The debt of Rs 90 crore of the Young Indian company, when converted into equity, would not result in any income for levying tax, top Congress leader Sonia Gandhi told the Delhi High Court today.
Young Indian (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.
The submission on behalf of Sonia Gandhi by senior advocate P Chidambaram was made before a bench of Justices S Ravindra Bhat and A K Chawla appearing for Gandhi.
Chidambaram said that even if this was taxable income, it would not go into the hands of YI's shareholders like the former Congress President.
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 that once it reserved its judgement on conclusion of the arguments, it will ask the tax department not to take any coercive steps till the verdict was pronounced.
The bench also did not issue any order restraining the reporting of contents of the petitions filed on behalf of Sonia Gandhi, Congress president Rahul Gandhi and party leader Oscar Fernandes.
The Gandhis and Fernandes have challenged the reopening of their tax assessment for the year 2011-12 in March this year.
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" as it was known who reports contents of the matter and who is the source of the information.
During the over an hour-long hearing, Chidambaram contended, "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 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."
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