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Supreme Court invalidates Ncell capital gains tax assessment



Kathmandu, Aug 27: The Supreme Court on Monday invalidated the assessment of the Capital Gains Tax (CGT) to be paid by telecommunication company Ncell Pvt Ltd. The Large Taxpayers Office (LTO) had determined on April 16 that the company had to pay Rs 39 billion as CGT including accrued interest and fines.

A five-member larger full bench of Justices Tej Bahadur KC, Purusottam Bhandari, Dambar Bahadur Shahi, Sushmalata Mathema and Manoj Kumar Sharma issued the certiorari order invalidating the tax assessment made by LTO in pursuance of a previous order of the Supreme Court issued on February 7.

Ncell had moved the apex court arguing that the CGT payable should be only Rs 14.36 billion and not the Rs 39 billion assessed by the LTO inclusive of interest and other charges . Ncell had earlier paid Rs 23 billion in CGT.

Stating that the assessment made by LTO was not done properly, the apex court scrapped the tax assessment and directed that a fresh capital gains tax assessment be made as per the demand of the telecom service provider.

The order further states that while LTO has the right to re-determine the capital gains tax as per Section 101 of the [Income Tax] Act and levy fees as per Section 120(A) of the same Act. “…the tax liability of Ncell was created only after a decision was made by the Supreme Court to collect the capital gains tax from Axiata and Ncell for the transaction of shares and after the companies were notified about this.” It further says, “It seems the capital gains tax assessment made as per Section 120(A) is against this provision; so the tax assessment made by LTO on April 16, 2019 has been scrapped.”

With this verdict, the LTO now needs to reassess the amount with effect from the date when the apex court decided that Axiata and Ncell should pay the CGT.

Earlier, Ncell had refused to pay the CGT, saying it was TeliaSonera, which sold the company’s majority share to Axiata, that should pay CGT. But later, the court asked Axiata and Ncell to pay the tax.

On April 23, Ncell had challenged the capital gains tax assessment made by the LTO just two days before the seven-day deadline given to pay Rs 39 billion as the balance of the capital gains tax assessment including fines and interest.

In its order, the apex court has stated that Rs 143.65 billion was assessed at the transaction value of Ncell shares and both parties—the petitioner and the LTO—accepted this fact which was also accepted by the February 7 verdict. The LTO has to determine the capital gains tax, verifying the facts and documents as per Section 120(A) of the Act.

In its petition, Ncell had argued that the tax assessment was against the SC verdict handed down by a larger full bench led by Chief Justice Cholendra SJB Rana on February 7 and that the assessment did not verify all the documents and facts.

The February 7 verdict stated that Ncell and its parent company Axiata should pay the CGT and asked LTO to assess the tax within three months. LTO had then simply transferred the assessed tax from Teliasonera to Ncell and its parent company Axiata.

On February 7, a five-member larger full bench of Chief Justice Cholendra SJB Rana and justices Meera Khadka, Bishwambhar Shrestha, Ananda Mohan Bhattarai and Tanka Moktan had directed Ncell and Axita to pay the huge tax they avoided paying when Ncell shares changed hands three years ago.

In the mandamus order issued in response to a writ petition filed by civil society members including Dwarika Nath Dhungel, the bench directed the two private-sector telecommunications service provider companies to cough up the tax amount.