In a significant blow to the Kenya Revenue Authority (KRA), the High Court overturned a previous ruling, resulting in the loss of more than Sh360 million.

The case pertains to the payment of corporate tax by Eastleigh Mall Ltd, with Justice Alfred Mabeya ruling that the KRA's failure to issue an objection within the required 60-day timeframe allowed the taxpayer's objection.

The court emphasized that the provisions outlined in section 51(11) of the Tax Procedures Act are not mere procedural technicalities but rather mandatory timelines crucial for matters of taxation.

Justice Mabeya stressed the importance of time in commerce, stating, "If the commissioner is allowed to exercise his discretion and stay ad-infinitum before issuing an objection decision, the taxpayer would be unable to make crucial decisions and plan his/her business properly."

The case centred on the KRA's investigation into Eastleigh Mall's affairs for the years 2008 to 2015, particularly focusing on rent income for corporation tax, VAT on commercial rent, and PAYE on employees' salaries.

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Following the investigation, the KRA issued an assessment of Sh386,701,864 on June 16, 2015.

In response, Eastleigh Mall raised an objection on April 28, 2017, confirming the assessment of withholding tax and corporate tax.

The Tax Appeals Tribunal subsequently upheld the KRA's assessment, prompting the company to approach the High Court, criticizing the tribunal for not considering its raised issues and for overlooking the Act's specified timelines for the objection decision.

The tribunal had argued that the delay in issuing the objection decision was due to ongoing discussions between the parties.

It contended that substantial justice should be prioritized over technicalities, as urged by the KRA. However, Justice Mabeya maintained that the failure to issue the objection decision within the mandated 60-day period implied that the taxpayer's objection had been upheld.

In his ruling, Justice Mabeya set aside the tribunal's decision entirely, including the objection decision made by the KRA, effectively siding with Eastleigh Mall's arguments.

“The decision of the tribunal is hereby set aside in its entirety as well as the respondent’s objection decision,” Mabeya ruled.

The outcome of this case serves as a significant reminder for tax authorities and taxpayers alike about the importance of adhering to prescribed timelines and procedures in tax matters.

The ruling's implications reach beyond the immediate financial loss for the KRA, emphasizing the necessity of timely decisions to allow businesses to plan and operate effectively.

The Kenya Revenue Authority may consider appealing the High Court's decision, but until then, the outcome stands, resulting in a substantial financial setback for the tax collection agency.