Automated Summary
Key Facts
Far East Connections Limited appealed against a tax assessment by the Commissioner of Investigations and Enforcement for the period 2020-2022, demanding Kshs 48,988,514.00. The Appellant objected to the assessment on 8th March 2024, arguing the Respondent erred in disallowing expenses incurred wholly and exclusively for income generation and in taxing gross income via withholding certificates. The Respondent partially allowed Kshs 23,926,362.00 for 2021 after the Appellant provided some documents but disallowed expenses for 2020 and 2021 due to missing invoices and proof of payment. The Tribunal found the Appellant failed to discharge its burden of proof under Section 56(1) of the TPA and Section 30 of the TATA, concluding the appeal lacks merit and dismissing it.
Tax Type
Corporate Income Tax and Value-Added Tax (VAT)
Issues
- Whether the Respondent acted unfairly in carrying out its administrative duty, including compliance with Section 4(3)(g) of the FAAA and Article 47 of the Constitution.
- Whether the Appellant discharged its burden of proving the objection decision dated 7th May 2024 was incorrect, particularly regarding failure to provide required documentation under Section 51(3) of the TPA.
Tax Years
- 2021
- 2020
- 2022
Holdings
- The Tribunal determined that the Appellant failed to discharge its burden of proving that the objection decision dated 2024-05-07 was incorrect, as required by Sections 56(1) of the TPA and 30 of the Tax Appeals Tribunal Act (TATA).
- The Tribunal found that the Respondent acted fairly in carrying out its administrative duty, complying with the provisions of Section 51(8) of the Tax Procedures Act (TPA).
Remedies
- The Tribunal upheld the Respondent's objection decision dated 7th May 2024.
- The Appeal was dismissed as it lacked merit.
- Each party was ordered to bear its own costs.
Tax Issue Category
- Withholding-Tax Characterisation
- Deductibility / Allowances
Legal Principles
- The Tribunal emphasized that under Section 56(1) of the Tax Procedures Act (TPA) and Section 30 of the Tax Appeals Tribunal Act (TATA), the burden of proving a tax decision is incorrect lies with the taxpayer. The Appellant failed to provide sufficient documentary evidence to discharge this burden, leading to the upholding of the Respondent's objection decision.
- The Respondent's compliance with Section 4(3)(g) of the Fair Administrative Action Act (FAAA) and Article 47 of the Constitution was scrutinized. The Tribunal found that the Respondent provided the Appellant with opportunities to submit supporting documents and acted within statutory requirements, satisfying the principles of fair administrative action.
Disputed Tax Amount
41810605.00
Precedent Name
- The London County Council & Others v The Attorney General
- Kottle General Contractors Company Limited v Commissioner of Domestic Taxes
- Katebes Enterprises Limited v Commissioner of Domestic Taxes
- Digital Box Limited v Commissioner of Investigations and Enforcement
- Atronix Limited v Commissioner Domestic Taxes
Cited Statute
- Tax Procedures Act, CAP 469B
- Fair Administrative Action Act, CAP 7L
- Kenya Revenue Authority Act, CAP 469
- Tax Appeals Tribunal Act, CAP 469A
- Income Tax Act, Cap. 470
- Constitution of Kenya, 2010
Judge Name
- Boniface K. Terer
- Eunice N. Ng'ang'a
- Ololchike S. Spencer
- Christine A. Muga
- Elishah N. Njeru
Passage Text
- The Tribunal finds that the Respondent complied with the provisions of Section 51(8) of the TPA in discharging its administrative duty and consequent upon this finding and the analysis in the preceding paragraphs, the Tribunal finds and holds that the Respondent acted fairly in carrying out its administrative duty.
- The Tribunal finds that the Appellant failed to discharged its burden of proving that the objection decision dated 7th May, 2024 was incorrect.
- The Tribunal further noted that the Appellant did not file its notice of objection which would have enabled the Tribunal determine whether or not the Respondent was provided with the documents attached to the instant Appeal. There was no evidence from the Appellant to indicate that the Appellant availed the documents to the Respondent during the objection review stage.