NDTV case: assessing officer was right in adding ₹642 crore, says ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the Assessing Officer and the Dispute Resolution Panel’s (DRP) order in the NDTV case, bringing to tax the ₹642 crore ($150 million) raised by the news broadcaster’s Dutch subsidiary, followed by a series of restructuring transactions.

The AO and DRP order is related to assessment year 2009-10. The ITAT, has in its July 14 order, confirmed (endorsed) the AO move to add ₹642 crore to the income of NDTV by treating it as “unexplained money” under Section 69A of the income-tax law.

“We are of the opinion that the Assessing Officer has correctly made the addition of ₹642.54 crore by invoking Section 69A of the Act on account of money transferred by M/S Universal Studio International BV, which was routed to the coffers of the assessee (NDTV) by entering into a series of mergers and liquidation by payment of dividends, loans without any obligation for repayment,” said the ITAT order, which was seen by BusinessLine . The Tribunal added in its order, running into 400 pages: “Hence, we do not find any infirmity in the order of the Assessing Officer as well as the Dispute Resolution Panel, and hence the addition of ₹642.54 crore in the hands of the assessee u/s 69 A is confirmed.”

It also concluded, that the “amount of ₹642.54 crore represents the assessee’s own taxable income, earned by it from undisclosed sources and the same is taxable.

The ITAT has also held that the transaction/structuring has been used principally as a devise for the distribution or diversion of the sum to the Indian entity, and that the beneficial owner of the money is the assessee (NDTV).

The ITAT observed that share money was subscribed by a Bermuda-based group (investor company) in NDTV’s Dutch subsidiary (investee company), and in the same year the investee company paid ₹643-crore dividend out of its securities premium account to another NDTV group company without payment of dividend to the investor company.

The Tribunal rejected NDTV’s contention that since the money was received in the subsidiary, it cannot be taxed in the hands of the assesse (NDTV) as it was not party to the transaction. Also, the ITAT noted that in each and every agreement, the assessee was a party, and the subsidiary companies had almost the same set of directors.

Also, at that time, the Netherlands did not have any tax on distribution of dividends and there was no need of establishing substance in that jurisdiction, according to the ITAT order.

The order also noted that there was no business activity at the level of the investee company, which was in existence for less than a year.

Last week, in a BSE filing, NDTV said it will, “continue to fight this misguided case made by the ITD” and that it is exploring all the options available to it in accordance with law. While the company claimed there were numerous inconsistencies and contradictions in the ITAT order, it stated: “It is important to note that the ITAT has accepted that there was no round-tripping or money laundering, as was alleged by Income-Tax Department.”

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