Big win for KRA in Sh9b tax dispute

Thursday, January 28th, 2021 00:00 |
KRA headquarters. Photo/File

Kenya Revenue Authority yesterday won a Sh9.3 billion tax dispute with Paleah Stores Limited after a tribunal ruled in its favour.

In its judgment, the Tax Appeals Tribunal dismissed the appeal by Paleah Stores Limited challenging KRA’s move to demand Sh9. 3 billion arrears from their company.

The Tribunal, led by its chairman Josphine Maang, Geofrey Karuu and Delilah Ngala upheld objection decision dated March 29, 2017 with the revised tax payable for the years 2008 to 2014 of Sh 1,361,746,295.00 and Sh 7,891,387,842.00, being corporation tax and VAT, respectively, comprising of principal tax, penalties.

“We find the appellant (Paleah Store Limited) has failed to make a case against the respondent (KRA) on account of the alleged unfairness and breach of Article 47 of the Constitution,” Tribunal the ruled. 

Tribunal further ruled that the taxman did not violate Paleah Stores rights under Article 47 of the Constitution. 

In May 2017, Paleah Stores had filed an appeal before the Tribunal, contesting assessment and demand of the taxes Sh9. 3 billion by  KRA for the years of income 2008 to 2014.

Company disputed the taxman findings, claiming a victim of bad professional advice leading to its accounts and tax returns not reflecting the correct position of its operations for the stated years. 

It, however, contested the tax assessments on the grounds that KRA did not consider its input tax claims, operational expenses and that the computation of the taxes was unfair.  

Three issues

Based on Paleah Stores Limited’s appeal, the Tribunal framed the following three issues for determination by the Tribunal.  

Tribunal observed that Paleah Stores had not complied with its statutory obligations of keeping proper records for purposes of computing tax. 

 This necessitated KRA to obtain information from third parties such as the firm’s suppliers and bankers.

 In its statement of facts to the Tribunal, Paleah Stores stated as follows; “In absence of complete records, the Appellant and the Respondent agreed to use the Banking Method to compute income for corporation tax, sales for output tax and purchases for input VAT.” 

The banking method revealed that Paleah Stores Limited had undeclared income tax and VAT, which it failed to prove that it was excessive.

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