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Workers from China Overseas Engineering Group Co. (Covec) install live-load sensors on the Sigiri Bridge in Budalang’i, Busia County, on August 28, 2018.
By Sam Kiplagat
Court Reporter
Nation Media Group
A top Chinese construction firm has moved to court seeking to block the Kenya Revenue Authority (KRA) from auctioning its property on Nairobi’s Lang’ata Road over an undisclosed amount in tax arrears.
China Overseas Engineering Group Co. (Covec) filed an urgent application to block KRA from auctioning the land in Galleria to recover the tax arrears.
Other than the planned auction, Covec has also complained that a freeze on its bank accounts was hurting its operations.
“That pending the hearing and determination of the application, the court be pleased to restrain the respondent and its agents from selling, transferring or otherwise disposing of the property known as No. 1160/606 (new title Nairobi/block 148/333 Galleria),” the petition filed before the High Court Commercial & Tax Division stated.
The Chinese firm said the KRA had issued multiple agency notices to several banks, including NCBA, KCB, Cooperative, Equity and Standard Chartered, requiring them to remit the funds.
According to the firm, the agency notices have paralysed its business operations.
“The applicant has received a courtesy notice indicating that the property is scheduled to be sold by public auction unless the alleged tax arrears are paid,” said the firm.
Evidence tabled before court shows that the KRA conducted a tax audit on the firm’s operations covering many years of income and subsequently issued audit findings alleging tax liabilities against it.
Thereafter, the taxman issued agency notices to various banks where it maintains accounts, requiring the lenders to remit funds in the said accounts.
The court directed Covec to serve the KRA with the court papers and scheduled the matter to be mentioned on May 11, for further directions.
The Chinese firm says in the petition that the KRA is under statutory duty, pursuant to Section 97(1) of the Land Act, to exercise reasonable care to obtain the best reasonable price obtainable at the time of sale.
“The plaintiff states that the present suit challenges the legality and propriety of the enforcement measures undertaken by the defendant [KRA], including the issuance of agency notices, the restraint placed over the plaintiff’s property and the threatened sale of the said property,” said the company.
The construction firm said the intended sale of the property threatens its right to property as guaranteed under Article 40 of the Constitution.
Further, the firm said a forced sale valuation of the property must be undertaken before the property is sold.
“The applicant avers that the intended sale of the property without compliance with the mandatory provisions of the Land Act is unlawful,” the firm’s official, Liu Haoran, said in an affidavit.
The firm said the KRA’s enforcement measures, including the issuance of multiple agency notices, restraint over the property and instructions to auction the property, are oppressive and disproportionate.
The firm has previously been embroiled in a dispute over tax amounting to Sh310 million for assessment done in September 2021.
The demand was, however, quashed by the Tax Appeals Tribunal in a decision made on July 12, 2024 after the Chinese firm indicated that it filed an objection late, because it was undergoing an additional audit.
The tribunal noted that the additional audit had not been controverted by the KRA.
It further noted that evidence tabled before it indicated that multiple audit and assessment processes had been undertaken by the KRA for varied tax liabilities.
The tribunal then directed the KRA to consider and issue an appropriate objection decision within 60 days.
In the petition, Covec wants the court to issue a permanent injunction stopping the same and from further issuing orders freezing its bank accounts.
“An order directing the defendant to lift or withdraw the agency notices issued against the plaintiff’s bankers,” the application stated.
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