[2023] KETAT 528 (KLR)

Zumandu Limited v Commissioner of Legal Services & Board Coordination (Tribunal Appeal 733 of 2022) [2023] KETAT 528 (KLR) (13 October 2023) (Judgment)

Neutral citation: [2023] KETAT 528 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Tribunal Appeal 733 of 2022

E.N Wafula, Chair, D.K Ngala, GA Kashindi, CA Muga, AM Diriye & SS Ololchike, Members

October 13, 2023

Between

Zumandu Limited

Appellant

and

Commissioner Of Legal Services & Board Coordination

Respondent

Judgment

Background 1. The Appellant is a limited liability company that was incorporated on 26th January 2018 and is a registered taxpayer with income tax and PAYE obligations. It is a licensed company under the Betting, Lottery and Gaming Act Chapter 131 with its principal business being the provision of online betting and gaming services.

2. The Respondent is a principal officer 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 conducted an audit of the Appellant’s tax affairs for Corporation tax, PAYE, Withholding tax and Excise duty for the December 2018 to December 2019 review period resulting in a tax assessment of Kshs 64,758,487. 00 vide a notice of assessment dated 19th October 2021.

4. On 4th December 2021, the Appellant objected to the assessment through its notice of objection.

5. Following the Appellant’s objection, the Respondent reviewed the assessment downwards in its objection decision of 31st May 2022 to Kshs 52,589,089. 00 inclusive of penalties and interest.

6. Aggrieved by the Respondent’s objection decision, the Appellant lodged its Notice of Appeal at the Tribunal on 30th June 2022.

The Appeal 7. The Appellant’s Appeal was premised on the following grounds as set-out in the Memorandum of Appeal dated 4th July 2022 and filed on even date;a.That the Respondent erred in fact and law in demanding tax amounting to Ksh 51,227,853. 00 as a result of a factual and legal error in ascertaining, interpreting and computing of what constitutes winnings in relation to a bookmaker’s transaction.b.That the Respondent erred in law by demanding tax amounting to Ksh 51,227,853. 00 despite cogent legal expectation and guidance on what constitutes winnings under this tax head by the Tribunal and upheld by the High Court.c.That the Respondent erred in law and in fact by imposing a retrospective consideration by demanding withholding tax on winnings from the Appellant for the period in review based on a calculation that was not supported by the prevailing law and decisions of the Tribunal.d.That the Respondent erred in law by failing to provide the Appellant with its objection decision within sixty days provided for under Section 51(11) of the TPA. That as result, the Appellant’s notice of objection dated 4th December 2021 and lodged 6th December 2021 ought to be allowed.e.That the Respondent erred in fact by utilizing and applying erroneous and arbitrary calculations in its objection decision. That the calculations were arithmetically inaccurate and did not satisfy taxation principle of certainty.

Appellant’s Case 8. The Appellant stated as hereunder in its Statement of Facts dated 14th July 2022 and filed on even date.

9. The Appellant stated that it is a registered company and taxpayer providing online betting and gaming services and that its business operations began in December 2018 and filed its first return in January 2019.

10. The Appellant averred that after the audit of its books, records and accounts and the resulting assessment by the Respondent on 19th October 2021, it provided supportive documents and reconciliation that led to the reviewed assessment of Ksh 52,589,089. 00 on 31st May 2023.

11. The Appellant averred that it fully agreed with the assessment for Corporation tax of Ksh 1,361,236. 00 which it duly fully settled by utilizing tax credits. That however, it contested the Respondent’s assessment of withholding tax of Ksh 51,227,853. 00.

12. It was the Appellant’s assertion that the bone of contention in the instant Appeal was the definition and tax treatment of “winnings” assigned by the Respondent specifically with regard to withholding tax.

