Judgment summary
This is a ruling on a Notice of Motion dated 27th April 2026 filed by L.A.B. International Kenya Limited (the Appellant/Applicant) seeking leave to file and rely on its Transfer Pricing Policy dated June 2013 in an appeal against the Commissioner of Domestic Taxes' Objection decision dated 26th June 2025, relating to transfer pricing for the 2019 year of income (paragraph 1).
The Appellant argued the document had been inadvertently omitted from its bundle and that the Respondent already knew of and had relied on it in its Assessment dated 13th March 2025, Objection decision dated 26th June 2025, and Statement of Facts dated 26th September 2025 (paragraphs 2, 3).
The Respondent opposed the application, arguing the document was in the Appellant's custody, was not new evidence in the relevant sense, could have been produced earlier, and that its admission would prejudice the Respondent and delay proceedings (paragraph 4).
The Tribunal found that the Applicant had shown the 2013 TP Policy had already been shared with and relied on by the Respondent at the assessment and objection stages, and allowed the application (paragraphs 15 to 27).
Background
The dispute before the Tribunal is an appeal against the Respondent's Objection decision dated 26th June 2025 relating to the Appellant's transfer pricing for the year 2019 (paragraph 1(d)).
The Respondent had issued an Assessment dated 13th March 2025 which referenced the Appellant's Transfer Pricing Policy and analysed provisions of it, including characterisation of the Appellant, functions, assets and risks analysis, the transfer pricing methodology, the Berry Ratio Profit Level Indicator, and allocation of various risks (paragraph 3(o)).
The Respondent's Objection decision dated 26th June 2025 and its Statement of Facts dated 26th September 2025 filed before the Tribunal also referenced and analysed the Transfer Pricing Policy, including at paragraphs 102, 106 and 148 of the Objection decision and paragraphs 20, 46, 49 and 55 of the Statement of Facts (paragraph 3(q) to (v)).
The Appellant filed the Notice of Motion dated 27th April 2026 and filed on 28th April 2026, supported by an Affidavit sworn by Naomi Musau, the Appellant's advocate, on 27th April 2026, seeking leave to file and rely on the Transfer Pricing Policy dated June 2013, which it said had been inadvertently omitted from its List and Bundle of documents filed before the Tribunal (paragraph 2).
Core dispute
The sole issue identified by the Appellant/Applicant was whether the Tribunal should grant the Appellant leave to file and rely on the Transfer Pricing Policy dated June 2013 (paragraph 3(a)).
The Respondent framed the issue as whether the Appellant had met the threshold for grant of leave to file supplementary documents (paragraph 5).
The Appellant contended the document was not new evidence, having already been provided to and relied upon by the Respondent, and that its admission was necessary for a just determination of the transfer pricing dispute (paragraph 3(z) to (gg)).
The Respondent contended the document was in the Appellant's custody throughout, could have been produced with reasonable diligence before the Objection decision, and that its late introduction would prejudice the Respondent, amount to filling gaps in the Appellant's case, and delay the substantive determination of the appeal (paragraph 4, paragraph 5).
Court findings
The Tribunal held that its power to admit additional documents is anchored in Section 13(3) and (4) of the Tax Appeals Tribunal Act, and that Section 13(6) limits an appellant to the grounds or documents to which the decision relates unless the Tribunal orders otherwise (paragraphs 10, 11).
Citing Commissioner of Income Tax vs Total Kenya Limited [2021] eKLR and the principles in Mohamed Abdi Mahamud vs Ahmed Abdullahi Mohamed & 3 Others [2018] eKLR, the Tribunal found that the power to admit additional evidence is discretionary but should be exercised restrictively, sparingly, and only where necessary and not to patch up a party's case (paragraphs 13, 14).
The Tribunal found that the Appellant had shown evidence that it had shared the 2013 TP Policy with the Respondent at the assessment and objection stages, a fact the Respondent had not disproved, and that the Respondent's notice of assessment and Objection decision made specific reference to the 2013 TP Policy, which appeared to be constituent of the basis of the assessment confirmed in the impugned Objection decision (paragraphs 15, 16).
The Tribunal found that failure to admit the 2013 TP Policy would prejudice the Appellant, while the Respondent would suffer no prejudice since it could file supplementary pleadings (paragraph 17).
Applying the Mohamed Abdi Mahamud guidelines, the Tribunal found the document relevant to the dispute, likely to influence the result, not overtly voluminous, and not indicative of wilful deception or an attempt to fill gaps in evidence (paragraphs 19 to 22).
The Tribunal found the Respondent had not demonstrated what grave prejudice it would suffer if the document were admitted (paragraph 23), and concluded the tests in Mohamed Abdi Mahamud had been met and the balance of convenience favoured the Appellant (paragraphs 24, 25).
Outcome
The Tribunal found the Application meritorious and allowed the Notice of Motion Application dated 27th April 2026 and filed on 28th April 2026 (paragraph 27(a)).
The Appellant was granted leave to file its 2013 Transfer Pricing Policy, which was deemed to have been duly filed and served on the Respondent (paragraph 27(b), (c)).
The Respondent was granted corresponding leave to file and serve a Supplementary Statement of Facts and additional documents, if necessary, within fifteen (15) days of the delivery of the Ruling (paragraph 27(d)).
No order was made as to costs (paragraph 27(e)).
Tp method highlighted
The underlying transfer pricing dispute concerns the Appellant's transactions with its related party, L.A.B International (UK) Limited, for the 2019 year of income. According to submissions referencing the Transfer Pricing Policy and the Respondent's Statement of Facts, the Appellant selected the Transactional Net Margin Method (TNMM), applying the Berry Ratio, as the most appropriate transfer pricing method, and the Respondent's Assessment and Objection decision analysed the characterisation of the Appellant, functional and risk analysis, benchmarking, and the Berry Ratio Profit Level Indicator (paragraphs 3(o), 3(t), 3(v)).
This ruling does not determine the substantive correctness of the transfer pricing methodology; it concerns only the admission of the 2013 Transfer Pricing Policy document into the record.
Major issues / areas of contention
- Whether the Tribunal should grant the Appellant leave to file and rely on its Transfer Pricing Policy dated June 2013
- Whether the Transfer Pricing Policy constituted 'new evidence' given the Respondent's prior reliance on it in its Assessment, Objection decision and Statement of Facts
- Whether admission of the document at this stage would prejudice the Respondent
- Whether the Appellant met the threshold set out in Mohamed Abdi Mahamud v Ahmed Abdullahi Mohamed & 3 Others [2018] eKLR for admission of additional evidence
- Whether the application was brought without undue delay and in good faith
- The scope of the Tribunal's discretion under Section 13 of the Tax Appeals Tribunal Act to admit documents beyond those originally filed