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KRA loses bid for piece of Sh4.4bn Westgate payout

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KRA loses bid for piece of Sh4.4bn Westgate payout


The Westgate shopping mall. FILE PHOTO | NMG

Summary

  • Through the commissioner of domestic taxes, KRA wanted the court to overturn a decision of the Tax Appeals Tribunal that blocked it from demanding Sh380.3 million from the mall owners, Sony Holdings Ltd.
  • High Court judge David Majanja dismissed the appeal saying the Commissioner failed to demonstrate any error in the Tribunal’s decision that would warrant intervention by the court.

The Kenya Revenue Authority (KRA) has lost a court battle for a share of the Sh4.4 billion compensation that the Westgate Shopping Mall received from Kenindia Insurance following a terrorist attack in 2013.

Through the commissioner of domestic taxes, KRA wanted the court to overturn a decision of the Tax Appeals Tribunal that blocked it from demanding Sh380.3 million from the mall owners, Sony Holdings Ltd.

High Court judge David Majanja dismissed the appeal saying the Commissioner failed to demonstrate any error in the Tribunal’s decision that would warrant intervention by the court.

Westgate owners had argued that the taxman had unfairly classified the compensation as revenue instead of capital to justify the tax demand.

However, KRA maintained that Sh600 million of the compensation should have been regarded as income and was therefore liable for payment of 30 per cent corporation tax as Westgate had informed the court that it was also set to enjoy duty exemptions.

“Based on the law and evidence, the Commissioner failed to demonstrate any error, factual or otherwise, in the Tribunal’s decision that would warrant intervention by this court, said the judge while upholding the tribunal’s decision of March 2020.

“On the other hand, Sony Holdings was able to demonstrate before this court that the Tribunal came to the correct conclusion based on the facts and law.”

Kenindia Assurance Company had paid Sony Holdings Sh3.1 billion as compensation for damage to the mall and a further Sh1.2 billion as compensation for loss of rent during the period the shopping complex in Nairobi’s Westlands remained closed.

KRA was seeking a share of the Sh1.2 billion after deduction of operation expenses.

The September 2013 attack by the Somalia terrorist group Al-Shabaab left 67 people dead and many others injured after gunmen stormed into the mall and opened fire on shoppers.

Since its reopening, major foreign brands, including Subway, KFC and Converse, have opened outlets there, as has Carrefour, which took over the space previously occupied by Shoprite and Nakumatt Supermarket.

In the court case, KRA had said that Sony Holdings had classified the Sh600 million as capital income instead of revenue income without supporting documents.

Sony Holdings had faulted KRA’s decision to classify the Sh600 million as revenue, arguing that it suffered a net loss of nearly Sh1 billion after reconstructing the mall at Sh4.04 billion against a compensation of Sh3.1 billion.



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