The income tax department chose the softer option of acting on a tax evasion of Rs 29 crore from CWG broadcast firm SIS Live by withdrawing its own order to attach the company’s bank accounts.It rewrote its order attach accounts directly and instead asked Prasar Bharati (PB) to recover the amount. The I-T department’s order overturning its directions came within a space of 24 hours.
In the initial order on October 6, tax authorities directed Prasar Bharati to freeze all future payments to SIS while seeking attachment of bank accounts. The firm is believed to have bank accounts with the Royal Bank of Scotland at its Mumbai branch.
Then, on October 7, the department issued a second notice withdrawing the October 6 order for attachment of bank accounts and instead left it to PB to deduct total tax of Rs 29 crore from the contracted amount of Rs 246 crore. With PB itself in the dock for allegedly favouring SIS, this was a surprising move.
Just as changes in SIS Live’s payment contracts were linked to the threat of the Games telecast being disrupted, some feel the change in I-T orders might have been due to similar considerations.
Defending the decision on releasing payments before deduction of service tax, Doordarshan director general Aruna Sharma told a news agency, “It is incumbent on the contracting entity, namely, SIS Live to pay the service tax to the service tax authorities. Once this tax is paid only then Doordarshan makes the final payment. This is the procedure followed for all contractual formalities.”
The I-T survey conducted on the UK-based broadcasting firm found that the firm was given the contract despite no valid service tax number and not having filed tax returns in previous years, necessary to bid for such contracts.
In fact, a day after ToI reported this anomaly an unsigned statement issued by Sharma’s office admitted that SIS Live did not have a valid registration certificate when it bid for the Commonwealth Games coverage. According to DD, a permanent service tax number was granted by the Central Board of Excise and Custom only on September 28.
DD recognised at the same time that service tax was an “essential ingredient of the contract”. By its own admission DD signed a contract with SIS Live six months earlier on March 5, 2010 and had in fact paid the company about Rs 150 crore by mid-September.
Despite the payments made by PB, I-T officials who surveyed SIS Live office in Delhi this month found no trace of accounts or bills maintained by the company. Further probe revealed SIS Live violated several conditions. It had outsourced the work to Zoom Communications, which was also found to be operating from the same premises in Okhla. SIS Live officials even failed to produce contract papers that could indicate it had sub-contracted the work to Zoom worth Rs 177 crore.
In its observation, the I-T report says SIS Live was formed “solely with the purpose of…implementing the CWG contract…and the assessee is not likely to remain in India”.
