025, and the Appellant’s claim for credit in respect of those years cannot be entertained in this Appeal. 90.As for the year 2023, which is within the assessed period, the Tribunal observes that the Respondent did not specifically controvert the Appellant’s assertion that VAT was being paid on a monthly basis for that year. The Appellant filed a general ledger report evidencing the VAT paid in 2023. Where a taxpayer has produced evidence of payments made within the assessed period and the Respondent has not disputed those payments, fairness and the need to avoid demanding tax already paid require that the payments be brought to account. The Tribunal is therefore of the view that the Respondent ought to revise the VAT demand for the year 2023 by reference to the general ledger report so as to credit the payments already made. 91.Accordingly, the Tribunal finds that the Respondent was justified in bringing the 2023 commercial rent to charge under Section 12 of the VATA, but was not justified in confirming the 2023 VAT without crediting the payments the Appellant had already made for that year. c. Whether the Respondent was Justified in Confirming the Paye Assessment 92.The Appellant’s case was that the drawings made by its directors were wrongly treated as directors’ fees or emoluments and subjected to PAYE. It contended, first, that one of its directors, Mr. Maina Kamau, had paid taxes on behalf of the company amounting to Kshs 12,688,624 in the years 2020 to 2023, which sum ought to be deducted from the drawings; and secondly, that subjecting the balance of the drawings to PAYE, when those drawings had not been claimed as an expense in the company’s income statement, amounted to double taxation because corporation tax had already been borne on the unadjusted income. 93.The Respondent’s case was that its audit established that the directors made drawings from the company for personal expenditure. It averred that the invoices and proof of how the purported company expenses were settled by the directors were not provided, that the director’s bank statements said to support the payments made on the company’s behalf were not availed during the audit, and that the drawings lacked corresponding double entries in the financial statements. On that basis it treated the drawings as emoluments and brought them to charge for PAYE. 94.The Tribunal has examined the evidence bearing on this issue. It is settled that the burden of proving that a tax decision is incorrect rests on the taxpayer. The High Court affirmed this framework in Commissioner of Domestic Taxes v Block International Limited [2024] KEHC 8889 (KLR), observing that under Section 30 of the Tax Appeals Tribunal (TAT) Act and Section 56(1) of the TPA the taxpayer bears the burden of proving that a tax assessment or decision is incorrect. 95.Section 56(1) of the TPA provides:“In any proceedings under this Part, the burden shall be on the taxpayer to prove that a tax decision is incorrect.” 96.That burden of proof is reinforced by Section 30 of the TAT Act, which provides:“In a proceeding before the Tribunal, the appellant has the burden of proving—(a)where an appeal relates to an assessment, that the assessment is excessive; or(b)in any other case, that the tax decision should not have been made or should have been made differently.” 97.Applying that standard, the Tribunal draws a distinction between the two limbs of the Appellant’s case on PAYE. On the first limb, the Appellant produced payment slips together with the director’s bank statement in support of its contention that the director paid taxes of Kshs 12,688,624 on behalf of the company. Having examined those payment slips and the bank statement, the Tribunal is satisfied that the director did indeed pay taxes on behalf of the company in that sum. This being a matter capable of verification from the documents on record, the Respondent ought to have taken it into account, and its failure to do so rendered the PAYE assessment excessive to that extent. 98.On the second limb, however, beyond the taxes paid on the company’s behalf, the Appellant did not furnish invoices, primary records or corresponding accounting entries to demonstrate that the balance of the drawings represented company expenditure rather than emoluments enjoyed by the directors. The Appellant did not dispute that the directors withdrew substantial sums, and the drawings remained unsupported and unstructured in the manner described by the Respondent. In the absence of such evidence, the Tribunal is unable to disturb the treatment of the balance of the drawings as emoluments chargeable to PAYE. 99.The Tribunal therefore finds that the Appellant partially discharged its burden on this issue, and that the Respondent was not justified in confirming the PAYE assessment to the extent that it failed to credit the taxes of Kshs 12,688,624 paid by the director on the company’s behalf, but was justified in confirming the balance of the PAYE assessment founded on the unsupported directors’ drawings. d. Whether the Respondent was Justified In Confirming The Withholding Tax Assessment 100.The Respondent raised assessments for Withholding tax on the basis that payments made to the professionals engaged by the Appellant had not been subjected to Withholding tax as required by Section 35(3) of the ITA, the individual monthly payments having exceeded the statutory threshold. The Respondent noted, and it is borne out by the record, that the Appellant did not object to having made the payments for the professional services received. 101.The Tribunal notes that, in its grounds of appeal, statements of facts and written submissions, the Appellant advanced no argument and led no evidence contesting the Withholding tax assessment. An assessment that is not challenged stands unrebutted, and, consistent with the burden of proof under Section 56(1) of the TPA and Section 30 of the TAT Act, there is no basis upon which the Tribunal can interfere with it. Accordingly, the Tribunal finds that the Respondent was justified in confirming the Withholding tax assessment. 102.Drawing the findings together, the Appellant succeeded in part. the Appellant demonstrated that the Respondent erred in confirming the VAT for 2023 without crediting the payments made, and in confirming the PAYE without excluding Kshs 12,688,624 from the drawings amount despite having demonstrated that the sum was utilised for payment of taxes by the director on the company’s behalf. In all other respects, the Appellant failed to disprove the assessments. Final Determination 103.The upshot of the foregoing is that the Tribunal finds and holds that the Appeal is partially meritorious and makes the following orders:a.The Appeal be and is hereby partially allowed;b.The Objection Decision dated 21st May 2025 be and is hereby varied as follows:i.The Corporation tax assessment for the year of income 2019 be and is hereby upheld;ii.The Respondent be and is hereby directed to revise the VAT for the year 2023 by reference to the general ledger report so as to credit the payments already made;iii.The Respondent be and is hereby directed to revise the PAYE assessment to take into account the taxes of Kshs 12,688,624 paid by the director on behalf of the company, and the remainder of the PAYE assessment be and is hereby upheld; andiv.The Withholding tax assessment be and is hereby upheld;c.The Respondent is hereby directed to revise the Objection Decision in line with order (b) above within thirty (30) days of the date of this Judgment;d.Each party shall bear its own costs. 104.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 13TH DAY OF JULY 2026.…………………………ROBERT M. MUTUMACHAIRPERSON…………………………DR. TIMOTHY VIKIRUMEMBER…………………………GLORIA OGAGAMEMBER…………………………JIMMY MUSEMBIMEMBER