All petitions Against the Decision to Collect tax on Mergers and FPOs were Dismissed by the Supreme Court

Kathmandu: All petitions against the decision to collect tax on mergers and FPOs were dismissed by the Supreme Court, banks and insurance companies must pay 40 billion as tax.

After the statement of the government’s decision to levy tax on mergers and FPOs (Follow-on Public Offer), due to which banks and insurance companies had approached the Supreme Court demanding the annulment of the government’s decision but they lose that case and now have to pay the tax.

A constitutional bench of the Supreme Court headed by Chief Justice Bishsambhar Prasad Shrestha and Justices Anand Mohan Bhattarai, Sapna Pradhan Malla, Sushmalata Mathema and  Kumar Regmi dismissed all the petitions filed against the government’s decision to levy tax on mergers and FPOs and upheld the government’s decision.  Now, banks and insurance companies must pay around 40 billion tax.

Banks and insurers approached the Supreme Court demanding an injunction against the government’s decision to levy tax on mergers and FPOs. The bank was led by Nepal Investment Mega Bank Limited, Darbar Marg, while the insurer was led by Shikhar Insurance Company Limited.

16 commercial banks filed a joint petition in the Constitutional Bench of the Supreme Court on 15th of September, 2023 A.D, demanding the cancellation of the FPO and merger income tax regime in the current fiscal year 2023 A.D financial bill.

The hearing of this case was scheduled on Wednesday, 13th of December, 2023 A.D in a constitutional bench consisting of five judges. Chief Justice Bishambhar Prasad Shrestha along with judges Dr. Anand Mohan Bhattarai, Sapna Pradhan Malla, Sushmalata Mathema and Kumar Regmi had been scheduled to appear in the constitutional bench.

16 banks including Nepal Investment Mega Bank Limited, Darbarmarg have reached the Supreme Court. 16 commercial banks had filed a joint writ in the Supreme Court, demanding the repeal of the FPO and merger income tax regime in the current fiscal year 2023 A. However, the three government-owned Nepal Bank, National Commercial Bank, Agriculture Development Bank and Everest Bank had not gone to court.

2 writs has been registered in the Supreme Court. The both the petitions were about, new taxes have been imposed contrary to the constitutional provision and the investment environment has been spoiled by bringing in anti-establishment laws.

In the writ, it has been demanded to cancel Section 26 and 27 of the Finance Bill for the fiscal year 2023/24 A.D. It is mentioned in the writ petition that the current shareholders of the petitioner banks will be directly affected when tax is imposed on the capital distributed to the former shareholders.

7 commercial banks which have issued FPO at premium have filed a writ demanding cancellation of the provision of tax on the income of issue of FPO at joint premium. Similarly, 15 commercial banks that have gone through the process of merger and acquisition have jointly filed a writ demanding cancellation of the tax regime imposed on the “bargain purchase gain” of the merger.