Young Indian Pvt Ltd (YI) had been directed by Delhi High Court on Monday, March 19th to pay Rs. 10 crore to the IT department following a case of alleged misappropriation of funds of funds by the company.
Facts of the case
IT department had sent a notice to the Young Indian Pvt Ltd (YI) on 27th December 2017 under section 156 of the IT Act to pay Rs. 49.83 crore which is 20% of Rs. 249.15 crore, the amount that is due to tax and interests as per tax authorities for the assessment year 2011-12. Young Indian had approached the High Court challenging the said notice stating that they are a charitable organization and they do not have any income, hence they are not liable to pay any tax and was wrongly imposed the tax amount of Rs. 249.15 crore.
The information as provided to the Court was that a case of misappropriation of funds, cheating and fraud charges were brought against Young Indian by the IT department following a complaint filed by Bharatiya Janata Party (BJP) MP Subramanian Swamy accusing the main stakeholders of the company of criminal conduct in his complaint stating that “a firm in which Sonia and Rahul Gandhi each own a 38 percent stake”.
Investigations revealed that the 83.3% shares of Young Indian were held by Sonia Gandhi and Rahul Gandhi, a firm which was incorporated in 2010 with a capital of Rs. 50 lakh. Young Indian had acquired all the stakes in Associated Journal Ltd (AJL), the owner of the National Herald newspaper for Rs. 50 lakh in lieu of Rs. 90.25 crore owed by AJL to the Congress Party.
Previously Gandhi and other accused Congress Party members were granted bail on 19th December 2015 on charges of dishonest misappropriation of property, criminal breach of trust and cheating read with criminal conspiracy.
Advocate Arvind Datar representing Young Indian further stated that the income tax authorities should investigate their claims that the company is exempted from paying taxes as per IT Act. He requested the Court for an interim stay order on the notice sent by the IT department until the case is reviewed by the Commissioner of IT (Appeals).
It was pointed out by Advocate Ashish Jain on behalf of the IT department that as per the new 2017 memorandum of the Central Board of Direct Taxes (CBDT) a deposit of 20% of the disputed income tax demand need to be paid by the aggrieved taxpayer in order to obtain a stay until the matter can be disposed of by the Commissioner of IT (Appeals).
The Division Bench of the High Court comprising of Justices S. Ravindra Bhat and A.K. Chawla reviewed the facts of the case and refused to grant the plea of the Young Indian. The Court directed the company to pay Rs. 10 crore to the IT department in two installments; the first half by 31st March and the next by 15th April before further hearing of the case on 24th April. The Court urged the CIT (Appeals) to expedite the plea proceedings of the Young Indian and to soon dispose of the case.
Advocate Datar’s contentions that it would be quite difficult for the firm to cough up Rs. 10 crore within the allotted time period and the amount should be reduced to Rs. 7.5 crore was not accepted by the Court. The High Court stated that the payment of Rs. 10 crore would absolve the company for the time being and the tax authorities will not charge the company with any dues until the case is disposed of by the CIT (Appeals) while rejecting Advocate Jain’s views that 20% of the disputed amount be paid by the company.