13. The Appellant contested the Respondent’s definition of “winnings” as the amount the punter received in the account and instead relied on the definition that winnings were based on its computation in line with the guidance of the Tribunal’s ruling in Pevans East Africa Limited vs Commissioner of Domestic Taxes, TAT 304 of 2019 that winnings refer to payouts by the licensee but does not include amounts staked by the bettor, a position that was upheld by the High Court in Commissioner of Domestic Taxes V Pevans East Africa Limited & 6 Others HCCOMMITA/E003 of 2019.

14. It was the Appellant’s assertion that the Respondent was dilatory in providing its objection decision as laid out in Section 51(11) of the TPA and that the objection decision was also sent outside the legal timelines of sixty days.

15. The Appellant accentuated its compliance to legal timelines in its notice of objection as well as in lodging its Notice of Appeal upon clearing all outstanding tax liabilities.

Appellant’s Prayer 16. The Appellant prayed that the Tribunal;a.Do set aside the assessment as contained in the Respondent’s objection decision with costs.b.Bar or estop the Respondent or its agents from demanding or taking any further steps towards enforcement or recovery of tax.

The Respondent’s Case 17. The Respondent replied to the Appeal through its Statement of Facts dated 8th August 2022 and filed on 10th August 2022.

18. The Respondent averred that effective January 2014, the Finance Act of 2013 introduced withholding tax on winnings at 20% which was reviewed to 7. 5% by the Finance Act of 2015. That this again was repealed by Finance Act of 2016 but re-introduced by the Finance Act of 2018 at the rate of 20%.

19. The Respondent stated that the Appellant’s self-assessment returns, financial statements, ledgers, trial balances and data filed with the Betting, Control and Licensing Board (BCLB) revealed under declared income for the December 2018 to December 2019 review period. The Respondent noted that the Appellant filed its first return with BCLB on January 2019, a return that should declare revenue, payouts and gross gaming revenues.

20. The Respondent further claimed that the audit established that Appellant’s withholding tax paid on winnings was less than the withholding tax payable on winnings; that the resulting variance was brought to charge at the standard withholding tax rate.

21. The Respondent stated that winnings were payments made to customers by the Appellant which amount to income thus attract withholding tax. The Respondent claimed that Macmillan dictionary defined winnings as money that somebody wins in a competition or game or by gambling; a definition that found similar meaning in Collins and Longman dictionaries. To buttress its position, the Respondent stated that tax experts understanding of the term “winnings” was an amount a punter receives in the account.

22. The Respondent asserted that winnings mean “money won” and there is no reference to stakes as not all form of games of chance have stakes. Further, the Respondent asserted that the issue of stakes does not arise as definition is applicable in all instances of games of chance even where no stakes are placed. It was the Respondent’s emphasis that there was nothing like net winnings or gross winnings because these terms were not backed by any legal authority and that the Finance Act of 2018 placed withholding tax on winnings not “net winnings.”

23. The Respondent cited the Presidential Memorandum of 13th September 2018 that amended Section 2 of the ITA in defining winnings as;“'It is noted that the definition limits the tax charged to the net payments. Further reference to bookmarkers also limits the tax to winnings from betting only. No tax will therefore be charged on the winnings from lotteries, prize competition and gaming hence narrowing the tax base."

24. To buttress its position, the Respondent cited the Finance Act No. 10 of 2018 that amended Section 2 of the ITA in defining winnings as;“Winnings of any kind and a reference to the amount or the payment of winnings shall be construed accordingly".

25. The Respondent stated that Parliament was moving from the position where withholding tax was to be charged on net payments from betting to the position that winnings as payouts would be charged to withholding tax from any game of chance. The Respondent relied on Section 34(3) of the ITA in asserting that withholding tax is a first charge on the payment or amount from which the tax is withheld or deducted. That the implication of this was that withholding tax can never be an amount paid out on the net as it is a first charge on payment made.

26. The Respondent averred that what comes out from the provisions of Section 34 (3) (b) as read with Rule 6 and Rule 8 (2) the Income Tax Withholding Tax) Rules, 2001 is that withholding tax is chargeable and calculated on gross payments without netting off any expense/investment. That this is the case for all the other incomes that fall under Section 10 and winnings should not be subjected to a different treatment.

