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Background

This Alert brings to your attention the Tax Appeals Tribunal’s (TAT) decision in the case of National Bank of Kenya Limited (Appellant) vs. Commissioner of Domestic Taxes (Respondent), Tax Appeal No. 474 of 2020. The Appellant had moved to the TAT seeking to overturn the Respondent’s corporation income tax (CIT) assessment relating to alleged underpayment of CIT for the period 2015 - 2018. The underpayment was as a result of the Appellant’s utilization of tax overpayments from 2014 in offsetting CIT liabilities in later years.

The main point of contention was whether the Appellant was justified in utilizing CIT overpayment to offset CIT liabilities arising in subsequent years. The Appellant used the “credit under special arrangement” field of the SelfAssessment Return (SAR) template which relate to foreign tax credits as per the provisions of Section 42 of the Income Tax Act (“ITA”). The Appellant lodged an appeal at the TAT against the Respondent’s decision in September 2020.