Companies
Kaluworks loses Sh730m tax fight with taxman
Wednesday May 10 2023
Kalu works limited aluware division along Kitui Road in Industrial area in Nairobi. FILE PHOTO | JEFF ANGOTE | NMG
Kaluworks Limited, a manufacturing company, which is part of billionaire Manu Chandaria’s Comcraft Group has lost a Sh730 million tax dispute after its case was dismissed by the High Court.
Justice Alfred Mabeya threw out the appeal by the firm of aluminium cookware and roofing sheets, saying the firm failed to comply with section 52(2) Tax Procedures Act (TPA).
The section requires a taxpayer to remit undisputed taxes before challenging Kenya Revenue Authority’s tax assessment.
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Justice Mabeya said the manufacturer admitted owing KRA Sh24 million of the demanded tax and the company was, therefore, bound to pay the taxes before taking any step of challenging the demand.
“The submission that the notice of appeal had disputed all the taxes does not help. It goes to show that the appellant was double speaking, asserting a denial while well knowing the contrary was the truth,” the judge said.
The company moved to the tribunal after KRA demanded taxes totalling to Sh839 million.
The amount demanded in the assessment made on September 28, 2018, included Sh199.2 million for corporate tax, Sh530.8 million for Value Added Tax (VAT) and Sh109.7 million for customs taxes.
In a judgement delivered on May 7, 2021, the tribunal struck out the firm’s appeal against the objection of corporate and VAT and upheld the appeal in relation to the demand for customs duty and import VAT.
The tribunal ruled that Kaluworks had not complied with the TPA provision after admitting owing part of the demanded tax, before filing the appeal.
It was noted that although the company admitted to not paying the taxes, the firm should have settled the uncontested amount before filing the appeal.
Kaluworks was not satisfied with the decision and moved to the High Court faulting the tribunal for striking out its appeal on corporate tax and VAT.
The manufacturer argued that the tribunal misinterpreted the provisions of the TPA. Further, the company submitted that decisions on tax legislation must be ruled in favour of the taxpayer where there is ambiguity.
It was argued that the tribunal was wrong in holding that the Sh24 million was not disputed, yet the manufacturer subsequently changed its mind and conceded to a part of the demanded amount.
The court was told that the tribunal failed to appreciate that KRA owed the manufacturer Sh229.9 million and the taxman should have deducted the conceded amount from what was owed.
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Justice Mabeya said Kaluworks unequivocally conceded that VAT amounting to Sh24 million and the intention of section 52(2) of TPA is to ensure that a taxpayer pays what is undisputed before challenging the assessments made by the KRA.
The judge said other complaints that the Tribunal failed to consider whether KRA’s conduct was irregular and unlawful, do not have a basis.
