Background
In October 2014, a significant ownership change occurred affecting Bottlers Nepal Ltd when Coca-Cola Sabco (Pty) South Africa transferred 100% of its shares in Coca-Cola Sabco (Asia) Ltd, Dubai UAE to European Refreshment, Ireland. This transaction triggered Section 57 of Nepal’s Income Tax Act, which requires special tax treatment when an entity’s underlying ownership changes by 50% or more. However, Bottlers Nepal Ltd (Nepal Subsidiary) failed to comply with the necessary reporting requirements, prompting an investigation by the Revenue Investigation Department.
The tax office uncovered several issues during their examination. They found discrepancies in the reported transaction value, with different figures submitted to different government bodies. The reported price of around $171 million was deemed unrealistically low given the company’s paid-up capital of over $120 million. Furthermore, the transaction was identified as occurring between related parties, raising questions about the fairness of the stated price.
Based on these findings and supported by a relevant Supreme Court precedent, the Large Taxpayers Office conducted a revised tax assessment. They calculated a significantly higher tax liability for Bottlers Nepal Ltd, arguing that the company had failed to properly report and pay taxes on the true value of this complex international corporate transaction as per the requirement of Section 57 of the Income Tax Act, 2058.
Timeline of Events
On 2071.07.07, Coca-Cola Sabco (Pty) South Africa transferred 100% of its shares in Coca-Cola Sabco (Asia) Ltd, Dubai UAE to European Refreshment, Ireland, thereby effecting a change in control and ownership of its subsidiary in Nepal Bottlers Nepal Limited. The period from approximately 2071.04.01 to 2071.07.07 (July 17, 2014 to October 24, 2014), marked the time during which Bottlers Nepal Ltd. underwent tax examination.
On 2078.12.25, the Department of Revenue Investigation initiated an examination into the transaction of 2071.07.07, and informed the Inland Revenue Department accordingly.
Subsequently, On 2079.12.03, the Large Taxpayers Service Office at Hariharbhawan, a division of the Inland Revenue Department, issued a Preliminary Tax Assessment Order against Bottlers Nepal Limited. Bottlers Nepal Limited responded to this order on 2079.12.19.
Following this, On 2079.12.21, the Large Taxpayers Service Office at Hariharbhawan issued a Final Tax Assessment Report concerning the aforementioned transaction.
On 2080.02.07, Bottlers Nepal Limited filed for an administrative review with the Inland Revenue Department regarding the assessment order issued by the Large Taxpayers Office.
On 2080.05.18, Bottlers Nepal took the case to the Revenue Tribunal under Section 6(1) of the Revenue Tribunal Act, 2031, citing the Inland Revenue Department’s failure to provide a decision within the stipulated time under Section 115(8) of the Income Tax Act, 2058.
Finally, On 2080.11.22, the Revenue Tribunal issued its decision against Bottlers Nepal Limited that Section 57 is applicable in the aforementioned transaction leading to the deemed disposal of the assets and liabilities for taxation purposes. Revenue Tribunal ०८०-RB-००९२ Link to the full text here.
Ownership structure of BNL (before and after)


The recent annual turnover of the Bottlers Nepal Limited group has averaged around 12 billions NPR. The estimates of its annual taxes paid is shown in the graph below.

Court's Decision
BNL’s Contentions |
Court’s Decision |
BNL contented that the tax assessment for the transaction that took place in the Fiscal Year 2071/2072 was made on 2079/2080, which is beyond the 4 year statute of limitation specified under Section 101(3)(Ka) of the Income Tax Act, 2058 – which expired on 2076.10.06 |
Information regarding fraudulent activity related to the non-disclosure of the transaction under Section 57 of the Act was received by the Inland Revenue Department on 2078.12.25, following an investigation conducted by the Department of Revenue Investigation. This triggered a 1-year extension under Section 101(4), making the tax assessment within this extended period valid. The court also established that the taxpayer failed to file separate income statements before and after the change in control, as required by Section 57 of the Income Tax Act, 2058. This omission is considered wilful fraudulent evasion of tax. |
BNL contends that change in ownership of parent company doesn’t constitute change in ownership of taxpayer under Section 57. |
Based on the definition of “vested ownership” as per Income Tax Act, 2058, a change in the parent company’s ownership constitutes a change in control of the taxpayer, thereby triggering Section 57. The Ncell Case (discussed in more depth here) also sets a precedence for this decision. The court’s interpretation in the Ncell case, which established that indirect offshore transfers are taxable in Nepal, applies similarly to this situation involving indirect ownership change. |
BNL contends that since a case on the same matter has been lodged by the Department of Revenue Investigation (DRI) at the Patan High Court (Case No. 078-FJ-131), the Revenue Tribunal’s decision should consider the Principle of Double Jeopardy under Article 115(1) and Article 20(6) of the Constitution of Nepal, 2072. |
The case lodged at Patan High Court concerns capital gains tax, while this assessment pertains to deemed disposal income to the entity. These are different tax issues, so the Principle of Double Jeopardy does not apply. |
BNL questions the basis on how taxable income of NPR 6,561,391,827 was calculated. |
The income was determined based on the market value of assets and liabilities as required by Section 57(1), using an expert valuation from JKK Associates, Chartered Accountants. BNL argues that the price in the share sale agreement represents the actual transaction value. However, the joint valuation of multiple entities and the unnaturally low price indicate that the agreement price is not reliable. Therefore, market valuation was used as per Sections 22(1) and 46(3). Inconsistencies were found between documents submitted to different authorities, which undermined the taxpayer’s credibility. The taxpayer’s internal valuation, prepared after the investigation began, was not considered reliable. Instead, an independent expert valuation was used. The expert valuation determined the taxable gain amount of NPR 6,561,391,827 for the transaction for the purpose of Section 57, in addition to applicable interest, fines, and penalties under Sections 118, 119, and 120(Ka) of the Act on the tax amount. |
Claims fees under Sections 117-120 shouldn’t apply as revised assessment is invalid. |
The taxpayer’s failure to comply with Section 57 requirements constitutes willful or negligent non-compliance, justifying the imposition of fees and interest. Penalty under Section 120(Ka) was applied, while Section 120(Kha) was not applied, as the latter was not deemed applicable in the initial tax assessment report by the Large Taxpayers Office, Hariharbhawan. |
Great content sir