The High Court on Thursday, April 27 temporarily stopped the National Treasury from collecting an estimated KSh900 million from NCBA Bank as it considers a petition by the bank against the Government.
Lady Justice Mugure Thande issued the order after the bank petitioned High Court to intervene in a dispute between NCBA and the State after Treasury CS Prof. Njuguna Ndung'u revoked an exemption granted when the bank merged in 2019.
“I am satisfied that the application has met the test for the grant of conservatory orders at this ex parte stage. Accordingly, Prayer 2 of the application (for conservatory orders) is hereby granted," the order reads in part.
The judge also certified the case as urgent and asked the bank to serve the Attorney General and Cabinet Secretary by May 5, responses be filed by May 19, further affidavits by June 2, and for the matter to be mentioned on June 6 for directions.
In the case filed at the Constitutional Division, NCBA stated that the revocation and any subsequent demand for the tax go against its legitimate expectation that decisions granted by a Government institution are final as outlined in Article 47 of the Constitution.
The revocation was issued via a letter by the Cabinet Secretary for the National Treasury to NCBA and the Kenya Revenue Authority on March 24th, 2023. In the letter, the Cabinet Secretary directed the Kenya Revenue Authority to collect the exempted taxes from the bank.
“The purported revocation is in breach of basic rules of natural justice as envisaged by the provisions of Article 47 of the Constitution, especially since the Petitioner (NCBA) was not given an opportunity to be heard before such an unprecedented reversal of an earlier decision was made,” said Senior Counsel Kamau Karori, the lawyer representing the bank in the case.
NCBA argued that by arbitrarily revoking a justified exemption granted through due process, the action could damage the confidence of investors and the general public in the finality of decisions made by Government institutions.
The bank has asked the court to reinforce its constitutional rights, to quash the revocation decision by the National Treasury, and to prohibit the Kenya Revenue Authority from implementing the tax in dispute.
Following the revocation, KRA has demanded about KES 900million plus interests in lieu of Capital gains tax.
This comes barely months after NCBA Managing Director John Gachora admitted that the bank benefited from a Ksh350 million tax waiver during the merger between NIC Group PLC and Commercial Bank of Africa (CBA).
However, Gachora noted that should the court find that NCBA contravened any tax-related law following the waiver they would pay without hesitation.