Pinnie Agency Limited v Commissioner Legal Services & Board Co-ordination Department [2024] KETAT 1602 (KLR) | Input Vat Claims | Esheria

Pinnie Agency Limited v Commissioner Legal Services & Board Co-ordination Department [2024] KETAT 1602 (KLR)

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Pinnie Agency Limited v Commissioner Legal Services & Board Co-ordination Department (Civil Appeal E833 of 2023) [2024] KETAT 1602 (KLR) (Commercial and Tax) (11 October 2024) (Judgment)

Neutral citation: [2024] KETAT 1602 (KLR)

Republic of Kenya

In the Tax Appeal Tribunal

Commercial and Tax

Civil Appeal E833 of 2023

E.N Wafula, Chair, Cynthia B. Mayaka, RO Oluoch, G Ogaga & AK Kiprotich, Members

October 11, 2024

Between

Pinnie Agency Limited

Appellant

and

The Commissioner Legal Services & Board Co-ordination Department

Respondent

Judgment

Background 1. The Appellant is a company registered in Kenya and incorporated under the Companies Act (Cap 486) and deals in general supplies.

2. The Respondent is the principal officer appointed under Section 13 of the Kenya Revenue Authority Act. The Kenya Revenue Authority is an agency of the Government of Kenya mandated with the duty of collection and receipting of all tax revenue, and the administration and enforcement of all tax laws set out in Parts 1& 2 of the First Schedule to the Act, for purposes of assessing, collecting, and accounting for all tax revenues in accordance with those laws.

3. The dispute in this Appeal arose when the Appellant was selected for a return review resulting in the issuance of income tax and VAT assessment against the Appellant totaling Kshs 60,631,670. 00 vide a letter dated 16th March 2023.

4. The Appellant objected to the said assessment vide its objection letter dated 6th July 2023.

5. The Respondent issued its objection decision vide a letter dated 12th October 2023 confirming the assessment.

6. Aggrieved by the Respondent’s decision, the Appellant lodged at the Tribunal a Notice of Appeal dated 10th November 2023 and filed on 22nd November 2023.

The Appeal 7. The Appellant premised its Appeal on its Memorandum of Appeal dated 11th November 2023 and filed on the 22nd November, 2023 and which raised the following grounds:a.That the Respondent erred in law and fact by raising additional assessment for Corporation tax amounting to Kshs. 22,910,696. 00 on the basis that the Company had over-claimed input VAT claims from amounting to Kshs. 143,191,853. 00. b.That the Respondent erred in law and fact by raising additional assessment for Corporation tax amounting to Kshs. 28,196,632. 00 on the basis that the Company had made fictitious / over claimed input VAT claims amounting to Kshs. 143,191,853. 00. c.That the Respondent erred in fact and law in disregarding the explanations, documents and information provided by the Appellant in the objection and at the request of the Appellant.d.That the Respondent erred in fact and law by disallowing the valid input VAT as claimed in ITAX returns, yet the same can be fully accounted for and supported with the necessary documents.d.That the Respondent erred in fact and law by disallowing the valid purchase invoices that were wholly and exclusively incurred in the production of income that was generated in the period under review, yet the same can be fully accounted for and supported with the necessary documents.

Appellant’s Case 8. The Appellant set out its case in its Statement of Facts dated 12th November 2023 and filed on 22nd November, 2023 and Written Submissions dated 30th July 2024 and filed on the even date.

9. The Appellant’s objection was urged under the following sub-heads:

Erroneous finding by Commissioner: - 10. The Appellant took the position that the Commissioner arrived at an erroneous assessment for the following reasons: -a.That it had all the necessary documents and records which supported and validated the authenticity of the impugned disallowed invoices.b.That the expenditures which were disallowed through the purchase invoices were incurred wholly and exclusively in the production of income.

11. The Appellant asserted that it availed the documents requested by the Respondent to support the disallowed claims. That the documents provided included the following:a.A detailed schedule of the disallowed purchases.b.Copies of the invoices related to the disallowed purchases.c.Concrete proof of payment, as demonstrated by bank statements for the year 2021. d.The audited financial statements for the year 2021, provided a comprehensive overview of the financial activities during that period.

12. That the Respondent’s finding that it had failed to furnish it with the required documents to support its objection under Section 17 of the VAT Act and VAT Regulations 2017 was not correct because it had provided the Respondent with documents including invoices, corresponding ETRs, delivery notes, payment records and store records.

