Court hearing on Ncell’s tax issues today

Kathmandu, May 6

The hearing on a writ petition filed by Ncell at the Supreme Court (SC) against the decision of the government to levy Rs 39.06 billion capital gains tax (CGT) on the company’s buyout deal has been scheduled for Tuesday.

Though the hearing on this case was initially scheduled for today, Kishor Poudel, communication expert at SC, informed that the hearing on the case was scheduled for Tuesday.

The Large Taxpayers’ Office (LTO) had officially determined Rs 62.63 billion as applicable CGT on the Ncell buyout deal on April 16 and ordered Ncell to deposit Rs 39.06 billion within seven days, as the telecom firm has already deposited Rs 23.57 billion as CGT and late fee.

However, Ncell on April 22, had moved the SC against LTO, claiming that it needed to pay a capital gains tax of only Rs 14.5 billion to LTO, and not Rs 39.06 billion as determined by LTO for the sale of its shares to Axiata Investment UK Ltd.

Following this, SC had stayed the LTO’s decision to collect Rs 39.06 billion tax from the telecommunication company. The apex court had observed that LTO’s decision to impose Rs 39.06 billion capital gains tax on Ncell was wrong, as the LTO calculated the whole due amount without deducting the advance capital gains tax that Ncell had paid earlier.

In response to the writ petition filed by Ncell against LTO, the court had stated that interest and fee should be imposed on the remaining CGT that Ncell had not deposited in the state coffers, which implies the Large Taxpayers’ Office should add interest and fee on around Rs 40 billion in the due CGT.

Meanwhile, though the years-long CGT issue of Ncell was believed to have been solved finally following SC’s verdict and the determination of applicable taxes on Ncell buyout deal from LTO, the issue seems likely to prolong further especially due to two reasons — Ncell’s writ petition against LTO’s decision and arbitration call made by Ncell and Axiata at the International Centre for Settlement of Investment Disputes (ICSID).

Ncell’s parent company Axiata Group (UK) has submitted a request for arbitration with the ICSID against the government of Nepal, regarding the CGT levied by the Nepali authority on Ncell buyout deal relating Nepal’s conduct in contravention of its international law obligations under the bilateral investment treaty.