The Adani Group has claimed that its deal to acquire media house NDTV does not require the approval of Income Tax authorities. The group’s statement is backed by experts on taxation and acquisitions. The case dates back to a decade ago when Adani-owned Vishwapradhan Commercial Private Limited (VCPL) gave a loan. 403 crore in lieu of warrants to the founders of NDTV, which allowed the company to acquire a 29.18 per cent stake.
The Adani group now wants to exercise such rights but NDTV is claiming that such conversions have been barred by the Income Tax authorities.
VCPL clarified in a statement that the restrictions of the Income Tax authorities are applicable only to NDTV Holdings, which is held by RRPR Holdings Pvt Ltd, which is the promoter of NDTV. Sanctions Don’t stop RRPR To allot the share payable to VCPL.
“IT orders have been issued only against RRPR and with a view to secure the continued ownership of RRPR on the said NDTV shares. IT orders have not been issued against Prannoy Roy and Radhika Roy individually and RRPR are not related to their equity ownership in the Company,” it said, citing the reply received from VCPL.
Against this background, “the suggestion that Prannoy Roy and Radhika Roy would require prior approval of the Assessing Officer under section 281 of the Income-tax Act, 1961, is wholly false and has no basis.”
“It is clear that RRPR shall continue to be the absolute owner of the said NDTV shares even though RRPR has completed the necessary steps under the notice and, therefore, the question of any prior approval of the Assessing Officer does not arise,” it said.
The statement also said that the RRPR should initiate all necessary steps to convert the warrant into equity And there should be “close and away” from “repeating false and misleading statements”.
Taxation experts like Nangia Andersen LLP partner Vishwas Panjiar also backed Adani’s claim and insisted that NDTV’s position appears to be an erroneous interpretation of Section 281 of the Income Tax Act, 1961.
“Section 281 commences in the case when there is a transfer of property or when duty is levied on a property, whereas in the present case, fresh shares have been issued in RRPR (resulting in the passing of 99.5 per cent stake in RRPR to Adani). has been done))
“…therefore no transfer has been made by any Roy so as to trigger the provisions of section 281 (Although Adani has the right to acquire the entire equity shares held by Roy in the RRPR, this transfer is yet to be effected) It hasn’t happened. ),” said Panjiar.
Similarly, Anita Basrur, partner of Sudit’s Parekh & Co LLP, claimed that Section 281 is applicable when there is a transfer of property or levy of duty on any property.
“In the present case, the warrants held by VCPL are being converted into equity shares of RRPRH. There is no transfer but fresh shares are being issued. This does not trigger the provisions of section 281,” he said.
AMRG & Associates Senior Partner Rajat Mohan said the attachment order of 2017 prohibited NDTV from transferring the said shares, by converting the share warrants issued earlier and never prohibited RRPRH from restructuring.
“The tax position adopted by NDTV seems to be incorrect as each private company enjoys the status of a separate legal entity. Hence, any capital restructuring of RRPRH would not require permission from the Income Tax Department u/s 281.
“Moreover, there is no jurisprudence available under section 281 which permits lifting of corporate veil to prohibit indirect transfer of assets,” Mohan said.
Ashok Shah, partner, NA Shah Associates, said that Section 281 does not declare the share transfer to be void from the very beginning. This section basically protects the interest of revenue on collection of income tax.
“This section provides that if a taxpayer is in possession of any property (by way of sale, mortgage, gift, exchange, etc.) in favor of any person with duty or parts, pending any proceeding under the Income-tax Act, or after the completion of the proceedings but before the service of notice, then such transfer is void against the claim in respect of the tax payable as a result of the completion of the proceedings.
“It further provides that if the transfer is for sufficient consideration and without notice of pendency of proceedings or without the previous sanction of the tax authorities, such transfer is not invalid,” Shah said.
In 2017, the Income Tax Department “temporarily attached” the shares held by RRPR in NDTV till the resolution of the tax dispute. Based on this order, NDTV was claiming that the Adani Group would need consent from the tax authorities before proceeding to convert the warrants into equity shares.
With inputs from PTI.
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