Judgment summary
The Tribunal considered an appeal by International Cancer Institute Limited against an objection decision of the Kenya Revenue Authority dated 12th September 2025, which sought to recover income tax of Kshs. 49,210,246 and principal withholding tax of Kshs. 183,016.
The Respondent raised a preliminary objection contending that the Appellant's Notice of Objection had only challenged the corporation tax assessment and not the withholding tax assessment, and that the appeal was also filed outside the statutory timelines.
The Tribunal upheld the preliminary objection, finding that the Appellant failed to prove that the withholding tax assessment formed part of its Notice of Objection, rendering it tax not in dispute under Section 51(3)(b) of the Tax Procedures Act. The Tribunal also found that the Notice of Appeal was lodged outside the statutory 30-day period under Section 13(1) of the Tax Appeals Tribunal Act.
As a result, the Tribunal held the appeal to be procedurally incompetent and struck it out without addressing the substantive issues raised, including the taxability of donor grants, disallowed expenditure, and treatment of unspent project funds.
Background
The Appellant is a limited liability company incorporated in 2018 under the Companies CAP 486 Laws of Kenya, operating as a not-for-profit organisation specialising in cancer care, research, training and capacity building across Sub-Saharan Africa (paragraph 1).
The Respondent is a principal officer appointed under Section 13 of the Kenya Revenue Authority Act, CAP 469, mandated under Section 5 of the Act to administer and enforce written tax laws (paragraph 2).
The Respondent analysed the Appellant's audited accounts, amended returns and supporting documents and identified inconsistencies in capital expenditure, miscellaneous, surplus and office expenses for 2021, and found that the Appellant failed to withhold income tax on payments for professional, audit and security fees for 2021 (paragraph 3).
An assessment was issued to the Appellant on 16th June 2025 relating to corporation tax and withholding income tax (paragraph 4). The Appellant lodged an objection on 31st July 2025 (paragraph 5). The Respondent issued an objection decision dated 12th September 2025, seeking to recover income tax of Kshs. 49,210,246 and principal withholding tax of Kshs. 183,016 (paragraph 6). The Appellant lodged a notice of appeal dated 22nd September 2025 and filed on 26th November 2025 (paragraph 7).
Core dispute
The Appellant argued that grants received from donors were not taxable income under Section 3 of the Income Tax Act Cap 470, that the surplus or unspent project funds should not be treated as chargeable profit, and that the Respondent had wrongly disallowed electronics, equipment and furniture fitting expenditure under Section 15(2)(n) of the ITA. The Appellant also contested the withholding tax assessment of Kshs 183,016, asserting that all taxes meriting withholding had been deducted and paid (paragraph 8).
The Respondent maintained that the Appellant's objection was limited to corporation tax and did not extend to withholding tax, rendering the withholding tax component tax not in dispute under Section 51(3)(b) of the Tax Procedures Act. The Respondent further contended that the Appellant had failed to provide records supporting the disallowed expenses and had not obtained a tax exemption certificate to support exemption of the surplus under Paragraph 10 of the First Schedule to the ITA (paragraphs 24 to 30).
The Respondent additionally challenged the validity of the appeal on the basis that the notice of appeal and memorandum of appeal were filed outside the statutory timelines (paragraphs 31 to 33).
Court findings
The Tribunal treated the Respondent's contention as a preliminary objection and applied the test in Mukisa Biscuits Manufacturing Co. Ltd v West End Distributor Ltd [1969] E.A 696 (paragraph 41).
The Tribunal held that Section 51(3)(b) of the Tax Procedures Act imposes a substantive, not merely procedural, requirement that a taxpayer pay or arrange to pay tax not in dispute, and that any assessment component not specifically objected to becomes tax not in dispute (paragraphs 42 to 43).
The Tribunal found that the Appellant did not produce its Notice of Objection or contemporaneous correspondence to demonstrate that the withholding tax assessment had been objected to, and, applying the burden of proof under Section 56(1) of the Tax Procedures Act, held that the Appellant failed to discharge that burden (paragraphs 48 to 50).
The Tribunal relied on Commissioner of Domestic Taxes v Dinesh Construction Limited [2025] KEHC 17058 (KLR), which held that any item of an assessment not traversed by the objection becomes a crystallised debt, and that failure to settle tax not in dispute renders a subsequent appeal incompetent under Section 52(2) of the Tax Procedures Act (paragraphs 51 to 54).
Having found the withholding tax unchallenged and unpaid, and no extension or payment arrangement demonstrated, the Tribunal held that the statutory precondition to a valid appeal under Section 52(2) was not satisfied, rendering the Notice of Appeal incompetent (paragraphs 52 to 55).
As an alternative and independent ground, the Tribunal considered the Respondent's objection regarding timelines under Section 13 of the Tax Appeals Tribunal Act. The Tribunal found that its official Case Tracking System recorded the Notice of Appeal as lodged on 26th November 2025, outside the statutory 30-day period, and that no cogent evidence was produced to displace this record or to show any application for extension of time (paragraphs 56 to 58).
The Tribunal concluded that the appeal was procedurally incompetent on both grounds and that the remaining substantive issues were rendered moot (paragraphs 59 to 61).
Outcome
The Tribunal found and held that the appeal was invalid and struck it out, with each party bearing its own costs (paragraphs 62 to 63).
Major issues / areas of contention
- Whether the appeal is properly before the Tribunal
- Whether the grants received by the Appellant are taxable under the ITA
- Whether the Respondent was justified in disallowing expenditures claimed by the Appellant
- Whether the Respondent erred in law in treating the surplus, that is, unspent project funds, as a profit chargeable to tax
- Whether the Respondent erred in holding that the amounts for the year 2021 were taxable owing to the Appellant's lack of a tax exemption certificate
- Whether the Respondent erred in raising an assessment for withholding tax of Kshs. 183,016 for the year 2021