ICICI case: I-T dept suspects 'round-tripping' at Deepak Kochhar's NuPower

File photo of Deepak Kochhar
The income tax department’s preliminary findings have smelt the possibility of ‘round-tripping’ at Deepak Kochhar’s NuPower Renewables. 

Tax authorities have raised the red flag over a Rs 4.05 billion investment by Singapore-based Accion Diversified Strategies Fund (ADSF) through its Mauritius subsidiary, DH Renewables Holding. 

The significant premium at which NuPower shares were issued to DH Renewables has raised eyebrows. Between 2014 and 2016, DH Renewables paid a premium of Rs 1,161 apiece, against a face value of Rs 10, to buy compulsory convertible cumulative preferential shares (CCPS) worth over Rs 4.05 billion. 

The I-T department said NuPower’s balance sheet did not substantiate such a high premium and it could be a case of round-tripping of unaccounted income by NuPower. 

In a letter to the tax authorities in Singapore and Mauritius, the I-T department stated that such a modus operandi of infusing funds at a high premium could be “an organised manipulative practice”. 

It added, “This practice of issuing shares to a subsidiary of a Singapore-based entity (ADSF) is irregular, suspicious and unexplainable. If the creditworthiness of the Singapore-based entity is not proved, it could be a case of money laundering of unaccounted income, which shall have direct tax implications.”

The I-T department’s communication with its Singapore and Mauritius counterparts is aimed at investigating the matter further and substantiating its findings against ADSF and DH Renewables. Business Standard has reviewed the letter, dated April 11, sent in accordance with the provision of exchange of information between India and Singapore. 

The tax department has sought transcripts of all communication between ADSF and NuPower, agreements between the two, before or after such transfer of funds, share valuation report for investment in NuPower, along with the reason for making an investment at premium, and ADSF’s board resolution approving investment to be made in the wind energy firm.

The department has also sought information regarding the nature of activities carried out by ADSF, various financial credentials, such as annual report, tax returns, balance sheet, profit and loss account, promoters, beneficiary shareholders since the company’s incorporation, and the change in shareholding pattern to date. 

ADSF also has to furnish details about the bank accounts held from the date of opening to date, coordinates of power of attorney holders, authorised signatories and other firms where ADSF is an owner or a beneficiary. 

In the letter, the tax department mentioned the information the department possessed indicated that the entity under investigation received funds from a subsidiary of a Singapore-registered entity.  

The I-T department had summoned Deepak Kochhar on April 10 and sought details on ADSF’s two special purpose vehicles (SPVs) based in Mauritius, Firstland Holdings and DH Renewables, which had invested in NuPower. Tax sleuths asked Kochhar to explain the source of funds that NuPower had received from these two entities. 

Kochhar is already under the scanner of the Central Bureau of Investigation in connection with the alleged investments made by the Videocon group in NuPower. ICICI Bank, headed by Deepak Kochhar’s wife Chanda Kochhar, had sanctioned a Rs 32.5 billion loan to the consumer durables firm. The agency is investigating allegations of a quid pro quo.

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