Judgment summary
The Tribunal considered an appeal by Temptations Gelateria LLP against an Objection Decision of the Commissioner dated 25th June 2025, which had vacated default VAT assessments and instead upheld the Appellant's own self-assessment of Kshs. 1,900,089.57 inclusive of penalties and interest.
The Respondent raised a Notice of Preliminary Objection arguing that the Tribunal lacked jurisdiction because the Appellant had not paid, or arranged to pay, the undisputed tax as required under Section 52(2) of the Tax Procedures Act, 2015, before filing its Notice of Appeal.
The Tribunal upheld the Preliminary Objection, finding that the self-assessment adopted in the Objection Decision had not been disputed or amended by either party and therefore constituted undisputed tax. As the Appellant had not complied with Section 52(2) of the TPA, the Notice of Appeal was invalid and the Tribunal lacked jurisdiction to hear the matter. The Appeal was struck out, with each party bearing its own costs.
Background
The Appellant is a limited liability partnership registered in Kenya, whose principal activity is the provision of accommodation and food services (paragraph 1). The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, responsible for collection, receipting and administration of tax revenue (paragraph 2).
On 3rd April 2025, the Respondent issued default VAT assessments against the Appellant for the period November 2023 to February 2025, amounting to Kshs. 5,109,632.00 (paragraph 3). The Appellant objected to these assessments.
On 25th June 2025, the Respondent issued its Objection Decision, allowing the Appellant's objections against the default assessments and instead upholding the Appellant's own self-assessment of Kshs. 1,900,089.57, inclusive of penalties and interest (paragraph 4).
The Appellant then lodged this Appeal by way of a Notice of Appeal dated 24th July 2025 (paragraph 5).
Core dispute
The Appellant's Memorandum of Appeal dated 24th July 2025 raised several grounds, including that the Respondent had grossly exaggerated the computation of expected sales, misapplied Section 3(1) of the Income Tax Act as to what constitutes income, disallowed expenses wholly and exclusively incurred in making income contrary to Section 15 of the Income Tax Act, failed to credit input tax against output tax contrary to Section 17 of the VAT Act 2013, assessed car benefit tax without factual or legal basis, disregarded supporting documents, and breached Article 47 of the Constitution on fair administrative action (paragraph 6).
The Respondent disputed these grounds, contending that it had issued default assessments due to the Appellant's failure to file VAT returns, but that upon objection it reviewed the Appellant's records and adopted the Appellant's own self-assessment, which properly supported input VAT deductibility under Section 17 of the VAT Act (paragraphs 18 to 22).
The Respondent further contended that, because it had adopted the Appellant's own self-assessment, the Appellant was effectively objecting to its own figures and that the tax was undisputed and due for collection under Section 52 of the Tax Procedures Act. On this basis, the Respondent filed a Notice of Preliminary Objection asserting that the Tribunal lacked jurisdiction to hear the Appeal until the undisputed tax was paid or a payment arrangement was in place (paragraphs 23 and 24).
Court findings
The Tribunal identified two issues for determination: whether the Appeal was valid, and whether the Objection Decision dated 25th June 2025 was proper and justified (paragraph 27). Because the Preliminary Objection raised a question of jurisdiction, the Tribunal determined it first (paragraph 30).
The Tribunal noted that the Notice of Appeal specifically disputed the Objection Decision, which had vacated the default assessments and adopted the Appellant's self-assessment for VAT. The Tribunal found nothing on record showing that the self-assessment had been disputed or amended by either party, and held that the self-assessed tax had therefore become undisputed tax as confirmed in the Objection Decision (paragraph 32).
The Tribunal held that the Appellant ought to have complied with Section 52(2) of the Tax Procedures Act, 2015, which requires payment of undisputed tax, or an arrangement to pay it, at the time of lodging a notice of appeal relating to an assessment. As this had not been done, the Tribunal found the Notice of Appeal dated 24th July 2025 invalid, and held that it lacked jurisdiction to hear and determine the Appeal (paragraph 33).
The Tribunal referred to the Court of Appeal decision in Owners of the Motor Vessel "Lillian S" v Caltex Oil (Kenya) Ltd [1989] eKLR on the primacy of jurisdiction, noting that a court without jurisdiction must down tools immediately (paragraph 34). Having found that it lacked jurisdiction, the Tribunal did not proceed to consider the second issue regarding the propriety of the Objection Decision (paragraph 35).
Outcome
The Tribunal held that it lacked jurisdiction to determine the Appeal. The Appeal was struck out, and each party was ordered to bear its own costs (paragraphs 36 and 37).
Major issues / areas of contention
- Whether the Notice of Appeal dated 24th July 2025 was valid under Section 52(2) of the Tax Procedures Act, 2015
- Whether the Appellant had paid, or arranged to pay, the undisputed tax before lodging its Notice of Appeal
- Whether the self-assessed VAT figure adopted in the Objection Decision constituted undisputed tax
- Whether the Tribunal had jurisdiction to hear the Appeal given the Preliminary Objection
- Whether the Objection Decision dated 25th June 2025 was proper and justified (not determined due to jurisdiction finding)