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IT dept seeks copy of audit report on Bharti
September, 20th 2010

The Income Tax department has asked the Department of Telecom (DoT) to submit a copy of the special audit report on leading telecom firm Bharti Airtel to look into corporate tax or income tax issues.

Government-appointed auditors contractor Nayak and Kishnadwala had submitted a report on Bharti Airtel in March this year, which according to the company, had not found any wrong-doings in accounting practices.

The special audit was done on all leading telecom firms to ensure that they were paying the required annual licence fee to the government and there was no diversion of revenues to segments which attracted a lower fee as a percentage of revenue.

A VIP reference has been forwarded to this office regarding certain discrepancies in the accounts of Bharti Airtel pointed out by the special auditor contractor Nayak and Kishnadwala, led by managing partner Himanshu Kishnadwala, appointed by the DoT, additional commissioner of income tax said in a communication to the DoT.

The I-T department said that a complete copy of the special audit report should be submitted to enable it to examine the same from the corporate tax/income tax angle. Please note that the income tax assessments of Bharti Airtel limited for assessment years 2007-08 and 2008-09 are pending and the same are time-barring proceedings as per provisions of the I-T Act.

Therefore, it is kindly requested that the copy of the special audit report referred above may be forwarded immediately, the additional commissioner of income tax said. As per the initial response of DoT, the report had found no fraud, though it had talked of some irregularities as being prevalent in the industry.

The audit report had also raised certain revenue-specific queries involving an amount of about `100 crore, while giving virtually a clean chit to the accounts of the multi-billion dollar company.

The special audit of Bharti Airtels accounts commissioned by the Department of Telecom has not found any irregularity in the companys books or loss of revenue fee to the government on account of licence fee, the companys top official, Manoj Kohli, had said. The report is a part of the special audit ordered by the government on leading telecom operators, including Anil Ambani-led RCom, Tata Groups TTSL, Birlas Idea Cellular and Vodafone Essar.

Bharti Airtel has always maintained the highest standards of corporate governance and has displayed the highest regard for regulatory compliance. The findings of the special auditors appointed by the DoT have validated this belief, Bharti Airtel had said.

The auditors have also quantified the dealer distribution margins. As per a judgement by the telecom disputes settlement appellate tribunal (TDSAT), Bharti Airtel is required to pay a licence fee only on actual realised revenues in the accounts of the company and not on the end-retail price collected by retail outlets.

While the auditors have estimated a notional figure of `98 crore as this margin, it has also commented that this quantification is being done only to meet the specific requirement of the DoT. However, the transaction followed by the company is as per the agreement it has with its distributors and also in line with the current TDSAT order.

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