I&M Bank has obtained a court order barring the Kenya Revenue Authority (KRA) from recovering Sh238 million that the taxman is claiming, until the lender’s suit against the demand is heard.
Justice George Odunga issued the order after I&M Bank claimed that the KRA went mute on an objection the lender raised to a 2015 tax assessment.
The lender argues that the objection it raised in 2015 was in the eyes of the law successful as the KRA did not respond to it within the required 60-day window.
The KRA is yet to respond to the suit.
Section 51(11) of the Tax Procedures Act requires the commissioner of domestic taxes to rule on any objection raised to an assessment within 60 days.
“The commissioner of domestic taxes failed to communicate her decision in respect of I&M’s notice of objection within the 60 days.
“By virtue of the clear provisions of the Act, the commissioner of domestic taxes is deemed to have allowed I&M’s objection.
“The respondent has no jurisdiction to demand the tax claimed in her decision dated May 13, 2017 claiming the tax, penalties and interest as she is deemed to have allowed I&M’s objection by virtue of section 51(11) of the Act,” the lender says in court filings.
The KRA had in May, 2015, demanded Sh434 million from the lender, a move that prompted I&M’s objection. The KRA in May this year issued a fresh demand to I&M, but for Sh238 million.
Mr Justice Odunga’s order barring enforcement of the Sh238 million demand was conditional on I&M furnishing a bank guarantee in the taxman’s favour.
I&M has already obtained the guarantee in KRA’s favour, a move that has brought into force Mr Justice Odunga’s order.
I&M head of business support division Lucy Thegeya argued in court papers that forcing it to pay the amount as demanded by the KRA would jeopardise its obligations to savers.