SC begins final hearings on Ncell capital gains tax

Published On: June 6, 2019 06:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 6: The Supreme Court on Tuesday began final hearings on the capital gains tax (CGT) for telecommunications company Ncell Pvt Ltd.

A five-member larger full bench comprising Justices Tej Bahadur KC, Purusottam Bhandari, Dambar Bahadur Shahi, Sushmalata Mathema and Manoj Kumar Sharma began the hearings on whether or not to collect CGT from Ncell as determined by the Large Taxpayers Office (LTO) .

On May 8, 2019, a division bench of Justices Sapana Pradhan Malla and Prakash Kumar Dhungana ordered government authorities—the Office of the Prime Minister and Council of Ministers, the Ministry of Finance and the Large Taxpayers Office—to hold back on the collection of CGT from the telecom company.

The bench thus continued a stay order issued by a single bench of Justice Bam Kumar Shrestha on April 25 directing that the tax collection be put on hold. The single bench was responding to a petition filed by Ncell questioning the CGT assessment by the LTO.

Continuing the stay order means Ncell will not have to pay the tax amount sought by the LTO until the court issues its final ruling on the petition.

On April 17, the LTO had calculated the tax amount payable on the Ncell buyout and required the company to pay the remaining CGT amounting to Rs 39.06 billion, including interest, within seven days.

Earlier in the month, the apex court had ordered Ncell and Axiata Company, which bought into Ncell shares, to pay CGT amounting to Rs 39 billion and interest

It left it to the LTO to assess the interest payable and other particulars.

The private sector telecommunications service provider had challenged the CGT assessment by the LTO .

Following a SC order of February 7, the LTO had determined that Ncell had to pay Rs 39 billion as the balance of the CGT assessment including fines and interest. Ncell claimed that the tax assessment was against the apex court verdict.

Ncell said it was not given any information about the tax assessment nor was it asked for any tax filing before the assessment was made. The interest and fines assessed and added onto the CGT payable is against the SC verdict, according to an excerpt from Ncell's court appeal.

The petition states: “The tax amount with fines and interest was earlier assessed for Teliasonera [which had sold the Ncell shares to Axiata]. But LTO has now come up with the same assessment including interest and fines, which is against the spirit of the SC verdict of two weeks ago.”

Ncell argues that the CGT payable should be only Rs 14.36 billion (or 10 percentage points off the total 25 percent CGT) or the remaining amount of the total 25 percent CGT on share transaction prices. Ncell has already paid Rs 23 billion CGT or 15 percent of the total CGT assessment.

The hearings will continue on June 25.

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