Supreme Court Rejects Banks’ Plea, Upholds Government’s Taxation Measures

KATHMANDU: In a recent development, banks in Kathmandu have faced a setback in a tax dispute related to mergers, acquisitions, and follow-on public offerings (FPOs). The Supreme Court has ruled against the banks, mandating them to settle the tax liabilities arising from gains in bargain purchases resulting from mergers and acquisitions.

Additionally, the court has stipulated that if banks issue bonus shares derived from FPO premiums, such transactions must be treated as income, and corresponding taxes must be promptly paid. The deadline for settling these tax obligations is within two days, specifically by the 16th of December.

This legal decision stems from the government’s provisions outlined in the economic bill of the Fiscal Year 2022-23, which introduced the requirement to file income tax for bonus shares originating from gains in bargain purchases during mergers and acquisitions, as well as premiums from FPOs.

Despite the banks’ attempts to challenge the government’s taxation approach, their petition was dismissed by the constitutional bench of the Supreme Court on Thursday. The court rejected the argument that the government was overstepping its bounds by attempting to collect taxes on capital, affirming the validity of the tax regulations in question.