China National Aero Technology Engineering Corporation lawyer Philip Nyachoti making submission before Justice Enock Chacha-Mwita on Thursday April 13, 2017.

High Court has blocked the Kenya Revenue Authority (KRA) from recovering Sh3.5billion from the China National Aero Technology Engineering Corporation in disputed tax arrears.

Justice Enock Chacha-Mwita suspended four agency notices the tax-man had sent to the firm’s bankers on April 10 requiring them to remit the money in enforcement of a contested assessment dated May 26, last year.

“I prohibit the respondents, whether by themselves, their servants, officers and agents from making any demand to the applicants and /or it’s bankers and particularly  in respect of Equity  Bank (K)  limited Account  Number 1480260880505, 1480260880517, 1480262262609,1480261312262,1480262262684,1480261684513,1480261684878 and 1480261289727; Standard Chartered Bank limited account number 0102015808100 ; Eco bank (K) limited Account  Number 001001502557701 as well as Chase Bank (K) Limited Account Number 0202058609006 for payment of any purporting owing tax arising out of its impugned default  Assessment Noticed dated 26th may 2016” ruled the judge.

The Judge allowed lawyer Philip Nyachoti, representing the construction firm, to file the substantive case within 14 days seeking to prohibit KRA and the Commissioners responsible for Investigation and Enforcement and Customs and Excise Departments from carrying through with the demands.

Nyachoti argued that the agency notices were premature since the firm had lodged its objection to the tax assessment and the dispute resolution mechanisms provided by the Tax Appeals Tribunal had not been exhausted.

Further, the firm had in excess of Sh547million in tax credit and had offered to furnish KRA with a bank guarantee of Sh200milion pending the outcome of its appeal before the tribunal.

Nyachoti explained that KRA had failed to specifically notify Equity Bank, Eco Bank Kenya, Standard Chartered Bank and Chase Bank about the collective sum involved and there was a risk of them remitting Sh14billion to KRA.

The firm stood to suffer financial ruin by the unreasonable demands, he said.

“In any event, such payment will totally cripple and paralyze the construction business of the firm, which is engaged in massive construction work in Nairobi and in particular the gigantic twin tower construction project next to Villa Rosa Kempinsky Hotel on Waiyaki Way which has employed over 2,000 workers,” the lawyer said.

Nyachoti said the purported enforcement of tax liabilities against the firm for alleged failure to file its annual returns for 2013 and 2014 amounted to an abuse of the justice system, unreasonable and malicious.

The firm will be seeking orders to compel KRA and its agents to return all the original documents and computers that were seized from the firm’s premises on June 21, last year.

The firm’s Managing Director, Igao Binghsheng, says the confiscation adversely affected operations in East and Central Africa and relations with the parent company in China.