Government Yields To Pressure from Amar Singh

January 3, 2007 (Press Release) -- It is widely known and reported earlier by the media that Mukesh Ambani, who had acquired 50 crores shares of Reliance Infocomm Ltd (RIC) at par from Reliance Communications Infrastructure Ltd. (RCIL), had in 2004, returned the said shares at par to RCIL to facilitate the family settlement.

Under pressure of Amar Singh (MP), the Income Tax Department has now brought to tax notional income ignoring the facts of this transaction and has raised a demand of Rs. 1156 crores in the hands of Mukesh Ambani. This newspaper has a copy of the letter dated Sept. 12, 2006 written by Amar Singh to the PM on the subject. Sources in the Income Tax Department believe that while this transaction does not result into any income, the government is trying to play safe fearing a back lash from Amar Singh especially when state elections are round the corner.

When contacted, highly placed sources in Reliance Industries Ltd. said that the order passed by the Income Tax Authorities is bad in law and will be challenged in appeal. In the transaction no income accrued to Mukesh Ambani - either in law or on facts. The demand will be wiped off as soon as this issue is taken up by independent judicial appellate authorities. It has been alleged that the assessing officer while being a judicial authority, had no choice to take an independent decision as he had written instructions from his superiors to make the addition. On this ground alone, the order is likely to be quashed.