Economy

Water agency suffers blow in Sh643 million tax row

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The government has been allowed to proceed with the construction of affordable housing units in Kericho town. PHOTO | POOL

The High Court has rejected an application by a water agency seeking more time to appeal against a Sh643 million demand arising from withholding tax and professional fees with respect to two foreign firms contracted to construct dams in the country.

Justice David Majanja rejected the application by the Central Rift Valley Water Development Agency (CRWDA) saying the delay of more than one year in filing the appeal was inordinate.

The judge said the water agency was never keen on pursuing the appeal and only did so to avert further recovery and agency notices from Kenya Revenue Authority (KRA).

READ: Water agency to pay Sh643m tax over Itare Dam

“I also reject any argument that gives preference to public bodies. They are to be treated like ordinary litigants and are required to comply with the legal procedures. Merely because the applicant is a public body does not excuse it from the application of the applicable procedures. If anything, the amount in dispute imposes on it a greater responsibility to conduct its litigation with the greatest care and respect for the procedures in order to protect its interests,” the judge said.

The water agency was ordered to pay the amount in June 2021 by a five-member tribunal, which ruled that the corporation was supposed to withhold tax for management and professional fees in respect of the construction of Itare dam in Nakuru and another project in Elgeyo Marakwet known as Sabor Iten Tambach Water supply project (phase 2), which was undertaken by Belgian firm Aspen International SPRL.

Itare Dam was to be constructed by CMC Di Ravenna, which later went bankrupt. The Italian firm was declared bankrupt in 2019, after years of serious cash problems that hindered its undertaking of projects for which it had been contracted by the government.

The tribunal chaired by Mahat Somane had dismissed the argument by the agency that the project was exempt from withholding tax as baseless because there was no evidence that the exemption was granted by Treasury.

KRA said the agency was responsible for the preparation of payment certificates which were forwarded to the Water ministry for processing of payment and the failure to account for withholding tax amounts to a failure to discharge its obligations as the employer of the contractor.

CRWDA had argued that it was not responsible for the preparation of payment vouchers and as such, it would have nothing to return to KRA since it was not in control of the funds.

The agency then tried moving to the High Court but Justice Majanja rejected the appeal saying it came late in the day.

According to the state corporation, it has been negotiating a settlement with KRA, which later broke down, forcing it to pursue the appeal.

It argued that courts have always held that time does not stop running merely because parties are engaged in out-of-court negotiations.

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Justice Majanja said any person intending to appeal has a limited time within which to act to secure the right of appeal.

He noted that the water agency never served the notice of intention to appeal within 30 days as required by law.

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