Judgment summary
This is a ruling on a Notice of Motion dated 20th July 2026 filed by the Applicant, the registered trustee of the Knowledge Empowering Youth Trust, seeking to strike out the Respondent's Statement of Facts dated 11th June 2026, or alternatively paragraphs 13 to 39 of it, on the basis that it introduced new grounds for rejecting the Applicant's income tax exemption application beyond those contained in the Rejection Notice dated 26th March 2026 (paras 1-2).
The Tribunal found that paragraphs 14 to 39 of the Statement of Facts advanced fresh grounds for refusal that were not contained in the Rejection Notice, and struck out those paragraphs while declining to strike out the Statement of Facts in its entirety (paras 90-96).
Background
The Applicant is the registered trustee of the Knowledge Empowering Youth (KEY) Trust, an irrevocable public charitable trust established for the advancement of education, operating through the KEY Libraries programme and the Kenya Scholar Access Program (KenSAP) (paras 3-4).
The Applicant applied for renewal of its income tax exemption status under Paragraph 10 of the First Schedule to the Income Tax Act, read with the Income Tax (Charitable Organizations and Donations Exemption) Rules, 2024 (para 5). The Respondent issued a Rejection Notice dated 26th March 2026, stating that large payments had been made to KenSAP Limited, a separate entity, and that such payments did not align with charitable purposes under Paragraph 10 (para 6).
The Applicant appealed against the Rejection Notice. The Respondent then filed a Statement of Facts dated 11th June 2026 which, according to the Applicant, raised further matters at paragraphs 14 to 39, including overseas expenditure and non-resident beneficiaries under Rule 4(1), failure to cater for persons with disabilities and abandoned children under Rule 12(2)(d), procedural defects under Rules 6, 17 and 18, and breaches of remuneration and surplus accumulation benchmarks under Rules 14 and 16 of the 2024 Rules (paras 8-9).
Core dispute
The Applicant contended that the Respondent's Statement of Facts introduced entirely new grounds for rejecting the exemption application that were never communicated in the Rejection Notice, contrary to the spirit of Section 56(3) of the Tax Procedures Act and the right to fair administrative action under Article 47 of the Constitution and sections 4 and 6 of the Fair Administrative Action Act (paras 2, 17-19).
The Respondent maintained that paragraphs 13 to 39 did not introduce new grounds but merely supplied factual particulars and evidentiary analysis, drawn from the Applicant's own trial bundle and pleadings, demonstrating why the Applicant failed the statutory test under Paragraph 10 of the First Schedule. It relied on sections 3, 12, 13(6), 15(1)(b), 29(2) and 30(b) of the Tax Appeals Tribunal Act, arguing that the Tribunal's jurisdiction extends to a full merits review and that section 13(6), which restricts an appellant to its stated grounds, does not apply to the Respondent (paras 37-44, 51-60).
The central question was whether paragraphs 13 to 39 (or 14 to 39) of the Statement of Facts fell on the side of permissible particulars of the communicated ground or constituted fresh, independent grounds of rejection, and whether the Statement of Facts should be struck out in whole or in part as a result.
Court findings
The Tribunal formulated a test: a matter is a particular where it explains, evidences or elaborates a reason already communicated and would not survive if that reason were withdrawn; a matter is a fresh ground where it would independently sustain the refusal even if the communicated reason were withdrawn (para 76).
Applying that test, the Tribunal found that paragraphs 14 to 20 (overseas expenditure and non-resident beneficiaries under Rule 4(1)), paragraphs 21 to 27 (disability and abandoned children under Rule 12(2)(d)), paragraphs 28 to 31 (procedural defects under Rules 6, 17 and 18) and paragraphs 32 to 39 (remuneration and surplus accumulation benchmarks under Rules 14 and 16) would each independently sustain a refusal, and were therefore fresh grounds and not particulars of the ground communicated in the Rejection Notice (paras 78-80).
The Tribunal rejected the Respondent's argument that the source of the evidence being the Applicant's own records cured the defect, holding that evidence from a taxpayer's own record may prove a communicated reason but cannot convert an uncommunicated reason into one that was communicated (para 81). It also rejected the argument that Paragraph 10 of the First Schedule, being broad, could absorb any number of distinct compliance failures as a single ground (para 82).
The Tribunal held that Rule 12 of the Tax Appeals Tribunal (Procedure) Rules, 2015 requires reasons fixed at the moment the decision is taken, and that Rule 21 restricts pleadings which raise new issues, noting the Respondent had made no application to amend its pleadings (paras 83-84). It found the Respondent's reliance on section 13(6) of the TAT Act and section 56(3) of the Tax Procedures Act misplaced, as those provisions address the grounds available to an appellant, not the reasons for the decision under appeal (para 85). It further held that section 15(1) and section 29(2) of the TAT Act concern review of the decision made and communicated, not its enlargement (para 86).
The Tribunal relied on Chavangi & another v National Assembly & 2 others; Swazuri (Interested Party) [2023] KEHC 19049 (KLR) and National Lotteries Board v South African Education and Environment Project [2011] ZASCA 154, finding the reasoning in both cases apposite, including that later reasons are an ex post facto rationalisation rather than the true reasons for a decision (paras 87-88). It held that Article 47(2) of the Constitution fixes the time for giving reasons as the time the decision is taken (para 89).
On the remedy, the Tribunal applied the caution set out in D.T. Dobie & Company (Kenya) Limited v Muchina & another [1980] KLR 1, that striking out is to be exercised only in plain and obvious cases, and declined to strike out the entire Statement of Facts, retaining paragraphs 1 to 13 as recording the chronology and communicated ground (paras 91-93). It rejected a lesser order permitting the impugned paragraphs to stand as evidentiary material only (para 94).
Outcome
The Tribunal allowed the Notice of Motion to the extent set out in its orders. It declined to strike out the Respondent's Statement of Facts dated 11th June 2026 in its entirety, but struck out paragraphs 14 to 39 of that Statement of Facts (paras 96(b)-(c)).
The Respondent was confined to the ground and reasons contained in its Income Tax Exemption Rejection Notice dated 26th March 2026 in its defence of the appeal. No order was made as to costs (paras 96(d)-(e)).
The Tribunal noted that nothing in the Ruling prevents the Commissioner from acting on the matters raised in paragraphs 14 to 39 by way of a fresh and properly reasoned decision, in which event the Applicant would have the opportunity of response it was denied on this occasion (para 95).
Major issues / areas of contention
- Whether paragraphs 13 to 39 (or 14 to 39) of the Respondent's Statement of Facts introduced grounds for rejecting the income tax exemption that were outside the scope of the Rejection Notice dated 26th March 2026.
- Whether the Respondent is entitled, at the appeal stage, to rely on reasons not communicated in the original Rejection Notice, or whether it is confined to the reasons given in that Notice.
- Whether section 13(6) of the Tax Appeals Tribunal Act, which restricts an appellant to its stated grounds, can be read as also restricting the Respondent, or whether its silence as to the Respondent is deliberate.
- Whether facts drawn from the Applicant's own trial bundle and pleadings can be characterised as new grounds of rejection or merely as evidentiary particulars of an existing ground.
- Whether striking out the impugned paragraphs of the Statement of Facts, in whole or in part, was an appropriate remedy given the drastic and exceptional nature of the striking-out jurisdiction.
- Whether the introduction of new grounds after the Rejection Notice breached the Applicant's right to fair administrative action under Article 47 of the Constitution and the Fair Administrative Action Act.