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Probe to track bribes begins by the Income tax department
November, 12th 2010

Telecome minister A Raja lands in more trouble when the income-tax department resumes a probe on whether there was any irregularity while allocating the 2G spectrum to new players by his ministry.

According to an official of the Central Board of Direct Taxes (CBDT), the I-T department is trying to find out whether there have been violation of the I-T Act in the deal. Were essentially looking into two aspects. First, whether payments were made by beneficiaries as kickbacks out of unaccounted funds. Even if payments were made out of accounted funds, they will not be considered as allowable expenditure, the CBDT official said. Bribes are usually accounted by inflating expenditure and reducing profits. These figures form part of I-T returns. Were exploring this angle also, the officer said.

The first part of the investigation is being carried out under Section 37(1) of the I-T Act, which states that any expenditure (not being expenditure of the nature described in Sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head profits and gains of business or profession.

The clause was explained by the department thus: For removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.

The I-T probe began a few months ago, but the department had to hand over papers of the spectrum allocation deal collected to CBI, after it began a probe. The department has now re-launched its probe. The development, which comes in the wake of strong observations made by the Supreme Court on the shoddy probe conducted so far into the scandal by CBI and the final report of the Comptroller and Auditor General (CAG), does not augur well for Mr Raja.

CAG has accused the telecom ministry of undervaluing the 2G spectrum sold to new players in 2008, and concluded that the allotment price was not realistic, causing a revenue loss to the tune of `1.77 lakh crore.

Armed with the CAG report, the Opposition has already ratcheted up its oust-Raja campaign, and has also demanded a JPC investigation into the deal. The two Houses of Parliament remained paralysed for the second consecutive day on Thursday, with the ruling side-Opposition deadlock showing no sign of being resolved anytime soon.

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