- 01
The situation
The client's income had been reported under a standard, default heading, on the assumption it was the only applicable treatment. No one had tested that assumption against the specific facts of the transaction.
- 02
What we found
Reviewing the transaction's actual facts against the relevant provisions of the Income Tax Act 2058 showed the default heading was not the correct classification. A different, legally supportable classification applied, given how the transaction actually worked.
- 03
What we did
We reclassified the income under the correct heading, supported by a documented technical position tying the classification to the specific facts and the statutory language, without restructuring or altering the underlying transaction in any way.
- 04
What changed
The correction produced a tax saving of approximately NPR 50 lakh.
The lesson
The difference between tax planning and tax avoidance is that nothing about the transaction changed, only the accuracy of how the law was applied to it.
