Hemingways Watamu Limited v Commissioner of Domestic Taxes (KRA)

implementation of the said judgment including the issuance of any revised or Page 2 of 6

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additional tax assessment; disallowance or claw-back of investment deductions previously allowed; imposition of penalties or interest; and recovery, enforcement, or collection proceedings by the respondent, Commissioner of Domestic Taxes (KRA). 3. The background in brief is that on 26 th June 2023 KRA issued Hemingways with a notice of assessment of VAT and income tax loss adjustment for the period 2017 and 2021. The assessment was based on disallowed input VAT and disallowed investment deduction claims for 2018 and 2019. Hemingways objected to the assessment on 26th July 2023. On 5th October 2023, KRA issued its decision on the objection. 4. Dissatisfied with KRA’s decision, Hemingways successfully appealed to the Tax Appeals Tribunal. In its judgment given on 4th October 2024, the Tribunal set aside KRA’s decision of 5th October 2023. KRA was aggrieved and appealed to the High Court complaining, among other things, that the Tribunal erred in setting aside its (KRA’s) decision; failing to make a finding on the disallowed input VAT; and in holding that Hemingways qualified for investment deduction at the rate of 150%. Page 3 of 6

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5. In its judgment delivered on 7th October 2025, the High Court (J. K. Ng’ar’ar, J.) partially allowed KRA’s appeal. It set aside the judgment of the Tribunal “to the extent that it allowed investment deduction at the rate of 150%” and substituted it with a finding that Hemingways “is entitled to investment deduction at the statutory rate of 100%”. In addition, and in relation to the matter of VAT assessment, the High Court found that the Tribunal had failed to address it and remitted the matter back to the Tribunal to decide on VAT assessment. 6. Dissatisfied, Hemingways then lodged a Notice of Appeal dated 21st October 2025 on which the present application is hinged. 7. We heard the application on 3 rd March 2026. Learned counsel Mr. Alex Mola urged the application for Hemingways while learned counsel Ms. Almadi held brief for Miss. Kithinji for KRA. 8. We have considered the application, the affidavits sworn by Dr. Joseph Wambua Kithiku in support and by Christine Mwaja in reply and the rival written submissions which were orally highlighted by counsel during the hearing. The applicable Page 4 of 6

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legal principles are well known and informed the arguments by counsel before us. Hemingways is required to demonstrate that Page 5 of 6

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its intended appeal is arguable and that if we decline the orders sought, and the intended appeal ultimately succeeds, it will be success in vain. See for instance Stanley Kangethe Kinyanjui vs. Tony Ketter & 5 Other [2013] KECA 378 (KLR) . Moreover, an arguable appeal is not one which must necessarily succeed, but one which ought to be fully argued before the Court. See Joseph Gitahi Gachau & Another vs. Pioneer Holdings (A) Limited & 2 Others [2009] KECA 201(KLR). 9. In that regard, whereas Hemingways contends that under Paragraph 24(1)(f) of the Second Schedule to the Income Tax Act it is entitled to a 150% investment deduction as held by the Tribunal, KRA on the other hand argues that the High Court was right that Hemingways entitlement to an investment deduction is 100% under Paragraph 24(1)(e) of the Second Schedule to the Income Tax Act. This in our view is arguable. The intended appeal is not frivolous. 10. On the nugatory aspect, Hemingways urged that enforcement of the High Court judgment exposes it to immediate and Page 6 of 6

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irreversible administrative action by way of issuance of revised or additional tax assessment and claw-back of previously allowed investment Page 7 of 6

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deductions and risk of imposition of interest and penalties. KRA on the other hand urged that if the appeal succeeds, there is an elaborate statutory mechanism under Section 47 of the Tax Procedures Act for refund. 11. Whether an appeal will be rendered nugatory depends on whether what is sought to be stayed, if allowed to happen will be reversible, or if it is not, whether damages will reasonably compensate the aggrieved party. See Stanley Kangethe Kinyanjui vs. Tony Ketter & 5 Other above. In his affidavit in support of the application, Dr. Joseph Wambua Kithiku deponed that at the time of filing the application, no enforcement mechanisms had been instituted by KRA but that his apprehension was well founded. He deponed further, without elaboration of the exposure, that unless the orders sought are granted, Hemingways stands to suffer irreparable harm. It is not contended, whatever the monetary exposure might be, that KRA would not be able to refund if the appeal succeeds. On the contrary, KRA forcefully maintains that there are elaborate refund mechanisms under Section 47 of the Tax Procedures Act Page 8 of 6

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and Hemingways would be secured in that regard. There is merit in this argument. 12. All in all, although the intended appeal is indeed arguable, we are not persuaded that Hemingways has demonstrated that its success will be rendered nugatory. Consequently, the applicant’s application dated 16th December 2025 fails. It is hereby dismissed with costs to the respondent. Dated and delivered at Nairobi this 25th day of September 2026. S. GATEMBU KAIRU, FCIArb, CArb. ………………………………. JUDGE OF APPEAL G. V. ODUNGA ……………………………… JUDGE OF APPEAL L. M. NDOLO ……………………………. JUDGE OF APPEAL I certify that this is a true copy of the original. Signed DEPUTY REGISTRAR. Page 9 of 6

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