BY SAM ALFAN.
Madison Insurance company has lost a bid to quash a demand of Sh41 million from Kenya Revenue Authority (KRA) of unpaid taxes.
High Court Judge Lucy Gitari dismissed the appeal by the underwriter saying the law cannot be applied retrospectively, for the company to be allowed to carry forward losses of the previous year.
The Judge said Parliament was very clear that the Finance Act which amended section 19(9) of Income tax Act would come inforce in January 1, 2009 hence the company cannot claim that the law allowed it to carry forward the losses of the year 2008.
“For these reasons I find that the Tax Appeals Tribunal applied the law correctly and came up with a proper decision based on the facts of the case. I have no reason to interfere with the decision of the Tax Appeals Tribunal in its judgment dated May 25, 2017. I hold that the appeal is without merits and I dismiss it with costs,” said the judge.
The Insurer was challenging the Tax Appeal Tribunal decision dated May 26, 2017 that upheld the decision by KRA to collect the tax debt.
The dispute emanated from the repeal of Section 19(9) and the amendment of Section 19(5) of the Income Tax Act by the Finance Act 2008, which took effect on 1st January 2009.
The Insurer in its claim purported to offset its losses for year 2008 in the year 2009. KRA disallowed the same and raised additional assessments for two years.
The Insurer then filed an Appeal at the Tax Appeals Tribunal, which was dismissed and KRA’s assessment upheld on grounds that the Madison Insurance, was not entitled to offset the life insurance business tax losses incurred prior to 1st January 2009 in its taxable income for the year 2009.
Being aggrieved, Madison moved the High Court for Orders among others that it was entitled to offset the accumulated life insurance business tax losses as at the end of the year 2008 in its taxable year of income for the year 2009.
KRA’s position was that the law could not be applied retrospectively and that only losses obtained from 1st January 2009 onwards could be offset but not those before.
The High Court reaffirmed KRA’s position and upheld the Judgement by the Tax Appeal Tribunal as having been sound and correctly based on the law and facts of the case.
