Tax authorities give Ncell seven days to pay Rs39 billion in dues

The Large Taxpayers Office on Tuesday set the capital gains tax for Ncell and Axiata at Rs62.63 billion and gave the company seven days to clear the dues.

The order from the tax office comes a week after the Supreme Court released the full text of its February verdict that Ncell and Axiata, the parent company of the private sector mobile firm, should pay capital gains tax.

In a press statement released on Tuesday, the tax authority said because Ncell had already paid Rs23.57 billion in total—Rs21.54 billion as capital gains tax and Rs2.02 billion as fine—the company should now pay the remaining Rs39.06 billion.

“We have already forwarded a letter asking Ncell to clear the dues within seven days,” Dhani Ram Sharma, chief of the Large Taxpayers Office, told the Post. “Since the Supreme Court has already debated the issue at length and completed all the required hearings in relation to the case, we have directly asked the telecom company to clear the outstanding amount.”

Responding to public interest litigation filed by a group of civil society members, including former secretary Dwarika Nath Dhungel, the Supreme Court in the first week of February ordered Ncell and Axiata to clear the outstanding capital gains tax.

The full text of the verdict, however, was released last week, in which the Supreme Court ordered government authorities to recoup the outstanding capital gains tax from Ncell and Axiata within three months and barred the company from repatriating profit and distributing dividend and shares until the dues were cleared.

A full bench of Chief Justice Cholendra Shumsher Rana and Justices Mira Khadka, Bishwombhar Prasad Shrestha, Ananda Mohan Bhattarai and Tanka Bahadur Moktan observed that the onus to pay capital gains tax lay with Ncell—and not TeliaSonera.

“Since the capital gains tax is applicable to Ncell, not to TeliaSonera, determine the tax dues,” the verdict read. “Since Ncell had on May 7, 2016, and June 4, 2017, paid a total of Rs 21.54 billion as capital gains tax and Rs 2.32 billion as late fee to the Large Taxpayers Office, make all necessary decisions as per the legal provisions to collect the dues within three months,” the court order said.

The court verdict had put an end to the long-drawn-out debate over whether the buyer should pay the tax when the seller does not clear its tax liability.

TeliaSonera, which earlier owned Ncell, exited the country after selling the telecom to Axiata on April 11, 2016, as per an acquisition deal, the biggest in Nepal’s corporate sector, signed in December 2015.

The tax office said in its statement that after Telia Sonera sold its share to Axiata on April 11, 2016, the capital gains tax was settled at Rs143.65 billion. “On June 27, 2017, the tax authority had fixed the capital gains tax of Rs60.71 billion to be recovered from TeliaSonera.”

But the tax authority had initiated the process to collect capital gains tax in the deal after TeliaSonera exited Nepal, which sent the issue to the court.

The Large Taxpayers Office said it started the process to recover tax from Ncell and Axiata after it received the full text of the top court verdict.

Of the total liability of Ncell and Axiata, the tax authority has fixed income tax of Rs35.91 billion, a service charge of Rs18.33 billion and interest amount, as of mid-April 2018, as Rs8.39 billion.