I-T dept disallows $20-mn 'sham' investment in NDTV

Media group to challenge order

The income tax (I-T) department has disallowed a $20-million (Rs 135-crore at current exchange rate) investment by Velocity Interactive Group (VIG) in New Delhi Television Ltd (NDTV) in 2007. Calling the investment a 'sham transaction', the department has issued an order to the media company, NDTV informed the BSE on Monday.

Terming it "unexplained investment in the hands of NDTV", the department has also raised a tax demand of Rs 47.27 crore for the assessment year 2007-08 under Section 148/143(3) of the Income Tax Act. When contacted, an NDTV employee told Business Standard the channel had nothing more to say other than what had already informedbeen told to BSE. US-headquartered VIG acquired Velocity Investment Group in December 2007.

According to a report by VCCircle, the said investment came under Velocity Investment's portfolio after ComVentures, another US-based private equity fund, got merged in it within days of the previous merger.

ComVentures had "invested in two Indian media companies - NDTV Networks Plc and India TV ($11.5 million)" through Fuse+Media Holding LP earlier in the same year. NDTV Networks Plc is a subsidiary of NDTV and headquartered in the UK. It used to operate the company's media and entertainment channels such as NDTV Imagine and NDTV Lifestyle.

"Based on legal advice from senior counsel, the company strongly believes the said order is untenable and misconceived. The company will challenge the said order before the appropriate forum and believes it has a strong chance of success in such proceedings," NDTV informed the BSE.

Earlier, the I-T department had issued a similar order to NDTV regarding an investment made by National Broadcasting Company Universal Inc, US, which had invested $150 million (Rs 1,000 crore) in 2008 in NDTV Networks Plc in exchange of 26 per cent stake.

At that time, National Broadcasting Company Universal, which is into the business of production and marketing of entertainment and news, was owned by General Electric Corp.

According to information available on the NDTV website, NDTV Networks Plc raised $20 million in funding from a venture fund and $100 million (Rs 670 crore) in convertible bonds from a range of funds. This was followed by a strategic investment from National Broadcasting Company Universal.