New Delhi: The Income Tax department is probing the country’s first real estate private equity fund for alleged violations of FDI norms and evasion of taxes in bringing a whopping Rs8,000 crore through tax havens like Isle of Man and Cyprus.
The department is investigating the source of investments in the real estate firm -- Ireo -- after it recently conducted searches on its premises on 19 October and seized documents related to the ownership pattern of the company, investments, expenditure and its tax statements to revenue departments in India and abroad.
“Shareholding of all Ireo Group companies in India (with the exception of JVs in India) is entirely held by Ireo Private Equity Funds, which are domiciled in Mauritius. The funds, in turn, have raised nearly $2 billion in capital from a base of global blue chip investors including renowned global financial institutions, university endowment funds and sovereign wealth funds,” an Ireo spokesperson told PTI in a statement.
“All investments into India by Ireo Private Equity Funds is in complete compliance with all relevant rules and regulations, and suggestions of any wrongdoing such as round tripping of funds etc are entirely without any factual basis,” the spokesperson said.
The I-T department, sources said, has found that Ireo has purchased vast expanses of land in various Indian states to build townships and residential estates in contravention to the FDI laws which prohibit foreign investment in agricultural activities.
The firm, however said that it has followed the law by purchasing agricultural land and using it for development purposes.
“Ireo has approximately 3,000 acres of land-holding across India, all of which has been legitimately purchased in full compliance with all relevant state regulatory norms. As per FDI regulations, use of FDI for agricultural activity like farming, plantations etc is prohibited; however it is not against the law of the land for FDI-funded Indian companies to purchase agricultural land for development purposes,” the spokesperson said.
The department is also scrutinizing the tax statements of the firm, which has its operations in the National Capital Region (NCR), Haryana, Punjab, Tamil Nadu and Maharashtra, to check avoidance of tax by routing the funds through tax haven countries like Mauritius, Isle of Man and Cyprus.
“The I-T department approached Ireo for a search on October 19, and Ireo is cooperating with all requests for information/clarifications. Unfortunately, recent media coverage has incorrectly speculated and cast aspersions in connection with this event,” the Ireo spokesperson said while reacting to the I-T action that came on the same day when it raided the premises of four consortia which had bagged contracts worth Rs700 crore for the Commonwealth Games.
Sources said the I-T probe is also looking at the avoidance of taxes by the firm under the Double Taxation Avoidance Agreement which enables a taxing entity to pay tax in either country, thereby avoiding getting taxed twice.
The firm, in April this year, was also searched by officials of the Enforcement Directorate for similar charges of violating the provisions of the Foreign Exchange Management Act (FEMA) in bringing in and investing FDI funds.