Commissioner of Domestic Taxes v Golden Acre Limited

On 27/2/2014, KRA assessed GAL and demanded payment of taxes amounting to 7,875,461/-. GAL objected to the additional tax assessment on 27/3/2014. No action took place but 3 years later, on 28/3/2017, KRA  issued a notice of amended assessment based on documents it had retrieved from GAL bankers.

Upon the issuance of objection decision, GAL appealed to the Tax Appeal Tribunal

In October 2009,GAL had taken a loan amounting to KES 18m, that was deposited into the bank accounts of two directors of the company. GAL only claimed interest for the loan deposited in one account. GAL could not produce evidence to show the purpose of the loans.

GAL also submitted that KES 546k deposited into its bank account wasn’t an income but money it collected as agent to a third party

GAL submitted that some funds deposited into its bank account from a Kariobangi property did not belong to the company but to a director.

The tribunal noted that GAL did not give satisfactory reason why it didn’t claim the interest on one loan nor reported the said loan in its financial statements

The tribunal noted that , GAL didn’t provide any evidence to prove that KES 546K did not belong to the company.

The tribunal agreed with GAL that bank deposits from the Kariobangi property did not belong to the company

TAT upheld the tax assessment of 27/4/2014 for Kshs. 7,875,461/- subject, however, to GAL allowing interest on loans borrowed by the directors to finance the properties of the respondent.

Being dissatisfied with that judgment, KRA lodged an appeal to the High Court on the following grounds

(i) THAT the Honourable Tribunal erred in law and in fact in failing to appreciate that the burden of proof in tax matters lies on the taxpayer.

(ii) THAT the Honourable Tribunal exercised its discretion wrongly by issuing a Judgment that contravenes an express Provision of the Law.

(iii) THAT the Honourable Tribunal erred in law and in fact in finding that the Respondent failed to state evidence of ownership of the Kariobangi property.

(iv) THAT the Honourable Tribunal erred in law and in fact in finding that the Kariobangi property should not be subjected to Income Tax

The High Court ruled , it was upon GAL to prove that the assessment was wrong and that the Kariobangi property belonged to the alleged directors and not the company. It is GAL who had included that property in the Schedule of those rental premises from which the tax was assessed. At the hearing no title was produced to prove that the property did not belong to GAL. The issue of ownership of the subject property was in the special knowledge of GAL. GAL failed to prove it.

KRA Succeeded

The ruling was delivered on 22/04/2021