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Coast Bus Loses Sh28m Tax Battle Against KRA

Coast Bus

Coast Bus Limited

The High Court has struck out an application made by Coast Bus (Mombasa) Ltd seeking temporary orders to stop the Kenya Revenue Authority (KRA) from interfering with or selling its property over alleged unpaid taxes of Sh28.1 million.

Justice Olga Sewe ruled that the application was premature and did not warrant being subjected to a merit analysis, as the bus operator had not exhausted all dispute resolution mechanisms provided by the taxman before taking legal action.

According to court documents, a tax assessment was done by KRA on Coast Bus’ income for the period of 2015 to 2018, based on the returns made by the bus operator.

The tax due was assessed at Sh188.3 million, which the bus operator objected to.

A re-assessment was then done by the Commissioner for Domestic taxes, which formed the basis of the Notice of Distress for Sh28.1 million.

However, the court heard that Coast Bus did not act on the notice with promptness, and as a result, KRA issued instructions to Phillips International Auctioneers, the second respondent, to levy distress in terms of the notice.

Justice Sewe stated that while an attempt was made by the company to appeal the decision of the Commissioner (on the alleged tax arrears) to the Tax Appeals Tribunal as per the law, the appeal was late, thus a non-starter.

The court noted that the tribunal had advised Coast Bus to seek permission to appeal out of time and show why it (appeal) could not be filed on time.

In its application, Coast Bus said that on August 16, 2021, KRA arbitrarily issued a notice of distress and instructed the auctioneer to seize property for the unsubstantiated amount of Sh28.1 million, purporting it to be tax arrears.

Through an affidavit of one of its directors, Mr. Mohamed Mirza, Coast Bus said it has been willing to offset and settle the rightful taxes due to KRA and that it was ready to be subjected to an in-depth forensic audit to determine the tax arrears if any.

Coast Bus also submitted that it would amount to irreparable harm if the taxman were to take away its tools of trade before the court could ascertain the actual amount of tax arrears and allow it a chance to repay what is duly owed.

On its part, KRA, through an affidavit of its officer Francis Gitonga, asserted that the taxes it was claiming were justly due.

Mr. Gitonga said that Coast Bus ignored the advice given by the officers of the Tax Appeals Tribunal and opted to file the case, thereby failing to exhaust the laid-down procedure for resolving the dispute.

KRA further argued that Coast Bus does not have the locus standi (right to appear in court) since it is challenging its statutory duty to collect taxes that are in arrears.

In conclusion, Justice Sewe stated that instead of pursuing the recommended course of action, the plaintiff opted to file this suit which in her considered view was ill-advised in the light of the doctrine of exhaustion.

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