Afrikon had been awarded the contract in June 2019 for sheet piling and associated works but could not complete the contract, leading to its assignment to Jilk.

The project accounted for Sh649.6 million of the wider dispute pitting Jilk against KRA, with the company arguing that the project was zero-rated when it took over the contract and that the client – National Irrigation Authority -had wrongly withheld VAT.

The case followed a KRA audit covering Jilk’s corporation tax from January 2019 to December 2023 and PAYE, VAT and withholding tax from June 2020 to December 2024. KRA issued an audit notice on February 20, 2025, followed by a pre-assessment notice and assessment dated July 4, 2025.

The demand comprised Sh948.6 million in principal taxes, Sh47.4 million in penalties and Sh385.9 million in interest.

Jilk lodged a manual notice of objection in August 2025 and KRA partially allowed its objection before the company appealed to the Tribunal.

Jilk said it had taken over a contract originally awarded to Afrikon by the National Irrigation Board with preferential tax treatment.

The Tribunal heard that it took over the development project from Afrikon Company Ltd through a Deed of Assignment dated August 27, 2021. It maintained that the project was zero-rated for VAT at the time of the assignment, relying on the tax treatment that applied to the project under the VAT (Exemption) Order, 2018.

Jilk argued that the National Irrigation Authority, which had taken over the functions of the National Irrigation Board, wrongly withheld VAT on payments for the project, creating what it described as an artificial VAT liability of Sh649.6 million.

The company said it had already declared the output VAT in the relevant periods when it issued its invoices, while some of the VAT withheld by the authority related to supplies from earlier years, creating timing differences that KRA failed to reconcile.

However, the Tribunal found that Jilk did not provide the invoices linking the disputed supplies to the withholding-VAT certificates, nor evidence of the specific gazetted tax exemption applicable to the Bura project.

It also did not show that it had asked the National Irrigation Authority or KRA to cancel or amend the certificates it claimed were wrongly issued.

The Tribunal further noted that Jilk had claimed and benefited from the withholding-VAT credits arising from those certificates, which it found inconsistent with the company’s claim that the withholdings were erroneous.

“The respondent failed to consider material evidence including invoices and interim payment certificates, payroll records and muster rolls for casual site workers, and contracts and the Deed of Assignment confirming zero-rated supplies, rendering the objection decision procedurally unfair and legally defective,” argued the contractor.

KRA rejected the explanation, saying Jilk had failed to provide invoices linking the disputed transactions to the withholding-VAT certificates.

In addition, KRA said Jilk had not produced evidence showing that the Bura supplies qualified for the claimed tax treatment.

The Tribunal agreed with KRA and said a taxpayer claiming preferential treatment must prove that the supplies qualify under the law and connect transactions to disputed certificates. It found that the tax assessment was not excessive or erroneous.

Jilk failed to overturn the Sh1.38 billion demand after the Tribunal found that key explanations about the irrigation project, VAT certificates, customer invoices and labour payments were not supported by the required documents.

The Tribunal held that KRA’s assessment retained its presumption of correctness because Jilk had not produced competent and relevant evidence sufficient to displace it.

It found that Jilk had not produced supporting invoices or demonstrated a link between the invoices and withholding-VAT certificates.

“The appellant provided a copy of the contract and the Deed of Assignment, but did not submit the supporting invoices or demonstrate a linkage between the invoiced transactions and the Withholding VAT certificates,” said the Tribunal dismissing the appeal.

It also found that Jilk had not produced the relevant gazetted tax exemption order or evidence that it had asked the National Irrigation Authority or KRA to cancel or amend the certificates. The Tribunal noted that Jilk had claimed and benefited from the withholding-VAT credits generated by the certificates.

“A taxpayer cannot approbate and reprobate,” the Tribunal said, holding that Jilk could not benefit from the credits while disowning the sales that generated them.

For corporation tax, KRA initially identified a Sh979 million variance between Jilk’s declared sales and purchases claimed by customers. Jilk said much of it resulted from duplicate or erroneous customer claims.

KRA accepted evidence supporting more than 91 percent of the variance. It allowed Sh50 million linked to duplicated Kenya Breweries claims, Sh841 million in duplicated or overclaimed Kenya Ports Authority invoices, and Sh128,296 involving an Export Processing Zone invoice.

But Sh87.6 million remained. KRA said Jilk had not provided confirmation from KPA showing that the underlying invoices had been wrongly claimed.

The Tribunal upheld that position because Jilk did not produce invoices, payment schedules, later billing records, ledger extracts or KPA correspondence supporting its explanation.

Jilk also challenged a Sh35.4 million disallowance for subcontractor fees. The Tribunal made an important distinction.

It said failure to deduct withholding tax, by itself, was not a lawful reason to disallow an otherwise deductible business expense. The remedy was recovery of the unremitted tax, penalties and interest.

“Had the matter rested there, the appellant’s complaint would have carried force,” the Tribunal said.

But Jilk had not provided its general ledger or proof of payment. The Tribunal therefore upheld the disallowance because the company failed to prove that the expenditure was incurred.

The PAYE dispute concerned differences between wages claimed as expenses and amounts declared in PAYE returns between 2020 and 2023.

Jilk said the differences represented casual workers whose wages were below the PAYE threshold. It provided schedules showing workers and amounts paid but did not provide the payment evidence KRA requested.

The Tribunal said Jilk had supplied sign-out schedules for only one week of the four-year audit period. It also did not place muster rolls, transfer records or mobile-money and bank confirmations before the Tribunal.

KRA corrected computational errors during the objection process, reducing PAYE principal tax from Sh235 million to Sh228.5 million. The Tribunal found no basis for a further reduction.

Jilk argued that KRA failed to give reasons for its objection decision, but the Tribunal found that KRA had addressed each objection and explained why items were allowed or rejected.

On Jilk’s decision to invoke the constitutional right to fair administrative action, the Tribunal said it could not determine whether KRA had violated Article 47 because constitutional interpretation and judicial review belong to the High Court.