IT dept launches probe into Kraft's Cadbury takeover

NEW DELHI: The income tax department has initiated an inquiry into Cadbury India's takeover by US-based Kraft Food Inc for alleged tax evasion and flouting of buyout norms, following a Delhi High Court directive. The High Court asked the government last month to complete the probe within 8 weeks.

The court's direction came in response to a petition by an individual, Ved Prakash, seeking action against the entities involved for flouting takeover laws and evading tax. "I am directed to inform you that taking cognisance of the petition filed by you, action has been initiated in the matter under Income Tax laws," under secretary Salil Mishra said in his letter addressed to the petitioner.

The public interest litigation filed by Ved Prakash had alleged huge loss to the Indian exchequer on account of tax evasion in Kraft's takeover of Cadbury.

Kraft Foods had acquired British candy maker Cadbury for $19.6 billion in February 2010. The deal included the UK firm's Indian subsidiary. The petition moved court asking that the government to assess the tax liability in respect of the transaction and recover the same. The petition makes a reference to the UKbased Vodafone's arm that has been asked by authorities to pay over Rs 11,000 crore in taxes for buying Hong Kong-based Hutchison's telecom company. The deal involved Hutchison Telecom's India assets in a JV with the Essar group.

Without going into the merits of the case, the court asked the petitioner to approach the government and the authorities concerned. In a letter on December 14, 2010, Prakash made a representation to the central government and the Income Tax Department. "If the representation is submitted, the competent authority shall address the same within eight weeks," the court had said.