Kenya Revenue Authority (KRA) has lost more than Sh360 million after the High Court overturned a decision directing owners of Eastleigh Mall Ltd to pay the money arising from corporate tax.
Justice Alfred Mabeya ruled that failure by the taxman to issue an objection as raised by the taxpayer within 60 days as required by law, meant that its objection had been allowed.
The judge said the provisions of section 51(11) of the Tax Procedures Act are mandatory and the timelines set are a must and not a procedural technicality.
“They are not cosmetic. Parliament in its wisdom knew that in matters of tax, time is very crucial as those in commerce need to make informed decisions. If the commissioner is allowed to exercise his discretion and stay ad-infinitum before issuing an objection decision, the taxpayer would be unable to make crucial decisions and plan his/her business properly,” the judge said.
Evidence presented in court was that the KRA investigated the affairs of the company for the years 2008 to 2015 for rent income for corporation tax, VAT on commercial rent and pay as you earn (PAYE) on the employees’ salary.
By a letter on June 16, 2015, the KRA raised an assessment of Sh386,701,864.
The company raised an objection on April 28, 2017, and confirmed the assessment of withholding tax at Sh140,965, PAYE of Sh2.7 million and corporate tax of Sh22.2 million.
Eastleigh Mall also lodged the assessment on corporate tax at the Tax Appeals Tribunal, which in a judgment on July 2020, dismissed the appeal and upheld KRA’s assessment.
The company then moved to the High Court faulting the tribunal over the failure to consider the issues it had raised and for employing the wrong analysis in coming up with its determination.
Eastleigh Mall also said the tribunal was wrong by failing to appreciate the timelines set out in the Act as the objection decision was issued after the lapse of 60 days.
The company argued that failure to issue the objection decision in time meant that its objection had been upheld.
The tribunal had observed that the reason for the late objection was due to the fact that the parties were engaged in discussions and it was guided by the Constitution, to do substantive justice, an argument submitted by KRA urging the court to look beyond technicalities and for substantial justice.
Justice Mabeya overturned the tribunal’s decision saying the failure to issue the objection decision within 60 days meant that the taxpayer’s objection had been allowed.
The judge said there was no need of considering the second ground regarding the assessment of Corporation Tax.
“The decision of the tribunal is hereby set aside in its entirety as well as the respondent’s objection decision,” Judge Mabeya ruled.
