The probe concerns a parcel of land that Jet had acquired in 2006 and gave Godrej full development freedom for the same.
The income tax (I-T) Department is investigating a financial deal between Jet Airways and Godrej Buildcon (GBPL), a subsidiary of Godrej Properties.
According to a Business Standard report, the Naresh Goyal-led Jet Airways received a ‘monetary consideration’ to the tune of Rs 1,725 crore from the developers as part of a land development deal.
The I-T Department is now evaluating whether both the parties would attract any tax liability on the deal.
This probe concerns a 2.5-acre plot of land that Jet Airways had acquired in 2006 at the Bandra-Kurla Complex for Rs 390 crore. The airline subsequently entered into an agreement with Godrej Properties in 2011 to develop the land and take on Jet’s Rs 360 crore debt responsibility on the property. Godrej will additionally have to pay Rs 135 crore to the airline for expenses incurred.
Under the deal, GBPL was provided rights for construction, marketing, and selling from Jet Airways in the form of direct payment, credit, and/or by altering accounts over time. Records obtained by the tax department show that, in a few cases, Godrej even paid the amount directly to the Mumbai Municipal Regional Development Authority (MMRDA) on behalf of the airline.
But the daily quoted a tax department official as saying the airline’s financial records did not contain any traces of Godrej’s name in these transactions.
An email sent to the daily by a spokesperson from Godrej Properties said that ‘appropriate approvals’ were given by authorities to build commercial office spaces in BKC. GBPL completed the project and all accounts were settled as part of the agreement with Jet Airways. The email added that all accounting was done with regard to modern accounting standards and that taxes due have been accordingly settled.Jet Airways also said the same - the deal complied with every regulation, was registered and had obtained all prior approvals from the concerned authorities. The airline added that the project was completed successfully with regards to prescribed accounting standards and all taxes have been duly discharged.
Meanwhile, the tax department has asked both parties for a reasonable explanation. It is also analysing the GST department’s probe findings, which raised and ordered a service tax demand of Rs 237 crore on the airline in March.
Jet Airways clarifies on Godrej Buildcon Deal, says accounting of development agreement done in compliance with the regulations
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