Mumbai: Mumbai’s income taxpayers, who account for one-third of India’s total direct tax collection, owed Rs1.35 trillion at the end of 2009 in outstanding dues that had piled up over several years, according to an internal report of the Central Board of Direct Taxes (CBDT).
The amount due is spread across companies and individuals, according to a 12 January performance review of the Mumbai income-tax (I-T) department by CBDT, the country’s apex body for the administration of such taxes.
A copy of the report was reviewed by Mint.
According to a list prepared by the Mumbai I-T department, Hinduja Ventures Ltd, UltraTech Cement Ltd, Reliance Industries Ltd (RIL), Videsh Sanchar Nigam Ltd (now Tata Communications Ltd) and State Bank of India (SBI) are among the entities that are in arrears.
But the top three tax defaulters are individuals who have been under investigation by various agencies, among which are the Enforcement Directorate (ED) that probes foreign exchange violations, and the Central Bureau of Investigation (CBI).
Pune-based real estate consultant Hassan Ali Khan, who is the main accused in an $8 billion (around Rs37,040 crore today) money laundering case going back to 2007, owes Rs50,000 crore from last year when the I-T department issued him a show-cause notice. In a January 2007 raid, the department found that Khan had concealed income and had not paid income-tax since 1999.
Chandrika Tapuriah, wife of Kashinath Tapuriah, a Kolkata-based businessman and an alleged accomplice of Khan, owes Rs20,000 crore.
The third largest amount due is from the late Harshad Mehta, the main accused in a 1992 stock market fraud that, when exposed, led to a collapse of share prices. Mehta, who died in 2001, is listed as owing the I-T department Rs12,000 crore.
Five other individuals in the tax defaulters’ list are connected to Mehta.
Graphic : Ahmed Raza Khan / Mint
A senior I-T official told Mint that the department had “initiated recovery proceedings”. He declined to specify a specific time frame for recovering the dues. The official didn’t want to be named because he is not authorized to speak to the media.
Part of the difficulty in recovering tax dues is that individual defaulters often have inadequate assets.
Companies tend to initiate litigation that prevents any settlements as long as the case is in court.
“Most of these firms are contesting the order passed by the I-T department and the cases are still pending in the (Income-tax) Appellate Tribunal,” said the I-T official cited above.
Net direct tax collections in the first three quarters of this fiscal, which ends in March, increased 8.5% to Rs2.5 trillion, from Rs2.3 trillion in the same period a year ago.
Corporate tax collection increased 13.47% to Rs1.66 trillion, from Rs1.46 trillion. Personal tax collection dropped 0.41% to Rs83.178 crore.
According to the CBDT report, at the end of 2009, Hinduja Ventures owed Rs2,800 crore, UltraTech Cement owed Rs2,500 crore, RIL, India’s most valuable firm with a market capital of Rs3.39 trillion, owed Rs290 crore.
Tata Communications and SBI were in arrears to the tune of Rs500 crore and Rs350 crore, respectively, said the report.
In an email response to queries from Mint, Hinduja Ventures’ vice-president (finance) and company secretary Dilip Panjwani said that based on legal opinion, “…these (tax demands) are being disputed by HVL before relevant tax authorities”.
He also disputed the amount mentioned in the report, saying: “The demands aggregate to around Rs133.66 crore on account of normal business issues and the demand is not Rs2,800 crore.”
Adesh Gupta, whole-time director and chief financial officer of Grasim Industries Ltd, denied there were any taxes due. “There is no such demand,” he said in an email.
Last year, the board of UltraTech Cement approved its merger with Samruddhi Cement Ltd (into which Grasim Industries hived off its cement business). UltraTech and Grasim both belong to the Aditya Birla Group.
A spokesman for RIL said: “For the assessment year 2007-08, the total outstanding arrears as per demand by the income-tax department is about Rs18 crore. Reliance Industries has gone in appeal against the aforesaid amount and the assessing officer has agreed to stay the recovery of this amount.”
A spokesperson for SBI declined to comment.
A Tata Communications spokesperson said the company is “in appeal in respect of certain tax exemptions disallowed by the I-T department and is awaiting decisions from the appellate authorities”.
In an August statement to Parliament, Union minister of state for finance (revenue) S.S. Palanimanickam said the government had introduced an alternative dispute settlement mechanism to recover tax dues speedily.
The ministry of finance has also asked adjudicating authorities such as the Income- tax Appellate Tribunal to dispose of cases involving a high tax demand on a priority basis, he said. A task force has been created to monitor recovery of money from large taxpayers, the minister said.