Stefanutti Stocks Kenya Limited v Commissioner of Domestic Taxes (Tax Appeal 18 of 2020) [2021] KETAT 168 (KLR) (18 June 2021) (Judgment)
- Court
- Tax Appeals Tribunal
- Case number
- 168
- Citation
- [2021] KETAT 168 (KLR)
- Decided
- 18 June 2021
The Tribunal found that the Respondent erred in disallowing the Appellant's deferred revenue and disallowed the expenditure incurred for the year 2013 in respect of deferred income. The Respondent's decision to disallow personnel expenses and related party expenses was upheld.
Facts
Stefanutti Stocks Kenya Limited (Appellant) received deferred revenue in advance of performance. The Commissioner of Domestic Taxes (Respondent) demanded tax on this deferred revenue and disallowed certain expenditures.
Issues
- Whether the Respondent erred in demanding tax on deferred revenue.
- Whether the Respondent erred in disallowing expenditure incurred by the Appellant for the year 2013 in respect of deferred income.
- Whether the Respondent erred in disallowing personnel expenses.
Reasoning
The Tribunal noted that the deferred revenue had already been accounted for and was not required to be accounted for in 2014. The expenditure incurred in the production of deferred income could only be attributed to the year when the income was earned.
Outcome
The assessment of tax on deferred income for the year 2013 is set aside. The Claim of expense in respect of deferred income for year 2013 is disallowed. Disallowing of personnel expense by the Respondent is upheld. Respondents' decision to disallow related party expenses is upheld.
Orders
- The assessment of tax on deferred income for the year 2013 is hereby set aside.
- The Claim of expense in respect of deferred income for year 2013 is disallowed.
- Disallowing of personnel expense by the Respondent is hereby upheld.
- Respondents’ decision to disallow related party expenses is hereby upheld.
Remedies
- Each party to bear its Costs.
Authorities cited
Legislation (2)
- Income Tax Act
- Kenya Revenue Authority Act
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