With legal battles continuing between the government and the telecom giant Ncell at both national and international levels over capital gains tax, a full Supreme Court bench is scheduled to give its final verdict on August 6 on the amount of tax that Ncell, along with its parent company Axiata, will have to pay.

The government recently wrote to the International Centre for the Settlement of Investment Dispute, a body under the World Bank Group, saying it would not take part in international arbitration over the tax dispute, questioning the Centre’s jurisdiction over the matter. It is awaiting the Supreme Court’s verdict.

Although the Supreme Court’s verdict on February 6, along with its full text issued on April 9, had held Ncell and Axiata liable to pay capital gains tax unpaid by TeliaSonera, Ncell’s former owner, the top court had not specified just how much they would have to pay.

The Large Taxpayers’ Office, on April 16, had determined Ncell and Axiata’s tax liability at Rs39.06 billion, but Ncell had registered a writ petition at the top court on April 22, arguing that the tax authority had wrongly determined their dues. Ncell had said that its tax liability stood at Rs14.36 billion, not Rs39.06 billion, from the three-year-old Ncell buyout deal.

“The prolonged tax dispute with Ncell is coming to an end soon as the Supreme Court fixed August 6 as the date for verdict,” said Dhaniram Sharma, chief of the Large Taxpayers’ Office.

The government’s argument is that Ncell and its parent company are liable to pay as much as the tax liability created for Teliasonera as per the last verdict of the Supreme Court, according to Regmi.

Ncell, however, maintains that the Large Taxpayers’ Office determined the tax on Ncell and Axiata as per Sections 101 (6) and 102 (E) of the Income Tax Act, without allowing them to furnish a clarification.

The writ petitioners argue that it was not clear whether Ncell was liable to pay tax until the Supreme Court passed its February verdict.

With the legal battle ongoing at the domestic level, Ncell and Axiata Investment’s United Kingdom branch opened another legal front by applying to the world dispute settlement body in April.

The government wrote to the world body, arguing that the issue was not related to investment but taxation, which falls under full jurisdiction of Nepal’s laws.

Semanta Dahal, a corporate lawyer, however, told the Post that Nepal, as a signatory to the convention related to the world dispute settlement body, could not escape the arbitration process.

“The Nepal government's letter arguing that it does not fall under the jurisdiction of the international arbitration body is correct,” said Dahal. “But Nepal cannot say it will not participate in arbitration proceedings.”

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