Building Real Estate Over The Debris Of Fourth Estate

In the light of the decision of Delhi High Court, Sonia, Rahul and other Congress leaders have to face the trial court and income tax adjudicators in National Herald case.

Viraat from Delhi

Gandhis, the Congress and their income was not taxed. Now in the light of Delhi High Court orders,the IT department wants documents from the Congress, AJL and YIL. Sonia, Rahul and others have to fight before the trial court of IT adjudicators.

“Don’t be arrogant”; this is the counsel given by the Delhi High Court to the Congress leaders.  It was clearly told that Sonia Gandhi and Rahul Gandhi have to fight the legal battle before trial court or IT adjudicators.  The bench of S Muralidhar and Chander Shekhar, JJ, warned the Congress’ spokes person and senior Advocate Abhishek Manu Singhvi either to withdraw or take an order of dismissal. To avoid an adverse order, he withdrew.

The media rightly reported that it was a major setback to two Gandhis. They cannot approach the Supreme Court for revision or appeal. Not even for review before the same court. Because, in the eyes of law, there is no writ petition at all because the petitioner has withdrawn it. Had it been an order on merits, Congress leaders would have scope for appealing as aggrieved parties. A withdrawing party cannot claim to be an aggrieved party.

Is it an issue of Congress Party?

Is it a matter of Congress party or an allegation against two individuals? It is not a party issue at all. Some of the Congress leaders held ‘shares’ in the Young Indians Pvt Limited (YI).  Subramanian Swamy alleged that Gandhis had taken over the assets of Associated Journals Ltd (AJL) which include vast land holdings. AJL shares shifted to YI. Swamy saw conspiracy and cheating behind the YI acquiring AJL, the publishers of National Herald, for Rs 50 lakh. Interestingly, the YI also purchased right to recover a loan of Rs 90.25 crore that AJL owed to Congress.  The Congress party gives loan, the YI collects it back.  The YI purchases AJL for Rs 50 lakh.

The Trial court allowed the Income tax department to proceed with the probe into the Swamy’s complaint. Then it was YI, not Congress party, that approached the Delhi High Court to quash the IT probe as permitted by trial court. Delhi High Court was no ready to quash. A very intellectual lawyer, legal expert Abhishek Manu Singhvi understood the mood of the court and withdrew the petition.

Interest free loan!

The YI took over the AJL but it did not revive the National Herald. Congress gave an interest free loan of Rs 90.25 crore loan to AJL. It has neither newspaper nor income to back the loan. Gandhi’s purchased AJL which has a liability of Rs 90.25 crore just for Rs 50 lakh. But the National Herald has real estate worth Rs 2000 crore. Subramanian Swamy called it conspiracy.

Income Tax department issued a 24-page notice to Young Indian considering Sonia and Rahul as real beneficiaries of the entire transaction.  The notice dated 10 January 2017 alleged that Priyanka played a role in ascertaining that YI comes in control of 100 per cent shares of this company.

The Tax dilemma

The Income Tax department just wants the documents from Congress, AJL and YI to verify these claims to assess their tax.  The YI is challenging the proposed reassessment for financial year 2010-11.Because, the IT wanted to know real income that accrued when company was fully taken over with properties at least worth of Rs 1600 crore.

What is this Rs 50 lakh? Is it charity? The income accrued by investing Rs 50 lakh cannot be disallowed as ‘expenditure’.  The IT doubted this transaction and considered several steps involved in this take over.  For IT, it is “the scheme to take over immovable properties of AJL without paying any taxes on benefits accrued to YI and its majority shareholders”.  The IT considered the following points:

  1. Registered office of AJL was shifted from Lucknow to Delhi and a new company YI was incorporated by some important persons such as Sonia, Rahul, Fenandes and Vora, who were connected with AICC as well as AJL.
  2. The YI had no assets. It has an AICC loan of Rs 90.21 crore, which was shown as sale of loan for a consideration of Rs 50 lakh. The amount was fixed at Rs 90.21 crore in order to ensure that the amount is just sufficient to allot 99 per cent of share of AJL to YI. Rs 1 crore was suspiciously obtained as a loan from a dubious company.
  3. The YI did not carry out any activity consonant with its stated objective but took over real estate business of AJL to its benefit.
  4. Alleged sale of loan of Rs 90.21 crore by AICC to YI have not been proved through documents because assignment of loan was not acknowledged and confirmed by AJL.
  5. Takeover of AJL was complete within 3 months from the date of incorporation of YI, which subsequently shifted to Herald House in Delhi, one of the prime properties of AJL without paying any compensation for use of space.
  6. The YI obtained registration under Section 12A of the Act, which entitled it to exemption on its income on May 9, 2011 so that value of all benefits from real estate business of AJL get tax exemption.
  7. In order to hold 100 per cent shares of AJL by YI, Priyanka Gandhi Vadhra also purchased additional shares through Rattan Deep Trust and Janhit Nidhi Trust.
  8. YI concealed purchase of loan of Rs 90 crore for Rs 50 lakh in its Profit and Loss Account and the same was camouflaged as expenditure on object of YI. It was not disclosed on the ground of being insignificant investment whereas the reason was to hide real transaction.

The Income Tax department is concerned only with the hidden income for its tax purpose. But the angle of conspiracy and criminality is yet another trial, none knows when it  begins and concludes.

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