The Delhi High Court has vacated a stay granted by the Income Tax Appellate Tribunal (ITAT) on the Rs525 crore penalty on New Delhi Television Ltd (NDTV), saying that the Tribunal does not have any powers in this matter. This is a big setback to the Prannoy Roy-controlled NDTV within this month.
The Delhi High Court was hearing the case (W.P.(C)1327/2017) related with a stay granted by the ITAT on 15 September 2016. In its order, the ITAT had directed Income Tax (I-T) Department not to pass any order for the proposed penalty of Rs525 crore against NDTV till final disposal of the main appeal pending before the Tribunal.
However, the HC Bench of Justice S Ravindra Bhat and Justice Najmi Waziri felt that, in such matters, the ITAT does not have any powers in the penalty matter and hence the stay given by the Tribunal was vacated.
A senior official from NDTV said the company will appeal against the ruling of Delhi High Court. “This entire case relates to a baseless and outrageous charge by the Income Tax department that in effect accuses (Jeff Immelt, CEO) GE (US) as well as (Jeff Zucker, then CEO) NBC (US) of money laundering -- which is an offence that is punishable with jail in the US. In 2008, NBC (a 100% subsidiary of GE) invested $150 million in an entertainment wing of NDTV. Subsequently, without any evidence whatsoever, the I-T Department in Delhi called this legitimate investment a 'sham transaction' and in effect accused NDTV of round tripping money and using NBC and GE to act as a 'front' in a case of money laundering by GE and NBC,” says KVL Narayana Rao, Group Chief Executive & Executive Vice Chairperson of NDTV, in an email reply.
He says, “The ITAT has been unable to hear the case as the Delhi I-T Department has asked for 20 consecutive adjournments - with a succession of flimsy excuses. With the basic case not even being heard, the Delhi I-T department suddenly tried to levy a further penalty on NDTV for a delay in the case. Please note the delay is entirely the fault of the Delhi IT dept. asking for adjournments. The ITAT stayed the penalty. Now the Delhi High Court has ruled that the ITAT does not have the authority to stay the penalty. The Delhi I-T department's accusations against GE, NBC and NDTV are very damaging for the global image of India. With all due respect to the High Court, NDTV will appeal against this ruling.”
Earlier this month, the Reserve Bank of India (RBI) rejected NDTV's application to compound from the Rs2,030 crore notice issued by the Enforcement Directorate (ED) under the Foreign Exchange Management Act (FEMA). "Filing compounding application to RBI by those who served notice under FEMA means that they have admitted their contravention in routing money from abroad and plead guilty by paying a fine. So NDTV admitted its guilt and offered its readiness to pay a fine. Many FEMA defaulters were using this compounding method to escape from being prosecuted under the FEMA. Continuing prosecution under FEMA also has a danger of converting the case to PMLA, when money laundering is established," says an article in PGurus.com
However, according to Mr Narayan Rao, the RBI has not rejected NDTV's application for settlement under FEMA provisions. “The RBI has asked NDTV to approach a particular division of the RBI called the Foreign Investment Division of RBI's Central Office,” he said.
Earlier in November 2015, the ED had slapped a Rs2,030 crore notice on NDTV for allegedly violating FEMA provisions for routing huge funds through the channel’s foreign units. The notice served to promoters Prannoy Roy, his wife Radhika Roy and senior executive KVL Narayan Rao stated that NDTV had violated RBI provisions on fund transfers.