Date:11/04/2007 URL: http://www.thehindubusinessline.com/2007/04/11/stories/2007041104780400.htm

Back I-T dept sends notice to Asim Ghosh

Thomas K. Thomas

Clarifications sought on investments, source of funds

What they say
One of the questions posed by the I-T Department was how Mr Ghosh could get 4.7 per cent stake in Hutchison Essar by investing only $110.4 million.
Sources from Hutchison Essar said that questions raised by the authorities were irrelevant to assess the income of a person.

MR ASIM GHOSH

New Delhi April 10 Even as the Foreign Investment Promotion Board is investigating the Hutchison-Vodafone deal, the Income-Tax Department has brought the investments made by Mr Asim Ghosh, Managing Director, Hutchison Essar, under its scanner. The Income-Tax Department has shot off a note containing a set of 33 questions to Mr Ghosh seeking clarification on a range of issues including details of his investments, source of funds and the structure of equity holding in the mobile venture through various companies.

One of the questions posed by the Department was how Mr Ghosh could get 4.7 per cent stake in Hutchison Essar by investing only $110.4 million even as disclosures by Hutchison Telecom International Ltd pegged the valuation of HEL at $ 6 billion, which meant that 4.7 per cent stake should have cost $281 million.

When contacted, Mr Ghosh did not comment on the notice. However, sources from Hutchison Essar said that the questions raised by the income-tax authorities were irrelevant to assess the income of a person. "The questions asked relates to FDI and equity holding. What business does an income-tax officer have to ask such questions?" said a company source. Mr Ghosh has not yet given his response to the I-T Department.

Mr Ghosh has been asked to clarify whether any income-tax claim was pending and what was the main source of income after he took over as the Managing Director of Hutchison Essar. The I-T Department has asked Mr Ghosh to authenticate by bank statements and income-tax returns filed in Canada and Hong Kong. The letter sent on March 27 has sought clarity on why Mr Ghsoh chose to route his investments through three layers of companies.

The note has asked whether the acquisition of indirect interests in Hutchison Essar has been disclosed to Indian regulators and whether HTIL had disclosed the transaction to Hong Kong and US Stock Exchanges.

Benami transactions

The FIPB is also investigating the equity held by Mr Ghosh after a consumer group alleged in a public interest litigation that the shares were being held through benami transactions on account of HTIL. The Reserve Bank of India had also raised concerns regarding the equity structure of Hutchison Essar that it may violate the Foreign Exchange Management Act. The Law Ministry has suggested taking the opinion of the Attorney General since the issue was complex.