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April 19, 2021

Kenya’s High Court rules that a Commercial Building Allowance is not premised on year of construction

Executive summary

On 31 March 2021, the High Court of Kenya ruled that a person qualified for a commercial building allowance (CBA) from 1 January 2010 as long as they met the conditions set out in Paragraph 1(1) (ee) of the Second schedule (now repealed) to the Income Tax Act (ITA).

A person was thus entitled to claim a CBA on capital expenditure incurred on the expansion or substantial renovation or a commercial building on or after 1 January 2010, irrespective of the year in which the building was constructed.

Detailed discussion


The Respondent, a company that specialized in the construction and lease of buildings, constructed a shopping mall and opened it for business in 2007. On 1 January 2010, the ITA introduced the CBA for commercial buildings that met certain requirements.

The Respondent made an application to amend its self-assessment returns for the years of income 2010 to 2015 to allow it to claim the CBA on the basis that it was entitled to the allowance at the rate of 25% annually. The application was rejected by the Commissioner of Domestic Taxes.

The Respondent filed an appeal with the Tax Appeals Tribunal (TAT) and won the case. Following the TAT’s decision, the Appellant, the Commissioner of Domestic Taxes filed an appeal in the High Court challenging the decision of the TAT.

The Appellant’s Case

The Appellant asserted that the Respondent was not entitled to claim the CBA since the building was constructed in 2007 and the law that introduced the CBA came into force on 1 January 2010.

The Commissioner contended that the law that allowed a CBA came into effect in 2010 and it only affected taxpayers who were constructing buildings and who incurred that expenditure from the date the law came into effect going forward.

Respondent’s Case

The Respondent stated that the issue before the High Court was whether the amendment of the Second Schedule by the Finance Act, 2009 which introduced the CBA applied only to those buildings which were constructed after 2010 or whether it applied to any person claiming from the year of income 2010, provided that they met the requirements of the Second Schedule to the ITA.

The Respondent contended that the amendment was not concerned with the date when the building was built but rather whether the specific capital expenditure was incurred after 1 January 2010.

The Respondent indicated that the Commissioner had not disputed that the following three conditions had been met as required by the law:

  • A person must have incurred a capital expenditure on the construction of an industrial building to be used in a business carried on by him or his lessee.
  • The CBA is claimable for any year of income commencing on or after 1 January 2010.
  • The claimant must have provided roads, power, water, sewers and other social infrastructure.

High Court’s decision

The High Court stated that that the issue under determination concerned the interpretation and application of Paragraph 1(1) (ee) of the Second Schedule (now repealed) of the ITA. The Court held that the statute was clear and did not require any technical interpretation.

The Court rejected the Commissioner’s submission that the words, “for any year of income commencing …” included “buildings that were completed and put to use on or after 1st January 2010 ….”

The Court thus concluded that the Respondent was entitled to the CBA and was allowed to amend the self-assessment returns.


This is a landmark ruling that further reflects the importance of the well-established rule of interpreting tax statutes. That in a Taxing Act, one has to look merely at what is clearly stated. There is no room for any intendment. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Kenya), Nairobi

Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP, Pan African Tax Desk, New York


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