Introduction
1. This Judgment concerns an appeal filed by Kumar Haria Asvin (“the Appellant”) against the decision of the Tax Appeals Tribunal ("the Tribunal") delivered on 26th April 2024, in in which the Tribunal dismissed the Appellant's appeal and upheld the Respondent's (Kenya Revenue Authority, hereinafter "KRA") Objection Decision dated 27th July 2023, which imposed on the Appellant an additional assessment in the sum of Kshs. 247,217,628 in account of Capital Gains Tax (CGT).
2. The undisputed facts reveal that as part of a restructuring process, the Appellant, alongside two other (Rupen Haria and Nishil Haria) shareholders of Harleys Limited, transferred their shares in Harleys Limited to Westlands Heights Limited, a company wholly owned by the same individuals.
3. The agreement evidencing this transfer was dated 29th December 2022. On 30th December 2022, the said agreement was presented to the Lands Registry for stamping. On the same day, 30th December 2022, the Appellant duly paid all requisite taxes, including stamp duty and Capital Gains Tax (CGT), at the then-prevailing rate of 5%. The payment was accepted by the Respondent. The document was, however, stamped/franked at the Lands Registry on 4th January 2023.
4. The Respondent took the view that the actual transfer was effected on 4th January 2023, after the coming into force of the Finance Act 2022, which raised the CGT rate from 5% to 15%, thereby raising additional assessment for Kshs. 247,217,628.00, occasioned by the difference in the rates.
5. The Appellant challenged this additional assessment before the Tax Appeals Tribunal, which dismissed the appeal, finding that "the transfer of ownership took place in 2023 when the rate for CGT was 15%," thereby justifying the Respondent's assessment.
The Appeal
6. Aggrieved by the Tribunal’s decision, the Appellant lodged the present appeal to this Court, raising some fourteen grounds of appeal, key among them being that the Tribunal: -
i. Failed to appreciate that the subject transfer was not undertaken in the year 2023 but rather in the year 2022, when the rate of CGT applicable was 5% and not 15% as alleged in the impugned assessment.
ii. Erred in law in its interpretation of section 3(2)(f) of the Income Tax Act as read with paragraph 2 of the Eighth Schedule of the Income Tax Act with regard to the tax point for CGT.
iii. erred in law in failing to appreciate that the Finance Act 2022, which amended section 34(1)(1) of the Income Tax Act, does not apply in retrospect, and to do so is not only unconstitutional but also impractical and unreasonable.
iv. erred in law and in fact in finding that CGT is due upon registration of the transfer instrument contrary to the provisions of paragraph 11A of the Eighth Schedule of the Income Act as to what constitutes the ‘tax point’ and/or when tax is said to be due.
v. erred in fact in making a finding that the date of franking of the transfer deed by the Collector of Stamp duty was commensurate to the ‘tax point’ for the purposes of Capital Gains Tax.
vi. erred in law and in fact in failing to appreciate that where an appellant lodges documents with a government entity for a transfer, as was the case herein, then any delay by the government entity in lodging and/or registering the documents cannot be attributed to the appellant.
7. The appeal was canvassed by way of written submissions. The Appellant filed its submissions dated 18th June 2025, whilst the Respondent filed theirs dated 16th June 2025.
Appellant’s Submissions
8. The Appellant contended that CGT is payable upon the "transfer" of property, and for shares, "transfer" occurs when the property is "sold" as per Paragraph 6(1)(a) of the Eighth Schedule of the Income Tax Act (ITA). A sale, it was argued, is effected through the exchange of promises and completed by payment of the price. In this case, the agreement was dated 29th December 2022, and the price paid on 30th December 2022, therefore, the shares were sold on 30th December 2022.
9. The Appellant submitted that the Tribunal erred by relying on Law Society of Kenya v. Kenya Revenue Authority & another, which concerned the transfer of land, an immovable property where registration of title is mandatory, unlike shares for which no such registration requirement exists in the Lands Registry. Stamping of the share transfer agreement, according to the Appellant, is merely for evidentiary purposes under the Stamp Duty Act and does not determine the tax point for CGT under the ITA. To apply the Law Society of Kenya decision to shares would lead to absurdity, as it would imply no CGT is payable if the document is never stamped.
