Mjengo Limited v Commissioner of Domestic Taxes [2014] KECA 504 (KLR)

Court of Appeal of Kenya

27 June 2014

AMA.K. Murgor

1,041 words in judgment

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The bottom line

The Court of Appeal refused to fast-track a taxpayer's case because routine KRA demand letters don't prove real urgency.

What this practically means

Executive summary

This is a single-judge interlocutory ruling of the Court of Appeal concerning an application for a certificate of urgency. The applicant, engaged in importing and packaging rice, had been assessed by the Kenya Revenue Authority for Kshs.2,761,932/- for tax year 2006 after an audit found it had wrongly claimed an industrial building allowance. The Local Committee found the applicant was not a manufacturer under the Income Tax Act, since cleaning and repackaging rice did not amount to manufacturing. The High Court (Musinga J) dismissed the applicant's appeal on 25th January 2013. The applicant filed a Notice of Appeal on 7th February 2014 and, on 9th April 2014, filed a certificate of urgency in support of a Notice of Motion seeking stay of execution pending the intended appeal, apprehending enforcement of disputed taxes. On 30th April 2014 the judge declined to certify the matter urgent. The application was referred back under rule 55 of the Court of Appeal Rules for hearing inter partes. Counsel for the applicant argued an arguable appeal and alleged that KRA was demanding Kshs.3,559,466/- including interest and penalties. Counsel for KRA submitted the letters were routine requests for payment of taxes for tax years 2006 and 2007, unrelated to each other, and that any tax paid could be refunded under section 105 of the Income Tax Act. The court held it was unable to identify any urgency: the demand letters were routine and the applicant had not responded to them. The judge declined to certify the matter urgent, upheld the decision of 30th April 2014, and ordered that the costs of the application for urgency be in the main application. The substantive application for stay of execution remains to be heard in the ordinary course.

Key legal issues

Whether the applicant demonstrated urgency justifying certification

Holding

The court declined to certify the matter as urgent because the only urgency alleged rested on routine demand letters for payment of tax, and the applicant had not responded to the respondent's invitation to make representations or query the demands

Reasoning

The letters of demand from KRA for tax years 2006 and 2007 were routine notifications requesting payment to avoid interest and penalties, and inviting the applicant to contact the respondent with any concerns. The record contained no response from the applicant, so no imminent enforcement or threat existed that would justify imposing the matter on the full court by way of an urgency certificate.

p. 2

Legal principles established

A certificate of urgency must be founded on a demonstrable threat or imminent action; routine demand letters inviting payment of tax do not establish urgency

Court orders

1.Declined to grant a certificate of urgency, upholding the earlier decision of 30th April 2014
2.Ordered that the costs of the application for urgency be in the main application

Authorities

Legislation

Income Tax Actsection 105
Court of Appeal Rulesrule 55

On appeal from: High Court of Kenya; Not stated in the judgment
Jurisdiction invoked: Rule 55 of the Court of Appeal Rules (procedural jurisdiction to certify a matter as urgent and refer an application for hearing inter partes); the substantive appeal is a first appeal to the Court of Appeal from the High Court on an appeal from the Local Committee under the Income Tax Act

Key timeline

Practical implications

Frequently asked questions

Cite this brief

Caselaw, "Mjengo Limited v Commissioner of Domestic Taxes [2014] KECA 504 (KLR)", Case Analysis (2014). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2014/504/eng@2014-06-27

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.