October 5: The Supreme Court issued a ‘show cause order’ to the government regarding the provision under the Finance Act 2080 that requires payment of tax on income earned through the merger or acquisition of companies and through the issuance of further public offering (FPO) of shares.

The banks had filed separate writ petitions against the provisions of the Finance Act arguing that the profits from mergers and acquisitions and dividends from share premiums should not be subjected to income tax. The banks sought injunctions and interim orders in both the writs. The constitutional bench of the SC issued the show cause order on Wednesday.

Govinda Prasad Ghimire, information officer of SC, informed that both the parties were called for a discussion on November 8.

On Wednesday, Supreme Court’s full bench chaired by Chief Justice Bishwambhar Prasad Shrestha along with justices Ishwar Prasad Khatiwada, Dr Ananda Mohan Bhattarai, Prakash Kumar Dhungana, and Sushma Lata Mathema presided over the hearings on both the cases. The first hearing of the writ filed on September 15 was adjourned due to the fact that it was not sent for hearing on September 27.

Standard Chartered Bank and Nepal SBI had filed a writ against the provision of tax on issuance of FPO at premium rate. Likewise, Sanima Bank, Siddhartha Bank, NIC Asia Bank, Kumari Bank, Himalayan Bank, Prime Commercial Bank, Prabhu Bank, Global IME Bank, Laxmi Sunrise Bank, and Machhapuchhre Bank filed a writ against the provision of taxation on gains through merger/acquisition. Similarly, Citizens Bank, NMB Bank, Nabil Bank and Nepal Investment Mega Bank have filed writs in both cases.

In the writ petition, it has been claimed that the provision of taxation on profit received through merger or acquisition and issuance of FPO at premium rate is an ‘ex post facto taxation' and it is against the constitution.