The Centre on Monday moved the Supreme Court challenging the merger of two Vedanta group companies — iron ore mining unit Sesa Goa and copper producer Sterlite Industries — alleging that the amalgamation approved by the Bombay High Court in August last year was aimed at avoiding taxes to the tune of Rs 847 crore.
While seeking the setting aside of the merger scheme, the ministry of corporate affairs (MCA) said the relevant scheme of amalgamation was nothing but a “colourable device” adopted by Sesa Goa, the once-flagship iron ore producer of Anil Agarwal-controlled Vedanta Resources, to evade payment of tax, by being eligible for refund.
The Sesa Goa-Sterlite merger conducted in an all-share transaction led to the formation of Sesa Sterlite, India’s biggest aluminium maker. As per the merger scheme, investors got three Sesa Goa shares for five shares of Sterlite, while London-based Vedanta transferred to the new entity for $1 its 38.8% stake in Cairn India, including debt of $5.9 billion. The scheme, first announced in February 2012, has since received all other regulatory clearances and the merged entity started trading on Indian bourses on August 30 last year.
A bench headed by justice Fakkir Mohamed Ibrahim Kalifulla posted the matter for further hearing on Thursday, the day when an earlier the income tax department’s appeal in a related matter comes up for hearing.
The department had appealed against the Bombay HC’s order that dismissed its intervention application on the ground that it had no locus standi, and the Supreme Court then said any objection would be entertained only if the MCA filed a special leave petition.
The ministry has now said that parent company Vedanta Aluminium had huge accumulated loss/unabsorbed depreciation of Rs 2,461 crore whereas Sesa Goa had paid total taxes of Rs 846.97 crore for the financial year ended March 31, 2012. Therefore, the entire tax liability of Sesa Goa was wiped, causing the total taxes of Rs 846.97 crore to be refunded at the expense of the public exchequer, it added.
Senior counsel Harish Salve and Ranjana Roy, appearing for Sesa Goa, argued that the ministry had filed objections that were never raised by it before the high court. Under Section 72A of the Income Tax Act, if there is any merger or demerger, the company can take refund to set off the losses, they said, adding that the SC has already upheld the merger scheme