NEW DELHI: In a setback to the Congress leadership, the Income Tax Appellate Tribunal (ITAT) has upheld the I-T department's withdrawal of 'charitable' status of Young Indian in which party president Sonia Gandhi and her children hold majority stake and which controversially acquired properties estimated to be worth Rs 400 crore belonging to Associated Journals Limited (AJL), the publisher of National Herald and other mouthpieces of the opposition party.

The order, unless challenged, renders the Gandhis liable to pay Rs 145 crore to the tax department on account of their control of Young Indian. They had appealed against the I-T department's decision in July to scrap the 'charitable' tag, saying that the tax exemption they enjoyed could not be reversed retrospectively.

The ITAT, however, turned down the appeal after scrutinising the two-part transaction which saw Congress waiving off a loan of Rs 90 crore it had advanced to AJL for a mere 50 lakh just after AJL was acquired by the Gandhis-controlled Young Indian.

The ITAT said Young Indian's "entire move for acquiring AJL, which had stopped/suspended its publication activities and was holding large number of properties worth hundreds of crores with huge rental and lease income, was for acquiring control and interest in such properties for mere sum of Rs 50 lakh. Can prudence justify such acquisition was for furtherance of charity or for furtherance of the objects of Young Indian?".

The ITAT emphasised that Young Indian got beneficial interest in AJL's property which on the said date was valued at more than Rs 400 crore on payment of a sum of Rs 50 lakh to Congress. "This, according to the respondent, if viewed in the backdrop of the purpose of transfer lease and the modus operandi adopted, is nothing but a device to transfer the property held on lease from the government by AJL to Young Indian which became 99% or rather 100% shareholder of AJL," the ITAT order said.

"In view of our findings, we hold that the CIT-E (Commissioner I-T exemption) was justified in cancelling the registration from the assessment year 2011-12, because none of the activities of the assessee (Young Indian) was carried out in accordance with its objects nor its activities can be held to be genuine. Consequently, the appeal of the assessee is dismissed," the ITAT said.

The appellate tribunal said the only activity of the assessee, ie Young Indian, was borrowing of Rs 1 crore from a Kolkata-based company and making the payment of Rs 50 lakh to AICC and applying for allotment of shares against cancellation of loan. "All these activities definitely cannot be held to be in furtherance of the objects of Young Indian, because at no point of time, it was ever stated what was the purpose and objective behind acquiring AJL and making payment of Rs 50 lakh to AICC," the ITAT said.

"The events clearly pointed out that even before incorporation of Young Indian, the registered office was shifted to Delhi and the directors managing the affairs of the assessee company were taken on board of AJL. Not only that, Young Indian was permitted to use the property of AJL as its registered office," the order said.



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