Kathmandu, August 26

The Supreme Court gave a ruling in Ncell’s favour in a case filed by the private telecom against Large Taxpayers’ Office for imposing Rs 62.63 billion as applicable capital gains tax on Ncell for its buyout deal.

A grand full bench of the apex court said that Ncell could be expected to fulfil its CGT liability from 6 February 2019 when the SC gave the ruling and not the date the LTO used to impose CGT on Ncell.

A source at the SC said that the SC quashed LTO’s decision to impose fine on Ncell, which means that the private telecom firm would now have to pay only around Rs 22 billion, including some late fees.

The SC also quashed LTO’s decision to impose fine on Ncell as per section 120 (a) of Income Tax Act 2002, which allows the LTO to impose fine equal to fifty per cent of the amount that the concerned company failed to reveal in the document.

“Today’s verdict means that  Ncell needs to pay a total of around Rs 45 billion CGT since it has already paid around Rs 23 billion, it will now have to pay only Rs 22 billion more,” the source added.

The apex court observed that the LTO had determined Rs 143 billion as gains in the Ncell buyout deal, which the SC also had accepted. “But if the LTO finds evidence of more taxable income, then it is free to impose more tax on the telecom firm,” the SC said in its verdict.

The court said that the LTO’s decision to impose fine on Ncell was wrong as it imposed fine without any solid evidence, the SC source added.

The apex court said that the LTO, while determining CGT for Ncell, did not allow it to furnish details of its transactions and buyout.

The LTO had officially determined Rs 62.63 billion as applicable CGT on the Ncell buyout deal on April 16 and had ordered the private telecom firm to deposit Rs 39.06 billion, as the firm had already deposited Rs 23.57 billion as CGT and late fee. The LTO levied CGT on Ncell from the date the Ncell buyout took place. Axiata Group Berhad, through its wholly-owned subsidiary Axiata Investments (UK) Ltd, had bought 80 per cent stake in Ncell for $1.4 billion in December 2015.

Ncell moved the SC on April 22  against the LTO, claiming that it needed to pay a capital gains tax of only Rs 14.5 billion for the sale of its shares to Axiata Investment UK Ltd.

Following this, the SC had stayed the LTO’s decision to collect Rs 39.06 billion tax from Ncell.

Ncell’s parent company Axiata Group (UK) has submitted a request for arbitration with the ICSID against the Government of Nepal, for levying CGT on the Ncell buyout deal saying Nepal’s conduct was in contravention of its international law obligations under the bilateral investment treaty.

Ncell had argued that LTO should not have levied tax on Ncell for the period preceding February 6, the day the SC decided that CGT liability rested with Ncell and not TeliaSonera.

Ncell also argued that the SC, in its February 6 decision, did not order Ncell to pay any fees or interests. The SC is yet to prepare the full texts of the verdict.

The order was passed by a full bench consisting of justices Tej Bahadur KC, Purushottam Bhandari, Dambar Bahadur Shahi, Sushmalata Mathema and Manoj Kumar Sharma.