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The Court of Appeal has ruled that statutory tax deadlines cannot be suspended while related cases remain pending. The decision has strengthened taxpayers’ protection against prolonged delays in the handling of tax objections.
The court held that an objection becomes allowed when the Commissioner fails to issue a decision within 60 days. The deadline cannot be extended merely because related proceedings are still being considered elsewhere.
The judges found that statutory obligations must be performed within periods prescribed by Parliament. Administrative convenience or pending collateral proceedings cannot be used to suspend those obligations.
The ruling followed a dispute involving VAT refund claims exceeding Ksh168 million. Some of the claims had reportedly remained unresolved for as long as seven years.
Dispute Involved VAT Refunds
The affected taxpayer had challenged several refund claims that had been rejected by KRA. The disagreement included whether certain services qualified as zero-rated exported services under applicable tax provisions.
Some refund claims had already undergone audits before remaining unresolved. Other claims had reportedly neither been audited nor conclusively determined by the tax authority.
KRA had attributed the delays to ongoing proceedings before the Tax Appeals Tribunal and courts. That explanation was rejected by the appellate judges, who found no legal basis for suspending statutory duties.
Court Clarifies Legal Remedies
The ruling also distinguished between tax appeals and judicial review proceedings. A statutory appeal examines whether a tax decision was correct, while judicial review considers whether lawful procedures were followed.
The requirement to exhaust available tax appeal mechanisms was therefore found not to apply universally. Where no decision has been issued within the legally prescribed period, judicial review may become available.
However, judicial review cannot be used to circumvent the statutory tax appeals process. It also cannot be used to obtain payment of disputed refunds where entitlement remains unresolved.
Earlier Decision Overturned
The Court of Appeal overturned an earlier decision that had dismissed the taxpayer’s entire case. However, the appellate judges stopped short of ordering KRA to determine or pay the disputed refunds directly.
The remaining issues concerning statutory deadlines and fair administrative action were returned to the High Court. Those matters were directed to be considered on a priority basis.
The decision places greater emphasis on compliance with mandatory timelines established under tax legislation. It also clarifies the circumstances under which taxpayers may seek court intervention against administrative delays.
The case has therefore provided further guidance on the relationship between tax appeals and judicial review. Taxpayers facing unresolved statutory obligations may rely on the clarified legal principles when pursuing appropriate remedies.
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