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SC pulls up I-T for slow probe into 2G scam

News18test sharma |

Updated: May 16, 2011, 3:14 PM IST
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SC pulls up I-T for slow probe into 2G scam
The SC asked the department why it acted on tax evasion in 2G case after three years.

New Delhi: The Supreme Court on Monday pulled up the Income Tax department for not taking timely action against the companies involved in the 2G spectrum scam and said had it not intervened, the officials would have "slept over it" and the oversees probe would not have proceeded.

The court said despite the department coming to know about tax evasion cases in 2008, it started taking action only after March 2011 after it was directed to file action taken report.

"We are sure they (Income Tax Department) would have slept over it otherwise (if it had not intervened). There is no doubt about it," a bench comprising justices GS Singhvi and AK Ganguly said.

Additional Solicitor General Vivek Tankha, appearing for the department, tried to justify the delay saying that big companies are involved in the case and they are creating obstacles.

The court, however, was not satisfied with the submission and said there is no need to say all these things about these companies as they are "prima facie tax evaders".

"How are they big. What kind of mindset do you have. Prima facie they all are tax evaders. Do not call them big. Do not insult the word," the bench said.

The department also informed that all telecom companies, which after the allotment of the spectrum, have sold their controlling stakes to foreign firms through the Mauritius route, have been asked to pay tax on the capital gain from such transactions.

Tankha submitted that the department has already served notices to these firms and are treating them as assessees.

"The Director General of International Transactions has already issued notices to them. Some of them have already admitted that they should be taxed in India and we have issued them notices. They have permanent offices in India and they are assessees now," said Tankha.

The bench asked the IT department to complete the departmental proceedings against the tax-evading firms within the permitted time.

The bench also asked CBI, ED and IT department to cooperate with each other during the probe.

The department said that it was following the Vodafone case, where the UK-based telecom giant bought controlling 67 per cent stake in the Hutchison Essar using the DTAA (Double Taxation Avoidance Agreement) route in Mauritius and claimed exemption. However, the apex court asked it to make part payment of Rs 2,500 crore.

"In such cases, transaction and the beneficiaries were outside India, but the companies were physically present here," Tankha contended.

Prashant Bhushan, counsel appearing for the NGO, Centre for Public Interest Litigation (CPIL), submitted that companies from the US, Europe and the Gulf were taking the Mauritius route by opening "post box companies" and taking tax benefits.

As per the DTAA agreement signed between India and Mauritius, if a firm pays tax in the island nation, then it is exempted from paying any tax here. Telecom firms such as Swan, had sold their equity to the foreign partner through Mauritius route and claimed tax exemptions.

It has been alleged that Swan telecom after securing the 2G licence, sold its stake to Mauritius-based Delphi Investments, which later transferred its stake to a Mauritius-registered subsidiary of Dubai-based Etisalat.

First Published: May 16, 2011, 3:14 PM IST
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