How did the income tax authorities establish the kickbacks money trail in the Rs. 1,400 crore Bofors case? Raman Kirpal finds out
THE SURPRISE floating of the Bofors balloon this time cannot be blamed on any politically motivated investigating agency. It is simply a result of due diligence done by the Income Tax Appellate Tribunal tracking the money trail. “Indian income tax is leviable on all types of income, including legal and illegal income, whether recipients are Indian or foreign resident. In these facts, all the connected entities are clearly amenable to Indian tax jurisdiction for their respective income,” the tribunal says in its assessment.
The tribunal was not interested in finding out if Ottavio Quattrocchi and the late Win Chadha acted as middlemen in the deal. Also, it wasn’t concerned whether the duo clinched the Rs. 1,400 crore deal for Bofors. Criminal conduct, or otherwise, is no concern of the tribunal: it finds that money was paid to the duo and wants its pound of flesh.
The assessment goes 23 years back in time, but the Income Tax authorities initiated proceedings only in the 1990s after the CBI probe. Chadha died in 2001, but his son Harsh Chadha disputed the claim. Thus the case went in appeal to the tribunal in 2005. After five years, the tribunal gave its verdict, adding fuel to the Opposition parties’ fire against the UPA government on the CWG and 2G spectrum scams.
The verdict comes at a juncture when the CBI is pressing hard to close the case on Quattrocchi. “We have spent Rs. 250 crore on the Bofors probe and we tried to extradite Quattrocchi five times but we failed. So close the case without going into its merit,” the CBI argues. The Opposition parties were quick to remind the Congress that Sonia Gandhi is protecting Quattrocchi, because he is close to the Gandhi family. The Union law minister is dusting off the old Bofors files to see if the money trail is established as the tribunal claims.
The tribunal says clearly in its order that the money trail exists. It observes that Chadha represented Swedish company Bofors for many years. Till 1984, he worked as an agent to get defence deals for Bofors in India and got 2 percent as commission for every deal. But India changed its policy in 1984 and declared that agents were not to be allowed in defence purchases. In March 1986, Bofors gave a written declaration that Chadha is no more its agent. However, Bofors retained Chadha’s local firm Anatronic General Corporation for administrative services, such as hotel bookings, transportation, forwarding of letters, etc. Bofors was among the four companies shortlisted for the gun deal in 1986.
IT authorities did not conduct any first-hand investigation: they collected evidence from the CBI, Joint Parliamentary Committee and report of the Swedish National Audit Bureau (SNAB) and established that the kickbacks were given in the Bofors deal. The trail went as follows:
2 May 1986: The Indian government pays Rs. 296 crore as advance to Bofors
3 September 1986: Bofors remits $7.3 million to AE Services’ Zurich bank account, opened just a fortnight ago. This amount works out to exactly 3 percent of the advance paid by the Indian government to Bofors
16 September 1986: AE Services moved $7 million to M/s Colbar Investments Ltd Inc, Panama. On 29 September, $12,390 was transferred to the same account. Almost the same amount, $7.3 million with interest, was transferred on a number of occasions to other companies, including M/s Wetelsen Overseas, SA, International Investments Company in Ansbacher (CI) Ltd. Investigations abroad prove that Quattrocchi and his wife Maria controlled all these accounts. For the Colbar Investments Ltd bank account, Quattrocchi had given his address in India as Colony East, New Delhi/India, which is non-existent.
Bofors paid money to Svenska Inc in Panama. According to the agreement, Bofors would pay 3.2 percent of the total value of the ex-works value to Svenska. Out of this, 2.24 percent was to be paid when the advance payment had been received by Bofors. The remaining 0.96 percent of the ex-works was to be paid with subsequent payments received by Bofors.
Bofors transferred a total of Rs. 52.60 crore to Svenska between 24 April 1986 and 30 March 1987. This amount is exactly 3.2 percent of total value of the ex-works. Subsequently, Svenska transferred a large chunk of this amount to Chadha’s Swiss account. Chadha had given power of attorney in favour of his wife Kanta and son Harsh. It also emerged that Svenska had authorised Chadha to open and operate bank accounts of any type, with the fullest rights and powers to substitute anyone else’s name in place of his own.
Thus, the tax tribunal concludes that Bofors can’t be believed when it says that Chadha was not a representative but only a booking agent. The SNAB report quoting Bofors President PO Morberg, stated that the principal beneficiary in M/s Svenska Inc is an Indian, who has been as agent for Bofors for 10-15 years. “In the entire record, except the name of Mr Chadha, the name of no other Indian occurs and the SNAB report refers only to the old Indian agent of Bofors,” the tribunal says.
Besides, Bofors never denies making payments to Svenska and AE Services. It only says they are not middlemen or agents and the payment represents winding up cost and it does not represent kickbacks or commission. Even Harsh never denied that his father holds a Swiss account.
A letter by a Swedish friend clinched the case. It reveals Chadha received a well-earned fee in the Bofors deal
“While the commission of Anatronic was reduced following the declaration of the Government of India that there will be no middlemen in the deal, the commission of Svenska was raised. The commission so paid to Svenska reached the assessee (Chadha) through the bank account,” the IT authorities contend.
A letter, congratulating Chadha for the role he played in getting the deal, clinched the matter. The letter written by Sven Rhambergan, his Swedish friend, on 7 July 1986 reads: “Thank you for the beautiful sterling silver… I am very pleased that you were involved in the Bofors billion business; not only considering your wellearned fee but also proving that Anatronic can do business, which some people — not me, of course — doubted some years ago.” It reveals Chadha received a well-earned and congratulatory fee in this deal.
Moreover, Chadha, Quattrocchi and the Hinduja brothers had opposed the Letter Rogatory proceedings before the Swiss courts. “Now, if Chadha had no link with Svenska and his Swiss bank accounts, there was no need for him to have challenged these proceedings costing a fortune in Switzerland,” the tribunal says, sewing up its arguments in the case.