TAX TRIBUNAL CANNOT STAY OWN PROCEEDINGS

TAX TRIBUNAL CANNOT STAY OWN PROCEEDINGS

By Donald Kogai

The High Court has ruled that the Tax Appeals

Tribunal (TAT) does not have jurisdiction to stay

its own proceedings on account of other

proceedings pending in the High Court. The

court issued the verdict following Kenya

Revenue Authority’s appeal after TAT dismissed

KRA’s application to enforce a settlement

agreement reached with a taxpayer.

KRA had moved TAT to enforce a settlement

agreement entered with the taxpayer through an

Alternative Dispute Tribunal (ADR) process. In

the application, KRA wanted the tribunal to

direct and order that ADR Agreement was a

legally binding agreement on the issues agreed

upon and was capable of enforcement.

In the appeal, the High Court ruled that TAT

cannot stay its own proceedings for an

indeterminate period of time on the basis of a

suit whose outcome is unknown. In his

judgement, Justice David Majanja further held

that ADR Agreement was binding and

enforceable.

The case arises from TAT’s move to stay its

own proceedings pending a High Court case

filed by Ethics and Anti-Corruption Commission

(EACC) against the taxpayer. Before EACC filed

the case against the taxpayer, KRA had entered

an agreement with the company through the

ADR process and the company was supposed

to pay Kshs. 150.9 million.

As a result, the taxpayer requested KRA to

await the determination of the case stating that

the judgement will affect the amount of taxes

payable under the ADR Agreement. KRA

declined and filed an application at the TAT to

enforce the ADR Agreement. the taxpayer

argued that enforcement of the ADR Agreement

would be prejudicial and amounts to unfair

administrative action in the face of its pending

case with the EACC. TAT dismissed the

application on 31st March 2020.

KRA argued before High Court that it was not a

party to the pending case between EACC and

the taxpayer and that it was only the High Court

which can stay the enforcement of the ADR

Agreement. Following the High Court’s decision,

KRA can now move to collect the Kshs. 150.9

million taxes from the taxpayer.