https://new.kenyalaw.org/akn/ke/judgment/ketat/2026/141

Westomax Investments Limited v Commissioner of Domestic Taxes (Appeal E1035 of 2025) [2026] KETAT 141 (KLR) (30 June 2026) (Judgment) Neutral citation: [2026] KETAT 141 (KLR) Republic of Kenya In the Tax Appeal Tribunal Appeal E1035 of 2025 RM Mutuma, Chair, G Ogaga, T Vikiru & JM Malla, Members June 30, 2026 Between Westomax Investments Limited Appellant and Commissioner of Domestic Taxes Respondent Judgment Background 1.The Appellant is a limited liability company incorporated in Kenya under the Companies Act. The Appellant’s principal business activity is civil works and construction, including road maintenance and related activities. 2.The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469 Laws of Kenya (KRA Act). Under Section 5 (1) of the Act, KRA is an agency of the Government for the collection and receipt of all revenue. For the performance of its function under Subsection (1), the Authority is mandated under Section 5(2) of the Act to administer and enforce all provisions of the written laws as set out in Parts I and II of the First Schedule to the KRA Act to assess, collect, and account for all revenues under those laws. 3.The Respondent issued Corporation tax, Value Added Tax (VAT) and Pay as You Earn (PAYE) additional assessments. 4.The Appellant objected to the assessments on 30th July 2023. 5.The Respondent issued an Objection decision on 27th September 2023 confirming the assessments. 6.The Appellant, being dissatisfied with the Respondent’s Objection decision, filed its Notice of Appeal dated 18th September 2025 on even date. The Appeal 7.The Appeal is premised on the Memorandum of Appeal dated and filed on 18th September 2025 which raised the following grounds: -a)Mischaracterization of bank credits as sales: The Respondent assumed all bank deposits constituted sales, including director capital injections, contrary to Section 29 of the Tax Procedures Act, 2015 (as revised in 2024).b)Double counting of sales: Sales derived from withholding certificates were added back despite already being reflected in bank credits, amounting to double taxation contrary to Article 210(1) of the Constitution.c)Erroneous classification of payments: Payments to individuals were wrongly assumed to be professional fees subject to 5% withholding tax, while in fact they represented petty cash withdrawals, cheque payments to suppliers, and wages to casual laborers.d)Unreasonable disallowance of expenses: Only 40% of expenses were allowed, with 60% disallowed without reference to industry margins. Bank overdraft interest and charges were ignored. The Appellant has availed supporting records of operational, financial, and administrative expenses incurred wholly and exclusively in the production of income.e)Violation of precedent: The Respondent ignored Tribunal rulings, including Thika Road Baptist Church TAT No. 256 of 2021, which established that not all bankings constitute sales. In this case, deposits by Director Kenneth Mucuiya Ngai were capital injections, not taxable turnover. Appellant’s Case 8.The Appellant’s case is premised on its Statement of Facts dated and filed on 18th September 2025 and the documents attached to it. 9.The Appellant stated that on 27th September 2023, the Respondent issued an Objection decision confirming additional assessments for VAT, PAYE, and Income tax in respect of the tax periods 201 7, 2018, 2019, 2020, and 2021. 10.That the additional assessment was founded on audit findings conducted by the Regional Audit Centre (RAC), which: treated all bank deposits as taxable sales; added back sales from withholding certificates resulting in double counting; assumed payments to individuals were professional fees; allowed only 40% of expenses; and ignored bank overdraft interest and charges. 11.The Appellant averred that not all bank deposits constituted sales. That several deposits were capital injections by its directors, specifically by Director Kenneth Mucuiya Ngai. That the Respondent’s reliance on withholding certificates caused double taxation, while payments to individuals included petty cash, cheque payments to suppliers, and wages to casual laborers. 12.The Appellant asserted that it had availed documentation supporting operational, financial, and administrative expenses incurred wholly and exclusively in the production of income. That the disallowance of 60% of expenses was arbitrary and unjustified. 13.The Appellant averred that the Respondent ignored legitimate expenses such as bank overdraft interest and bank charges, despite these being reflected in the Appellant's bank statements. 14.The Appellant contended that the Respondent's conduct violated the Appellant’s rights under Article 47 of the Constitution, the Fair Administrative Action Act, 2015, and Sections 29 and 51 of the Tax Procedures Act, 2015 (as revised in 2024). 