27. The Respondent averred that in an email of 30th March 2022, it reminded the Appellant on the need to provide necessary documents yet the Appellant replied to the email on 12th April 2022. That this justified the Respondent’s objection decision since calculation of time to render the decision began on 12th April 2022.

28. According to the Respondent, the Appellant failed to lodge a valid objection pursuant to Section 51(3) of the TPA thus there was no valid objection.

Respondent’s Prayer 29. The Respondent prayers to the Tribunal were that;a.The Tribunal finds that the Respondent’s decision to partially reject the Appellant’s objection and confirmation of the withholding tax assessment of Ksh 51,227,853. 00 as proper in law and in conformity with the Income Tax Act and the Tax Procedures Act.b.The Tribunal dismiss the Appeal with costs to the Respondent as the same is without merit.

Parties Written Submissions 30. The Appellant’s written submissions dated 13th February 2023 were filed on 9th March 2023 in compliance with the Tribunal’s direction of 26th January 2023 following the parties’ agreement to dispense the Appeal through written submissions. The Appellant submitted on five issues for determination as follows;

a. What constitutes winnings for purpose of Income Tax Act? 31. It was the Appellant’s contention that the main issue for determination in the Appeal was what constitutes winnings for assessment of withholding tax.

32. The Appellant avowed that it had paid its withholding tax based on net winnings from clients’ winnings calculated as follows;

Net winnings= Total winnings less stakes 33. The Appellant asserted that the Respondent had incorrectly and illegally interpreted the term “winnings” in the context of Finance Act No. 10 of 2018 which amended Section 2 of ITA. The Appellant emphasized that the foregoing calculation was based on the Tribunal’s decision in Pevans East Africa Limited vs Commissioner of Domestic Taxes, TAT 304 of 2019 where the Tribunal stated as follows;“.,.in view of the foregoing, the Tribunal makes a finding that winnings as stipulated in the ITA refers to payouts by the licensee but does not include amounts staked by the bettor. ”

34. To reinforce its position, the Appellant cited the High Court decision at paragraph 38 in Commissioner of Domestic Taxes V Pevans East Africa Limited & 6 Others where the Court held that;“It is clear that strictest interpretation that favors the taxpayer, in this case the Respondents in respect of the definition of “winnings” in that is the payment made to the punter less the amount staked. It is this amount that is subject to tax and what the Respondents are obliged to deduct and remit to the Commissioner. I am therefore in agreement with the Tribunal’s conclusion on its definition of “winnings” ”

35. The Appellant stated that it relied upon the two judicial interpretations regarding definition of winnings as the payouts made by a bookmaker to the punter less amount staked or wagered.

b. Whether or not the Respondent’s assessment of winnings is in line with the law? 36. The Appellant stated that consolidating grounds 1-3 & 6-7 as laid out in its Memorandum of Appeal since they revolve around the singular issue of application of the interpretation of “winnings’ in the context of Finance Act No. 10 of 2018 would guide the Tribunal in determining whether the Respondent’s assessment of withholding taxes on winnings was valid and within the ambit of the law.

37. The Appellant averred that the Respondent assigned a different meaning and interpretation to the term winnings which was erroneous in law and fact thus rendering its objection decision illegal, inequitable and unjust as the Tribunal’s reasoning and the affirmation by the High Court was manifestly clear. It followed that there were no special reasons/ circumstances to depart from the same.

38. The Appellant claimed that the Respondent ignored the Tribunal and High Court decisions while issuing its objection decision and as such was unfounded and incapable of being enforced in the face of the two judicial decisions.

b. Whether or not the Tribunal decision and the High Court decision applied to the Appellant despite it not being a party to the concluded Tribunal case and subsequent appeal? 39. It was the Appellant’s submission that the Respondent undertook the audit and assessment in the pendency of two cases and by the time the objection decision was being rendered, the High Court had already delivered its decision. That the judgment was in rem not in personam; a decision to bind the Respondent’s similar actions towards other players in the industry to whom the offending withholding tax provisions would have applied.