13. The Appellant argued that Section 17 of the VAT Act required the Respondent to consider the following in processing its VAT claims, that:a.The taxpayer is registered for VAT.b.The purchase was to make taxable supplies.c.The input tax does not relate to the excluded purchases as set out in Section 17(4) of the VAT Act or exempt supplies.d.The input tax is claimed within six months of receiving the supply; ande.The claim for the input tax should be based on the documentation required under Section 17 of the VAT Act and VAT Regulations.

14. The Appellant contended that despite having met the threshold set out for VAT input claims, the Respondent disallowed its claim on the alleged grounds that its suppliers had indicated that they had not sold any goods to it.

15. It was the position of the Appellant that these findings were inaccurate, unreasonable and unfair considering that it had provided sufficient proof to show that it had indeed purchased the goods in question.

16. That in any event this new ground of failure to supply goods was not provided for in law as a ground for denying legitimate input VAT claims against a party that has complied with the provisions of Section 17 of the VAT Act.

Corporation tax assessment 17. The Appellant opined that it had demonstrated that the said expenditure was directly connected to the production of the business income and as such the costs ought to be matched with revenue. That the Respondent’s assessment meant that it was earning income from the business without incurring costs.

18. That by providing the requested documents, the Appellant adhered to the provisions of Section 56 of the Tax Procedures Act, which placed the onus on the Appellant to demonstrate that the Respondent’s decision was erroneous.

19. The Appellant identified the following as the issues for determination in this Appeal;i.Whether the Respondent erred in its assessment of the Value Added Tax of the Appellant for the period under review.ii.Whether the Respondent erred in the computation of the additional Corporation tax assessments of the Appellant for the period under review on the basis of fictitious/overclaimed input VAT claims and disallowing expenses incurred by the Appellant in the generation of the taxable income.iii.Whether the Respondent erred in disregarding the Appellant’s information and documentation provided.

Whether the Respondent erred in its assessment of the Value Added Tax for the period under review 20. The Appellant submitted that it filed its VAT returns and paid the VAT due for the period under assessment but the Respondent amended its VAT returns by disallowing some of the input VAT incurred and claimed by the Appellant during that period without conducting an audit or review of the Appellant’s books.

21. It asserted that it rightfully claimed input VAT supported with valid tax invoices and copies of other documents as stipulated in Section 17(1)(2)(3)(a) of the VAT Act. It supported this argument with the cases of:a.Ramco Printing Works Limited vs Commissioner of Domestic Tax (TAT No. 210 of 2018)b.Commissioner of Domestic Taxes v Trical and Hard Limited (Tax Appeal E146 of 2020) 2022} KEHC 9927 (KLR) (commercial and Tax).c.Keroche industries Limited V Kenya Revenue Authority & 5 [2007] eKLR.

22. It was its view that it had discharged its burden of proof with the documents provided, unlike the Respondent who alleged that it had obtained information from third parties without providing a scintilla of evidence to this effect.

23. It supported its argument that the Respondent was required to prove what it was alleging with the cases of:a.Kenya Revenue Authority v man Diesel & Turbo Se, Kenya [2021] eKLR.b.Kilburn v Bedford (H.M. Inspector of Taxes) 1955 Chancery Division, 36, p.262. ai.Whether the Respondent erred in the computation of the additional Corporation Tax assessments of the Appellant for the period under review based on fictitious/overclaimed input VAT claims and disallowing expenses incurred by the Appellant in the generation of the taxable income.

24. The Appellant submitted that it produced payment requisition forms, cash received vouchers which were received and signed by Robert Njoroge an employee of Samhua Investments Limited to prove that it had incurred expenses. That this, and other documents that it had provided were disregarded by the Respondent in arriving at its decision.

25. That the Respondent was required under Section 54 of the Income Tax Act to consider its documents in arriving at its decision as was held in the cases of Nizaba International Trading Company Limited v Kenya Revenue Authority [2000] eKLR and Silver Chain Ltd-vs- Commissioner Income Tax & 3 others [2016] eKLR.

26. That it had kept proper records of its expenses and books of accounts which the Respondent ignored when it arrived at its decision.

Whether the Respondent was wrong in disregarding the Appellant’s information and documentation provided. 27. The Appellant reiterated that it had discharged its burden of proof on the erroneous assessment in accordance to Sections 108 and 109 of the Evidence Act.

28. That it had also kept all its records as is required under Section 43 of the VAT Act and Section 23 of the TPA. That the Respondent was thus obliged to consider and reconcile these documents while arriving at its decision as was stated in the case of Keroche Industries Limited V Kenya Revenue Authority & 5 others [2007] EKLR.

