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Court of AppealDismissedCivil Appeal No. 85 of 2014· [2016] KECA 66 (KLR)

Mjengo Limited v Commissioner of Domestic Tax [2016] KECA 66 (KLR)

Court of Appeal of Kenya
2 December 2016
EGE. M. GithinjiAVAlnashir VisramSKS. Gatembu Kairu
2,733 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal ruled that packaging imported rice is not manufacturing, so Mjengo Limited lost its claim for a tax Investment Deduction.

What this practically means

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Executive summary

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The Court of Appeal (Githinji, Visram and Gatembu, JJ.A) dismissed an appeal by Mjengo Limited, a rice importer, against the High Court's decision (Musinga, J) upholding the Nairobi Area Local Committee's refusal of an Investment Deduction claimed on machinery acquired in 2006. The single issue was whether the machine was used 'for the purposes of manufacture' within Paragraph 24(3)(e) of Part V of the 2nd Schedule to the Income Tax Act. The court held that the definition, which begins with 'manufacture means', is a complete and hard-and-fast definition, relying on Thornton's Legislative Drafting and Stroud's Judicial Dictionary, and applying Dilworth v Commissioner of Stamps on the distinction between 'means' and 'includes'. The bracketed words 'including packaging' merely extend the meaning of 'making' and do not equate packaging, standing alone, to manufacturing. The court distinguished Commissioner of Income Tax v Kenya Seed Company Ltd, where technical evidence and pictures showed a process changing the state of raw seed into marketable planting seed; here there was no evidence of any change in the state of the imported rice beyond sorting and packaging it as imported. The court therefore agreed with the High Court that packaging alone did not amount to manufacture. The appeal was dismissed with costs to the respondent. The binding rule is that packaging without making does not constitute manufacture under the Investment Deduction provision, and 'means'-definitions are exhaustive.

Key legal issues

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01

Interpretation of the word 'means' versus 'includes' in the statutory definition of 'manufacture'

Holding

The definition of 'manufacture' in Paragraph 24(3)(e) beginning with 'means' is a complete, hard-and-fast definition beyond which the court must not look; it does not read 'includes'.

Reasoning

Relying on Thornton's Legislative Drafting and Stroud's Judicial Dictionary, the court held that 'means' assigns a complete and exhaustive meaning to the defined term, limiting its significance to the stipulated meaning. Since the provision opens with 'manufacture means' rather than 'manufacture includes', packaging cannot be imported into the definition independently of 'making'.

p. 4
02

Effect of the words 'including packaging' within the definition of 'manufacture'

Holding

The bracketed words extend the meaning of 'making' to include packaging, but do not equate packaging on its own to manufacturing.

Reasoning

The court read 'including packaging' as enlarging the governing activity of 'making' rather than as creating a standalone basis for the deduction. Packaging is encompassed only where it forms part of making goods or materials from raw or partly manufactured materials or other goods.

p. 5
03

Whether the appellant's rice processing and packaging operations amounted to manufacture

Holding

No: packaging alone did not amount to manufacture, and unlike Kenya Seed Company, there was no evidence of a change in the state of the rice.

Reasoning

Distinguishing Commissioner of Income Tax v Kenya Seed Company Ltd, where technical evidence and pictures showed processes changing the state of raw seed into marketable planting seed, the court found no comparable evidence here. The appellant imported rice, sorted and packaged it as imported, with no change in its state; therefore the machinery was not used 'for the purposes of manufacture'.

p. 5

Legal principles established

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  • Where a statutory definition uses the word 'means', it is a hard-and-fast, complete definition and no other meaning may be assigned beyond it.
  • Under Paragraph 24(3)(e) of Part V of the 2nd Schedule to the Income Tax Act, the words 'including packaging' extend the meaning of 'making' but packaging on its own, without making, does not equate to manufacturing.
  • Packaging alone does not amount to manufacture for purposes of Investment Deduction under the Income Tax Act.

Court orders

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  1. 1.Appeal dismissed
  2. 2.Costs awarded to the respondent

Authorities

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Legislation

  • Income Tax ActParagraph 24(1) of Part V of the 2nd Schedule
  • Income Tax ActParagraph 24(3)(e) of Part V of the 2nd Schedule
  • Standards Act

Cases cited (3)

  • Dilworth v Commissioner of Stamps
    (1899) AC 99
  • Reynolds v Income Tax Commissioner for Trinidad and Tobago
    [1966] 1 WLR 1
  • Commissioner of Income Tax v Kenya Seed Company Ltd
    High Court Income Tax Appeal No. 284 of 1986
On appeal from
High Court of Kenya at Nairobi, Commercial & Admiralty Division
Income Tax Appeal No. 1 of 2011
Jurisdiction invoked
Appellate jurisdiction of the Court of Appeal over a decision of the High Court (not expressly stated in the judgment; appeal from High Court income tax appeal arising from Nairobi Area Local Committee decision)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (7)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Mjengo Limited v Commissioner of Domestic Tax [2016] KECA 66 (KLR)", Case Analysis (2016). Civil Appeal No. 85 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/66/eng@2016-12-02

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