A day before the expiry of the seven-day deadline to pay its capital gains tax, Ncell, a private telecom giant, on Monday lodged a petition at the Supreme Court, saying the Large Taxpayers Office has wrongly determined their tax liability at Rs39.06 billion.

In line with the Supreme Court order to authorities to collect capital gains tax from the private sector mobile company and its parent firm, Axiata, the Large Taxpayers Office on April 16 determined their capital gains tax liability at Rs39.06 billion and and asked it to pay Rs39.06 billion within seven days after deducting the amount it had paid earlier.

Although the telecom company did not question the order to pay tax, it has said its outstanding tax stands at Rs14 billion. It should not be liable to pay fee and interest as determined by the Large Taxpayers’ Office, says the writ.

After TeliaSonera, which earlier owned Ncell, exited Nepal after selling the telecom company to Axiata on April 11, 2016, as per the acquisition deal—the biggest in Nepal’s corporate sector—signed in December 2015, the capital gains was determined at Rs143.6 billion. And the capital gains tax was to be determined accordingly.

Ncell has already paid Rs23.57 billion in total—Rs21.54 billion as capital gains tax and Rs2.02 billion as fine. So the tax office said last week Ncell should now pay the remaining Rs39.06 billion.

In its petition, Ncell has said Rs21.54 billion it paid earlier was 15 percent of the total capital gains (Rs143.6 billion). “Of the 25 percent tax liability, 15 percent has been paid, and the remaining 10 percent means the company needs to pay Rs14.36 billion,” the mobile firm said in the petition, demanding an order of mandamus along that line to the tax authorities.

Ncell has also sought an order from the court [to authorities] not to create any kind of obstructions in Ncell’s business until the case is fully settled and tax is determined.

As per the company’s argument, the tax authority did not follow due procedure to determine tax liability.  

The writ claims that only after the Supreme Court passed the verdict, it became clear that Ncell to provide transaction details to the tax authority for determining the tax. “Tax should have been determined as per Section 99 of Income Tax Act only after giving Ncell an opportunity to submit details,” the petition reads. “Without first determining tax as per Section 99 and 100 of the Act, revised tax as per Section 101 of the Act cannot be applied.”

The Large Taxpayers Office has determined tax for Ncell as per Section 101 of the Act and notified the company about revised tax determination, according to the writ.

While determining revised tax, interest and fee have also been applied, but Ncell claims that they cannot be added on top of applicable tax because the court has not stated in its verdict that fee and interest are applicable for the period before the verdict came out.

It has also claimed that the tax authority has not given why fines and interest were applied as per Section 120(A), 117(1A) and 117 1(C) of the Income Tax Act.

When asked about the writ, a senior tax official told the Post that the court verdict has clearly stated that Ncell and Axiata cannot escape from tax liability as TeloaSonera exited Nepal without paying tax and Ncell continues to exists in Nepal.

“It means, whatever tax liability TeliaSonera should have borne should be borne by Ncell and Axiata,” the official told the Post over the phone on condition of anonymity.

The tax official also questioned the Ncell’s move of approaching the Supreme Court instead of seeking an administrative review through the director general of the Inland Revenue Department and Revenue Tribunal.

“Lately, there is a trend of filing writs at the Supreme Court. This should be discouraged.”

However, a senior corporate lawyer said that Ncell has the right to go to the Supreme Court if it believes due legal procedures were breached while determining the tax.

Gandhi Pandit, a senior advocate, said although the usual legal procedure against tax determined by the tax authority is an administrative review from the director general of the Inland Revenue Department and Revenue Tribunal, a taxpayer (firm or individual) cannot be deprived of seeking legal remedy through courts if the taxpayer feels the due procedure has not followed.

Also Read: 

• As Ncell mulls over the tax decision, legal experts say it has no options but to pay its dues
• Tax office says Ncell dues will make up for around half of the revenue target shortfall
• Tax authority sets Rs 87 billion in capital gains tax on Ncell deal
• Top court orders Ncell and Axiata to pay capital gains tax
• Supreme Court sets three-month deadline for Ncell, Axiata to clear tax dues