15.The Appellant submitted that it relies on Tribunal precedent, including Thika Road Baptist Church TAT No. 256 of 2021, affirming that not all bankings are sales. The Appellant asserts that the additional assessments are arbitrary, unlawful, and unsupported by evidence. Appellant’s Prayers 16.The Appellant prayed for the following from the Tribunal:a)The Objection decision dated 27th September 2023 be set aside in its entirety;b)The additional assessment of KES 880,678, KES 7,251 ,878, KES 1,215,131 and 3,961,018 for tax periods 2017,2018,2019,2020 respectively on VAT for the tax be annulled;c)That the Objection decision dated 27TH September 2023 be set aside in its entirety;d)That the additional assessment of KES 1,587,988.34 KES 13,928,322, KES 2,207,085 and 7,071,299 for tax periods 2017,2018,2019,2020 respectively on income tax be annulled;e)That the Tribunal disallows the Commissioner's disallowance of allowable business expenses, and permits the deduction of: Actual administrative expenses (rent, salaries, utilities, office overheads); Financial costs, including interest on loans for working capital and project financing, as permitted under Section 15(2)(a);f)That the Tribunal orders the Commissioner to recompute taxable profit based on the Appellant’s actual income and documented costs. Respondent’s Case 17.The Respondent’s case is premised on the following documents filed before the Tribunal:a)The Respondent’s Preliminary Objection dated 6th January 2026 and filed on the same date; andb)Its Written Submissions dated and filed on 5th May 2026. 18.The Respondent raises a Preliminary Objection to the entire Appeal on the following grounds of Law: 19.That the Appeal as filed is fatally defective, incompetent and an abuse of the process of this Honourable Tribunal for failing to comply with the mandatory requirements of the Tax Appeals Tribunal Act and the Tax Appeals Tribunal (Procedure) rules. 20.That specifically, the Appellant failed to lodge its Memorandum of Appeal within 14 days after grant of leave to file it Appeal out of time. 21.That consequently this Honourable Tribunal is not properly seized of the matter and lacks the jurisdiction to entertain the Appeal. 22.That the Appeal is therefore a nullity ab initio and is fit for striking out. Respondent’s Submissions 23.The Respondent submitted that vide Misc. Application No. E109 of 2024, dated sometime in 2024, the Appellant moved this Honourable Tribunal seeking leave to file its Appeal out of time. 24.That the Honourable Tribunal granted leave to the Appellant to file its Appeal out of time within 14 days in the year 2024. 25.The Respondent averred that the Appellant failed and or neglected to lodge its Appeal within the prescribed timelines contrary to the directions of this Honourable Tribunal. 26.The Respondent considered that the following issues are for determination in this matter: whether the appeal is valid and whether the additional assessment was justified. I. Whether the appeal is valid. 27.The Respondent raised a preliminary objection on a point of law that the Appeal be struck out as it was filed out of time contrary to the provisions of Section 13 of the Tax Appeals Tribunal Act. 28.The Respondent submitted that Section 13(2) of the Tax Appeals Tribunal Act requires an Appellant to submit an Appealable decision and the Appellant failed and neglected to do so despite being afforded several opportunities within reasonable timelines. 29.It argued that failure by the Appellant to act within the prescribed timelines means that the leave expired by operation of the law, the same cannot be revived informally and nor can it be presumed to still exist, the import therefore means the Tribunal lacks Jurisdiction to entertain this suit. II. Whether the additional assessment was justified 30.The Respondent submitted that the decision to arrive at the additional assessment was justified and had basis in Law as required under the Tax Procedures Act, 2015. 31.The Respondent affirmed that it at liberty to make assessments based on information available to it in accordance to Section 24(2) of the Tax Procedures Act. That further, Section 31 of the Tax Procedures Act empowers the Respondent to make alterations or additions to original assessments from available information for a reporting period based on the Commissioner’s best judgement. 32.The Respondent submitted that the Appellant did not discharge its burden of proof under Section 56 (1) of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act. It referred to Ushindi Exporters Limited versus Commissioner of Investigation and Enforcement (Tax Appeals Tribunal No 7 of 2015) to support this submission. 