29. That there was no evidence provided to support the Appellant’s theory of the case that its documents were not genuine.

Appellant’s Prayers 30. In light of the foregoing, the Appellant urged this Tribunal for orders that:a.The Appeal herein be allowed, and the Respondent’s Objection decision dated 12th October 2023 be struck out in its entirety;b.The Tribunal be at liberty to grant any other or further remedies as it deems fit, just and reasonable in the circumstances.

Respondent’s Case 31. The Respondent’s case is premised on its Statement of Facts dated 18th December 2023 and filed on 19th December 2023 and its Written submissions dated 5th August 2024 and filed on 6th August 2024.

32. The Respondent averred that:a.The Appellant was selected for a return review after the Respondent was tipped on specific PINs highlighted to have made fictitious purchases from Samhua Investments Limited.b.Samhua Investments Limited wrote to it on the 17th of October 2022 informing it of the fictitious VAT entries on its i-Tax ledger from companies claiming to have made purchases from them.b.Samhua Limited called upon it to investigate the falsified entries.b.A review of the Appellant’s VAT returns indicated that it had claimed purchases from Samhua Investments Limited amounting to Kshs. 93,988,772 for the period July and September 2021. b.Upon its investigations and given that Samhua Investments Limited had refuted trading with the Appellant, the inputs which had been claimed by the Appellant were disallowed.

33. Flowing from the above, the Respondent stated that:a.It issued assessments against the Appellant on iTax on 10th & 14th of February 2023. b.The Appellant objected late to the assessments on 6th July 2023. c.The objection was allowed on 9th August 2023. d.It validated the objection on 17th August 2023.

34. That the basis of the assessment was that the information it had acquired after carrying out investigations into the tax affairs of the Appellant revealed fictitious dealings.

35. It stated that Section 17 of the VAT Act provides for deduction of input tax but the said input tax is only deductible after a taxpayer has provided valid documents to support its claim as envisioned by the Act.

36. That in the present case the Appellant was requested to provide documents to support its claims but it failed to do so. That the Appellant could also not demonstrate the authenticity of the invoices bearing the disallowed purchases which made it impossible for the Respondent to confirm the veracity of the deducted input VAT.

37. That the burden of proving that the VAT assessment was erroneous fell on the taxpayer as was stated in the case of Metcash Trading Limited vs Commissioner for the South African Revenue Service and another (CCT3/00) [2000] ZACC 21.

38. That the Appellant did not provide any document to support its claims for VAT and or to disprove the Respondent’s assessments. It supported its argument on documentation with the cases of Manguzi Hardware Limited Vs. Commissioner of Investigations & Enforcement, TAT Appeal No. 238 of 2018 and Commissioner of Domestic Services V Galaxy Tools Limited [2021] eKLR.

39. The Respondent identified the following as the issues for determination in this matter:a.Whether the Appellant complied with the record-keeping requirements under the VAT Act and the TPA.b.Whether the Respondent’s dis-allowance of input VAT was justified.b.Whether the additional assessments issued were lawful.b.Whether the Respondent’s assessment process was fair and within the legal framework.Whether the Appellant complied with the record-keeping requirements under the VAT Act and the TPA.

40. The Respondent asserted that the Appellant failed to keep record as was required of it under Sections 43 of the VAT Act and 23 of the TPA. That the document provided did not meet the statutory requirement necessary for claiming input VAT under Section 17 of the VAT Act. That this argument was supported with the case of Kenya Revenue Authority v Man Diesel & Turbo Se Kenya {2021} eKLR.

41. That information obtained from third parties also confirmed that there was no business trading between the Appellant and Samhua Investment Ltd. That this failure to provide evidence of purchase is what led the Respondent to arrive at its conclusion.

42. That the invoices provided by the Appellant belonged to Samhua Limited and not Samhua Investment Limited. That this discrepancy supported in documentation supported its position that the claimed transaction did not occur.

Whether the Respondent’s dis-allowance of input VAT was justified. 43. The Respondent asserted that the Appellant did not meet the conditions of documentation prescribed in Section 17 of the VAT Act because;a.It did not have valid tax invoices.b.It lacked supporting documentationc.It failed to provide adequate documentation.d.The documentation provided did not meet the statutory requirementse.Third-party information confirmed that there was no trade between Samhua Investment Limited and the Appellant.

