Section 3 of the ITA provides for the charge to tax. Section 3(1) provides that:

“Subject to, and in accordance with, this Act, a tax to be known as income tax shall be charged for each year of income upon all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya.”

While the Act does not define the phrase “accrued in or derived from Kenya,” judicial precedent provides interpretive guidance. In Esso Standard East Africa Inc. v. Commissioner of Income Tax [1971] E.A. 127, the court held that:

“the words ‘accrued in’ and ‘derived from’ are synonymous; the source of income is the place from which it is derived and this is a question of fact; and that the source of the interest was the contract made in New York, the location of that source was New York and the interest neither accrued in nor was derived from Kenya.”

We also rely on CIR vs. Hang Seng Bank Ltd (1991)1 AC 306 wherein Lord Bridge attempted to define the terms “accrued in” and “derived from” in relation to the source of income and stated that:

“The broad guiding principle, attested by many authorities, is that one looks to see what the ...