Income Tax Department surveys Sesa Sterlite offices on tax refund claims
March, 24th 2014
The Income Tax Department today conducted 'survey' at different offices of Sesa Sterlite, the main operating company of London-listed Vedanta Resources, in connection with about Rs 1,500 crore tax refund claimed by the company.
Sources said that the 'survey' was conducted under section 133 of the IT Act at 3 offices of Sesa Sterlite - Delhi, Mumbai and Goa as the Income Tax department was looking for papers related to merger of Sterlite Industries and other Vedanta entities into Sesa Goa. They added that Sesa Sterlite had sought tax refunds of about Rs 1,500 crore after formalities related to the amalgamation scheme between Sterlite Industries, Vedanta Aluminium, Sterlite Energy and Madras Aluminium Company with Sesa Goa were completed last year in August.
However, the claim has not yet been accepted by the Income Tax Department as it suspects that the merger was designed in such a way that the new entity (Sesa Sterlite) can claim tax refunds by setting off losses of loss-making companies against the profit making firms, they said. Accordingly, the appointed date (day from which the scheme becomes effective) was fixed retrospectively and different dates were applicable to different firms.
Net result of this process was that the new entity (Sesa Sterlite) became eligible for claiming refunds against the excess taxes paid by the profit making firms, the sources said, adding that today's survey was in this regard only. A Sesa Sterlite spokesperson did not respond to calls. However, officials of the company confirmed that the Income Tax Department has conducted the survey at various offices.
On February 25, 2012, Vedanta had announced plans to restructure its various businesses and has proposed to merge Sterlite Industries, Vedanta Aluminium, Sterlite Energy and Madras Aluminium Company with Sesa Goa, thereby creating a new entity Sesa Sterlite.
The company had fixed separate appointed dates for different companies. For Sterlite Industries and Vedanta Aluminium, the appointed date was April 1, 2011, while for Sterlite Energy, it was January 1, 2011.
For hiving off power business of MALCO to Vedanta Aluminium, the appointed date was April 1, 2012 and thereafter, rest of the entity of MALCO was proposed to be merged with Sesa Goa as and when the amalgamation scheme becomes effective. Noting that the merger was announced on February 25, 2012, the IT department suspects that the appointed dates were deliberately kept retrospectively by Vedanta, so that the new entity (Sesa Sterlite) can claim huge tax refunds.
The IT Department had also filed a case in Goa Bench of Bombay High Court last year challenging the amalgamation and contended that the merger should be allowed to become effective with the date from when the Court had given final approval to the merger (August 12, 2013).
However, the tax department lost the case as the court ruled that the department does not have any locus standi and the merger issue should be dealt by the Ministry of Corporate Affairs (MCA). Its appeal in the Division Bench was also rejected on the same issue, following which it moved to the Supreme Court, which decided in November last year that the appeal can be heard only if the MCA files a special leave petition, sources said.