IT dept wrongly calculated tax liability: Sonia tells Delhi HC

Former Congress president Sonia Gandhi today told the Delhi High Court that the tax department has "wrongly invoked and applied" the formula for calculating her tax liability after reopening her assessment for the year 2011-12.

The contention on behalf of the Congress leader was made before a bench of justices S Ravindra Bhat and A K Chawla by senior advocate P Chidambaram.

"They have not applied the formula correctly. The formula was wrongly invoked and wrongly applied. I received nothing except 1,900 shares in the company," the lawyer said.

Another objection raised by him was that the debt of Rs 90 crore bought by Young Indian from Associated Journals Ltd (AJL), which owns National Herald newspaper, was converted into equity and this would not result in any income which was taxable.

The lawyer further said even if the equity resulted in taxable income, it would not go into the hands of Young Indian's (YI) shareholders like Sonia Gandhi, her son Rahul Gandhi and party leader Oscar Fernandes, all of whom have challenged reopening of their tax assessments for the same year, 2011-12.

He said that banks often convert the debt they acquire into equity and this does not result in income in the hands of the bank or its shareholders.

YI, which was incorporated in November 2010 with a capital of Rs 50 lakh, had acquired almost all shareholdings of the AJL, which owns the National Herald newspaper. In this process, YI had also acquired AJL's debt of Rs 90 crore.

After hearing part arguments, when the court said it will issue a formal notice, Additional Solicitor General (ASG) Tushar Mehta said there was no need for it as he was present in the court.

The court, thereafter, listed the matter for further hearing on August 16, when the ASG will argue in defence of the action taken by the tax department.

The court said once it reserves its judgement on conclusion of the arguments, it will ask the tax department not to take any coercive steps till the verdict was pronounced.

Senior advocate Arvind Datar, appearing for Rahul Gandhi, said that arguments during the hearing may be reported and urged the court to order that confidentiality be maintained regarding the contents of the petitions.

However, the bench declined to issue any such direction saying "we cannot go into all this" as it would be akin to going on a "wild-goose chase".

During the over an hour-long hearing, Chidambaram said, "when debt is converted to equity, it does not result in any income and, even if it does, it would not result in income for the shareholder".

He further said that even if it was accepted that income was generated, "it cannot be the income of YI and its shareholders in the same assessment year of 2011-12."