Westgate Attack: KRA Blocked From Taxing Compensation Billions

  • People going about their day to day activities outside the Westgate Mall.
    People going about their day to day activities outside the Westgate Mall.
    File
  • The High court has rejected an appeal by the Kenya Revenue Authority (KRA) to collect a share of the billions paid to Westgate Mall owners as compensation following the 2013 terror attack.

    Justice David Majanja affirmed the position by the Tax Appeals Tribunal stopping the taxman from claiming a share of Ksh4.4 Billion compensation paid to the mall by Kenindia Insurance.

    KRA through the commissioner of taxes appealed the ruling as it sought Ksh380.3 million from the owners noting that a portion of the compensation (Ksh660 million) should have been classified as income.

     High Court Judge David Majanja
    High Court Judge David Majanja
    File

    In his ruling, Majanja stated that KRA had not shown any error in the decision by the tribunal.

    "On the other hand, Sony Holdings was able to demonstrate before this court that the Tribunal came to the correct conclusion based on the facts and law," the judge observed.

    The insurance company had paid Ksh3.1 billion as compensation to the mall following the terror attack and an additional Ksh1.2 billion for rent lost during the period when the mall was closed.

    In court documents, KRA sought to tax Ksh1.2 billion of the amount arguing that the mall owners had classified some of the amounts as capital income instead of revenue income without supporting documents. 

    During the court proceedings, the mall's owner, Sony Holdings Limited, noted that the compensation was classified as revenue instead of capital by the tax agency, which it faulted.

    In 2019, High Court judge John Mativo quashed an application by the mall’s owner seeking to stop KRA from demanding the taxes.

    The owners further stated it suffered a net loss of nearly Ksh1 billion after reconstructing the mall at Ksh4.04 billion against compensation of Ksh3.1 billion.

    "I find and hold that the applicant has failed to present grounds to demonstrate that the impugned conduct of decision is legally frail,"Justice Mativo stated.

    The Westgate mall reopened in 2015 following the terror attack in 2013 that left 67 people dead and many others injured.

    High Court Judge John Mativo in court during a past case hearing.
    High Court Judge John Mativo in court during a past case hearing.
    Citizen Digital