Judgment summary
Virgin Estate Ltd appealed against an Objection Decision dated 20th September 2024 confirming additional VAT and income tax assessments of Kshs 86,989,440 for the years 2019 to 2022 (para 5, 32). The Appellant argued that the Respondent failed to consider additional documents substantiating investment deduction claims relating to a commercial mall construction project, and failed to carry forward corporation tax losses and VAT credits from 2018 (para 7).
The Tribunal considered two issues: whether the assessments were time-barred, and whether the Objection Decision was justified (para 22). On the time-bar issue, the Tribunal found that under Section 31(4)(b)(ii) of the Tax Procedures Act, assessments issued on 25th July 2024 could only lawfully reach back five years, meaning income tax assessments for 2017 and 2018 and VAT assessments for periods before June 2019 were statute-barred, as fraud, wilful neglect or tax evasion had not been pleaded or proved (paras 27-31).
On the merits of the Objection Decision, the Tribunal found that the Appellant had not provided the supporting documents (from Co-operative Bank and other sources) to the Respondent at the objection stage, and that these were only produced before the Tribunal after 11th April 2025 and 22nd May 2025, without leave (paras 33-34, 41). Relying on Section 13(6) of the TAT Act, Section 59 of the Tax Procedures Act, and Section 30 of the TAT Act, the Tribunal held it could not consider documents not placed before the Commissioner at the objection stage, and that the Appellant had failed to discharge its burden of proving the Objection Decision incorrect (paras 35-46).
Background
The Appellant is a limited liability company incorporated in Kenya (para 1). The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act, responsible for administration and enforcement of tax laws (para 2).
On 26th June 2024, the Respondent issued additional VAT and income tax assessments for 2019 to 2022 (para 3). The Appellant objected on 25th July 2024 (para 4). On 20th September 2024, the Respondent issued its Objection Decision confirming additional assessments of Kshs 86,989,440 (para 5). The Appellant lodged this Appeal on 9th July 2025, with leave of the Tribunal, via a Notice of Appeal dated 13th June 2025 (para 6).
Core dispute
The Appellant contended that the Respondent erred by failing to consider additional documents substantiating investment deduction claims for construction of a commercial mall, disallowing qualifying investment deductions, and failing to carry forward the 2018 corporation tax loss of Kshs 9,745,846 and VAT credit of Kshs 1,755,162, which it said should have reduced tax liability by Kshs 11,501,008 (paras 7, 9).
The Appellant said supporting documents from Co-operative Bank, the financier of the mall construction, were only received on 11th April 2025 and 22nd May 2025, after the objection decision, and identified omitted capital allowances including mortgage direct disbursements of Kshs 181,245,435.78, interest costs of Kshs 22,629,386.30, and directors' capital contributions of Kshs 11,197,199.23 (paras 10-12).
The Respondent maintained that the documents provided at the objection stage were the same as those provided at investigation, that no adjustment for director capital injections was possible without supporting documents, and that the objection decision confirming additional taxes of Kshs 86,989,440 (Income Tax Kshs 46,692,103 and VAT Kshs 40,297,337) should be upheld (paras 18-19, 23).
Court findings
The Tribunal found that under Section 31(4)(b)(ii) of the Tax Procedures Act, the Respondent may amend a self-assessment within five years of the taxpayer's self-assessment return, and Section 23 requires records to be kept for five years (paras 24-26). As the assessment was issued on 25th July 2024, lawful VAT assessments could only run back to June 2019, and income tax assessments could only cover 2019 to 2023 (para 28).
Accordingly, income tax assessments for 2018 and 2017 and VAT assessments before June 2019 were found unlawful and statute-barred, as fraud, wilful neglect or tax evasion had not been pleaded or proved, citing Fabro Ltd v Commissioner [TAT Appeal No. 132 of 2023] and Patel v Commissioner for Legal Services & Board Co-ordination Services (Tax Appeal E628 of 2025) [2025] KETAT 420 (KLR) (paras 29-31).
On the merits, the Tribunal held that under Section 13(6) of the TAT Act, it is limited to grounds and documents placed before the Commissioner, and cannot consider new documents introduced only at appeal without leave, citing Commissioner of Investigation & Enforcement v Wamunyinyi [2026] KEHC 379 (KLR), Commissioner of Investigations & Enforcement v Doshi Enterprises Limited [2025] KEHC 4501 (KLR), and Spread Marketing Consultancy Ltd v Commissioner of Domestic Taxes [2025] KEHC 11487 (KLR) (paras 35-40).
The Appellant admitted the supporting documents were not produced at the objection stage (para 41). The Tribunal found the Appellant failed to discharge its burden under Section 30 of the TAT Act to prove the Objection Decision incorrect, and had not complied with Section 59 of the Tax Procedures Act requiring production of documents when required by the Commissioner (paras 43-46). The Respondent was therefore found justified in disallowing the objection based on the information available to it (para 47).
Outcome
The Tribunal held that the Appeal was partially meritorious (para 48).
The Appeal was partially allowed. The Objection Decision dated 20th September 2024 was varied as follows: income tax assessments for 2018 and 2017 were set aside; VAT assessments for May 2019 running backward to 2017 were set aside; income tax assessments for 2019 to 2022 were upheld; and VAT assessments for June 2019 to 2022 were upheld. Each party was ordered to bear its own costs (para 48).
Major issues / areas of contention
- Whether the additional income tax and VAT assessments issued by the Respondent were time-barred under Section 31(4)(b)(ii) of the Tax Procedures Act.
- Whether the Respondent's Objection Decision dated 20th September 2024 confirming additional assessments of Kshs 86,989,440 was justified.
- Whether the Tribunal could consider documents supporting investment deduction claims that were not presented to the Commissioner at the objection stage.
- Whether the Appellant discharged its burden of proof under Section 30 of the TAT Act to show the Objection Decision was incorrect.
- Whether the Respondent should have carried forward the 2018 corporation tax loss and VAT credit.