Forget NDTV Ban, Do you know how much Tax has it evaded?

NDTV going off the air for a day doesn’t cause much impact to neither the people nor the media house financially, but what is at stake is its “credibility” amongst its viewers.

This is not the first time that NDTV is at crossroads with the law enforcement agencies, people who are lending their support including the “Editors Guild”, “political parties” and “others” should remember this. There is already a show cause notice issued by the Income tax department against the media house on June 2016 for raising $150 US million i.e. Rs 642 crores via backdoor route. This is what we call black money, which NDTV is probably finding it hard to justify.

We are going to unravel these details for you to know the truth.

NDTV created four subsidiary companies namely NDTV BV (NBV), NDTV Networks BV (NNBV), NDTV Networks International Holdings BV (NNIH) and NDTV Networks Plc (NNPLC). Universal Studios International BV (USBV) on 23^rd May 2008 entered into an agreement with NDTV Networks International Holdings BV (NNIH) for purchase of 9,15,498 shares worth Rs 642 crores (US$150 million) equivalent to 26 % effective indirect stake in NDTV Networks Plc (NNPLC).

Universal Studios International BV’s (USBV) parent company is NBC Universal Inc. (NBCU) and NBCU is managed by CA Holdings, CV, Bermuda.

The amount of Rs 642 crores for 9,15,498 shares comes to Rs 7,015.05 / share, whereas the face value of each share of NNIH at that time was around $1 / share which was equivalent to Rs 45 to 50 / share. NNIH was a holding company and NNPLC was incorporated to promote interests of NNIH, the above sale was despite the fact that NNPLC did not have any business activities, no fixed assets, no rent paid and even no employee with just an exception of Mr. Vikram Chandra, who was designated as the CEO of the company.

The subscription of a share with a valuation of Rs 50 / share has been purchased by USBV for Rs 7015 / share, is what the Tax sleuths are finding suspicious. It feels that “Since no prudent business man will purchase the shares of a paper company at a price, which was more than 140 times of the face value that too without any credible valuation, the transaction was held as a part of scheme of routing own fund of the assesse company in the assessment order”

NNIH was a shell company 100 % owned by NDTV and the only asset it has was direct ownership of shell company NNBV and indirect ownership of another shell company NNPLC. The entire capital of NNIH was a mere Rs 12 Lakhs invested by NDTV. Inspite of this NNIH was able to issue fresh shares with a valuation of 6 Lakhs and was able to sell them at an astronomical value of Rs 642.54 crores to USBV. Immediately after receipt of this money NNIH declared dividend and distributed the amount of Rs 643.35 crores only to NNBV which was 68.60 % stakeholder, while in a surprising move no dividend was given to the other stakeholder USBV which had indeed brought the entire money of Rs 642.54 crores.

During the FY 2009-10 in an equally dramatic move the same 9,15,498 shares were re-purchased back by NNBV for Rs 58.08 crores, which is Rs 634.17 / share from USBV marking its exit with a loss of Rs 584 crores.

Now to summarize the events, the Income tax department says that shares having a face value of Rs. 50 / share approx. were sold at Rs. 7015.05 / share and for a cover up they were bought back at Rs 634.17 / share resulting in a claim of loss amounting to Rs. 584.45 crores to USBV and simultaneous introduction of undisclosed income of Rs. 642.54 crores in the books of NDTV group.

Further the amount of Rs. 643.35 crores that NNBV received as dividend from NNIH were routed back in two trails through another set of complex cobweb of sham companies.

• TRAIL (1) NNBV invested Rs 389 crore in NDTV (Mauritius) Media Ltd (NMML), a 100% subsidiary of NDTV, NMML invested 387.59 crore in NDTV Studios Ltd (NSL) on 29/09/2008 and eventually NSL merged with NDTV on 01/04/2010.

• TRAIL (2) NNBV advanced unsecured loan of Rs 254.75 crore to NDTV Networks Plc (NNPLC). NNPLC was then liquidated and merged with NDTV One Holdings Ltd. (NOHL) on 30/09/2011 and eventually NOHL merged with NDTV on 02/11/2012.
• Due to the above facts and circumstances, the IT dept. feels that there has been a “deliberate and planned concealment and misrepresentation of facts and deems fit to levy a penalty @ 200 % of the tax sought to be evaded.”Proposed Quantum of Punishment:-
  • Penalty @ 200 % in respect to addition of Rs 642,54,22,000/-
    1. Tax sought to be avoided = Rs. 218,40,00,938/-
    2. Penalty proposed u/s 271(1)(c ) @ 200 % = Rs 436,80,01,876/-
  • Penalty @ 100 % in respect to addition of Rs 260,63,06,619/-
    1. Tax sought to be avoided = Rs. 88,58,83,620/-
    2. Penalty proposed u/s 271(1)(c ) @ 100 % = Rs 88,58,83,620/-
  • Total amount of proposed of proposed penalty = (1b)+(2b) = Rs 525,38,85,496/-

  Ironically if one does the arithmetic, it can be concluded that in an attempt to bring Rs 642 crores in the country illegally the IT dept. has calculated Rs 525 crore as tax with fine and the quest by investigating agencies to find the root source of this “unexplained money”.

  Fundamentally the muted question still remains WHO paid this money and WHY? NDTV must answer to it’s tax evasion allegations and not only play the victim card that it’s been hounded by the government.

  Reference: https://www.scribd.com/document/319908941/NDTVe-Income-Taax-Notice-June-2016