The mainstream media industry in India is a dog eat dog world. Most of the major media houses have some vested interests controlling them. Even with political money backing these ventures they seem to be losing money. One of pioneers of the news television NDTV evolved from being content provider to Star News to becoming a major channel. This evolution has not been an easy one. It has managed to thrive not based on Darwin theory of being tough but under the shelter of an ex- Cabinet Minister.
The Income Tax Department in its order dated 31.3.13 held that NDTV pay nearly Rs 800 crores as income tax for the assessment year 2009-10.The additions were under
1.Unexplained Investment Rs 642 Crore
2. Non deduction of TDS Rs 48 crore
3.Disallowance of expenses Rs 0.82 crore
4. Disallowance u/s 14A Rs .78 crore
5.Transfer Pricing adjustments Rs 12 crore.
This huge demand came about after prolonged battle by S.K.Srivastava,IRS Officer. This man blew the lid of the fraud even as the Assessing Officer was bribed by NDTV into granting a refund of Rs 2.47 crores. Srivastava went through hell after he wrote an open letter to then Finance Minister P.Chidu alleging that Chidu and his son funnelled Rs 5,500 crores into NDTV from sham companies in London through NDTV subsidiaries in Mauritius. His letter went to say that this money was Chidu’s share of 2G scam. The FM went into overdrive first transferring him, trying to have the Delhi High Court declare the man is mentally unsound and finally accuse him of molesting a lady IRS officer. None of these succeeded and Chidu had to bite the dust.
This matter started after NDTV filed its return of income declaring a loss of 64 crores for AY 09-10. Now NDTV being a listed company needs to disclose all its subsidiaries to the Stock Exchange and other regulators. However, it failed to disclose its subsidiaries. NDTV shareholding pattern is a complex one.
One of the companies NDTV International (NNIH) received Rs 6,42,54,22,000 on account of subscription of shares by Universal Studios International BV (USI). This transaction was never disclosed by the company to the regulators.This sum was received by NNIH which had no business transactions. This was channelled into different NDTV companies in India and finally all the Indian entities were merged into one.
The DRP as well as the Income Tax Dept clealy called this a sham transaction as the NDTV entities acted as an agent of the NDTV India. The DRP went on to question as to why an Indian company would form so many layered subsidiaries in Netherlands? The shares of NNIH was worth $1 upon being formed. The shares were bought by USI at huge premium. The shares of NNIH worth Rs 40-45 was bought at Rs 7,015 and were sold to a another group entity at Rs 634.
Once the transaction was complete the Mauritius & the Netherlands entities were closed down. These companies were not given their fair share of holding. The money so received was called “Step Up Coupons”.This is a new financial instrument invented by NDTV.
The mystery is why would anyone invest nearly $150 million (600 crores) into a letter box company called the NNIH.The directors of this company were Indian, it had no assets or liabilities, no business to speak of. Clearly the intention of NDTV was to bring in laundered money through the Mauritius route.
S.K. Srivastava alleged that the AO handling the case was bribed by NDTV, she was sent of holiday to Europe and her husband was given a job at NDTV. Now the IRS Service rules require a declaration if the AO or family members of AO are interested in the assessee. But the AO did not do this and proceeded to grant a refund.
The assessment was set aside and S.K. requested permission to tap phones of NDTV.He even wrote a letter stating that the FM was guilty of accepting bribes & laundering money. But PC tried to browbeat the officer.
At the DRP hearing, NDTV refused to cross examine SK thereby tactically admitting guilt.Now NDTV boxed into a corner will have to pay up. But will the master mind be held guilty of his crimes?