ITAT confirmed: NDTV Group Laundered Rs 642 crore

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. 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 amount (Rs 624 crore) received by NDTV was from a subsidiary for allotting shares to NBC Universal Inc and Universal Studios International BV. The shares were allotted at Rs 7,015 each to the companies — which had no business activities. It was done without the valuation of shares.

After analysing the various subsidiaries and internal mails, the ITAT documents suggested that NDTV has made a "conscious, deliberate and well-planned attempt to conceal particulars of income."

The ITAT, in a ruling on July 14, 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.

On May 23, 2008, titled as the agreement for the subscription of shares in NDTV Networks International BV by Universal Studios International BV, 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 through an agreement, titled as the agreement 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.

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.

NDTV claimed that the investor in NNIH was the GE group. There is no reference to the amount invested in USBV by the GE group for making investments in USBV.

NDTV "concealed" the "actual ownership and control" over the money amounting to Rs 642.54 crore. The group had "introduced this money by creating a complex cobweb of sham subsidiaries in The Netherlands and the UK, and later routed this money through sham subsidiaries in Mauritius until the money was ultimately ploughed back into the assessee company in India," the tax documents accessed by DNA revealed.

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". In a stock exchange filing, NDTV said it was surprised. "It is important to note foremost that the ITAT has accepted that there was no round-tripping or money laundering, as was alleged by the income tax department," it said.

The document revealed that a top official of NDTV had been given the rationale for the creation of foreign subsidiaries as being the restrictions imposed on FDI in news channels, whereas the funds introduced through foreign subsidiaries were meant for non-news companies only — which could be achieved through obtaining direct FDI into these companies in India.

THE NETWORK

NDTV group had set up wholly-owned subsidiaries (WOSs) and joint ventures abroad through overseas investment.
Investigations revealed that NDTV had about 11 subsidiaries, two associates and one trust in foreign land.
NDTV holds 100 per cent shares in NDTV Networks BV, Netherlands. Further, the step-down subsidiary of NDTV Networks BV, Netherlands holds 68 per cent of shares of NNIH Netherlands.
The next step-down subsidiary NDTV BV, Netherlands has 90 per cent shareholding from NNIH Netherlands and 10 per cent shareholding from NDTV India Ltd.
NDTV BV, Netherlands holds 92 per cent of shares of NDTV Networks Pic, UK and remaining 8 per cent of its shares have been held under ESOP scheme.
NDTV Networks Pic, UK has 80-100 per cent shares in four different media entities located in India - namely NDTV Labs, NDTV Imagine, NDTV Lifestyle and NDTV Convergence.