Equity Insurance Agency Limited v Commissioner of Domestic Taxes (Appeal 628 of 2021) [2023] KETAT 154 (KLR) (Civ) (17 March 2023) (Judgment)

Facts

The Appellant, Equity Insurance Agency Limited, was assessed additional excise duty, corporate tax, withholding tax, and VAT by the Respondent, Commissioner of Domestic Taxes, for the period 2015-2018. The Appellant objected to the assessment and the matter was referred to the Tax Appeal Tribunal.

Issues

1. whether override commissions earned by the Appellant from insurance companies are chargeable to excise duty
2. whether the Respondent can demand additional excise duty on a revenue that the Appellant had already charged excise duty
3. whether the Respondent is liable to pay Corporate Income Tax on non-existent revenue
4. whether the Appellant is entitled to utilize the 2014 tax overpayment to settle the Corporate Income Tax Assessment for the 2015 year of income

Reasoning

The Tribunal interpreted the Service Level Agreements (SLAs) between the Appellant and insurance companies to exclude the term 'commissions' or 'override commissions' and held that the Appellant and insurance companies intended to describe the income as 'agency/administrative costs and expenses'.

Outcome

The Tribunal dismissed the appeal and upheld the Respondent’s objection decision, vacating part of the excise duty and corporate tax assessments.

Authorities cited