SC Delays Ncell Tax Dispute Hearing, Sets New Date for February 27

The Supreme Court has decided to postpone the hearing of the Ncell tax dispute case, originally scheduled for today, pushing it to February 27. The case was deferred after none of the available justices selected it during the lottery held on Tuesday.

The ongoing tax controversy involves the Malaysian company Axiata’s dealings with Ncell, a telecom company. Despite Axiata divesting its shares and exiting the scene, Ncell is entangled in a dispute over a Capital Gains Tax assessment of approximately Rs 57 billion imposed by the Office of the Large Taxpayer.

The roots of the conflict trace back to Axiata’s acquisition of 80 percent of Ncell’s shares in collaboration with the Swedish telecommunications giant TeliaSonera in March 2016. The dispute revolves around the alleged non-payment of capital gains tax during the transaction, an issue that remains unresolved despite Axiata’s payment of around Rs 47 billion.

Axiata, in an attempt to resolve the escalating tax predicament, sought an international mediator in the form of 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 delivering a verdict on the additional Rs 57 billion demanded. Consequently, this financial dispute now awaits resolution in the Supreme Court.

If the court rules in favor of the tax authorities, complications may arise as Axiata has already offloaded Ncell. 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 had 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 decision of the Supreme Court, setting the stage for a crucial legal showdown.