National Herald Case: Delhi HC Directs Young Indian To Deposit Rs. 10 Crore [Read Order]

The Delhi High Court has directed Young Indian Pvt. Ltd., in which Congress President Rahul Gandhi and his mother Sonia Gandhi are major stakeholders, to deposit Rs. 10 crore out of the total of Rs. 249.15 crore income tax demand from it.

The Bench comprising Justice S. Ravindra Bhat and Justice A.K. Chawla allowed the company to deposit half the amount with the I-T department before March 31 and the remainder by April 15, directing the I-T Department to not act against the entity subject to fulfilment of this condition.

The Court is hearing a Petition filed by Young Indian, which had moved the High Court seeking a stay on the income tax proceedings initiated against it. The company has contended that the tax wing's demand is prima facie untenable, questioning the method of valuation adopted by the Assessing Officer (AO).

Appearing for the company, Senior Advocate Arvind Datar submitted that it had no assets or readily available resources to pay any amount, and can with difficulty raise Rs. 5 crores from willing individuals, if required.

The Revenue Department, on the other hand, had asserted that the valuation method adopted by the AO was justified, and that the company should deposit at least 20% of the entire amount. It had further pointed out that the company's appeal was being heard on its merits by the Commissioner of Income Tax (A) and had demanded that any interim order staying the demand should ensure that a substantial amount is deposited before 31 March.

The matter will now be heard on 24 April.

The National Herald case

At the heart of what came to be known as the "National Herald case" is the Associated Journals Limited (AJL), publisher of three newspapers, including the National Herald, an English daily founded and edited by Jawaharlal Nehru before he became India's first Prime Minister.

AJL shut down in 2008 with an alleged unpaid debt of about Rs. 90 crores. BJP leader Subramanian Swamy had then, in November 2012, filed a complaint accusing Sonia Gandhi and Rahul Gandhi of committing fraud and land grabbing by acquiring AJL through their private company, Young Indian, which was incorporated in November, 2010, with a capital of Rs. 50 lakh.

Mr. Swamy had pointed out that the Congress Party had lent more than Rs. 90 crore to AJL for commercial purposes at zero interest. This, he had contended, was violative of Section 29A to C of the Representation of People Act, 1951 and Section 13A of Income Tax Act, 1961. Further, AJL's purchase had allowed Young Indian to recover the amount which AJL owed to the Congress Party. Highlighting such transactions, the duo was accused of cheating and misappropriating funds.

Young Indian had then approached the Delhi High Court last year, seeking a stay on the proceedings initiated against it as well as quashing of re- assessment notices issued against it in connection with the case. The Court had, however, directed the company to approach the tax authorities instead.