The Income-tax department on Thursday raided 12 premises of HDIL, a Mumbai-based real estate developer, and questioned HDIL on three issues. According to an I-T source, one of the questions raised was in connection with claims made under Sections 80 IB (10)(c) of the I-T Act, a provision that allows tax benefits to a developer of residential apartments with an area of 1,000 sq ft or less. This is the second instance that HDILs premises have been raided by the I-T officials; the earlier raid was in 2007.
The second allegation pertains to the diversion of funds from the company, while the third relates to HDILs transaction with IL&FS. HDIL recently acquired 53 acres from IL&FS for Rs 1,900 crore. Hari Prakash Pandey, CFO, HDIL, who was in New York, said: I am not aware of any such (the three points raised by the I-T officials) thing.
I did talk to HDIL officials in Mumbai and they did not mention anything of that sort to us, I do not think that the ground for investigation relates to these areas. HDIL officials were questioned under Section 80 IB (10)(c), which refers to the deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.
Under this section, a developer gets some I-T deductions on residential apartments that have a maximum area of 1,000 sq ft in Mumbai and New Delhi and less than 1,500 sq ft for other cities. The I-T department believes that HDIL sold bigger apartments and still managed to get deduction under this section.
Elaborating on the issue, an I-T official said: HDIL allegedly sold 2,000 sq ft apartments, but showed them as two 1,000 sq ft apartments and took the deduction on profit. As a result, they are not paying income tax that they were supposed to pay. HDIL has denied this allegation.
I-T officials, under the provisions of the I-T Act, are not obliged to convey to the investigated party any specific reason for conducting a raid. Any I-T raid requires prior approval of the director (investigation) and the director general (investigation). The HDIL stock fell 3.85% or Rs 12.35 on Thursday to close at Rs 308.
I-T officials, on Thursday, also surveyed Dewan Housing Finance Corporation (DHFL), a company owned by Kapil Wadhawan, though no raids were conducted. Mr Wadhawan, till recently, was on the board of HDIL. Both HDIL and DHFL are a part of the Wadhawan group.