A Delhi Court has dismissed three complaints filed by the Income Tax department against news website Newslaundry, its co-founder Abhinandan Sekhri and others in connection with the valuation of the company’s shares, reported Bar and Bench on Tuesday.
An Income Tax officer had accused Sekhri, the company’s partner Chartered Accountancy firm and others of criminal conspiracy. The officer had alleged that they evaded tax by issuing shares based on a bogus valuation report that failed to account for the company’s losses in the previous assessment years.
In its order, Additional Chief Metropolitan Magistrate Anurag Thakur said that there was no criminal conspiracy in the case as the valuation report was genuine and in compliance with the Income Tax guidelines. “It is also not the case of the complainant that there was any wrong entry in the books of accounts, balance sheet and income tax return,” the judge said, reported Live Law.
The court also said that most startups incur losses in the initial phase because businesses have a gestation period. Citing the example of internet-based platforms such as Flipkart, Zomato and Amazon India, Thakur noted that these firms incur massive losses year after year but still private equity investors value them at tens of thousands of crores and subscribe.
“Seen in this context coupled with the fact that the accused company has started making profit and is generating cash from operations, the valuation of equity shares given by the valuer as per DCF method [discounted cash flow] does not seem to be lofty at all and it certainly can not be termed as bogus,” the court added.