Judgment summary
The Tax Appeals Tribunal heard an appeal by Fanda Wired Enterprises Limited against an objection decision of the Commissioner Legal & Board Services dated 8 November 2024, which confirmed a VAT assessment for February 2023 [6][7].
The single issue for determination was whether the Respondent erred in confirming the VAT assessment [27].
The Tribunal dismissed the appeal, upheld the objection decision, and ordered each party to bear its own costs [44][45].
Background
The Appellant is a private company registered under the Company's Act laws of Kenya [1]. The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469 [2].
The Respondent conducted a compliance check on the Appellant's tax affairs for the period January 2019 to December 2023 and noted that the Appellant had made supplies to the County Government of Kitui, receiving payments of Kshs. 11,485,357 for the services or goods supplied [3].
The Respondent noted that the Appellant declared a Nil VAT return for the period, whereas the County Government withheld VAT amounting to Ksh.198,023. Based on the withheld amount, the Respondent issued a VAT assessment vide a letter dated 15th March 2024 for a VAT liability of Kshs 1,584,187 for the period February 2023 [4].
The Appellant objected to the assessment via letter dated 3rd October 2024 [5]. The Respondent issued an objection decision letter dated 8th November 2024 confirming the assessment fully [6]. The Appellant lodged a notice of appeal dated 8th May 2025 and filed on 9th May 2025 [7].
Core dispute
The Appellant asserted that no tender or contract was awarded to it during the period in question and that it did not supply services to the County Government of Kitui [8][10][28]. It relied on a letter dated 27th September 2024 from the County Government of Kitui stating that no contract had been assigned to it since 2022 and no payment received for works, goods or services from July 2022 [14][30].
The Appellant also stated that if the withholding credit of Kshs.198,023.4 was utilised, it was willing and capable of paying that amount, proposing a 40% deposit with the balance in six monthly instalments [11][12].
The Respondent averred that the Appellant received payment from the County Government of Kitui and failed to declare it, as evidenced by the withholding certificate issued by the County Government [18]. It relied on section 12 of the VAT Act on the time of supply [19] and on section 30 of the Tax Appeals Tribunal Act and section 56(1) of the Tax Procedures Act placing the burden of proof on the Appellant [20][22].
Court findings
The Tribunal noted that the Respondent filed a withholding certificate dated 7th February 2023 showing that the County Government of Kitui withheld Kshs 198,023 arising from a transaction valued at Kshs 11,485,357 [29].
The Tribunal observed that the Appellant's letter dated 27th September 2024 from the County Government of Kitui did not address the issue of the withholding certificate, which the Tribunal described as the Achilles heel in the Appellant's defence, leaving the certificate unimpeached [31].
The Tribunal referred to Rule 7 of the Income Tax (Withholding Tax) Rules Legal Notice 100 of 2001 on settlement of disputes in the calculation of withholding tax, finding that the Appellant's first port of call was to challenge the certificate with the County Government [32][33]. It also referred to Rule 6 on the issuance of certificates [34], holding that until the certificate is challenged and revoked it remains a valid document [35].
The Tribunal noted that the Appellant accepted liability to pay Kshs 198,024, the same amount as stated in the withholding certificate, and did not deny filing Nil returns [36][37].
The Tribunal cited section 50(1)(a) of the TPA establishing a rebuttable presumption that the Respondent's decision is correct, and section 56(1) of the TPA placing the burden of proof on the taxpayer, referring to Katambo v Attorney General & another [2023] KEHC 19949 (KLR) [38][39].
The Tribunal found that the Appellant failed to reconcile the differences between the letter and the withholding certificate, and did not provide the correlation between its bank statements covering 3rd January 2023 to 30th November 2023 and the County letter [40][41]. It found there was material non-disclosure of facts [42] and that the Appellant failed to discharge its burden of proof [43].
Outcome
The Tribunal found that the appeal lacks merit. It ordered that the appeal be dismissed, that the objection decision dated 8th November 2024 be upheld, and that each party bear its own cost [44][45].
Major issues / areas of contention
- Whether the Respondent erred in confirming the VAT assessment for February 2023 [27].
- Whether the Appellant discharged its burden of proof under section 56(1) of the Tax Procedures Act and section 30 of the Tax Appeals Tribunal Act [20][22][39].
- The evidential effect of an unchallenged withholding certificate issued by the County Government of Kitui [31][35].
- The effect of the Appellant filing Nil VAT returns despite the withholding certificate [28][37].