44. It was its position that the third-party supplier confirmation established that there was no business trading between the Appellant and Samhua Investment Ltd. That this lack of business activity invalidates the purchases claimed from Samhua Investments Ltd, amounting to Kshs. 93,988,772. 00 for the period from July to September 2021.

45. That the fact that the Appellant only attached “invoices” related to Cainda General Trading Ltd, Three (Mt) Network, and Samhua Limited. That document relating to other suppliers, such as Grey Worth Trading Co. Ltd, Easy Comp Computers and Keywood Agencies Ltd have not been included in the Appellant’s bundle of documents. It asserted that this supports its findings regarding the tax liability.

46. It supported these assertions with the cases of Metcash Trading Limited v Commissioner for the South African Revenue Service and Another (CCT3/00[2000] ZACC 21 and Commissioner of Domestic Taxes v Galaxy tools Limited [2021] eKLR.

Whether the additional assessments issued were lawful. 47. The Respondent contended that the additional assessments issued were lawful and in accordance with Section 31 of the Tax Procedures Act, which grants the Commissioner the authority to amend an assessment based on available information and to the best of the Commissioner’s judgment.

48. That furthermore, Section 66 of the VAT Act allows the Respondent to raise assessments where a tax benefit has been conferred upon the taxpayer. That this provision ensures that any tax benefits claimed by the taxpayer are legitimate and substantiated by appropriate documentation.

49. The Respondent stated that it conducted thorough investigations into the tax affairs of the Appellant and these investigations revealed fictitious dealings, particularly with Samhua Investment Ltd.

50. That third-party supplier confirmation established that there was no business trading between the Appellant and Samhua Investment Ltd. That consequently, the purchases claimed from Samhua Investment Ltd, amounting to Kshs. 93,988,772. 00 for the period from July to September 2021, were deemed non-existent.

51. That it thus acted within its mandate and the law in using the information that was available to it is issuing the additional assessments.

Whether the Respondent’s assessment process was fair and within the legal framework. 52. The Respondent stated that it was guided by all relevant laws and it also followed due procedure in arriving at, and confirming the assessments. That the Appellant was also given adequate opportunity to defend its position but failed to do so.

53. That the additional assessments issued were based on thorough investigations and were necessitated by the Appellant’s failure to substantiate their claims with adequate documentation.

54. It was its view that the Appellant did not meet the Statutory requirements under Section 17 of the VAT Act because it failed to provide sufficient evidence to support its input VAT claims.

55. That third-party confirmations and inadequate documentation further validated its findings.

Respondent’s Prayer 56. The Respondent prayed that this Tribunal holds that:a.That this Appeal be dismissed.b.The taxes due and unpaid together with interest thereon be paid to the Respondent.c.The Respondent reserves the right to adduce any further oral and written evidence during the hearing of the Appeal.d)That the Appellant be compelled to pay costs to the Respondent.

Issues For Determination 57. The Tribunal has considered the Memorandum of Appeal, the parties' Statements of Facts and Written Submissions on record. It is thus of the view that the issues falling for its determination are:a.Whether the Respondent erred in its decision to disallow the input VAT.b.Whether the Respondent erred in its assessment for Corporation Tax after disallowing input VAT.

Analysis And Determination 58. The Tribunal having identified the issues falling for its determination proceeds to analyze the same separately as hereunder.

Whether the Respondent erred in its decision to disallow the input VAT. 59. The Appellant argued that it had complied with the provision of Section 17 of the VAT Act to the extent that it had provided all the documents prescribed therein. It was thus of the view that the Respondent disallowed its input claims based on extraneous issues that are not known to law and which also remained un-proved.

60. The Respondent argued that it disallowed the Appellant’s input tax claims on legitimate grounds considering that a third-party supplier had refuted any trade engagement with the Appellant. It was thus its view that the document presented by the Appellant did not meet the statutory requirements for claiming input VAT.

61. The Tribunal notes that it is a common principle that a taxable person who makes transactions in respect of which VAT is deductible may deduct the VAT in respect of the goods or services acquired by him, provided that such goods or services have a direct and immediate link with the output transactions in respect of which VAT is deductible. This system is well settled under Section 17 of the VAT Act and was restated by this Tribunal in Judgement Appeals Nos.58 and 186 of 2019 (Shreeji Enterprises (K) Limited) where the Tribunal stated that the law under Section 17 of the VAT Act should apply whether or not there is a missing trader somewhere in the value chain. A similar view was held in Optigen (Taxation) [2006] EUECJ C-354/03 (12 January 2006).

