The Supreme Court Friday quashed the tax re-assessment of New Delhi Television Ltd (NDTV) initiated by the income tax (IT) department that alleged Rs 400 crore unaccounted money in a UK subsidiary of NDTV.
The tax case relates to the issue of step-up coupon bonds amounting to $100 million issued in July 2007 by Network PLC (NNPLC), an NDTV company incorporated in London. At that time, NDTV had agreed to furnish corporate guarantee for this transaction. These bonds were subscribed to by various entities and were to be redeemed at a premium of 7.5 per cent after the expiry of the period of five years. However, these bonds were redeemed in advance at a discounted price of $74.2 million in November 2009.
The tax department held that NNPLC had virtually no financial worth, it had no business and therefore it could not have issued convertible bonds of $100 million, unless the repayment along with interest was secured. While the tax department did not doubt the validity of the transaction it imposed a guarantee fee at the rate of 4.68 per cent by treating it as a business transaction and added Rs 18.72 crore to the income of NDTV through an August 2012 order.
The SC in its order said that there has been “no non-disclosure of material facts” by NDTV as claimed by the tax department in this case. “…we find that the assessee (NDTV) had fully and truly disclosed all material facts necessary for its assessment and, therefore, the revenue cannot take benefit of the extended period of limitation of six years,” said the SC.
“The judgment of the Apex court relied on stelled position of law and was quashed for exceeding limitation period of four years. It was held that NDTV disclosed all the primary facts related to the assessment and hence the extended limitation period of 6 years for issuance of notice won’t apply. The point to be noted is that the SC didn’t rule on merits of the case but in the technicality of issuing the notice. The revenue may issue a further notice invoking the limitation of 16 years as is the case relating to a foreign asset/interest,” said Amit Maheshwari,Partner, Ashok Maheshwary & Associates LLP .
However, the tax department can still issue a fresh notice to NDTV under the rule that allows tax department to reopen assessment of firms up to to 16 years if it finds that the assessee has derived income from a foreign entity.
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