10. The Appellant further submitted that applying the 15% CGT rate (effective 1st January 2023) to a transaction completed on 30th December 2022 constitutes retrospective application of law. This according to the Appellant runs counter to Article 50(2)(n) of the Constitution, as affirmed by the Supreme Court in Samwel Kamau Macharia & another v Kenya Commercial Bank Ltd & 2 others (2012) KESC 8 (KLR)].
11. The Appellant challenged the constitutionality of Section 56 of the Tax Procedures Act, arguing that by placing the burden on the taxpayer to prove that a tax decision "should not have been made," it violates the right to be presumed innocent until proven guilty (Article 50(1)(a)), a non-derogable right under Article 25(c) of the Constitution, especially when non-payment can lead to criminal sanctions.
12. Finally, the Appellant contended that the Tribunal erred by considering irrelevant information, specifically subsequent communications and transactions by third parties regarding the acquisition of Westlands Heights Ltd in February 2023.
13. The Appellant therefore prayed that the Court allow the Appeal in full, set aside the Tribunal’s decision, and declare that CGT was payable at the rate of 5% as declared by the Appellant and not 15%.
Respondent’s Submissions
14. The Respondent supported the Tribunal’s Judgment and submitted that due to the fact that the transfer deed was franked by the collector of stamp duties on 4th January 2023, that then became the effective date of the transfer and not the date of the share purchase agreement (29th December 2022) or when the document was lodged at the Lands Registry, 30th December 2022.
15. Placing reliance on the decision in the case of Law Society of Kenya vs Kenya Revenue Authority & another [2017] eKLR, the Respondent asserted that the High Court in that case determined that the "tax point for CGT is upon registration of the transfer instrument in favour of the transferee." The Respondent therefore argued that the act of “franking” of the share transfer deed was analogous to "registration" for the purposes of establishing the tax point for CGT on shares.
16. The Respondent asserted that the Finance Act 2022, having come into force on 1st January 2023, and taking into account that the franking occurred on 4th January 2023, the 15% rate was correctly applied.
Analysis and Determination
17. I have carefully considered the grounds of appeal, the submissions by both the Appellant and the Respondent, and the relevant legal provisions and precedents. I am of the view that the only issue for determination is whether, on the facts of this case, the Tribunal erred in finding that the applicable CGT rate was 15%.
18. The core of this dispute lies in the interpretation of the term "transfer" for the purposes of CGT on shares. Section 3(2)(f) of the Income Tax Act (ITA) charges tax on "gains accruing in the circumstances prescribed in, and computed in accordance with the Eighth Schedule."
19. Paragraph 2 of the Eighth Schedule specifies that CGT is chargeable on a gain which accrues "on transfer of a property in Kenya." Paragraph 6(1)(a) then clarifies that a "transfer of property" occurs when the property is "SOLD, EXCHANGED, CONVEYED or otherwise disposed of."
20. A scrutiny of Paragraph 2 of the Eighth Schedule to the Income Tax, therefore, reveals that for the purposes of the Act, a transfer of property shall be deemed to have happened at any one of the three points indicated above, that is when a sale of the property happens (SOLD), or when possession is of the property passed to the purchaser (ECHANGED), or when the title to the property is transmitted/transferred (COVEYED) to the buyer/transferee.
21. A "sale" is typically effected when an offer is accepted and the price is paid. It is immaterial whether or not possession has been passed (exchanged), or whether registration of title (conveyance) has been effected. In the present case, the sale agreement was dated 29th December 2022, and the payment occurred on 30th December 2022. At this point, the shares were "sold," and the economic benefit and risks associated with the ownership of the shares effectively passed from the Appellant to Westlands Heights Limited.
22. The above interpretation aligns with Paragraph 11A of the Eighth Schedule to the Act, which provides the due date (essentially the “tax point”) for CGT under the Income Tax as follows: -
“11A.The due date for tax payable in respect of property transferred under this Part shall be the earlier of–
(a) receipt of the full purchase price by the vendor; or
(b) registration of the transfer
23. The Respondent's reliance on the date of "franking" (stamping) as the tax point is misplaced. Stamping of an instrument, while a requirement under the Stamp Duty Act for evidentiary purposes and, does not of itself determine the date of transfer or sale for all types of property. As indicated above, depending on the facts of a particular case and evidence available, for tax (CGT) purposes, a transfer may be deemed to have happened, despite the fact that title to the property is yet to be transmitted/conveyed to the purchaser.
