After the high-profile Hutch-Vodafone deal, Vedantas $981-million buyout of Sesa Goa has now caught the attention of taxmen. The Income Tax department has sent a missive to the countrys largest private iron ore exporter, Sesa Goa, seeking details of its acquisition by Vedanta. The I-T department has sent a notice to the company under Section 133 (6) of the I-T Act. Under this section, the department has the power to call for information.
The assessing officer, the deputy commissioner (appeals), the joint commissioner or the commissioner (appeals) may, for the purposes of this Act, require any person, including a banking company or any officer thereof, to furnish information in relation to such points or matters, or to furnish statements of accounts and affairs verified in the manner specified by the Assessing Officer..., will be useful for, or relevant to, any enquiry proceeding under this Act, says the provision.
The I-T department puts this section to use if it has reasons to believe that certain income has escaped tax. The details are then used to strengthen the case.
In April 2007, the Anil Agarwal-controlled Vedanta Resources bought out Mitsuis 51% stake in Sesa Goa for $981 million by offering Rs 2,036 per share. The deal was concluded with Vedanta acquiring 100% of UK-based Finsider International, a company that controlled Mitsuis interests in Sesa Goa. The company subsequently made an open offer to acquire 20% from retail shareholders of Sesa Goa. The company could not be reached for comments.
The I-T department had earlier issued a notice in the case of Hutch-Vodafone transaction that was carried out outside India between the two overseas entities. Tax experts feel the trend has caught on after that with some other high-profile international transactions like Fosters India-SABMiller transaction coming under the tax scanner. Tax authorities have been issuing notices/seeking information on transfer of shares of companies situated outside India who have a subsidiary here, wherein due to change in the overseas shareholding there is also a change in the business ownership in the Indian unit as well without any change in the shareholding pattern, says Vikas Vasal, executive director, KPMG.