Sec 4(a) deems certain worldwide income to be accrued in or derived from Kenya. Trouble comes up in the way courts have looked at it.
Sec 10 deems certain income to have accrued in Kenya.
Sec 9 (1) , (2) also deems income from use of a ship/aircraft in Kenya ports to have accrued in or derived from Kenya unless otherwise.
Sec 9(2) income from business or transmitting cable or radio messages from apparatus established in Kenya is also deemed to have accrued in or derived in Kenya.
Sec 10 touches on payments by Kenyan based residents persons and any persons who are non residents in respect of management /professional fees ,royalties ,interests ,use of property in Kenya and for any appearance or performance or any place for entertainment or sporting , then any such payments will be deemed to have accrued in or derived from Kenya and will be subject to a W.H.T (persons paying withholds tax from that payment and remits it to the Government.
Esso Standard Eastern Inc vs. Tax commissioner
The appellant was a neo-cooperation but had lent money to a Kenyan co-operation with rights plus construction of an oil refinery at Mombassa and for working capital account to loan arrangement , repayment for loan money to be made in New York in U.S dollars that agreement had also been drawn and where money was paid to the Kenyan Government. The appellant contested payment of tax on the interest and the issue was whether interest on loan had accrued in or was derived from Kenya in terms of Sec 3(1) of the Income Tax Act.
HELD: Appeal be allowed because the words “accrued” or “derived from” were anonymous and were the source of interest in this case was the contract made in New York and the location of the source was New York and thus the interest neither accrued nor was it derived from Kenya
Ec Boucher vs. income tax division
The appellant in 1953 and 1955 settled shares in a Kenyan company in discretionary trust in favor of his infant children by deeds executed in the US. Settler trustees and beneficiaries were at all relevant times resident in the UK but dividends accruing to these trusts from shares in 1951-1960 were deemed income of the appellant under Sec24 of the East African Management Act and assessed that income on him. The first appeal to the supreme board dismissed the matter. The second appeal to the court of appeal (East African) was that income being captured by Sec 24 was income of beneficiaries under UK settlement and neither accrued in or was derived from Kenya. It was held that dividends on Kenyan shares accrued as income of the settlement on which the trustees would be assessed at standard rates upon which after such assessment and tax being paid it was then paid to or for the benefit of the children and should therefore not be chargeable to tax under Sec 3 because it derives from settlement whose laws was in the UK.
Income tax commissioner vs. Amboni establishment holdings and five others
First second and fourth respondent were directors of the sixth respondent company while the second respondent were executors of the will of a deceased director of the company and the fifth respondent was managing director of the company. The company was incorporated in Gurnsey and carried on business in Tanganyika. Articles of association of the company provided for remuneration of directors of an additional 7.5% of the net profit of the company. Upon such renumeration ,the company sought to deduct as an expense the amounts paid for directors but the commissioner assed the company by denying such deductions and argued that the same was income and accrued in/derived from Tanganyika and was subject to taxation. Director not resident in Tanganyika except managing director duties fund in Gurnsey account. Although the MD was resident in Tanganyika for some time , his work was mostly in Switzerland where his service agreement was drawn and where he received his remuneration and neither has he/any of the other directors remitted any of the remuneration they had received in Tanganyika of which reason assessment was allowed. On appeal , it was held that where directors remuneration is paid in good faith under a purely commercial arrangrement , entered into by the company then the income tax commissioner cannot question its quantum as expenses. This company not having been a Tanganyika company director’s remuneration said to be derived from Gurnsey Switzerland , which are places where to maintain principle and central accounts , and not from Tanganyika