A U.K.-based company, which bagged the Rs.246-crore broadcast contract for the Commonwealth Games, has come under the scanner for alleged tax evasion even as the Central Vigilance Commission (CVC) asked the CBI to probe any criminal conspiracy angle in the award of certain Games-related projects.
The Income Tax Department has invoked provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the U.K. to go after British broadcast firm SIS Live, whose Indian arm was found to have come into existence “solely” for the purpose of executing a Games contract.
Survey operations on the Indian arm of SIS Live were conducted by the IT Department, whose Assessing Officers found alleged discrepancies in the firm's financial documents. It was allegedly trying to evade taxes to the tune of Rs.29 crore.
The department subsequently asked the Prasar Bharati — which had made Doordarshan enter into a contract with SIS Live for broadcast rights of the Games — to cut taxes from the company's receipts under the Tax Deducted at Source (TDS) category.
The department, in its order to Prasar Bharati, said that SIS Live had “come into existence solely with the purpose of carrying out and undertaking all activities and actions necessary or desirable to implement the CWG contract.”
Sources said that investigators were also looking into the terms of payment by Prasar Bharati.
“Whatever has been done has been done in a totally proper, correct and valid manner,” B.S. Lalli, Chief Executive Officer of Prasar Bharati, said.
“There is a payment schedule which is a part of the contract. So at that point of time, a payment had to be released, so what the members have recorded on his note to the senior general manager and I recorded there…that basically it is not for us to interfere in the matter of the service tax, because that is between the entity and the service tax department,” Mr. Lalli said.
The IT department on October 6 issued attachment orders of the unreleased amount of the contract amount of Rs.246 crore to SIS Live by Prasar Bharati. But a day later, it issued orders to cut taxes under the TDS category by invoking provisions of Section 197 (certificate for deduction at lower rate) and the DTAA.
As the multi-agency probe into corruption and financial irregularities moves forward, a criminal conspiracy angle will be probed by the CBI in the wake of the unearthing of discrepancies in the award of contracts for some Games-related projects.
Official sources said discrepancies such as payment to non-existent parties, wilful delay in execution of contracts, inflated prices, and bungling in purchase and renting of overlays, including equipment worth several crores through tendering have been noticed.