News Corp entity plans to exit Star CJ run into FIPB hurdle

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SummaryThe Department of revenue has put a spanner in the plans of Mauritius-based News Corp entity Star HS to exit from Star CJ Network India, the company that operates the Star CJ Alive home shopping channel in India.

The Department of revenue (DoR) has put a spanner in the plans of Mauritius-based News Corp entity Star HS to exit from Star CJ Network India, the company that operates the Star CJ Alive home shopping channel in India.

Sources said one of the 50% promoters in the Star CJ Network — Star HS (Mauritius) — reportedly sold its 10.2 crore shares to P5 Asia, a private equity fund managed by the Providence Group. Following the acquisition, P5 Asia sought government permission to allow the transfer of shares from Star HS to P5 Asia.

However, when the matter came before the foreign investment promotion board (FIPB), sources said DoR discovered that funds from other jurisdictions were being routed through the Mauritius based company in order to take advantage of the India-Mauritius double taxation avoidance agreement.

“The DoR therefore did not support the proposal. However, since the matter involves the I&B ministry, which asked for more time, the FIPB has deferred the matter till the next meeting,” a senior official said.

Also, FIPB discovered during its deliberations that the company engaging in multi-brand retailing using e-commerce which is banned under the current FDI policy on multi-brand retail, official sources said.

“The company had informed the board that in case of non-franchisee sellers selling the products via the website of Star CJ alive, the company was acting in the capacity of an intermediary. This amounts to multi-brand retailing via e-commerce platform which is not allowed,” said a senior official.

Star CJ Alive was launched around four years ago marking the foray of Star India into a 24-hour home-shopping channel. FIPB had allowed Star CJ Network India to float a home-shopping channel in December 2008 in which up to 100% foreign investment is allowed.

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