SC pulls up IT dept for not taking timely action in 2G case

New Delhi, May 16 (PTI) The Indian Supreme Court
Monday pulled up the Income Tax department for not taking
timely action against the companies involved in the 2G
spectrum scam and said had it not intervened, the officials
would have "slept over it" and the overseas probe would not
have proceeded.
The court said despite the department coming to know
about tax evasion cases in 2008, it started taking action
only after March this year after it was directed to file
action taken report.
"We are sure they (IT Dept) would have slept over it
otherwise (if it had not intervened). There is no doubt about
it," a bench comprising justices G S Singhvi and A K Ganguly
said.
Additional Solicitor General Vivek Tankha, appearing
for the department, tried to justify the delay saying that big
companies are involved in the case and they are creating
obstacles.
The court, however, was not satisfied with the
submission and said there is no need to say all these things
about these companies as they are "prima facie tax evaders".
"How are they big. What kind of mindset do you have.
Prima facie they all are tax evaders. Do not call them big. Do
not insult the word," the bench said.
The department also informed that all telecom
companies, which after the allotment of the spectrum, have
sold their controlling stakes to foreign firms through the
Mauritius route, have been asked to pay tax on the capital
gain from such transactions.
Tankha submitted that the department has already
served notices to these firms and are treating them as
assessees.
"The Director General of International Transactions
has already issued notices to them. Some of them have already
admitted that they should be taxed in India and we have issued
them notices. They have permanent offices in India and they
are assessees now," said Tankha.
The bench asked the IT department to complete the
departmental proceedings against the tax-evading firms within
the permitted time.
The bench also asked CBI, ED and IT department to
cooperate with each other during the probe.
The department said that it was following the Vodafone
case, where the UK-based telecom giant bought controlling 67
per cent stake in the Hutchison Essar using the DTAA (Double
Taxation Avoidance Agreement) route in Mauritius and claimed
exemption. However, the apex court asked it to make part
payment of Rs 2,500 crore.

"In such cases, transaction and the beneficiaries were
outside India, but the companies were physically present
here," Tankha contended.
Prashant Bhushan, counsel appearing for the NGO,
Centre for Public Interest Litigation (CPIL), submitted that
companies from the US, Europe and the Gulf were taking the
Mauritius route by opening "post box companies" and taking
tax benefits.
As per the DTAA agreement signed between India and
Mauritius, if a firm pays tax in the island nation, then it is
exempted from paying any tax here. Telecom firms such as Swan,
had sold their equity to the foreign partner through Mauritius
route and claimed tax exemptions.
It has been alleged that Swan telecom after securing
the 2G licence, sold its stake to Mauritius-based Delphi
Investments, which later transferred its stake to a
Mauritius-registered subsidiary of Dubai-based Etisalat.