Hearing on Ncell tax dispute case postponed until February 27

KATHMANDU: The Supreme Court has deferred the hearing of the Ncell tax dispute case, previously slated for today, to February 27.

The case was added to the postponed list after it was not selected by any available justice during the lottery on Tuesday.

The ongoing tax debate revolves around the Malaysian company Axiata’s Ncell, which was set to face a crucial hearing regarding a lingering dispute over Capital Gains Tax.

Despite Axiata divesting all its shares and exiting the scene, Ncell remains embroiled in a case where the Office of the Large Taxpayer has imposed an additional tax assessment of approximately Rs 57 billion on the telecom company.

The roots of the saga trace back to Axiata’s acquisition of 80 percent of Ncell’s shares in March 2016 for $1.365 million (about Rs 1.43 billion), in collaboration with the Swedish telecommunication giant TeliaSonera. The dispute centers on the alleged non-payment of capital gains tax during the transaction, an issue still unresolved despite Axiata’s payment of around Rs 47 billion.

Attempting 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.

While ICSID supported the capital gains tax already collected by the Nepal government, it refrained from providing a verdict on the additional Rs 57 billion demanded. Consequently, this financial dispute now rests with the Supreme Court.

If the court rules in favor of the tax authorities, complications may arise as Axiata has already offloaded the company. The current owner, SpectraLite UK Limited, founded by Nepalese individuals, could pose a challenge to recovering the demanded amount, given the relatively low sale price of Ncell.

Axiata previously appealed to ICSID, seeking the return of Rs 47.99 billion in capital gains tax paid thus far. However, ICSID rejected the claim, providing temporary relief to the government of Nepal.

Despite Ncell’s arguments that the additional Rs 57 billion tax should be nullified under Section 57 of the Income Tax Act, ICSID has not offered clear guidance on this aspect. The resolution of the dispute now awaits the impending Supreme Court decision.