The Delhi ITAT, recently upheld a tax demand raised on a $150 million investment by a US television network in NDTV in 2008.
It held that the assesse, NDTV indulged in a clear cut case of “abuse of organization form/ legal form and without reasonable business purpose” and therefore, confirmed the order passed by the Assessing Officer.
The IT Department had raised a demand of Rs. 218.30 crore, invoking section 69A of the Income Tax Act. It had alleged that Rs218.30 crore was the tax that was sought to be evaded on investment of Rs. 642.54 crore. It had sought a penalty of Rs. 436.8 crore at the rate of 200% of tax evaded.
It noted that there is no doubt that the transaction used principally as a devise for the distribution/ diversion of sum to the Indian entity. The beneficial owner of the money is the assesse.
Confirming the invocation of Section 69A of the Income Tax Act the Tribunal held that “It is a clear out case of “abuse of organization form/ legal form and without reasonable business purpose and therefore, no fault can be found with the order of the Id Assessing Officer/ Id DRP in charging to tax Rs. 642 crores by re-characterizing the conditions according to its economic substance and imposing the tax on the actual controlling Indian entity. In the present case we do not have any doubt that the transaction used principally as a devise for the distribution/ diversion of sum to the Indian entity on review of all the facts circumstances surrounding the present transaction. In the present case, the beneficial Owner of the money is the assessee. This money trail stares so glaringly on the various complex structures created by the assessee that without proving any substance one cannot reach to any other conclusion but to the conclusion that series of the transaction entered into by the assess were to transfer Rs. 642 crores from the investor-company or the owner of the investor company to the assessee”.
