The Tax Appeal Tribunal has rejected Sh73 million tax claim by the Kenya Revenue Authority (KRA) against real estate firm Global Investment Data Bank, citing a breach of law after the taxman failed to respond to an objection by the firm within set timelines.
The tribunal said KRA erred by responding to a tax objection by the property firm beyond the 60 days permitted by Article 51(11) of the Tax Procedures Act.
“The tribunal finds that the respondent’s decision was issued beyond the statutorily permitted 60 days, and therefore the appellant’s objection was deemed allowed by the operation of law... Consequently, the tribunal finds that the respondent’s decision of invalidating the appellant’s objection was not proper in law," the tribunal ruled.
KRA had assessed the tax liability of the Global Investment Data Bank to be Sh44,649,502 and Sh28,629,070 for Income Tax and Value Added Tax (VAT), respectively between 2014 and 2017, an assessment that the company objected to as erroneous.
The company told court that the taxman failed to consider that it had not generated any taxable income. It added that the VAT assessment was wrong as the firm was not registered for VAT, and it did not charge for or collect VAT from customers.
In their defence, KRA argued that the total income received by Global Investment Data Bank was lower than the business income declared in the tax returns.
KRA also maintained; “That its assessment was proper and valid in law. That the Appellant’s Notice of Objection lodged on 28th December 2022 was a late Objection and the Appellant (Global Investment Data Bank) never applied to extend the time within which to file its objection.”
The Tribunal chaired by Robert Mutuma found that “neither of the parties presented any evidence to the Tribunal to the effect that the Appellant was notified by the Respondent that its objection was not validly lodged either within the fourteen (14) days from October 12, 2022 or at all.
By relying on Section 51 (4) of the Tax Procedures Act, the Tribunal said that KRA failed to comply with the provisions of the Act thus the bank’s objection was deemed valid.
“The Respondent was placed under obligation by law to issue an Objection decision within sixty days. It is undisputed that the Appellant’s notice of objection dated 11th October 2022 was lodged on 12th October 2022, and the Respondent’s decision was issued on 21st February 2023, the Tribunal notes the time taken to issue the decision was 135 days.”