24. I have carefully perused and considered the case of the Law Society of Kenya v. Kenya Revenue Authority & another (supra) cited by the Respondent and relied on by the Tribunal. First, I wish to point out that the facts of that case were different from those obtaining in the instant case. Secondly, the case concerned the law as it then stood. The petitioner in that case challenged paragraph 11A, which then made the CGT payable "upon presentation of the transfer instrument". Paragraph 11A as it then existed, provided that:
“The due date for tax payable in respect of property transferred under this Part shall be on or before the date of application for transfer of the property is made at the relevant Lands Office.”
25. In the circumstances, this Court is of the considered view that, based on the facts and evidence on record, the "tax point" for Capital Gains Tax (CGT) purposes arose upon the sale of the shares, which, on the facts, occurred on 30th December 2022, being the date the sale agreement was executed and payment was made. It is further instructive that the Appellant both computed and remitted the CGT to the Respondent on the same date, i.e., 30th December 2022.
26. Once the agreement for the sale of shares was concluded and consideration received, the subsequent delay in registration at the Lands Registry became immaterial for purposes of CGT liability. The outcome might well have been different had the Appellant failed to adduce evidence demonstrating timely computation and payment of CGT on the said date.
45. For the reasons set out above, this Honourable Court makes the following orders:
i. The Appellant's Appeal dated 7th May 2024 is hereby allowed and the Judgment of the Tax Appeals Tribunal delivered on 26th April 2024 is hereby set aside.
ii. It is hereby declared that the Capital Gains Tax rate applicable to the Appellant's transfer of shares in Harleys Limited to Westlands Heights Limited was 5%.
iii. The Respondent’s additional assessment of 247,217,628.00 on account of Capital Gains Tax against the Appellant is hereby quashed
iv. The Respondent shall bear the costs of this Appeal and the proceedings before the Tax Appeals Tribunal.
27. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
31ST DAY OF JULY 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
………………………..for the Appellant
……………….…..... for the Respondent
1. This Judgment concerns an appeal filed by Kumar Haria Asvin (“the Appellant”) against the decision of the Tax Appeals Tribunal ("the Tribunal") delivered on 26th April 2024, in in which the Tribunal dismissed the Appellant's appeal and upheld the Respondent's (Kenya Revenue Authority, hereinafter "KRA") Objection Decision dated 27th July 2023, which imposed on the Appellant an additional assessment in the sum of Kshs. 247,217,628 in account of Capital Gains Tax (CGT).
2. The undisputed facts reveal that as part of a restructuring process, the Appellant, alongside two other (Rupen Haria and Nishil Haria) shareholders of Harleys Limited, transferred their shares in Harleys Limited to Westlands Heights Limited, a company wholly owned by the same individuals.
3. The agreement evidencing this transfer was dated 29th December 2022. On 30th December 2022, the said agreement was presented to the Lands Registry for stamping. On the same day, 30th December 2022, the Appellant duly paid all requisite taxes, including stamp duty and Capital Gains Tax (CGT), at the then-prevailing rate of 5%. The payment was accepted by the Respondent. The document was, however, stamped/franked at the Lands Registry on 4th January 2023.
4. The Respondent took the view that the actual transfer was effected on 4th January 2023, after the coming into force of the Finance Act 2022, which raised the CGT rate from 5% to 15%, thereby raising additional assessment for Kshs. 247,217,628.00, occasioned by the difference in the rates.
5. The Appellant challenged this additional assessment before the Tax Appeals Tribunal, which dismissed the appeal, finding that "the transfer of ownership took place in 2023 when the rate for CGT was 15%," thereby justifying the Respondent's assessment.
