Mindtree shares worth Rs 665 crore held by V G Siddhartha, Coffee Day attached

The I-T Department had earlier conducted searches at various premises of Cafe Coffee Day as well as the residence and offices of Siddhartha in September 2017.

Siddhartha, the founder of Coffee Day Enterprises — which runs the coffee chain Cafe Coffee Day — is also the son-in-law of erstwhile Karnataka Chief Minister and Congress leader S M Krishna.

The tax department’s restriction on transfer of Mindtree’s shares numbering 74.9 lakh, which include 52.7 lakh shares owned by Siddhartha and 22.2 lakh shares owned by Coffee Day Enterprises, will be valid for six months from the date of order, i.e., from January 25 till July 25.

“Provisional attachment under section 281B of Income Tax or prohibitory orders Act, 1961 for tax demand likely to be raised by the Income Tax Department on the following shareholders of the Company: (i) Coffee Day Enterprises Limited (ii) V G Siddhartha,” the Mindtree statement said.

Mindtree, in its filing, also said that the shares held by Siddhartha and Coffee Day enterprises have been prohibited for transfer or charge.

The attachment of shares has been ordered by Assistant Commissioner of Income-tax, Central circle, Bengaluru.

Section 281B of the Income-tax Act relates to provisional attachment to protect revenue in certain cases.

“… Where, during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment, the Assessing Officer is of the opinion that for the purpose of protecting the interests of the revenue it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee,” the section states.

At the end of December 2018 quarter, Siddhartha held 54.69 lakh shares (3.3 per cent stake) in Mindtree, while Coffee Day Enterprises Ltd had more than 1.74 crore shares (10.63 per cent stake).

Another entity, Coffee Day Trading Ltd, holds over 1.05 crore shares (6.45 per cent holding). Mindtree’s promoters, which include Subroto Bagchi, Krishnakumar Natarajan, NS Parthasarathy, and Rostow Ravanan, together hold roughly 13 per cent stake in the company.

[UPDATE]

On January 27, Sadananda Poojary, company secretary and compliance office at Coffee Day Enterprises Ltd, sent us this response: “V G Siddhartha has received orders u/s. 281B of Income Tax Act, 1961 provisionally attaching few shares held in Mindtree Limited to safeguard the interest of the Revenue in respect of possible future tax and penalty obligations in respect of open assessments. The Company would like to clarify that in response to notices u/s 148 & 153A of the Income Tax Act, the Promoter and the Company have filed required revised returns. Further, there is no tax liability payable by the company and its subsidiaries as per the revised returns filled. The promoter has discharged all the tax liability along with the revised returns. Further, there is no undisputed tax liability for the Promoter and the Company. The required action will be taken to release these shares in the next few days.”