In a further embarrassment to the Congress, under whose stewardship the United Progressive Alliance government is already neck-deep in tackling the impact of various scams, an Income- Tax Tribunal has provided fresh powder to fire the Bofors guns.
It ruled that Rs. 41.2 crore was paid as kickbacks to the late Win Chadha and Italian businessman Ottavio Quattrocchi in the Swedish howitzer deal and the two are liable to tax in India on such income.
Dismissing an appeal by Win Chadha's son against the I-T Department's tax claim of Rs. 52 crore and Rs. 85 lakh from his father for the assessment years 1987-88 and 1988-89, the Income Tax Appellate Tribunal (ITAT), in a 98-page order dated December 31, 2010, said: “The investigations revealed that an amount of 242.62 million Swedish kroners [Rs.412.5 million] was paid by M/s. AB Bofors, as commission, to Mr. Quattrocchi and Chadha through M/s. A.E. Services and M/s. Svenska, in contravention of the policy of the government of India not to allow middlemen/agents in the deal.”
In its order made available on Monday, the ITAT detailed the denials by Bofors on the existence of middlemen in the Rs. 1,437-crore gun deal contracted in 1986, as also the efforts made to open a series of accounts to transfer money in a bid to cover up the original source of the funds.
Urging serious and concerted steps to recover the tax dues, the two-member ITAT Bench that comprised R.C. Sharma and R.P. Tolani said: “In our view, to enforce the rule of law, these steps are desirable to bring all the relevant income-tax violations to the logical end by the Income-Tax Department. Inaction in this regard may lead to a non-existent undesirable and detrimental notion that India is a soft State and one can meddle with its tax laws with impunity.”
The tribunal order comes on the eve of a scheduled hearing by a Delhi court of a plea by the CBI seeking to drop criminal proceedings against Mr. Quattrocchi, the Italian businessman whom the Opposition says is close to the Gandhi family. Mr. Quattrocchi left India in 1993 even as the CBI lodged a case on the alleged kickbacks in the gun deal.
Bofors, the ITAT said, should have reduced the commissions paid from the contract price while pointing out that the government had to pay an excess amount of Rs. 41.2 crore, which was passed on to Chadha and Mr. Quattrocchi in violation of the terms of contract.
The ITAT noted that a commission of Rs. 32.66 crore was transferred to M/s. Svenska Inc., Panama, which was traced to Chadha, and eventually credited in an account of the Geneva-based Swiss Bank Corporation. Likewise, Rs. 8.57 crore was transferred to the AE Services Limited, c/o Mayo Associates SA, Geneva, which was opened only a fortnight earlier on August 20, 1986.
Moreover, despite the Indian government's insistence on not appointing or paying any agent, Bofors entered into a fresh consultancy agreement with the U.K.-based AE Services at the instance of Mr. Quattrocchi. “This amount of SEK (Swedish Kroner) 50,463,966 works out to be exactly 3 per cent of the amount of advance paid by the Government of India to the Bofors and was, thus, perfectly in accordance with the terms set out in the AE Services Limited-Bofors agreement dated November 15, 1985,” the order said. In the event, Chadha, as also the entities through which money was transferred as kickbacks to Mr. Quattrocchi, were liable to pay tax in India, the ITAT held.