The Appeal
6. Aggrieved by the Tribunal’s decision, the Appellant lodged the present appeal to this Court, raising some fourteen grounds of appeal, key among them being that the Tribunal: -
i. Failed to appreciate that the subject transfer was not undertaken in the year 2023 but rather in the year 2022, when the rate of CGT applicable was 5% and not 15% as alleged in the impugned assessment.
ii. Erred in law in its interpretation of section 3(2)(f) of the Income Tax Act as read with paragraph 2 of the Eighth Schedule of the Income Tax Act with regard to the tax point for CGT.
iii. erred in law in failing to appreciate that the Finance Act 2022, which amended section 34(1)(1) of the Income Tax Act, does not apply in retrospect, and to do so is not only unconstitutional but also impractical and unreasonable.
iv. erred in law and in fact in finding that CGT is due upon registration of the transfer instrument contrary to the provisions of paragraph 11A of the Eighth Schedule of the Income Act as to what constitutes the ‘tax point’ and/or when tax is said to be due.
v. erred in fact in making a finding that the date of franking of the transfer deed by the Collector of Stamp duty was commensurate to the ‘tax point’ for the purposes of Capital Gains Tax.
vi. erred in law and in fact in failing to appreciate that where an appellant lodges documents with a government entity for a transfer, as was the case herein, then any delay by the government entity in lodging and/or registering the documents cannot be attributed to the appellant.
7. The appeal was canvassed by way of written submissions. The Appellant filed its submissions dated 18th June 2025, whilst the Respondent filed theirs dated 16th June 2025.
Appellant’s Submissions
8. The Appellant contended that CGT is payable upon the "transfer" of property, and for shares, "transfer" occurs when the property is "sold" as per Paragraph 6(1)(a) of the Eighth Schedule of the Income Tax Act (ITA). A sale, it was argued, is effected through the exchange of promises and completed by payment of the price. In this case, the agreement was dated 29th December 2022, and the price paid on 30th December 2022, therefore, the shares were sold on 30th December 2022.
9. The Appellant submitted that the Tribunal erred by relying on Law Society of Kenya v. Kenya Revenue Authority & another, which concerned the transfer of land, an immovable property where registration of title is mandatory, unlike shares for which no such registration requirement exists in the Lands Registry. Stamping of the share transfer agreement, according to the Appellant, is merely for evidentiary purposes under the Stamp Duty Act and does not determine the tax point for CGT under the ITA. To apply the Law Society of Kenya decision to shares would lead to absurdity, as it would imply no CGT is payable if the document is never stamped.
10. The Appellant further submitted that applying the 15% CGT rate (effective 1st January 2023) to a transaction completed on 30th December 2022 constitutes retrospective application of law. This according to the Appellant runs counter to Article 50(2)(n) of the Constitution, as affirmed by the Supreme Court in Samwel Kamau Macharia & another v Kenya Commercial Bank Ltd & 2 others (2012) KESC 8 (KLR)].
11. The Appellant challenged the constitutionality of Section 56 of the Tax Procedures Act, arguing that by placing the burden on the taxpayer to prove that a tax decision "should not have been made," it violates the right to be presumed innocent until proven guilty (Article 50(1)(a)), a non-derogable right under Article 25(c) of the Constitution, especially when non-payment can lead to criminal sanctions.
12. Finally, the Appellant contended that the Tribunal erred by considering irrelevant information, specifically subsequent communications and transactions by third parties regarding the acquisition of Westlands Heights Ltd in February 2023.
13. The Appellant therefore prayed that the Court allow the Appeal in full, set aside the Tribunal’s decision, and declare that CGT was payable at the rate of 5% as declared by the Appellant and not 15%.
Respondent’s Submissions
14. The Respondent supported the Tribunal’s Judgment and submitted that due to the fact that the transfer deed was franked by the collector of stamp duties on 4th January 2023, that then became the effective date of the transfer and not the date of the share purchase agreement (29th December 2022) or when the document was lodged at the Lands Registry, 30th December 2022.
15. Placing reliance on the decision in the case of Law Society of Kenya vs Kenya Revenue Authority & another [2017] eKLR, the Respondent asserted that the High Court in that case determined that the "tax point for CGT is upon registration of the transfer instrument in favour of the transferee." The Respondent therefore argued that the act of “franking” of the share transfer deed was analogous to "registration" for the purposes of establishing the tax point for CGT on shares.
16. The Respondent asserted that the Finance Act 2022, having come into force on 1st January 2023, and taking into account that the franking occurred on 4th January 2023, the 15% rate was correctly applied.
