Nairobi-based hospitality firm Panari Centre has escaped a Sh33 million tax claim after the Kenya Revenue Authority (KRA) took nearly three years to respond to its objection in breach of the reply timelines set in law.
A tax tribunal said the KRA acted illegally when it failed to respond to an objection by Panari on a Sh33 million tax claim within 60 days.
“The view of the tribunal is that the provisions of Section 51(11) of the TPA (Tax Procedures Act) are express and mandatory in providing that the Respondent must issue its decision within 60 days of receiving the notice of objection,” said the tribunal.
“The consequence of the failure by the Respondent to comply with the provisions of Section 51 (11) of the TPA is that a notice of objection is deemed to be allowed by operation of the law,” the tribunal added in its March 14, 2025 decision.
The dispute between KRA and the hotel began when the tax authority issued an additional tax assessment on June 23, 2021, rejecting Panari’s claim for Sh33 million in tax credits for the 2015 financial year. The hotel objected to the assessment a month later, arguing that the credits stemmed from overpaid income taxes from 2012 to 2014 and should be carried forward under tax law.
For 35 months, Panari waited for KRA’s response, which came on June 26, 2024, where KRA formally confirmed its rejection of the objection, citing that the credits were wrongly claimed under Section 42 of the Income Tax Act rather than Section 47 of the Tax Procedures Act.
Frustrated, Panari Centre took the matter to the Tax Appeals Tribunal in July 2024. It told the tribunal that under section 51(11) of the Tax Procedures Act, KRA was required to issue a decision within 60 days of receiving an objection, meaning that by failing to respond in time, the tax credits should have been deemed approved by operation of law.
The tax tribunal led by Christine Muga found that KRA’s handling of the case was legally flawed, especially because of its delayed response.
The hotel also argued that the rejected tax credits were not special credits under Section 42 of the ITA, as KRA claimed, but rather standard withholding and instalment tax credits that had been duly accounted for in previous filings. The company insisted that KRA had no grounds to deny them.
In response, KRA said that Panari Centre had made its tax claims under the wrong legal provisions. The authority argued that Section 42 of the ITA applies to foreign tax credits under special agreements and that the hotel had not demonstrated that its claim met this criterion.
Additionally, KRA told the tribunal that Panari Centre had failed to apply for refunds properly during the relevant tax periods and had not provided sufficient proof to justify its claims.
The tribunal ruled that KRA was required to issue its objection decision within 60 days of Panari Centre’s July 2021 notice. By waiting nearly three years, KRA had effectively forfeited its ability to reject the objection.
“Consequently, the tribunal finds and holds that the Confirmation of Assessment Notice dated June 26 2024 was time barred pursuant to Section 51(11) of the TPA and the Appellant’s notice of objection stood allowed by operation of law,” said the tribunal.