40. The Appellant declared that if the Respondent’s objection decision was to be allowed, it would cause chaos in tax regime as different people within the same class of person would be treated differently with selective application of the law to the benefit and detriment of a certain class based only on their participation or lack thereof in the aforementioned suits.

41. To buttress this position, the Appellant cited the case of Republic v Attorney General & 2 Others Ex-Parte APM Terminals B.V [2015] eKLR where the court held as follows;“A judgement in rem is an adjudication pronounced upon the status of some particular subject-matter by a Tribunal having competent authority for that purpose. Such an adjudication being a solemn declaration from the proper and accredited quarter that the status of the thing adjudicated upon is also declared by the adjudication…so a declaration of legitimacy is in effect a judgement in rem.”

42. The Appellant asserted that the Respondent was bound to apply High Court guidance and rationale concerning every entity affected by the application of the amended Section 2 of the ITA. That it was not upon the Respondent to treat the Appellant differently since the aforesaid decisions in rem were final judgement or orders or decrees of competent courts which confer or take away from any person any legal character or to be entitled to any specific thing, not as against any specific person but absolutely.

b. What is the effect of Section 51(11) of the Tax Procedure Act? 43. It was the Appellant’s contention that the Respondent failed to file its response to the Appeal as stipulated in Section 15 of the TAT Act and as such the Appellant was not privy to what transpired to warrant the issuance of the objection decision.

44. The Appellant submitted that the objection decision was rendered five months after receipt of the notice of objection contrary to Sixty days envisaged under Section 51(11) of the TPA. To firm up its position, the Appellant relied on the case of Equity Group Holding Limited V Commissioner of Domestic Taxes (Civil Appeal E069 & E025 of 2020)[2021] KEHC 25 (KLR) where the court held that;“...the TAT rightly computed time and pronounced that the objection decision was rendered out of time. This being the position, then by dint of the above provision, the objection decision is deemed to have been allowed. This position has been upheld in a catena of superior court decisions in this country, among them those cited by the appellant’s counsel. In Republic V Commissioner of Customs Services Ex-Parte Unilever Kenya Limited, the court stated that if the Commissioner does not render a decision within the stipulated period, the objection is deemed as allowed by operation of the law. The law requires that where the Commissioner has not made an objection decision within 60 days from the date the taxpayer lodged the notice of objection, the objection shall be allowed. This means that the issues that the taxpayer had raised in the notice of objection will be accepted. In case of a tax assessment, it will be vacated…”

45. It was the Appellant’s assertion that by dint of operation of the law, its notice of objection stood and was allowable since the Respondent failed to render its decision within 60 days.

b. What was the effect of the Respondent failing to file any response to the appeal? 46. The Appellant averred that the Respondent did not serve its Statement of Facts to enable the Appellant adequately respond to any opposition the Respondent may have to the instant Appeal. That the right to fair hearing entailed that all parties as the Appellant would not be ambushed during proceedings in the event statement of facts under Section 15 of TAT Act were filed without leave or filed later on in the matter.

47. The Appellant sought to expunge any Statement of Facts filed at this late juncture as the same would be prejudicial to the Appellant’s right to fair hearing. The Appellant cited the case of Guaca Stationers Limited V Commissioner of Domestic Taxes [2020]eKLR where the court held as follows;“...Even though the parties were allowed to put forward their perspective cases, the importance of parties’ pleadings cannot be underestimated. The purpose of the statement of facts is to delineate the matters in dispute and by allowing the parties to submit, refer to and present documents at the end of the hearing without reference to the statement of facts undermines the objective of a fair process…”

48. The Appellant averred that it fully understood the onerous task placed upon it in discharging the burden of proof that would lead the Tribunal into finding that the tax decision was incorrect.

