KATHMANDU: Malaysian company Axiata’s Ncell faces a crucial Supreme Court hearing today regarding a lingering dispute over Capital Gains Tax.
Despite divesting all its shares and exiting the scene, Ncell remains entangled in a case where the Office of the Large Taxpayer has slapped an additional tax assessment of approximately Rs 57 billion on the telecom company.
Axiata, which Ncell shares merely five days before the Supreme Court ruling, now watches from the sidelines as the legal drama unfolds.
With the company having distanced itself from the issue, uncertainties loom over the potential repercussions should the verdict favor the tax authorities.
The saga dates back to Axiata’s acquisition of 80 percent of Ncell’s shares in March 2016 for 1.365 million dollars (about 1.43 billion rupees) in collaboration with Swedish telecommunication giant TeliaSonera.
The dispute stems from the alleged non-payment of capital gains tax during the transaction, a matter that remains unresolved despite Axiata’s payment of around 47 billion rupees.
In a bid to resolve the escalating tax predicament, Axiata sought an international mediator, turning to the International Center for Settlement of Investment Disputes (ICSID).
However, ICSID did not proceed with the case, leaving the Supreme Court as the final arbiter.
Even though ICSID supported the capital gains tax already collected by the Nepal government, it refrained from providing a verdict on the additional 57 billion rupees demanded.
Consequently, this financial dispute now rests in the hands of the Supreme Court.
Should the court rule in favor of the tax authorities, complications could arise as Axiata has already offloaded the company.
SpectraLite UK Limited, the current owner of Ncell, is a company founded by Nepalese individuals.
Legal experts argue that the government may lack a robust basis to recover the demanded amount from Axiata through SpectraLite, emphasizing the potential challenge posed by the relatively low sale price of Ncell.
In an attempt to recover the capital gains tax paid thus far, Axiata previously appealed to ICSID, seeking the return of 47.99 billion rupees.
However, the government of Nepal received a reprieve when ICSID rejected the claim, saving a substantial sum of money.
Notably, Ncell also contends that the additional tax of 57 billion rupees should be nullified under Section 57 of the Income Tax Act.
Despite these arguments, ICSID has yet to offer clear guidance on this particular aspect, leaving the resolution of the dispute squarely within the purview of the impending Supreme Court decision.
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