Commissioner of Lands v Essaji Jiwaji & Public Trustee [1978] KECA 5 (KLR)
The bottom line
#The Court of Appeal ruled that the Government cannot deduct withholding tax from compensation paid to landowners when it compulsorily acquires their land.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether compulsory acquisition of land by the Government under the Land Acquisition Act is subject to the Income Tax (Amendment) Act 1976
- 2.Whether the Commissioner of Lands is entitled to deduct 10 per cent withholding tax from compensation payable for compulsory acquisition of land
- 3.Whether compensation awarded is full and adequate compensation within the meaning of the Land Acquisition Act if 10 per cent is deducted by way of withholding tax
Key legal issues
#Whether compulsory acquisition constitutes a 'transfer' for income tax purposes
It does not; a compulsory acquisition involves vesting in the Government, not a transfer by the owner.
Paragraph 6(1)(a) of the Eighth Schedule defines transfer as property being sold, exchanged, conveyed or otherwise disposed of. The court construed 'otherwise disposed of' ejusdem generis with 'sold' and 'exchanged', all denoting voluntary dispositions. In compulsory acquisition the owner loses rights and title against his will and does not in any sense transfer the property.
Whether 10 per cent withholding tax may be deducted from compensation
No; section 75(1)(c) of the Constitution, implemented by section 8 of the Land Acquisition Act, requires prompt payment of full compensation with no exception for retention of tax.
Section 8 of the Land Acquisition Act provides that full compensation shall be paid promptly, in accordance with section 75(1)(c) of the Constitution. No exception is made for retention of any part of the compensation in payment of income tax, past, present or future. Compensation withheld in part would not be full compensation.
Whether any general tax of general applicability remains payable notwithstanding the full-compensation guarantee
The court confined its holding to the deduction question; it did not decide that gains tax is not payable at all on such compensation, leaving that for legislation if necessary.
Law JA read the judgment below narrowly: it decided only that compensation is not subject to reduction by withholding, not that gains tax is never payable. If any tax of general applicability is due, it is payable, as in Marjorie O'Byrne; any apprehension could be allayed by legislation.
Legal principles established
#- Compulsory acquisition of land is not a 'transfer' within the meaning of paragraph 6(1) of the Eighth Schedule to the Income Tax Act, so no withholding tax may be deducted from compensation payable on compulsory acquisition.
- The constitutional guarantee of prompt payment of full compensation for compulsory acquisition requires that compensation be paid in full, without deduction of any part by way of withholding tax.
Court orders
#- 1.Appeal dismissed
- 2.Dismissal with costs
- 3.Certificate for two counsel
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the lead judgment, agreeing with Sheridan J on all three questions and proposing dismissal with costs.
I agree with the judge’s decision on all three points at issue and find nothing raised on these appeals to justify departure from the conclusions so carefully reached by the judge.p. 2
Wrote the judgment
Separate concurring judgment analysing whether compulsory acquisition constitutes a 'transfer' and endorsing the full-compensation point.
When property is compulsorily acquired by the Government, it vests in the Government. The previous owners merely loses his rights and title to the property; he does not in any sense transfer the property.p. 2
Wrote the judgment
Separate concurring judgment addressing the constitutional 'payment in full' requirement and the Marjorie O'Byrne and Kirkness authorities.
In the case before us the element in section 75 of the Constitution is “payment in full”. Those are plain words and the meaning is clear the compensation must be paid in full.p. 3
- On appeal from
- High Court
- Jurisdiction invoked
- Appellate jurisdiction of the Court of Appeal over appeals from the High Court in its appellate capacity under the Land Acquisition Act
- Consolidated with
- Two appeals from the High Court consolidated into one (numbers not stated)
Relief refused
#The appellant's contention that compensation for compulsory acquisition is subject to the Income Tax (Amendment) Act 1976 and to 10 per cent withholding tax deduction
Compulsory acquisition is not a 'transfer' within paragraph 6(1) of the Eighth Schedule to the Income Tax Act, and the constitutional requirement of prompt payment of full compensation means compensation must be paid in full.
Costs
Appeals dismissed with costs and certified for two counsel.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
I agree with the judge’s decision on all three points at issue and find nothing raised on these appeals to justify departure from the conclusions so carefully reached by the judge.
When property is compulsorily acquired by the Government, it vests in the Government. The previous owners merely loses his rights and title to the property; he does not in any sense transfer the property.
In the case before us the element in section 75 of the Constitution is “payment in full”. Those are plain words and the meaning is clear the compensation must be paid in full.
To say of a man who has had his property taken from him against his will and been awarded compensation in the settlement of which he had no voice, to say of such a man that he has sold his property appears to me to be as far from the truth as to say that a man who has been deprived of his property without compensation that he has given it away.
The appeal is dismissed and there will be an order in the terms proposed by Wambuzi JA. Appeal dismissed.
Issues in the judgment
#The judgment caption and appeal numbers are not reproduced in the copy provided; the parties other than the appellant (the landowners/respondents) are not named, so respondent identities cannot be recorded.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (2)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Registered Trustees of Christs Co-Workers Fellowship v Kenya National Highways Authority & another (Environment and Land Appeal E028 of 2026) [2026] KEELC 5241 (KLR)[2026] KEELC 5241 (KLR)31 Jul 2026
- Kamau & another v Mjad Investments Limited & 3 others (Civil Appeal E106 of 2021) [2025] KECA 1824 (KLR)[2025] KECA 1824 (KLR)7 Nov 2025
Cite this brief
#Cite this brief
Caselaw, "Commissioner of Lands v Essaji Jiwaji & Public Trustee [1978] KECA 5 (KLR)", Case Analysis (1978). Two consolidated appeals (numbers not stated in the judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1978/5/eng@1978-10-24
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.