Income Tax Appellate Tribunal: NDTV round-tripped Rs 642 crore via shell companies in 2009-2010

 

The Income Tax Appellate Tribunal (ITAT) has indicted the founder of NDTV, Prannoy Roy, for tax evasion and money laundering. The tribunal said that in the year 2009, the Ministry of Corporate Affairs was hands in gloves with the owners of NDTV in hiding financial information of the foreign shell companies floated and used for money laundering of Rs 642 crores.

The tax department had alleged that Rs 218.30 crore was the  tax that was sought to be evaded on investment of Rs 642.54 crore. The amount, Rs 624 crore received by NDTV was from a subsidiary for allotting shares to NBC Universal Inc and Universal Studios International BV. It had sought a penalty of Rs 436.8 crore at the rate of 200 per cent of  tax evaded.

Income Tax Appellate Tribunal (ITAT)  is second appellate authority under the direct taxes and first independent forum in its appellate hierarchy. With a view to ensure highest degree of independence of the ITAT, it functions under the Department of Legal Affairs in the Ministry of Law and Justice ,and is kept away from any kind of control by the Ministry of Finance.

The Income Tax Appellate Tribunal (ITAT), in its latest ruling, has revealed that the NDTV group laundered Rs 642.54 crore through a complex cobweb of shell companies. ITAT upheld the tax demand of around Rs 450 crore raised by the Income Tax Department in a case pertaining to a US$150 million investment by US television network NBC in NDTV Networks in 2008. NDTV Networks is the holding company of NDTV.

The order states that NDTV and its promoters laundered 1,100 crore of black money during 2007-08 to 2009-10. The ITAT order, which runs into 385 pages, stated: “The real nature of the transaction was actively and deliberately concealed under a thorough, methodical and calculated planned strategy”.

The ITAT order said, “Given the above facts and circumstances of the case, which involve active, deliberate and planned concealment and misrepresentation of facts, this is a fit case, which merits the levy of penalty of 200 per cent of the tax sought to be evaded. Accordingly, you are requested to show cause as to why penalty u/s 271(1)(c) of the Act read with Explanation 1 thereof may not be imposed upon the company for concealment of the particulars of its income in respect of the impugned addition of Rs 642,54,22,000”.

ITAT has also taken note of the role of PWC in the scheme of tax evasion,said official sources. The adjudication of the I-T case against NDTV over alleged round-tripping of investments of Rs 450 crore for the assessment year 2007-08 and 2008-09 is still pending.

According to the agreement on May 23, 2008,for the sale and purchase of shares in NDTV BV between Universal Studios International BV as the seller and NDTV Networks BV as the purchaser of the shares.

It was agreed that US$150 million would be a consideration for the purchase of shares. Accordingly, 9,15,498 shares were subscribed and the price per share was Rs 7,015.05. The subscription amount was received by NDTV Networks International Holdings BV on October 14, 2009.

According to the agreement, the seller subscribed for the sale of shares to the subscription agreement. The consideration of shares was Rs 58.08 crore, and approximate valuation was Rs 634.17 per share. The same shares, which were purchased by Universal Studios International BV for Rs 64,254 were sold on October 14, 2009, for Rs 58.08 crore. It means shares were purchased by the investor at the rate of Rs 7,015.05 per share and were sold at 634.17 per share.

With the ITAT’s July 14 order upholding the tax demand, penalty proceedings are likely to commence shortly.

NDTV said, “The legal advice received is that a consistent view has to be taken and it appears that the order had been passed in a haste and the above inconsistencies have arisen because of a hurried order.”

“We have been advised that Section 69A of the Act is applicable only when money is found in possession of a taxpayer but not accounted for in the books of accounts. However, the said section has no application in the present case since admittedly, investment made by NBC Universal (admittedly then subsidiary of the GE Group) through its step down subsidiary, Universal Studios International BV, was duly recorded in the books of accounts of the company’s subsidiary, viz,  NDTV Networks International Holdings BV,” it said.

Stating that it will continue to fight the “misguided case” made by Income Tax Department, NTVD said it is “exploring all options available to it in accordance with law.

One Response to "Income Tax Appellate Tribunal: NDTV round-tripped Rs 642 crore via shell companies in 2009-2010"

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