KRA wins Sh100m case against Fly540

Kenya Revenue Authority (KRA) Commissioner General John Njiraini. PHOTO | SALATON NJAU |

What you need to know:

  • High Court judge George Odunga sanctioned the agency notices issued to four banks, directing them to remit the funds from the accounts of Fly540 Aviation to Kenya Revenue Authority (KRA).
  • Fly540 said the charges and fees had been determined arbitrarily without due consultations and termed them irrational, unreasonable and excessive.

A Nairobi court has allowed the taxman to recover Sh100 million from regional airline Fly540, representing accrued charges for air navigation services and regulatory fees.

Consequently, High Court judge George Odunga sanctioned the agency notices issued to four banks, directing them to remit the funds from the accounts of Fly540 Aviation to Kenya Revenue Authority (KRA).

On January 16, Justice Odunga threw out the airline’s suit against the KRA, Kenya Civil Aviation Authority, Transport ministry and the Attorney General. He said the institutions were within their mandate to demand tax payment.

“Considering the legislation guiding the operations of KRA and the allegations made by the airline, I am not satisfied the respondents did overreach their mandate,” he ruled.

The airline had urged the court to restrain the taxman and the aviation authority from collecting, levying or recovering Sh101,455,818 — whether as principle dues or penalties on late payment.

Fly540 also pleaded with the court to quash the agency notices directing KCB, Diamond Trust, Equity Bank and Barclays Bank to pay the disputed navigation charges and regulatory fees, together with accrued interest.

Justice Odunga declined to quash the notices, saying the fact that KRA and KCAA could resort to other legal means to recover the taxes due, other than the agency notices, “does not render their actions liable of being quashed”.

DENIED ALLEGATIONS

Through an affidavit by its director Nixon Ooko, Fly540 said the charges and fees had been determined arbitrarily without due consultations and termed them irrational, unreasonable and excessive.

But the KCAA, through a sworn statement, denied the allegations, saying the charges were based on lack of sufficient finances by the authority to fund its infrastructure development and carry out its statutory functions.

Mr Ooko said stakeholders in the aviation industry had complained to the Transport ministry over the adverse effects the charges and fees would impact on them.

He said the ministry had agreed with the stakeholders and directed the aviation authority to hold consultative meetings with local airlines to resolve the dispute.

According to Mr Ooko, the industry stakeholders agreed to continue paying the prescribed charges. Consequently, Fly540 paid Sh16 million, pending the outcome of the proposed review.

But Mr Ooko informed the court that when consultative meetings between air operators and the authority to review the charges were ongoing, KRA wrote to the airline demanding Sh67 million for November 2011 to August 2012.

In response, the authority dismissed the air operators committee, saying it was not statutorily mandated to advise, authorise or issue directions regarding the implementation or stoppage of the fees.