Two writ petitions were filed by Ms Srijana Adhikari and Mr Rajesh Kafle against Government of Nepal claimed that the initial extension of Jestha 25, 2077 and subsequent extension until Ashad 7, 2077 is not adequate based on the existing scenario of lock down, industrial closure and economic activities that has been halted for more than Two Months. Due to lock down, almost all industries are closed down and the government has declared to be a holiday for the lockdown period. The Court understood that there is no economic transaction and no trade possibilities. In such a situation it is apparent that taxpayers are in difficulty to pay the tax. Even if they tax payers attempt to pay they need to defy lockdown rules. Regarding additional extension until Ashad 7, 2077, the Court also found this to be impractice for the same reason.
Upon hearing the writ petition Yesterday, the court came to the conclusion to issue interim order invalidating the deadline of Ashad 7, 2077 for tax return submissions. Advocate Saroj K Ghimire, who represented on behalf of the petitioner at the Supreme Court stated that while considering the adequacy of time extension as demanded by the Petitioner, the Court took took into consideration of the decision made by the historical Special Full Court of 19 Justice first time ever sat in the judicial history of Nepal on this Jestha 15 2077 which interpreted the deadlock of law of limitation created by the lock down. Based on that decision, the Supreme Court stated that the pandemic of corona vires ( COVID-19) has created an unusual situation all over the world. Because of the lock down called by the Government. the taxpayers were not able to submit their tax returns, VAT and other applicable tax payments to the Inland Revenue Department (IRD). Advocate Ghimire further mentioned that the court considered that there is no specific law relating to lock down that could be referred for the extension apart from the precedent laid down by the historical bench of the Supreme Court. Thus based on the equitable analysis of the existing situation, worldwide scenario and practicality and taking into consideration of the precedent on law of limitation developed on the base of lock dow, the court considered that taxpayers are not able to pay the tax in this situation of lock down and will have same situation of difficulty post lock down and thus taxpayers may need some easy time to reinstate their going concern of the business including employee arrangements and account settlements.
Mr Ghimire added that the Supreme Court upon understanding the gravity of the decision of the historical bench relating to the interpretation of the limitation, the court convinced to assess the possibility of extension .Hence, understanding the role of state as guardian and taking into consideration of the principle of taxation that not tax shall be levied without making law, the Supreme Court speculated that the timeline given by the Second notice of IRD appears to be unrealistic and impractical and thus state has to support to the taxpayer when the taxpayers are expecting the support and privilege from the government. With this statement in brief, the Supreme Court stated that the implementation of the tax return submission deadline given by the IRD i.e. until Ashad 7, 2077 shall stand invalid and not be implemented until lock down is fully called off.
Regarding the deadline the Supreme Court said that the date shall be extended for 30 days after the end of the lockdown and shall arrange a safety environment and social distancing at the tax offices. The Court further stated that incase lockdown is recalled upons assessing the COVID-19 impact, the review of the deadline shall be made based on the employment, industry and trade situation and shall be determined the deadline accordingly.
The Interim Order has come as relief to the taxpayers due to the extension of the deadline which will enable taxpayers to prepare in advance and avoid any fines or payments. However, this order does not require taxpayers to wait until lock down is over submission and tax payers may comply any time prior to this.
It is expected that the industries which have been suffering financial difficulty due to lock down got some relaxation by the extension of deadlines.
Advocate Ghimire also opines that the review of the Interim Order is not possible at this stage even though the Government intends to challenge the order on the ground that the order is an Interim and not final and until final verdict is granted, the order stands as valid and enforceable. Senior Advocate Sushil Kumar Pant and Prakas KC, Advocate Megharaj Pokhrel also represented the petitioner at the hearing.