62. Section 17(2) and (3) of the VAT Act provides as follows regarding the deduction of VAT input claims:“(2)If, at the time when a deduction for input tax would otherwise be allowable under subsection (1), the person does not hold the documentation referred to in subsection (3), the deduction for input tax shall not be allowed until the first tax period in which the person holds such documentation.Provided that the input tax shall be allowable for a deduction within six months after the end of the tax period in which the supply or importation occurred.(3)The documentation for the purposes of subsection (2) shall be—a.an original tax invoice issued for the supply or a certified copy;b.…”

63. The right of being allowed to deduct input tax is an integral part of the VAT scheme and in principle may not be limited. It must be exercised in respect of all the taxes charged on transactions relating to inputs.

64. It may nevertheless be limited in transactions which are vitiated by VAT fraud that the trader was involved in or was part of. On the other hand, transactions of which he has no knowledge and the fraudulent acts or intentions of other persons in the chain of supply whose involvement he is unaware do not affect his entitlement.

65. A taxpayer should thus take every reasonable precaution to ensure that its transactions are not connected with fraud so as to protect its right to claim input tax.

66. The undisputed evidence and facts before the Tribunal show that the Appellant complied with the provisions of Section 17(2) and (3) of the VAT Act to the extent that it provided invoices and ETR receipts to support its supply. It was thus entitled to input tax claims under the law unless it could be shown that it was involved in fraud. The burden to prove such fraud lay with the Respondent.

67. The Respondent alleged that it had obtained information from a third party known as Samhua Investments Limited (SIL) who had refuted trading with the Appellant and hence the reason for the disallowed input tax claims and additional assessment. The Appellant’s response to this was that it had traded with the said SIL as evidenced by its invoices, receipts and delivery notes signed by SIL employee Mr. Robert Njoroge.

68. The Tribunal held as follows regarding the standard for proving fraud in tax cases in its Judgement in Appeals Nos.58 and 186 of 2019 (Shreeji Enterprises (K) Limited) X:“Furthermore, the standard of proof in fraud is distinctly higher than the normal civil standard of balance of probability and the Respondent has not attained or satisfied that standard.”

69. Once the Appellant showed its compliance with Section 17 of the VAT Act and the Respondent alleged that the said Appellant was involved in a fictitious claim, then the Respondent was expected to table minimum tangible evidence to support this theory of fraud like it did in the case Judgment TAT E-267 Of 2023 China Communications Construction Company Limited Vs. The Commissioner of Intelligence, Strategic Operations, Investigations & Enforcement, where it called its investigating officer/witness to take oath and affirm the allegation of fraud under oath and cross-examination from the Appellant. The trail showing how the fraud was committed was also explained in detail in this case.

70. However, in this case the Tribunal has noted as thus:a.The letter by SIL dated 17th October 2022 did not specifically state that the Appellant had not traded with it. It was merely a general letter which stated that SIL had noted fictitious entries in its ledger. The general nature of this complaint required the Respondent to create a nexus between this complaint and the Appellant’s input tax claims. This was not done and no nexus was created between the complaint and the Appellant’s input tax claims.b.The Respondent never invited the employee of the SIL one Mr. Robert Njoroge, who was named in SIL letter of complaint to confirm whether he had indeed signed the deliveries and invoices in possession of the Appellant which confirmed, on the face of it, that the Appellant had traded with SIL.c.The Respondent did not dispute or displace the Appellant’s allegation that one Mr. Robert Njoroge who signed its invoices and deliveries was an employee of SIL. Obtaining this confirmation from SIL would have been crucial in helping the Respondent to dismantle the Appellant’s theory that it was indeed trading with SIL through its authorized employee.c.The issue of the name of SIL also ought to have been clarified to make it clear that both parties were referencing the same entity. The invoices and receipts filed by the Appellant refer to trade that was done between it and Samhua Limited (SL). On the other hand, the Respondent constantly referred to this entity as SIL. The identity of the complainant entity needed to be verified. Otherwise, as it is:-i.It is difficult to decide whether the input claims of the Appellant from SL are different from the company known as SIL which had filed a complaint with the Respondent.ii.No reason has been provided on why the Respondent disallowed the Appellant’s claim when its invoices related to a company known as SL and not SIL who had filed a complaint of fraud.iii.No evidence has been tabled to explain why input claims have been disallowed against the Appellant when SL had not filed a complaint with the Respondent regarding its transactions with the Appellant.iv.No reason has been provided by the Respondent why it treated SIL and SL as one and the same entity.

