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ITAT upholds case against NDTV’s Prannoy Roy and Radhika Roy

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Prannoy Roy said the tribunal only said that the capital gains should be considered short-term in nature.
NEW DELHI: The Income Tax Appellate Tribunal (ITAT) has upheld the income tax department’s contention that New Delhi Television (NDTV) founders Prannoy Roy and Radhika Roy concealed income of more than Rs 117 crore each over two assessment years in a June 14 ruling. Following this, the I-T department is likely to move against the Roys and file a prosecution complaint, akin to a chargesheet, in a competent court, said people with knowledge of the matter. This may also set the ball rolling for enforcement agencies to probe charges of alleged money laundering, they added. ET has seen the ITAT order.

“There is absolutely no question of concealment of income,” Prannoy Roy told ET in an email. He said the ITAT ruling was to do with classification of the capital gains involved — whether short-term or long-term. Stating that the case involves “legal issues and technical tax law issues”, Roy said an appeal against the tribunal’s findings will be filed once courts reopen in July.

According to the I-T department, the Roys purchased shares of NDTV at Rs 4 apiece in August 2009 when they were trading at Rs 140.

‘Shares Transferred at Face Value’

They sold them the same day to RRPR Holdings at the market rate, making “huge illegal capital gains exceeding Rs 200 crore”, according to the income tax department, an official told ET. The Roys hold 50% each in RRPR Holdings. The assessment further alleged that the Roys failed to pay income tax on these transactions, pegging the evasion at more than Rs 100 crore each. Roy said this was merely a transfer of shares at face value among themselves.

The alleged concealment of income is Rs 1.30 crore each for the assessment year 2009-10 and Rs 116 crore each for the assessment year 2010-11.

“The assessee has failed to explain by credible evidence any reason of buying the shares at Rs 4 per share when the quoted price of the share on the recognised stock exchange is Rs 140 per share,” read the 137-page order passed on June 14. “As the motive itself of the assessee was not demonstrated at all with credible evidences, the assessee now cannot say that there was no motive of tax evasion.”

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Prannoy Roy said the tribunal only said that the capital gains should be considered short-term in nature.

“The ITAT or the tax department has not unearthed any undisclosed or concealed income,” he said in the email to ET. “The solitary issue in assessment year 2009-10 was whether income from capital gains was to be assessed as short-term or long-term gains. The ITAT has rejected our argument of long-term capital gains and taxed it as short-term.”

Roy said the shares were transferred at face value.

“For the assessment year 2010-11, the technical issue is whether we were obliged to transfer shares of NDTV to our own company (RRPR Holdings) at market value or could we transfer them at face value,” Roy said. “Moreover, there was no gain as the transfer was from ourselves to ourselves. All these transactions were duly and fully disclosed. There is no question of concealment.”

Besides a penalty of Rs 14 crore each for alleged concealment of income, the IT department may levy an additional penalty of Rs 17 crore each, said the people cited above.

The tribunal recorded that payments of Rs 403.85 crore from Reliance Industries Ltd to RRPR in July 2009 were routed through Reliance Ventures Ltd, Shinano Retail Pvt. Ltd and Vishwapradhan Commercial Pvt. Ltd (VCPL). It also referred to the Securities and Exchange Board of India (Sebi) order of June 2018 which held that the transaction was a takeover exercise couched as a loan agreement with the intention that VCPL acquire control of NDTV without contemplating any repayment.

Sebi had on June 14 banned the Roys from being directors or holding any key managerial positions in NDTV for two years because they didn’t disclose material and price-sensitive information about loan agreements entered into by them with ICICI Bank and VCPL. The founders were banned from accessing the securities market for that period. However, the Securities Appellate Tribunal (SAT) stayed the order on June 18.

All the investments of the Roys and RRPR Holdings, an NDTV promoter, in mutual funds were to remain frozen for two years as part of the Sebi order. It had also barred the Roys from holding board positions or key managerial posts in any listed company for a year. The Roys established NDTV, one of India’s top news broadcasters, in 1988.
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