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| Govt probes forex angle in IPL deals |
| Anindita Dey / Mumbai Apr 18, 2010, 00:56 IST |
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IPL’s Mumbai office is helping the I-T Department with inputs
While the Income-Tax (I-T) Department is assessing the income and expenses of the Indian Premier League (IPL), the Enforcement Directorate (ED) wing of the finance ministry has started a separate enquiry into terms of contracts of IPL team owners with team members and players.
Official sources explained, while the Mumbai office was coordinating with the I-T department with its inputs, ED in Delhi was looking into some guarantee structures.
Ministry officials explained these guarantees had been given by some Indian companies to overseas entities, which were supposed to be even management firms, celebrity management firms and companies for bringing in players and cheerleaders and other foreign services related to IPL.
The scope of ED investigation is to see if these guarantees that back monetary transactions in terms of payments to be made by IPL owners have received permission from the Reserve Bank of India (RBI).
“Moreover, it is also important to see such transaction, which may amount to outflow of funds, are complying with the norms of the Foreign Exchange management Act (FEMA)”, said sources.
The investigation was triggered when ED found that some companies had not received RBI permission for extending such guarantees, which violated FEMA provisions.
This investigation is over and above the inputs given to the I-T department for the IPL survey. The department is also investigating all returns filed by IPL team owners, who have received foreign funds. “This is to ascertain the source of funds. If the source cannot be proved properly, the entire funds will be treated as business income of the team owner and taxed at a higher tax rate — 33 per cent if it is an individual income or 45 per cent if it is company. If it is proved to be investment, the funds would be taxed only to the extent of capital gains earned on it or profits repatriated,” explained an official.
Further the purpose of investigating the funding pattern is also to ascertain if there has been a round tripping of funds.
Round tripping means that the money of an Indian individual or entity parked overseas is routed back into India through another Indian company or individual. This attracts provisions of Prevention of Money laundering Act.
The Central Board of Direct Taxes (CBDT) was sent an internal report on the action taken during the I-T survey. “The fact report is required to be sent within a few hours, but the report does not mean anything. It does not give any findings, as such, since that exercise is yet to be done,” said a senior CBDT official on Saturday.
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