71. It is settled that in cases of doubt like it is in the case regarding the identity of SIL and SL then the benefit of the doubt usually swings in favour of the taxpayer as was held in the case Ripple Mart Limited v Commissioner of Customs & Border Control (Tax Appeal E414 of 2023) [2024] KETAT 744 (KLR) (Commercial and Tax) (24 May 2024) (Judgment) when it stated that:-“The benefit of this doubt swings in favour of the taxpayer’

72. The Tribunal reiterates the holding in the case of Commissioner of Income Tax vs. Westmont Power (K) Ltd Nairobi High Court Income Tax Appeal No. 626 of 2002, where the Court while citing Inland Revenue vs. Scottish Central Electricity Company [1931) 15 TC 761 expressed itself as follows;“Even though taxation is acceptable and even essential in democratic societies, taxation laws that have the effect of depriving citizens of their property by imposing pecuniary burdens resulting also in penal consequences must be interpreted with great caution. In this respect, it is paramount that their provisions must be expressed and clear so as to leave no room for ambiguity… any ambiguity in such a law must be resolved in favour of the taxpayer and not the Public Revenue Authorities which are responsible for their implementation.”

73. The identity of SIL and SI was crucial in this dispute. The benefit of the doubt on the identity of SIL or SL must thus be settled in favour of the taxpayer. In any event the Tribunal is not required to sojourn on its own motion to investigate the identity of SIL and SL because there is no equity about tax and there is no presumption as to tax. Nothing is to be read or implied on what is presented before the Tribunal. The Tribunal is instead enjoined to read and interpret the documents presented or tabled before it as they are.

74. The Tribunal would thus not imply anything for the parties. It would not be in its place to determine the dispute on the issue of SIL and SL except to state that the Respondent has failed to show the nexus between Appellant and SIL, and how the Appellant was involved in any fictitious trade with SIL when the receipts held by the Appellant showed that it had only traded with SL.

75. The Tribunal thus finds and holds that the Appellant has proved on a balance of probability that it was involved in trade and that the evidence required of it to claim input tax under Section 17(2) and (3) of the VAT Act being invoices and receipts were supplied to the Respondent and the Tribunal.

76. It is for this reason that the Tribunal has arrived at the conclusion that the Respondent erred in disallowing the Appellant VAT input tax claims for purchases from SL when the Appellant had complied with requirements of the law under Section 17(2) and (3) of the VAT Act.

Whether the Respondent erred in its assessment for Corporation tax after disallowing input VAT. 77. The evidence produced before the Tribunal showed that the Appellant was involved in a trade transaction between it and SL, from whom it purchased several products in the course of trade as is required under Section 15 of the ITA which provides as thus:“15. (1)For the purpose of ascertaining the total income of a person for a year of income there shall, subject to section 16, be deducted all expenditure incurred in that year of income which is expenditure wholly and exclusively incurred by him in the production of that income,”

78. The Respondent's assessment of Corporation tax was premised on the dis-allowance of the expenses incurred by the Appellant from its transactions with SL.

79. Having held that the Respondent was in error to disallow the Appellant’s VAT claims which were based on the invoices and ETR receipts. The Tribunal has held the position that there was trade between the Appellant, SL and other traders. The fact that the Respondent has not disputed that the purchases by the Appellant were made in the course of trade, and the fact that the trade between SL and the Appellant has not been disputed implied that the said purchases were made wholly and exclusively in the production of income.

80. Moreover, the Respondent’s assessment of Corporation tax was premised on the dis-allowance of the expenses incurred by the Appellant from its transactions with SL. Having held that the Respondent was in error to disallow the Appellant’s VAT claims which were based on the invoices and ETR receipts between it and SL. It follows that the decision to disallow the same invoices and ETRs as allowable expenses for Corporation tax was also erroneous.

81. The Respondent thus erred in its assessment for Corporation tax after disallowing input VAT.

Final Decision 82. The upshot to the foregoing analysis is that the Tribunal finds and holds that the Appeal is merited and consequently makes the following orders; -a.The Appeal be and is hereby allowed;b.The Respondent’s Objection decision dated 12th October 2023 be and hereby set aside.c.Each party is to bear its own costs.

83. It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 11TH DAY OF OCTOBER, 2024ERIC NYONGESA WAFULA - CHAIRMANCYNTHIA B. MAYAKA - MEMBERDR. RODNEY O. OLUOCH - MEMBERGLORIA A. OGAGA - MEMBERABRAHAM K. KIPROTICH - MEMBER