Judgment summary
The Tribunal considered an appeal by Gitrem Company Limited against a Commissioner of Domestic Taxes Objection Decision dated 22nd August 2025, which had revised a total tax liability from Kshs. 11,672,085.65 (exclusive of interest and penalties) to Kshs. 7,914,162.00 (inclusive of interest and penalties). The Appellant disputed the disallowance of expenses, alleged duplication of income across two financial years, alleged erroneous aggregation of sales from withholding certificates, and disputed the treatment of supplies to the Kenya Red Cross Society as taxable rather than zero-rated.
The Tribunal found that the Appellant did not file documentary evidence to substantiate any of its grounds of appeal, and accordingly dismissed the appeal, upholding the Respondent's Objection Decision.
Background
The Appellant is a limited liability company incorporated under the Companies Act (CAP 486) carrying on business in Kenya (para 1). The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469, mandated to collect and administer tax revenue (para 2).
The Respondent conducted a compliance verification exercise covering 2019 to 2024 to check the accuracy of the Appellant's declared gross income and the validity of claimed expenses and purchases (para 3). This exercise found variances between the Appellant's self-assessments and grossed-up amounts derived from Withholding VAT (WHVAT) and Withholding Income Tax (WHIT) certificates (para 4).
On 3rd December 2024, the Respondent issued assessment notices for CIT and VAT totalling Kshs. 11,672,085.65, exclusive of interest and penalties (para 5). The Appellant lodged a late objection on 24th June 2025 (para 5). The Respondent issued an Objection Decision dated 22nd August 2025, partially allowing the objection and revising the outstanding liability to Kshs. 7,914,162.00, inclusive of interest and penalties (para 6).
Dissatisfied, the Appellant filed a Notice of Appeal dated 28th August 2025, filed 29th August 2025 (para 7).
Core dispute
The Appellant's grounds of appeal concerned both Corporate Income Tax and VAT. On CIT, it argued that the Respondent erred by failing to allow deductible expenses wholly and exclusively incurred in producing taxable income, supported by VAT input returns (para 8a). It also acknowledged erroneous filing in the financial years 2022/2023 and 2023/2024, resulting in duplication of income of Kshs. 720,550.00 and Kshs. 1,383,937.00 respectively, the latter arising from the same income being withheld under both IT2C (3%) and VAT (2%) (para 8b).
On VAT, the Appellant argued that the Respondent erroneously aggregated sales based on both VAT and Income Tax withholding certificates for 2022/2023, overstating sales by Kshs. 1,383,937.00 (para 8c), and that the Respondent wrongly included zero-rated sales of Kshs. 720,550.00 relating to supplies to the Kenya Red Cross Society in taxable supplies for 2022/2023 (para 8d).
The Respondent's position was that the initial assessment had erroneously used a 31st December year-end, which it corrected in the Objection Decision by realigning WHVAT and WHIT certificates to the Appellant's correct accounting period ending in February (paras 23-24). It also stated that it had adjusted turnovers to remove duplicate certificate values and had confirmed, based on a Commissioner's letter dated 14th March 2018, that supplies to the Kenya Red Cross were zero-rated and excluded them from taxable VAT turnover (paras 25-26). However, the Respondent maintained the disallowance of expenses on the basis that the Appellant failed to provide primary supporting documents (paras 27-29).
Court findings
On the income tax issue, the Tribunal applied Sections 15(1) and 16(1)(a) of the ITA, which place the burden on the taxpayer to prove that expenditure was incurred and was wholly and exclusively incurred in the production of income (paras 36-38). It noted the record-keeping obligation under Section 54A(1) of the ITA and Section 30 of the TAT Act, which places the burden of proof on the appellant (paras 39, 41). The Tribunal found that the Appellant filed no documentary evidence to demonstrate that it incurred any expense, let alone that such expense was wholly and exclusively incurred in production of income, and therefore had no basis to fault the disallowance (paras 44, 46).
On the alleged duplication of income, the Tribunal made three findings: first, that the Appellant should have applied under Section 31(2) of the TPA to amend its self-assessment but did not do so; second, that the Appellant provided no documents to back up its assertions; and third, that the Respondent had already addressed the duplication in the Objection Decision by adjusting turnovers to drop duplicate certificate values (para 48). The Tribunal held it had no legal justification to disturb the Respondent's decision on income tax (para 49).
On the VAT issue, the Tribunal found that the Appellant did not file any document to support its claim of erroneous aggregation of sales (para 52). As to the Kenya Red Cross zero-rating claim, although the Appellant asserted it held a letter from the client confirming zero-rating, it did not adduce that document (para 54). The Tribunal referred to Section 43 of the VAT Act on record-keeping and Section 13(2) of the TAT Act on the duty to submit necessary documents (paras 55-56), and concluded that the Appellant had not proved that the Respondent erred in confirming the VAT assessment (para 60).
Outcome
The Tribunal held that the Appeal was devoid of merit and dismissed it. The Respondent's Objection Decision dated 22nd August 2025 was upheld, and each party was ordered to bear its own costs (para 62).
Major issues / areas of contention
- Whether the Respondent erred in confirming the income tax assessment
- Whether the Respondent erred in confirming the VAT tax assessment