A five-member tribunal has upheld a decision of the Kenya Revenue Authority requiring a company to pay it Sh672 million as tax arrears.
Josephine Maangi, Tanvir Ali, Delilah Ngala, Geoffrey Karuu, Patricia Anampiu dismissed an appeal filed by Ruaraka Diversified Investment Limited on grounds that it was liable to pay the money.
The money was arising from the sale of land for the development of Garden City project in 2013 and 2015.
The tribunal said the income the company received from the land transactions was business income and not capital gains.
In 2011, the company bought land from East African Breweries Limited for Sh1.2 billion. The land measured approximately 13 hectares, which is equivalent to 34 acres.
The land was for the development of Garden City project.
It then registered two wholly owned subsidiaries – GC Retail Limited and GC Residential Limited – to undertake the development of the retail and residential components of the development.
These were registered in 2013 and 2015. Subsequently, KRA in a letter dated 29 October 2018, communicated its finding of Sh672 million on corporation tax arising from the sale of land by Ruaraka.
Ruaraka objected to the assessment and filed an appeal. Ruaraka said KRA erred in law by levying corporation tax of Sh672 million.
It also said KRA erred in fact by holding that the company was incorporated to undertake land development and sale and therefore its principal business captivity is that of land development and sale.