The Supreme Court today granted an order to the government to recover applicable capital gains tax of the Ncell buyout deal from Ncell and its Malaysian-based parent company Axiata within three months.
Making public the full text of the ruling made on February 6 which claimed that Ncell and Axiata are responsible to pay the applicable CGT, the apex court directed the government to halt Ncell’s dividend distribution and equity transfer until the CGT issue is settled completely.
Previously, the Supreme Court had issued an order in the name of Ncell and Axiata putting an end to the years-long debate over who really should foot the tax bill following the sale of Ncell by Sweden-based TeliaSonera to Axiata.
Issuance of the full text of the previous verdict on the Ncell buyout deal by the apex court has now paved the way for the Large Taxpayers’ Office to collect capital gains tax dues from Ncell and Axiata.
Earlier, LTO had instructed THT that the Ncell buyout deal was subject to CGT of around Rs 61 billion when Ncell and Axiata were liable to pay around Rs 66 billion in taxes in case late fees were factored in.
But, Dhani Ram Sharma, chief of LTO, stated when the office was still to get the formal letter of today’s full verdict, it would again decide the applicable CGT in the Ncell buyout deal, as the apex court has invalidated the earlier calculated tax amount.
Bishnu Prasad Nepal, director general of IRD, stated Ncell would be given up to 35 days to pay the CGT amount after it was decided by LTO.
The apex court’s verdict has asked the government to collect the CGT on Ncell buyout deal when looking into the previous deposits made by Ncell towards CGT and other fines.
This means that Ncell and Axiata are not going to have to pay the entire CGT, as Ncell has already paid tax instalments totalling almost Rs 21 billion.
Axiata Group Berhad, through its wholly-owned subsidiary Axiata Investments (UK) Ltd, had bought 80 per cent stake in Ncell for $1.4 billion in December 2015.
Earlier, there was controversy on whether or not capital gains tax should be imposed on Ncell buyout deal. It was argued that the deal was held abroad and the Income Tax Act did not have clear provisions on offshore deals.
But, the apex court had ordered that Ncell and Axiata should file the capital gains tax on the buyout deal of Ncell despite TeliaSonera being the seller, as Ncell’s business was based in Nepal.