Mumbai: The income-tax (I-T) department in Mumbai has initiated penalty proceedings against two owners of Rosy Blue Group for allegedly holding money through a trust in LGT Bank in Liechtenstein Ltd, according to two department officials familiar with the development.
Neither of them wanted to be identified as proceedings are pending before the department. They declined to give the name of the two promoters of Rosy Blue, but indicated that they have interest in the Kochi IPL team.
Rosy Blue is one of the world’s leading diamond manufacturing companies and owner of jewellery brand Orra.
Harshad Mehta, chairman and one of the promoters of Rosy Blue, owns 13.97% in the Kochi IPL team through Film Waves Combine Pvt. Ltd.
In a parallel development, the Enforcement Directorate (ED) in Mumbai has written to Delhi seeking permission to launch investigations against the owners of the Kochi IPL team under the Foreign Exchange Management Act.
The ED and I-T department are already investigating other IPL franchisees such as Rajasthan Royals, Kings XI Punjab and Kolkata Knight Riders for alleged violation of foreign exchange and tax norms.
The Kochi IPL team, recently named Kochi Tuskers Kerala, is owned by a consortium of companies and individuals. Apart from Mehta, they include Anchor Earth Pvt. Ltd (31.45%), Parinee Developers Pvt. Ltd (30.27%), Rendezvous Sports World Pvt. Ltd (10%), Anand Shyam Estates and Developers Pvt. Ltd (9.31%) and Vivek Venugopal (5%).
The commissioner of income tax, appeal (first appellate authority), had in February upheld the order of the department levying tax on undisclosed income in the LGT Bank accounts of the owners of Rosy Blue for the assessment year 2003-04.
The I-T order was challenged by the owners of Rosy Blue who said that the accounts did not belong to them.
“We have enough evidence to initiate penalty proceedings under section 271 of the Income-tax Act, since the first appellate authority passed an order in favour of the department confirming that these individuals had indeed concealed income,” said one of the I-T officials cited in the beginning of the story.
According to another I-T official, the individuals had created a discretionary trust in LGT Bank in 2000. He declined to give the exact amount lying in the bank.
“Who owns how much stake in a discretionary trust is not known, but the details of beneficiaries of the trust such as their names and addresses are known. We have proceeded based on the names of the beneficiaries,” the second I-T official said.
Under Indian tax norms, beneficiaries of such trusts can be taxed if money is paid or received by any of the beneficiaries.
Emails sent to Mehta went unanswered. A secretary in his Mumbai office said Mehta was in London.
“These developments are coming as a surprise to us,” said one of the owners of the Kochi IPL team on condition on anonymity. “We have not received any information (from the investigating authorities) to this effect.”
In February, the finance ministry had said that a tax demand of Rs24.26 crore had been levied on 18 individuals with accounts in Liechtenstein’s LGT Bank, all of whom have a joint aggregate income of Rs39.66 crore.
Penalty proceedings for concealment of income were separately initiated in all cases.
The data was given by the finance ministry in an affidavit in the ongoing Supreme Court hearings on black money and also in a written presentation on 24 January to parliamentarians in the standing committee on finance.
The government has not disclosed the names of the account holders and said it could make them public only for “court proceedings arising out of assessment or prosecution of the taxpayer”.