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CfC Stanbic loses Sh113m tax refund suit against KRA

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Court of Appeal judge, Justice Asike Makhandia. PHOTO | KEVIN ODIT | NMG

CfC Stanbic #ticker:CFC has lost its court bid for a refund of Sh113 million from the Kenya Revenue Authority (KRA), which it paid in taxes on computer software purchased for business operations.

The Court of Appeal has ruled that the lender and the KRA had both agreed on computer software being taxable before paying the KRA’s dues.

Judges Asike Makhandia, William Ouko and Kathumira M’Inoti further held that Stanbic’s tax agents Ernst & Young had worked with other lenders that paid levies on purchased computer software hence it was implausible that they did not inform Stanbic of the same.

Stanbic argued that it was not part of the Local Committee proceedings that classified computer software as machinery. It added that the legislation was at the time ambiguous on levies on computer software hence it should have been given relief.

But the Court of Appeal ruled that Stanbic’s tax agents had supported the decision to classify computer software as machinery, and that the lender had also agreed to the product being taxable.

“The tax agents representing Stanbic were the same ones that had represented other banks before the Local Committee. It is implausible that Stanbic was kept in the dark on the committee’s decision.”

“Upon perusal of the record there is evidence that the parties had all come to a consensus that computer software expenditure was a deductible allowance even though the law did not provide for it.

“The only lacuna that presented itself was under what provision of the Act it would be deductible. A lacuna in law cannot be and is not the same thing as ambiguity,” the judges ruled.