Thika brewer fails to block Sh525m tax claim

“A reading of the decision of the Tax Appeals Tribunal shows that the tribunal considered the issue about the validity of the appellant’s notice of objection and rendered a reasoned determination on the issue,” the judge said.

“This court has also re-evaluated the evidence on record and is satisfied that the tribunal properly applied itself to the facts, evidence and the law in reaching the conclusion that the appellant’s appeal before it was for dismissal,” Justice Kendagor ruled on March 10, 2025.

The verdict stems from a dispute between KRA and Elle Kenya over excise duty, value-added tax (VAT) and income tax payments between 2015 and 2019.

The legal battle began when the taxman investigated Elle Kenya and issued a tax assessment notice in October 2021, demanding Sh525,653,847. The company challenged the assessment, arguing that the calculations were flawed and that the tax authority had overstepped legal timelines in issuing its demands.

However, KRA invalidated the objection in December 2021 and confirmed the assessment in September 2022. Aggrieved, Elle Kenya took its case to the Tax Appeals Tribunal, which ruled in favour of KRA in December 2023. This prompted the brewer to appeal to the High Court.

Elle Kenya told the court that KRA’s assessment was unlawful because it had determined taxes outside the legally mandated five-year period, rendering parts of the claim invalid. It also argued that KRA had used flawed methods in its assessment, which the company claimed resulted in double taxation.

In addition, the brewer contended that it had submitted a valid objection, complete with the necessary supporting documents. It accused KRA of failing to recognise the documents and making an objection decision outside the stipulated 60-day timeframe, which, under the law, should have allowed the objection by default.

On the other hand, KRA defended its actions, stating that its assessment was based on credible evidence showing under-declared taxes. The tax authority insisted that Elle Kenya Limited had failed to provide the necessary supporting documents to validate its objection.

According to KRA, the company had been asked to submit financial records, including audited statements, VAT returns and excise duty records. Still, it failed to do so within the required timeframe.

The agency also dismissed the company’s claim that the assessment period exceeded the statutory five-year limit, arguing that this issue had not been raised before the tribunal and, therefore, could not be introduced at the appeal stage.

As to whether the KRA had made its objection decision within the legal timeframe, the taxman argued that it had sent multiple requests for additional information and had not received the necessary documents from the company. Under the law, the 60-day period only begins once all required information is provided, meaning that Elle Kenya Limited’s claim of automatic approval due to delay was unfounded.

While delivering the ruling, Justice Kendagor ruled that the company had not provided the necessary supporting documents, and as a result, KRA’s decision to invalidate the objection was justified.

“The failure of a taxpayer to provide documents to support its objection vitiates the validity of the Notice of Objection. Courts have consistently held that a notice of objection that had not been supported by necessary documents is invalid,” said the court.

The court further ruled that KRA’s timeline for making an objection decision had not lapsed because it had been waiting for additional documents from the company.

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