33.The Respondent submitted that the Appellant did not discharge its burden of proving that the assessment was erroneous and the Commissioner was right in confirming the assessment. Respondent’s Prayer 34.The Respondent prayed that the Tribunal strikes out the Appeal. Issues For Determination 35.The Tribunal has considered the pleadings and the submissions made by the Parties, and considers the issues for determination as follows:a)Whether there is a valid Appeal on record; andb)Whether the Respondent was justified in confirming the Corporation tax, VAT and PAYE additional assessments in the Objection decision dated 27th September 2023. Analysis And Findings 36.The Tribunal analysed the issues that call for its determination as hereunder. A. Whether there is a valid appeal on record 37.The Respondent submitted that the Appeal as filed is fatally defective, incompetent and an abuse of the process of this Honourable Tribunal for failing to comply with the mandatory requirements of the Tax Appeals Tribunal Act and the Tax Appeals Tribunal (Procedure) Rules. The Respondent stated that the Tribunal granted leave to the Appellant to file its Appeal out of time within 14 days in the year 2024, however the Appellant failed and or neglected to lodge its Appeal within the prescribed timelines contrary to the directions of this Tribunal. 38.The Tribunal refers to the procedure for appeal provided in Section 13(2) of the TAT Act that: -“(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 appealable decision; and(d)such other documents as may be necessary to enable the Tribunal to make a decision on the appeal.” 39.Section 13(3) of the TAT Act provides the remedy to any party which wishes to lodge an appeal out of time, being that any such intended appellant may seek leave of the Tribunal in writing, seeking an extension of time and leave to file an Appeal out of time. The provision reads: -“(3) 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).” 40.The Tribunal notes that indeed the Appellant filed a Miscellaneous Application TATMISC/E109/2024 dated 17th October 2024 at the Tribunal, seeking to be granted leave to file its Appeal out of time. On 24th October 2024, during the application hearing, the Respondent confirmed that it does not oppose the application. By consent of the Parties, the Tribunal issued the following orders on 24th October 2024:“ 1.That the Applicant is granted leave to file Memorandum of Appeal and the supporting documents out of time. 2.That the Applicant to file and serve the Appeal papers within the next thirty (30) days. 3.That the Respondent to file its responses within statutory timelines.” 41.The Tribunal issued the Appellant with an order to file its appeal documents within 30 days of 24th October 2024. The Tribunal’s position is that the Appellant ought to have lodged its Notice of Appeal and Appeal documents on or before 23rd November 2024. The Tribunal notes that the Appellant filed its notice of appeal and appeal documents on 18th September 2025, which was beyond the thirty (30) days of 24th October 2024, and consequently out of time. 42.The Tribunal further notes that the Appellant failed to apply for extended leave to file its notice of appeal and appeal documents out of time after the time in the Tribunal’s orders lapsed. 43.The Tribunal is guided by the case of Boss Freight Terminal Ltd Vs Commissioner of Domestic Taxes(2017) eKLR, where the Court of Appeal reiterated the sentiments in Patrick Kiruja Kithinji Vs Victor Mugira Marete (2015) eKLR on time as a jurisdictional issue as follows: -“… in our view whether or not an appeal is filed on time goes to the jurisdiction of this Court. It is trite law that this Court has jurisdiction to entertain appeals filed within requisite time and or appeals filed out of time with leave of the Court. To hold otherwise would upset the established clear principles of institution of appeal of this Court.” 44.The question therefore, is whether the Tribunal has jurisdiction to entertain this Appeal. The Tribunal is guided by the case of Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] KLR, where Nyarangi JA held, inter alia as follows: -“… Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of the proceedings pending other evidence. A court of law downs its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.” 45.The Tribunal, consequently, finds that in the absence of the Tribunal granting further leave to the Appellant to file its appeal out of time, the Appeal herein is incompetent and untenable in law. The Appeal is therefore not validly before the Tribunal. 46.Having determined that this Appeal is not validly before the Tribunal, the Tribunal did not delve into the second issue for determination as it has been rendered moot. Final Decision 47.The upshot of the above analysis is that the Tribunal finds that the Appeal is incompetent. The Tribunal accordingly proceeds to issue the following Orders:a)The Appeal be and is hereby struck out.b)Each party to bear its own costs. 48.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 30TH DAY OF JUNE 2026.……………………………..….ROBERT M. MUTUMACHAIRMAN………………………………GLORIA A. OGAGAMEMBER……..….……..……………..DR. TIMOTHY B. VIKIRUMEMBER……………………………..….JIMMY M. MALLAMEMBER