MATTERS FOR DETERMINATION

i) Whether Passage of non resident employee is taxable and whether expenses relating to the same are non taxable benefits.

ii) Whether Passage of non resident employee is taxable and whether expenses relating to the same are non taxable benefits.

APPELLANT

a) Passage for expatriate director is not taxable in the hands of the expatriate director contrary to the assertion of the Respondent.

b) Section 5(4) (a) of the Income Tax Act allows that passage for employees who are not Kenya citizens and are recruited outside Kenya to serve their employer are not taxable income in the hands of the employees.

c) A director is considered and treated as an employee under the Income Tax Act for the purposes of section 5 (4)(a).

Where the Income Tax purports a different treatment for tax for an employee and director e.g. Sections 5(2)(c) on termination of contract. 5 (2A) in regard to loan benefit. 5(3) in regard to housing benefit. and 5(4)(b) in regard to medical benefit, then the Act clearly makes the distinction.

The making of the passage taxable using the definition under S5(2A) is not correct, as this definition only relates specifically, to the taxation of benefits for loans given to employees.

d) The expatriate director in question Mr. James Knight, the Appellant's executive director, is a foreigner and he was recruited outside Kenya to come and work for the Appellant in Kenya.

e) The Respondent erred in making the assessment on grounds that Mr. James Knight is excluded from Section 5(4) because he is also a shareholder in the Appellant.

f) The Respondent has disallowed travel expenses for the director for the years 2007 to 2009 on the grounds that these are not supported. However, original invoices, receipts, relevant pages from the director's passport with immigration stamps proving that the travel did indeed take place and details of clients visited were all availed to the Respondent.

The Tribunal will not belabor on the same as it is trite law that in interpreting statutes, the principle of strict or literal construction applies.

In the case of Cape Brandy Syndicate versus I.R.C (1KB 64, 71 it was stated as follows,

"In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment there is no equity about a tax.

There is no presumption as to a tax. Nothing is to be read in; nothing is to be implied. One can look fairly at the language used"

The upshot of the above is that the Appeal herein has no merit and the same is hereby dismissed with no Order as to Costs and the Respondent's Notice of Assessment is hereby upheld.