Analysis and Determination
17. I have carefully considered the grounds of appeal, the submissions by both the Appellant and the Respondent, and the relevant legal provisions and precedents. I am of the view that the only issue for determination is whether, on the facts of this case, the Tribunal erred in finding that the applicable CGT rate was 15%.
18. The core of this dispute lies in the interpretation of the term "transfer" for the purposes of CGT on shares. Section 3(2)(f) of the Income Tax Act (ITA) charges tax on "gains accruing in the circumstances prescribed in, and computed in accordance with the Eighth Schedule."
19. Paragraph 2 of the Eighth Schedule specifies that CGT is chargeable on a gain which accrues "on transfer of a property in Kenya." Paragraph 6(1)(a) then clarifies that a "transfer of property" occurs when the property is "SOLD, EXCHANGED, CONVEYED or otherwise disposed of."
20. A scrutiny of Paragraph 2 of the Eighth Schedule to the Income Tax, therefore, reveals that for the purposes of the Act, a transfer of property shall be deemed to have happened at any one of the three points indicated above, that is when a sale of the property happens (SOLD), or when possession is of the property passed to the purchaser (ECHANGED), or when the title to the property is transmitted/transferred (COVEYED) to the buyer/transferee.
21. A "sale" is typically effected when an offer is accepted and the price is paid. It is immaterial whether or not possession has been passed (exchanged), or whether registration of title (conveyance) has been effected. In the present case, the sale agreement was dated 29th December 2022, and the payment occurred on 30th December 2022. At this point, the shares were "sold," and the economic benefit and risks associated with the ownership of the shares effectively passed from the Appellant to Westlands Heights Limited.
22. The above interpretation aligns with Paragraph 11A of the Eighth Schedule to the Act, which provides the due date (essentially the “tax point”) for CGT under the Income Tax as follows: -
“11A.The due date for tax payable in respect of property transferred under this Part shall be the earlier of–
(a) receipt of the full purchase price by the vendor; or
(b) registration of the transfer
23. The Respondent's reliance on the date of "franking" (stamping) as the tax point is misplaced. Stamping of an instrument, while a requirement under the Stamp Duty Act for evidentiary purposes and, does not of itself determine the date of transfer or sale for all types of property. As indicated above, depending on the facts of a particular case and evidence available, for tax (CGT) purposes, a transfer may be deemed to have happened, despite the fact that title to the property is yet to be transmitted/conveyed to the purchaser.
24. I have carefully perused and considered the case of the Law Society of Kenya v. Kenya Revenue Authority & another (supra) cited by the Respondent and relied on by the Tribunal. First, I wish to point out that the facts of that case were different from those obtaining in the instant case. Secondly, the case concerned the law as it then stood. The petitioner in that case challenged paragraph 11A, which then made the CGT payable "upon presentation of the transfer instrument". Paragraph 11A as it then existed, provided that:
“The due date for tax payable in respect of property transferred under this Part shall be on or before the date of application for transfer of the property is made at the relevant Lands Office.”
25. In the circumstances, this Court is of the considered view that, based on the facts and evidence on record, the "tax point" for Capital Gains Tax (CGT) purposes arose upon the sale of the shares, which, on the facts, occurred on 30th December 2022, being the date the sale agreement was executed and payment was made. It is further instructive that the Appellant both computed and remitted the CGT to the Respondent on the same date, i.e., 30th December 2022.
26. Once the agreement for the sale of shares was concluded and consideration received, the subsequent delay in registration at the Lands Registry became immaterial for purposes of CGT liability. The outcome might well have been different had the Appellant failed to adduce evidence demonstrating timely computation and payment of CGT on the said date.
45. For the reasons set out above, this Honourable Court makes the following orders:
i. The Appellant's Appeal dated 7th May 2024 is hereby allowed and the Judgment of the Tax Appeals Tribunal delivered on 26th April 2024 is hereby set aside.
ii. It is hereby declared that the Capital Gains Tax rate applicable to the Appellant's transfer of shares in Harleys Limited to Westlands Heights Limited was 5%.
iii. The Respondent’s additional assessment of 247,217,628.00 on account of Capital Gains Tax against the Appellant is hereby quashed
iv. The Respondent shall bear the costs of this Appeal and the proceedings before the Tax Appeals Tribunal.
27. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
31ST DAY OF JULY 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
………………………..for the Appellant
……………….…..... for the Respondent