'Serious irregularities' by Infosys in SEZ: FinMin

Written by Priyadarshi Siddhanta | priyadarshi siddhanta | New Delhi | Updated: Oct 20 2014, 19:02pm hrs
InfosysThe revenue department has prepared a detailed report highlighting the alleged irregularities committed by Infosys in RGCTP SEZ in Chandigarh.
The finance ministry has alleged that IT firm Infosys has committed serious irregularities at a Special Economic Zone in Chandigarh and also availed undue tax concessions and exemptions.

The revenue department has prepared a detailed report highlighting the alleged irregularities committed by Infosys in its Rajiv Gandhi Chandigarh Technology Park (RGCTP) SEZ in Chandigarh.

The report said that the land in the RGCTP, which should have been in possession of the Chandigarh administration (the developer) was in actual possession with Infosys in 2006, which is against SEZ rules.

An attempt was belatedly made in April 2009 by signing a lease deed, which is improper, the department has said.

Further, the land which should have been vacant had structures erected on it, and economic and commercial activities were being carried out, which was against the rules, the report said.

Officials from the finance and commerce ministries are likely to meet next week to finalise an action plan based on the revenue departments report and seek approval from the Union Cabinet.

As such, if need be, the issue can be discussed in detail during the next meeting between the two departments (revenue and commerce) to find a just and reasonable solution to this long pending issue, revenue secretary Shaktikanta Das has wrote to commerce secretary Rajeev Kher on September 29.

The Indian Express emailed Kher a detailed questionnaire on October 10 on how the commerce ministry plans to resolve the issue. That remained unanswered at the time of this report going to press.

Infosys had also availed tax concessions for using duty free material for operation and maintenance of facilities in non-processing areas, while they were allowed to do so only in processing areas, the report said.

The existing SEZ rules mandates that the developer provide all infrastructural facilities for the SEZ and is allowed utilisation of duty-free raw materials for this purpose.

In the case of RGCTP all such works have been executed by Infosys and not by the developer. By doing so, the company has incorrectly availed tax concessions which otherwise was available to a developer, the revenue department said in the report.

In a reply to an e-mailed questionnaire, a spokesperson for Infosys denied any wrongdoing by the firm in the RGCTP. She said, No land has been sold to Infosys by the Chandigarh Administration on free hold basis. Infosys signed the land lease agreement as per the provisions of SEZ Rules on April 3, 2009.

The spokesperson added: The land was vacant at the time of application filing by Chandigarh Administration. As developer of the SEZ, the Chandigarh Administration made an application on November 30, 2004 to the ministry of commerce to notify 111 acres of the Rajiv Gandhi Chandigarh Technology Park (RGCTP) as SEZ.

She denied that Infosys availed any undue tax benefits and concessions saying the firm did not claim any such benefits till its SEZ got approved by the commerce ministry on June 16, 2006 and the customs bond was signed on July 10, 2006.

A SEZ Unit can be set up only in a defined processing area of a SEZ. Infosys Ltd has set up its SEZ Unit within the processing area defined under the RGCTP SEZ developed by Chandigarh Administration, she added.

The issue has been hanging fire since May 2011 and the UPA government had even decided to refer the matter to an empowered group of ministers in July 2012. But in May this year, the NDA government decided to abolish at groups of ministers and empowered groups of ministers and left it to the commerce ministry for an appropriate action.

CASE FILE

* The report by the revenue department said that Infosys was in possession of the land at RGCTP, which should have been in possession of the developer of the SEZ, the Chandigarh administration

* An attempt was belatedly made in April 2009 by signing a lease deed, which is improper, according to the department

* The company also erected structures on the land that was meant to be vacant, the report said

* Officials from the finance and commerce ministries are likely to meet next week to finalise an action plan

* Infosys has denied any wrongdoing in the issue