Govt initiates probe into Kraft's Cadbury takeover

The government has initiated an inquiry into US-based Kraft Food's takeover of Cadbury India for alleged tax evasion and flouting of buyout norms.

The Finance Ministry has initiated the probe under the Income Tax Act on an order of the Delhi High Court, which had asked the government last month to complete the investigation within eight weeks. Social activist Ved Prakash had filed a complaint seeking action against the entities involved for flouting takeover laws. Cadbury India is a subsidiary of UK-based Schweppes Cadbury PLC.

In a similar case, UK-based Vodafone’s arm has been asked to pay over Rs 11,000 crore as taxes for buying Hong Kong-based Hutchison’s telecom company. The deal involved Hutchison Telecom’s India assets in a JV with the Essar group.

“I am directed to inform you that taking cognisance of the petition filed by you, action has been initiated in the matter under Income Tax laws,” said Under Secretary Salil Mishra in a letter addressed to Prakash.

While refusing to go into the merits of the case, the court had asked Prakash to approach the government and the authorities concerned. The social activist, in a letter on December 14, had made representation to the Central government and the Income Tax Department.

“If the representation is submitted, the competent authority shall address the same within eight weeks therefrom,” the court said.

The suit filed by Prakash alleges huge loss to the Indian exchequer on account of tax evasion in Kraft’s takeover of Cadbury.

He claims that while acquiring the shares and assets of Cadbury, Kraft Food Inc was under an obligation to pay tax on the acquisition of the Indian business.

Kraft Foods had acquired British candy maker Cadbury for about $19.6 billion in February 2010 and the deal included the UK firm’s Indian subsidiary.