Laws · Analysis

Listed-company tax concession for alcohol and tobacco producers: does the Industrial Business Act exclusion reach the Income Tax Act concession?

Unclear wordingMedium confidenceEnacted Act

Section 11(3छ) of the Income Tax Act gives a 15 per cent concession on the tax of listed manufacturing entities. Section 24(3) of the Industrial Business Act says tobacco and alcohol industries (other than fruit-based brandy, cider and wine) get none of the concessions it mentions. The Auditor General read these together as denying the listing concession to an alcohol producer and asked for the concession it took to be examined. The wording of s.24(3) can also be read more narrowly.

Laws and sections involved

Income Tax Act, 2002 s.11(3छ)
Our translation: the tax payable by manufacturing, tourism-service, and hydropower generation, distribution and transmission entities listed on the securities market, and by entities mentioned in s.11(3ग), shall be reduced by fifteen per cent.
Law Commission consolidated text to the Financial Act 2083 (2083/03/30). The audited years (to 2079/80) fall under earlier versions; the wording of s.11(3छ) in force in each audited year was not checked. Official text
Industrial Business Act, 2076 s.24(1), (2) and (3)
Our paraphrase: (1) industries registered under the Act get the concessions available under prevailing tax law; (2) without limiting (1), they get the concessions listed in clauses (क)–(ब); (3) notwithstanding (2), tobacco and alcohol industries other than those in clause (घ) (fruit-based brandy, cider and wine) 'shall not get any of the concessions and facilities mentioned' — followed by a proviso allowing deduction of listed actual expenses.
Law Commission consolidated text (Gazette 2076/10/28; amended 2081/03/24 and 2081/12/18). s.24 on PDF pp.21–25. Whether the 2081 amendments changed s.24(3) was not checked against the amending Acts. Official text

The apparent issue

Section 24(3) of the Industrial Business Act begins 'notwithstanding anything in subsection (2)' and denies 'any of the concessions and facilities mentioned'. It is not clear whether 'mentioned' refers only to the concessions listed in s.24(2) of that Act, or to every tax concession including those that flow from the Income Tax Act under s.24(1), such as the listed-company concession in s.11(3छ). The Income Tax Act itself, in s.11(3छ), does not exclude alcohol or tobacco producers from the listing concession, although elsewhere in s.11 it defines 'special industry' to exclude them.

Evidence

The Auditor General noted that s.11(3छ) gives listed manufacturing industries a 15 per cent concession, while s.24 of the Industrial Business Act says tobacco and alcohol industries other than fruit-based brandy, cider and wine get no tax concession or facility. One taxpayer under the Large Taxpayers Office had computed tax at 25.5 per cent on taxable income of Rs 5.13 billion over four income years including 2079/80; the Auditor General said it did not appear entitled to the listing concession and asked for the Rs 230.9 million concession to be examined. Office of the Auditor General Ministry of Finance chapter, para 84, printed p.131 (PDF p.161)
The texts of s.11(3छ) of the Income Tax Act and s.24(1)–(3) of the Industrial Business Act were read in the Law Commission's consolidated versions. s.24(2) lists concessions in clauses (क) to (ब); none of them is a concession for listing on the securities market. Nepal Law Commission ITA PDF p.30; IBA PDF pp.21–25

Possible readings

Reading 1 (the Auditor General's view): the policy of s.24(3) is that alcohol and tobacco industries get no tax concession or facility at all; the listing concession is a tax concession, so it is excluded.
Reading 2: s.24(3) opens by overriding subsection (2) and refers to concessions 'mentioned' there; the listing concession is not in s.24(2) but in the Income Tax Act, which does not exclude these industries from s.11(3छ). On this reading the concession is available unless the Income Tax Act says otherwise.
Reading 3: where two Acts point in different directions, the Act that governs the tax in question (the Income Tax Act) prevails for computing tax, and the Industrial Business Act's exclusion matters only for incentives that Act itself grants. Others would argue the later, more specific Act (2076) prevails. Which rule of interpretation applies is itself a question for review.

Why does it matter in practice?

If Reading 1 is right, concessions may have been taken that were not due and tax offices may need to reassess. If Reading 2 is right, the Auditor General's query may not be sustained, but the policy goal of excluding these industries from incentives would be only partly achieved. Uncertainty either way affects listed producers, investors and the tax administration.

Hypothetical example

Hypothetical: a brewery lists its shares on the stock exchange and files its return applying the 15 per cent listing concession. One tax officer accepts the return because the Income Tax Act grants the concession to listed manufacturers; another, reading the Industrial Business Act, disallows it and assesses the difference with interest.

Possible improvements and trade-offs

Amend s.11(3छ) of the Income Tax Act to say expressly whether tobacco and alcohol producers (other than fruit-based brandy, cider and wine) qualify for the listing concession.
Removes the doubt in the Act that governs the tax; requires a policy choice on whether listing (which brings disclosure benefits) should be encouraged for these industries.
Amend s.24(3) of the Industrial Business Act to say whether it covers concessions under other tax laws, not only those in s.24(2).
Settles the cross-reference; but leaving tax concessions spread across two Acts may keep producing similar questions.
Leave the texts unchanged and let the question be settled through the tax review, Revenue Tribunal and court process.
No legislative cost; slower and case-by-case, with uncertainty for past years in the meantime.

Questions for legal review

Does 'उल्लिखित कुनै पनि छुट तथा सुविधा' in s.24(3) of the Industrial Business Act refer only to the concessions in s.24(2), or also to concessions available under the Income Tax Act through s.24(1)?
If the two Acts conflict, which prevails for computing income tax — the Income Tax Act as the tax statute, or the later Industrial Business Act?
What wording of s.11(3छ) was in force in each audited income year, and did earlier Industrial Enterprises legislation contain a similar exclusion?

Research status

Researched: 2026-10-12
Confidence: Medium confidence — Both provisions were read in official texts and the Auditor General raises the point directly, but only in one report and for one taxpayer; the text of s.24(3) supports more than one reading, so the existence of an actual conflict is uncertain.
Review: Not yet reviewed by a qualified lawyer.

Still unresolved

The outcome of the examination the Auditor General requested, and any response by the Inland Revenue Department, were not found.
The year-by-year text of s.11(3छ) and s.24(3) over the audited years was not reconstructed from the amending Acts.
The 63rd Annual Report was not found to repeat this paragraph; whether the matter was settled is unknown.