The Hindu : Karnataka News : Rs. 1.2 lakh crore tax evasion by telecom corporates: Patil

Online edition of India's National Newspaper
Tuesday, Aug 28, 2007
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Karnataka

Karnataka

Rs. 1.2 lakh crore tax evasion by telecom corporates: Patil

Special Correspondent

President urged to refer matter to Supreme Court

The issue was debated in Legislative Council
Patil submits a 313-page report
to President

BANGALORE: Leader of the Opposition in the Legislative Council, H.K. Patil, has alleged that high profile corporates in the telecom sector, particularly in the optical fibre cable (OFC) networks, have evaded taxes (sales tax, VAT etc.) amounting to Rs. 1.2 lakh crore to the Union and State governments and urged President Pratibha Patil to refer the case to the Supreme Court for its opinion.

Mr. Patil, who met the President on Friday and submitted to her a 313-page report on “Rampant tax evasion by high profile corporates in the field of telecom industry, particularly the OFC networks”, told presspersons here on Monday that the evasion related to “artificially created light energy” generated by the OFC network companies which was used by the information technology companies for the purpose of transmitting data/information from their given location to their desired destinations. “Forty-nine companies, including BSNL, Airtel, Dishnet Wireless Limited, Reliance Communications, Software Technology Park of India, Tata Power Company, VSNL etc., were doing the business with the help of “artificially created light energy” in an “OFC medium”, said the report, which was released to the press.

Mr. Patil said under Article 143 of the Constitution, the President could refer the matter to the Supreme Court and obtain its opinion on the issue.

The opinion of the Supreme Court had all sanctity and force of a law of the land. The report contained all scientific facts and empirical evidence, Mr. Patil claimed. The issue was discussed in the last session of the Legislative Council.

Mr. Patil also urged the Prime Minister to constitute an authority on a permanent basis, preferably headed by a Supreme Court judge and with members drawn from the fields of taxation and advanced technology, to suggest steps for effective assessment, collection and recovery of these taxes which were legitimately due to the State exchequer. A judicial commission should also be constituted to inquire into the lapses in collection and non-payment of taxes by the high profile corporates.

Mr. Patil said that “IT companies based in the State and other States are transmitting the data/information they are developing, to their respective customers with the help of artificially created light energy in an OFC medium.”

The Supreme Court had already held such “electrical energy” as goods. There was tax evasion to the tune of Rs. 8,000 crore to Rs. 10,000 crore, he said.

The Karnataka Sales Tax Act, the Central Sales Tax Act and the Karnataka Value Added Tax Act too recognise electrical energy as goods. Taxes at the rate of 12.5 per cent could be levied. However, most of those in the business had misled the authorities and the court resulting in the evasion, he pointed out.

It would only be appropriate if the Union Government had a comprehensive look into the matter and ensured that such evasion was plugged in the interests of the State and the people, the leader of the Opposition in the Legislative Council said.

Deputy Chief Minister B.S. Yediyurappa in his reply to the debate in the Legislative Council had referred the Supreme Court order and said the court held that since electromagnetic base did not constitute goods, no tax could be levied.

The matter of filing a review petition against the above verdict was under the consideration of the State Government, Mr. Yediyurappa said.

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