NBK fails in bid to stop taxman from demanding Sh510m

A National Bank of Kenya branch in Nairobi. FILE PHOTO | NMG

By SAM KIPLAGAT
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Summary

• The lender wanted the taxman to utilise alleged overpayment of tax made in previous years to offset the liabilities for subsequent years.
• However, Tax Appeal Tribunal dismissed the plea saying NBK cannot use the alleged overpayment without going through the validation process, set out in the Tax Procedures Act (TPA).

The National Bank of Kenya (NBK) has suffered a blow after Tax Appeal Tribunal dismissed its plea to stop Kenya Revenue Authority (KRA) from demanding Sh510 million arising from tax liabilities.

The lender wanted the taxman to utilise alleged overpayment of tax made in previous years to offset the liabilities for subsequent years.

However, Tax Appeal Tribunal dismissed the plea saying NBK cannot use the alleged overpayment without going through the validation process, set out in the Tax Procedures Act (TPA).

The tribunal chaired by Patrick Lutta said offsetting a tax due from an overpayment of tax is not automatic, as the taxpayer must apply under Section 47 of the TPA for validation.

“It is important to state that the law does not envisage a scenario where, after self-assessment, a taxpayer would utilise its overpayment to set off due taxes, prior to verification of the overpayment by the Commissioner,” Mr Lutta said.

Although KRA acknowledged the existence of the overpayment, it contended that the overpayment was subject to validation before approval and apply for refund.

The tribunal agreed saying “The Tribunal therefore finds that the Commissioner was right in disallowing the credit for overpaid tax entered under Section 42 of the ITA.”

The lender had appealed against the decision of the Commissioner of domestic taxes, disallowing tax credits of Sh510.9 million claimed on the iTax Income Tax Company self-assessment return (SAR) on the basis that it was captured under the wrong line of return.

NBK maintained that tax overpayments brought forward from the year 2014 through to 2018 should be used to offset tax liabilities of subsequent years up to 2018.

The lender stated that it encountered a challenge while filing its returns as there was no field in the iTax portal in which to file tax credits. As a result, it filed the credits in the iTax portal which relates to credit under special arrangements.