49. The Respondent’s written submissions dated 20th March 2023 were filed on 21st March 2023; the Respondent submitted on three issues as follows;a.Whether the instant Appeal is merited.b.Whether the objection decision was rendered within the statutorily prescribed timelines.c.What constitutes earnings in relation to a bookmakers’ transaction according to the law.

SUBPARA a. Whether the instant Appeal is merited 50. The Respondent claimed that the Appellant conceded and agreed to Corporation tax liability assessment of Ksh 1,361,236. 00. That however, the Appellant did not attach any proof of agreement with the Respondent to utilize its credits in settlement of the tax liability.

51. The Respondent asserted that in absence of proof, such an agreement and the Appellant’s failure to settle the conceded tax liability, renders the instant Appeal fatally defective by virtue of the provisions of Section 52(2) of the TAT Act which provides as follows;“A notice of appeal to the Tribunal relating to an assessment shall be valid if the taxpayer has paid the tax not in dispute or entered into an arrangement with the Commissioner to pay the tax not in dispute under the assessment at the time of lodging the notice.”

SUBPARA b. Whether the objection decision was rendered within the statutorily prescribed timelines 52. The Respondent alleged that after issuing additional tax assessments on 19th October 2021 and the Appellant’s objection decision dated 4th December 2021, there were varied correspondence between the parties culminating in a meeting held on 30th March 2022 where it was agreed that the Appellant avail the following records;i.BCLB returns sample filings for the year 2019. ii.Trial balance and all reclassification for 2019iii.Enhanced objection documenting position on withholding tax on winnings plus supporting documents.

53. The Respondent averred that after the Appellant availed the documents on 12th April 2022 vide electronic mail and resent the same on 17th May 2022, the Respondent reviewed the same and issued a revised assessment vide its objection decision within the statutory timelines. To prop up its position, the Respondent cited Section 51(11) of the TPA prior to 1st July 2022 which stated as follows;“The Commissioner shall make the objection decision within sixty days from the date of receipt of (a) the notice of objection; or (b) any further information the Commissioner may require from the taxpayer, failure to which the objection shall be deemed to be allowed.”

54. It was the Respondent’s contention that contrary to Appellant’s assertion on timelines, it was the Appellant who availed documents on 17th May 2022 in support of a notice of objection it had lodged on 6th December 2021. The Respondent asserted that the first day when a valid objection as envisaged under Section 51(3) of the TPA was thus 18th May 2022.

55. The Respondent claimed that the Appellant was guilty of approbating and reprobating since it was providing documents long after lodging its notice of objection. To reinforce this position, the Respondent relied on the case of Evans v BARTLAM (1937)2 ALL ER 649 page 652 where Lord Russel of Killowen held that;“The doctrine of approbation and reprobation requires for its foundation inconsistency of conduct, as where a man, having accepted a benefit given to him by a judgement cannot allege the invalidity of the judgement which conferred the benefit.”

56. The Respondent was adamant that the objection decision was issued well within time and that the Appellant’s inconsistency of conduct was apparent since the Appellant had legitimate expectation that the Respondent would review documents submitted on 17th May 2022 before rendering an objection decision.

c. What constitutes earnings in relation to a bookmakers’ transaction according to the law. 57. The Respondent relied on Section 2 of the ITA to define winnings as; “winnings include winnings of any kind and a reference to the amount or the payment of winnings shall be construed accordingly.”

58. The Respondent submitted that winnings refer to gross amount that a punter receives into their account and there is no reference to stakes since not all forms of games of chance have stakes. Thus, the position of Appellant of “net winnings” was not envisaged under the ITA.

ISSUES FOR DETERMINATION** 59. The Tribunal having carefully considered the parties’ pleadings, documentation and submissions is of the view that two issues call for the Tribunal’s determination:-a.Whether the Appeal was merited and validly lodged.b.Whether the Respondent’s Additional Assessment was proper.

