Govt, Tatas differ over VSNL move

Sharp differences have surfaced between the Tatas and the government over handling of surplus land of their joint venture VSNL, as also who would be liable to pay stamp duty for transfer of property to a new entity 'Hemisphere' being created for the purpose.

Panatone Finvest, which bought a controlling stake from government in VSNL in 2002, is in the process of demerging the surplus land and transferring the same to a new company Hemisphere created by the international communication giant with three of its nominees on board.

However, Panatone has resisted the move by the government to have its three nominees on the board of Hemisphere, which the department of telecommunication sought to induct as part of the confidence building measure, on the ground this was possible after the completion of demerger process.

When contacted, a VSNL source told PTI from Mumbai that the shareholders' agreement very clearly states that the strategic partner (Tatas) should facilitate the demerger. It does not have any clause for any payment (of taxes) by the partner."

Three months after Hemisphere was created with a equity of Rs 5 lakh by Panatone, DoT had sought to be included on its board, top government officials said, adding that it was only in the fairness to have their representatives in an entity where the entire 773 acres of surplus land would be transferred for the benefit of the government.

DoT officials said the proposed scheme of demerger, which Panatone has submitted to DoT, has laid down several conditions on the government over expenditures like stamp duty and income taxes which is not acceptable to DoT.

Government does not accept such conditions. DoT has sent the demerger proposals to law ministry for examinations. VSNL has over 773.1 acres of surplus land in prime locations in Delhi, Tamil Nadu, West Bengal and Maharashtra.

When the company was divested, the shareholders agreement envisaged that the surplus land would be demerged and a separate company would be formed. After demerger government will hold 51.12 per cent share in it.

When VSNL was formed, it got land at concessional rates as it was a PSU. However, any demerger now will be treated as a commercial deal as VSNL is now owned and managed by the Tatas. Therefore, any land transfer to a new entity will result in capital gains that would be subject to tax.

DoT has not yet valued VSNL's surplus land. It would be a complicated exercise as this land is unlikely to be used only for telecom and related fields.