Windmill Scam Snowballs
The windmill depreciation scam has assumed mammoth proportions with as much as Rs 2,000 crore estimated to be involved. The figure could be hig-her as more details come to light in investigations currently being conducted by the tax authorities, said income tax sources.
The estimate is based on findings by the tax authorities that the Gujarat Energy Development Agency (GEDA) had not issued a single clearance certificate to any of the 23 finance companies involved in the REPL Engineering Ltd case. REPL and the 23 firms had claimed 100 per cent depreciation (Rs 199 crore) on a number of windmills, which existed only on paper.
The sources said it was possible that the 23 firms may have been involved in similar windmill deals with several other companies in the country. The 23 firms include TDICI, Tata Finance, Shapoorji Pallonji Finance, LKP, HDFC Bank, Bank of Madura, IIT Corporate Services and Manipal Finance.
Since GEDA has not issued clearance certificates to any of the firms some of which had lease arrangements with other companies too for windmills in Gujarat the depreciation claimed on the windmills would be fictitious as, according to GEDA: These wind mills did not exist.
In view of this, the tax authorities feel the actual figure involved in the scam may be much higher.
An investigation into the entire windmill business has not been ruled out, said the sources, adding that the probe may unearth more irregularities.
REPL, like many other corporate entities had gone in for the windmill projects, basically to take advantage of the 100 per cent depreciation allowances. REPLs chairman and managing director Homi Patel has admitted that as many as 112 windmills, purportedly established by it in the last 18 months, existed only on paper.
Of the windmills, 48 were on lease from the 23 banks and finance companies on a sale-and-lease back arrangement, while the rest were directly owned by the company.
These windmills were reportedly imported by the REPL group of companies in the CKD form, each at a landed cost of Rs 1.5 crore.
According a source, REPL had cleverly worked out all its figures with a view to opting for disclosures under VDIS. But timely detection by the tax authorities put paid to its plan. The income tax department has also rejected the firms tax deduction of Rs 80 crore claimed towards interest outgo.
This, along with the penalty imposed on the firm may ultimately wipe off its net worth of Rs 108 crore.
While most of the finance companies involved opted for VDIS disclosures, a few companies like Tata Finance have decided to revise their tax returns. These firms, which could have got away with 30 per cent tax under VDIS, will now have to pay tax at the rate of 60 per cent which includes a 30 per cent penalty, said sources.
The companies, which had either set up wind mills or had expressed interest in doing so, include Indian Oil Corporation, LD Textiles, Indian Rayon, Essar, IPCL, Arvind Mills, Antifriction Bearings and a host of others.
Apart from in Gujarat, windmills have also been set up in states like Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, MP, Rajasthan and Maharashtra. Further investigations could cover these states as well, said the sources.
Wind-up case on REPL Engg
Crawford Bayley & Co, a leading solicitor firm, has filed a petition in the Mumbai High Court for the wind-up of REPL Engi-neering. We have filed the petition on behalf of a client, to whom REPL owes a large sum of money. It is clear that the company is no position to pay up, a company official said.