RULING
April 4, 1985, Hancox JA delivered the following Ruling.
The respondent taxpayer was assessed at shs 4,750,408 for the 1975 year of income, to which the income tax authorities added penalties of Kshs 1,312,448, making shs 6,062,856 for that year. He appealed against that assessment to the local committee for the Nairobi area under the provisions of section 86(1)(b) of the Income Tax Act, chapter 470 of the Laws of Kenya, contending that the amount charged was not taxable as it represented a receipt by way of capital.
His case was that it represented a loan made to him by the former East African Community for the purposes of the construction of a godown in Maidstone Road, Nairobi, which the community proposed to lease from the taxpayer. The Principal Assessor, however, decided that the sum charged to tax was received as income, inasmuch as it represented rent paid by the community for the godown. Moreover, as there was no provision for the apportionment of the amount said to repres…