Tata Industries gets I-T demand on round-tripping

    The Income-tax (I-T) Department has sent a notice to Tata Industries, raising a demand of Rs.298 crore on capital gains on the sale of shares in Idea Cellular, held through a wholly-owned Mauritius-based subsidiary, Apex Investments, to Birla TMT Holdings in India.

    In this connection, the Department depended on the Securities Exchange Commission (SEC) filings made by US-based Cingular AT&T, the merged entity of Cingular Wireless and AT&T, when it sold its shareholding in Idea.

    Earlier, the international tax division of the Department had sent a show-cause notice to the company for not paying tax deducted at source (TDS) on payments made to Cingular AT&T.

    The Department has also said that the transaction violates Foreign Exchange Management Act (FEMA) regulations on overseas investments by Indian companies in joint ventures and wholly-owned subsidiaries.

    These investments, according to the notice, have also violated telecom regulations in India since Tata Industries held two licences simultaneously – one directly and the other through substantial holdings in Idea, which it has now exited, the report said. Officials said the Enforcement Directorate, which is responsible for enforcing exchange control laws, was also being asked to look into the issue. In a response to a questionnaire, a Tata Industries official said, “TIL has received an order from the I-T Department under Section 143(3) of the IT Act for assessment year 2007-08. TIL has filed an appeal with CIT Appeals and the hearing is awaited”.