- Through the Internal Tax Commissioner, the KRA asked the court to overturn a decision by the Tax Appeal Tribunal which prevented it from demanding 380.3 million shillings from the owners of the mall, Sony Holdings Ltd.
- High Court Judge David Majanja dismissed the appeal, saying the commissioner had not shown an error in the court’s decision that would warrant the court’s intervention.
The Kenya Revenue Authority (KRA) has lost a legal battle over a share of the 4.4 billion shillings compensation Westgate shopping center received from Kenindia Insurance following a terrorist attack in 2013.
Through the Internal Tax Commissioner, the KRA asked the court to overturn a decision by the Tax Appeal Tribunal which prevented it from demanding 380.3 million shillings from the owners of the mall, Sony Holdings Ltd.
High Court Judge David Majanja dismissed the appeal, saying the commissioner had not shown an error in the court’s decision that would warrant the court’s intervention.
The owners of Westgate had argued that the tax authorities had unfairly classified the compensation as income rather than capital to justify the tax claim.
However, the KRA argued that 600 million shillings of the compensation should have been considered income and was therefore liable for the payment of 30 percent corporate tax, as Westgate had informed the court that it owed also benefit from duty exemptions.
“On the basis of the law and the evidence, the commissioner did not demonstrate any error, factual or otherwise, in the Tribunal’s decision that would justify the intervention of this tribunal,” said the judge while upholding the decision of the court of March 2020.
“On the other hand, Sony Holdings was able to demonstrate in this tribunal that the Tribunal reached the correct conclusion on the basis of the facts and the law.”
Kenindia Assurance Company paid Sony Holdings 3.1 billion shillings in compensation for damage to the mall and an additional 1.2 billion shillings in compensation for lost rent during the period the Nairobi Westlands shopping complex remained closed.
KRA was looking for a share of the Sh1.2 billion after deducting operating expenses.
The September 2013 attack by Somali terrorist group Al-Shabaab left 67 dead and many more 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 has taken over the space previously occupied by Shoprite and Nakumatt Supermarket.
In the lawsuit, KRA said Sony Holdings classified the 600 million shillings as capital income instead of unsupported income income.
Sony Holdings had criticized KRA’s decision to classify the 600 million shillings as income, arguing that it suffered a net loss of nearly 1 billion shillings after the mall was rebuilt to 4.04 billion shillings against compensation. 3.1 billion shillings.