The High Court has ordered the Kenya Revenue Authority (KRA) to pay Sh29.4 million in tax refunds to Pernod Ricard Kenya after finding that the taxman failed to determine the company’s refund applications within the 90 days required by law.
The court dismissed KRA’s appeal against a Tax Appeals Tribunal decision that found the authority’s delayed response automatically validated the liquor firm’s refund claims under the Tax Procedures Act.
The dispute arose after Pernod Ricard Kenya, a subsidiary of global wine and spirits company Pernod Ricard, applied for tax refunds on December 6, 2022.
The company sought reimbursement of overpaid taxes for different periods, including claims amounting to Sh25.9 million for July 2019 to June 2020 and Sh3.4 million for July 2020 to June 2021.
Under Section 47 of the Tax Procedures Act, the Commissioner of Domestic Taxes is required to determine a refund application within 90 days of receiving it.
Pernod Ricard Kenya argued that KRA failed to comply with the deadline. The company’s brands include Jameson, Absolut, Chivas Regal, Martell and Ballantine’s.
The company told the court that although KRA eventually rejected the applications, the decision was dated April 6, 2023 and communicated on May 23, 2023, long after the statutory deadline had expired.
“The tribunal correctly held that the refund was deemed allowed by operation of law,” the company argued.
KRA challenged that finding and asked the High Court to overturn the tribunal’s judgment delivered on June 7, 2024.
The authority maintained that it had made a refund decision on March 1, 2023, within the prescribed period.
KRA said the decision had been communicated by email to Pernod Ricard’s tax agent, PricewaterhouseCoopers, and advised the company that outstanding tax liabilities had to be resolved before any refund could be processed.
The authority further argued that the tribunal erred in disregarding that evidence. It also contended that Pernod Ricard’s appeal before the tribunal was defective because no proper notice of appeal had been filed against the commissioner’s decision.
The court, however, rejected those arguments, noting that the tribunal had found no evidence that the alleged March 1 communication had been produced before it.
Court findings
“The tribunal notes the respondent’s reference or averment that it had communicated to the appellant on March 1, 2023. However, it failed to adduce the said communication or correspondence in its pleadings,” the judge said.
The court noted that KRA had itself acknowledged that the refund decision was dated April 6, 2023 and communicated on May 23, 2023.
“Noting that the respondent had no knowledge of the decision dated March 1, 2023, it is questionable why the appellant went ahead to acknowledge the decision dated April 6, 2023 as opposed to March 1, 2023. Was this an afterthought ploy by the Appellant?” the court said.
It agreed with the tribunal’s computation that the period between the December 6, 2022 application and the April 6, 2023 decision was 147 days. The duration stretched to 169 days when calculated up to May 23, 2023, the date the decision was communicated.
“In both instances the period within which the KRA ought to have rendered its decision is outside the statutory timelines as envisaged under Section 47(3) of the Tax Procedures Act,” the judge said.
Quoting the law, the judge added: “Where the Commissioner fails to ascertain and determine an application under subsection (1) within 90 days, the same shall be deemed ascertained and approved.”
The court dismissed the appeal for lack of merit and upheld the tribunal’s decision.
