BY SAM ALFAN.
The tax-man has been blocked from demanding Sh73 million from a Real Estate firm.
The Tax Appeals Tribunal (TAT) has ruled that the Commissioner of Domestic Taxes was time-barred from collecting Sh73,278,572 from Global Investments Data Bank.
The contested tax liability comprised Sh44, 649,502 as Income Tax and Sh28,629,070 as Value Added Tax for 2014 to 2017.
The five-member Tribunal, chaired by Robert Mutuma, quashed the notice issued by the Agency on February 21, last year, requiring the firm to pay up. The d real estate company had lodged it’s objections on October 12, 2022.
Under the law, the Tribunal reasoned, the Commissioner of Domestic Taxes could not invalidate the firm’s objections after 135 days and stick to the contested assessment.
“The Tribunal finds that the decision of the Commissioner of Domestic Taxes was issued beyond the statutorily permitted period of 30 days and, therefore, the company’s objection was deemed allowed by operation of the law,” the 17-page ruling read.
The company, through lawyer Kethi Kilonzo, had argued that it’s objection to the tax assessment was lodged on October 12, 2022 but was rejected. The firm asked for extension of time and provided documentary evidence.
The firm had protested that the alleged tax liability did not take into consideration it’s financial statements, which reflected trading losses amounting to Sh18.6million.
The breakdown of the losses was as follows: 2014 (Sh5,391,736), 2015( Sh7,187,172), 2016(Sh4,203,063) and 2017(Sh2,081,566).
Further, the agency had imposed the Sh28.6million tax on VAT when the firm was not liable for registration and did not collect or levy VAT from customers.
The firm had called two witnesses, Dorothy Muli and Patrick Mutua Nzioka, who provided documentary evidence to prove borrowings from directors for investment purposes. The Commissioner of Domestic Taxes had erroneously treated these as taxable income, they had said.
Opposing the appeal, the agency claimed it had conducted investigations and issued the necessary notices to the firm.
The Commissioner had asserted that the firm’s objections were invalidated for failure to furnish sufficient documentary evidence within 45 days.
The agency claimed it had established that the firm’s total income reflected in bank statements was lower than declarations in tax returns.
