Sri Lanka's Keells says ruling could cost over $18 mn

COLOMBO, Sept 18 (Reuters) - Sri Lanka's John Keells Holdings JKH.CM on Thursday said a court ruling against privatisation of its subsidiary Lanka Marine Services (LMS) could cost a maximum of 2.032 billion rupees ($18.84 million).

The cost announced by the top conglomerate in the bourse is 50 percent higher than its original estimation of up to 1.3 billion rupees announced a day after the July 21 court ruling.

The ruling cancelled all the tax exemptions enjoyed by LMS since 2002 under an agreement with the country’s Board of Investment, after the court found the conglomerate had bought LMS from the state for an undervalued price.

And late on Wednesday, the country’s treasury secretary, who was ordered to pay 500,000 rupees to the state in compensation for his role in the sale, resigned.

Central Bank Governor Ajith Nivard Cabraal confirmed the resignation of Treasury Secretary P.B. Jayasundara, but declined to give a reason. Jayasundara could not be reached for comment.

Keells in a statement said it had received the formal assessments on the tax due, and that the minimum cost was estimated at 724 million rupees.

However, the company didn’t give any clear explanation for the difference of 1.3 billion rupees between minimum and maximum liability.

“There is a clear conflict between John Keells and the Inland Revenue Department with regard to the tax matters. Keells says it has to pay the tax at a rate of 15 percent, while IRD says it is 35 percent. There is a tax penalty as well,” Channa Amaratunga, director at CT Capital, said.

Since the ruling, shares in John Keells Holdings have plummeted 22.7 percent to close at a three-and-a-half year low of 81 rupees on Thursday. (Additional reporting by Ranga Sirilal; Editing by Bryson Hull)