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Sh400m fine for tycoon’s company in tax debt dispute

by kenya-tribune

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The Kenya Revenue Authority (KRA) has slapped a Sh400 million tax penalty on a company linked to a controversial city tycoon. In a letter addressed to the director of Granada Trading Company Ltd, KRA’s investigations and enforcement department says the tax collector is owed Sh406.2 million in corporation tax, Value Added Tax (VAT), director VAT, Withholding Tax among others charges.

The company associated with businessman Rajendra Sanghani was given 30 days to challenge KRA’s decision at the Tax Appeals Tribunal.

“Please note that assessments have been amended in the system and if you are dissatisfied with decision, the commissioner draws your attention to the provisions of section 52 (1) (Tax Procedures Act, 2015) which allows you to appeal the decision to the Tax Appeals Tribunal,” the KRA letter, dated May 14, reads.

The tax demand is in relation to a car import and sale business and promotional material.

Mr Sanghani had on March 13 objected to the tax demands.

KRA had further written to Mr Sanghani on April 12 and 24 with subsequent meetings during which documents were requested to guide in reviewing the company’s tax obligation.

KRA had demanded a breakdown of loan advances from Jack n’Jill Supermarket proprietor Schon Noorani indicating the date when the money was received, the amounts received and the bank account into which the amounts were paid.

Mr Sanghani had claimed the funds being taxed were loaned to him by the Jack n’ Jill proprietor.

The tax collector also wanted documents related to the breakdown of the loan repayments supported by cheque counterfoils and bank statements showing the outflows for the loan repayment to Schon Noorani, sales ledgers for the sale of vehicles showing the name of purchaser, amount, car registration number, sale contract agreements, and cost of vehicles purchased by Granada, among other details.

Mr Sanghani later provided audited financial statements, income statements and tax returns for both the company and director, acknowledgment of debt deed for the loan taken over the years, schedule of loan showing amounts advanced, principal and interest payments made over the years. Others were interest expensed analysis for 2012 to 2018, letter for amnesty application for rental income, list of vehicles sold indicating purchasing and selling prices, a list of interest earned from fixed deposits and a list of the promotional materials indicating name of buyer, purchasing and selling prices to KRA.

“We made our decision after considering all the documents provided and explanations provided from our engagements. From our analysis of bank statements, we observe that we had made an error in determination of total income by charging the bank debits instead of credit. The anomaly was rectified and we determined undeclared income from bank deposits of the company for the period 2013 to 2016,” said the letter.

Tabulation, according to KRA, indicates that Granada had undeclared income on banking income of Sh44.8 million in 2014 and Sh187.7 million in 2015 totalling to Sh232.6 million.

On interest income, KRA says the businessman failed to adequately demonstrate that the funds invested in the FDR accounts for generation of interest income were loans from friends.

However, the tycoon, while confirming to the Sunday Nation that he had received the tax penalty, said it was just a demand and he had been given 30 days to appeal.

Separately, Mr Sanghani and Mr Noorani are in court over repayment of a multimillion-shilling debt.

Mr Sanghani has over the years been caught up in various controversies. He is the chairman of Real Motors Group and former owner of Guilders International Bank, which was embroiled in a bitter court battle with depositors and then Guardian Bank during a takeover.

In 2002, the businessman and his brother Tony Sanghani were charged with robbery with violence. The brothers were locked up at Kamiti Maximum Security prison after being accused of inciting their guards into beating two men.

He was also linked to the controversial Armenian brothers, Artur Margarayan and Artur Sargasyan, who came to Kenya for a supposed real estate investment. He also gave them six Toyota Harrier vehicles that they used during their stay in Kenya.

In 2017, Nairobi Governor Mike Sonko accused Mr Sanghani of land grabbing.

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