ANALYSIS AND FINDINGS 60. The Tribunal proceeds to analyze the issues falling for determination separately as follows;

a. Whether the Appeal was merited and validly lodged 61. The Tribunal notes that the point of divergence between the parties is on the meaning assigned by law to the term “winnings” and exactly where assessment of withholding tax occurs.

62. Prior to 2018, winnings had the meaning assigned to it under the Betting, Lotteries and Gaming Act (CAP 131 of Kenya’s Laws). This was amended by the Finance Act 2018 which further limited the scope of winnings to mean payments made less stakes by punters. The Finance Act 2018 defined winnings as follows;“winnings means the positive difference between payments made and stakes placed in a given month, for each player, payable to punters by bookmakers licensed under Betting, Lotteries and Gaming Act.”

63. On 21st September 2018, Finance Act No. 10 of 2018 expanded the scope of winnings by reversing the definition of Betting, Lotteries and Gaming Act to cover other prizes by amending Section 2 of the ITA as follows;“winnings of any kind and a reference to the amount or payment of winnings shall be construed accordingly.”

64. The Tribunal notes that at all material times, the definition of winnings in the ITA was substantially similar to the definition in the Betting, Lotteries and Gaming Act. The Tribunal’s view is that ITA sought to tax what was construed and recognized as a winning in Betting, Lotteries and Gaming Act i.e. gaming revenue and other prizes won in the form of money or lottery in any game of chance whether a person has placed a bet or not.

65. It is the Tribunal’s holding that any definition of the term winnings for the purposes of the ITA should be confined to the definition prescribed in ITA. Therefore, winnings as stipulated in the ITA refer to payouts made less staked amounts placed by punters. The Tribunal is guided by its holding in a similar case of Pevans East Africa Limited vs Commissioner of Domestic Taxes TAT No. 304 of 2019 where the Tribunal held that;“That at no time prior to this case did the legislature explicitly or implicitly intimate that winnings either in the ITA or the BLGA should include stakes or have similar meaning as gross payouts.”

66. The Tribunal notes that the Appellant disputed the Respondent’s objection decision as being time barred pursuant to Section 51(11) of the TPA which provide that a decision shall be issued within sixty days of receipt of the Appellant’s valid notice of objection failure to which the objection shall be deemed to be allowed. The Respondent contested this position by adducing electronic mail correspondence between the parties specifically on 30th March 2022, 12th April 2022 and on 17th March 2022.

67. The Appellant claimed that there was an understanding that an assessment for Corporation tax amounting to Ksh 1,361,236. 00 had been agreed upon by both parties as due and payable and was to be set-off against Appellant’s tax credits. The Respondent contested these averments by stating that the Appellant did not avail any evidence to prove the existence of such understanding or settlement for the same.

68. The Tribunal has sighted Appellant’s pleadings claiming the existence of the understanding to set off the Corporation tax amounting to Ksh 1,361,236. 00 against its credits. However, the Appellant did not adduce any proof of settlement or any payment arrangement entered into with the Respondent before lodging the instant Appeal as set out in Section 51(3)(b) of the TPA as follows;“A notice shall of objection shall be treated as validly lodged by a taxpayer under subsection (2) if…(b) in relation to an objection to an assessment, the taxpayer has paid the entire amount of tax due under the assessment that is not in dispute or has applied for an extension of time to pay the tax not in dispute under Section 33(1) …”

69. The Tribunal observes that the earliest communication to the Appellant by the Respondent after the lodging of the notice of objection on 4th December 2021 was on 30th March 2021 more than one hundred days later. The Appellant ought to have been informed in advance and within the legal timelines if its objection was valid or not as clearly provided for in Section 51(3) of the TPA. In the circumstances, the Tribunal reaffirms its position in the case of Andrew Mukite Musangi vs Commissioner of Domestic Taxes (TAT No. 299 of 2018) that statutory timelines which give rise to substantive rights cannot be extended by the Tribunal suo moto.

