Penalties amounting to Rs.375 million have been levied against Lanka Marine Services Limited (LMSL) based on formal assessments with regard to the taxes payable as a result of July 21 Supreme Court judgment.

An announcement by John Keells Holdings (JKH) on Thursday stated that LMSL does not believe the penalties are applicable in terms of the Inland Revenue Department (IRD) Act based on opinions from independent legal counsel and tax consultants and will pursue the appeal as per the process set out in the IRD Act.

The Sunday Times FT last week reported that according to IRD computations, LMSL owes taxes amounting to Rs. 1.5 billion from the financial year 2002/2003 onwards. JKH also announced the sale of its shareholding in Associated Motorways PLC on 28 July 2008 and included the financial impacts as announced so far this quarter with and without contingencies as highlighted below.

Stockmarket analysts said

• P&L loss if contingencies crystallise has now increased to Rs2 billion, but the exact contingencies have not been clearly defined, and the components of the Rs724 million P&L loss impact without contingencies have also be not been explicitly disclosed
• It is not easy to reconcile figures with previous announcements from JKH.
• Recurring impact to JKH profitability from LMS judgement hasn’t been explicitly mentioned in the JKH statement.