70. From the preceding analysis of the Appeal, it is clear that the Appellant lodged its notice of objection in time but the Respondent was dilatory in communicating its decision within the stipulated sixty days legal timeline as laid out in Section 51(11) of the TPA. In any event the Respondent did not substantively raise or address the issue of the validity of the Appellant’s notice of objection in its Statement of Facts for any appropriate substantive rebuttal by the Appellant.

71. In view of the foregoing, the Tribunal finds that the Appeal was merited and validly lodged.

b. Whether the Respondent’s Additional Assessment was proper 72. The Applicable law on withholding tax on winnings is found in the ITA together with subsequent amendments that can be summarized as here under;a.Prior to 2018, winnings had the definition in ITA as winnings as assigned in the Betting, Lotteries and Gaming Act,CAP 131 of Kenya’s Laws.b.The Tax Law Amendment Act 2018 amended the meaning of winnings as the positive difference between payments made and stakes placed in a given month, for each player, payable to punters by bookmakers licensed under Betting, Lotteries and Gaming Act, CAP 131 of Kenya’s Laws.c.Finance Act 2018 amended Section 2 of the ITA as follows; “winnings include winnings of any kind and a reference to the amount of payment of winnings shall be construed accordingly.d.The Tribunal defined winnings as stipulated in the ITA refers to payouts by the licensee but does not include amounts staked by the bettor in the case of Pevans East Africa Limited vs Commissioner of Domestic Taxes TAT No. 304 of 2019 (Supra).

73. The Tribunal finds that the Respondent erred when it defined and applied the term “winnings” to include the amount staked in assessing the Appellant’s withholding tax liability on amounts including the punter’s stake. To buttress this position, the Tribunal relies on the case of Scott vs Russel (1948) (2) ALL ER in which it was stated as follows;“there is a maxim in income tax law which though it may sometimes be overstressed, yet ought not to be forgotten, it is that the subject- ought not to be taxed unless the words of a taxing statute unambiguously impose the tax on him.”

74. The Tribunal finds that the Respondent cannot demand tax from the Appellant as if it was due from it. It is to be appreciated that when Parliament intended withholding tax to be recovered from the withholding agent as if it was tax due from it, the legislation clearly stated so. This was not a tax due from the Appellant.

75. Accordingly, the Tribunal in the instant Appeal affirms its position held in a similar recent decision in Shop and Deliver Limited vs Commissioner of Domestic Taxes [TAT 126 of 2022] that;“66. It is settled in law that a decision of a judicial body that is clothed with jurisdiction settles an issue in dispute between the parties until a superior court stays and or overturn’s the previous decision.

67. As to what constitutes “winnings” under the Income Tax Act (Chapter 470 of the Laws of Kenya) (“the ITA”), this Tribunal concluded in TAT Appeal No. 304 of 2019 (Pevans East Africa Limited v Commission of Domestic Taxes) that winnings as stipulated in the ITA refers to pay-outs by the licensee but does not include amounts staked by the bettor.68. Therefore, as it is, the definition of the Tribunal in regard to winnings in TAT Appeal No. 304 of 2019 (Pevans East Africa Limited v Commission of Domestic Taxes) remains valid and hence the authoritative definition of “winnings” under the ITA until it is overturned on appeal.”

76. Consequently, the Tribunal is convinced that the Respondent’s additional assessment was not proper.

FINAL DECISION 77. The upshot of the foregoing is that the Appeal is meritorious and the Tribunal accordingly proceeds to make the following Orders:a.The Appeal be and is hereby allowed.b.The Respondent’s Objection decision dated 31st May 2022 be and is hereby set aside.c.Each party to bear its own costs.

78. It is so ordered.

DATED and DELIVERED at NAIROBI on this 13th day of October, 2023ERIC NYONGESA WAFULA - CHAIRMANDELILAH K. NGALA - MEMBERGEORGE KASHINDI MEMBERCHRISTINEA. MUGA - MEMBERMOHAMED A DIRIYE - MEMBERSPENCER S. OLOLCHIKE - MEMBER