Bombay high court to examine Ernst & Young report on Sahara buyout deal tomorrow

The Bombay high court would tomorrow examine the Ernst & Young report on the erstwhile Sahara Airlines buyout by Jet Airways to decide the onus on payment of tax liability amounting to Rs107 crore.

While Sahara contended that Jet Airways was liable to pay the tax liability after the takeover, the latter argued that the tax dues pertain to earlier period and hence Sahara should be made accountable for this.

Sahara has taken a stand to the contrary.

Global consultancy firm, E&Y, was appointed by Sahara Group in 2006 to carry the due diligence for the multi-crore takeover deal.

The issue arose after Jet Airways deducted a certain sum towards tax dues from the instalments it was to pay to Sahara as part of the deal.

However, Sahara India Commercial Corporation moved the high court in March 2009 contending that Jet was liable to pay the original price of the buyout, amounting to Rs2000 crore instead of renegotiated amount of Rs1450 crore as it had defaulted on payments.

Sahara submitted that the takeover price had been brought down to Rs1,450 crore from Rs2,000 crore provided Jet Airways would not default on payment.

Sahara said Jet had defaulted on payment and, therefore, the concession on the takeover deal was not tenable.

Jet Airways bought Sahara Airlines in April 2007 for Rs1,450 crore after an arbitration award. It paid Rs 900 crore and agreed to pay the balance in four instalments.

Jet's lawyer had earlier contended that in March 2008 the Income Tax Department demanded tax dues of Rs107 crore from Sahara.

According to Jet, this amount was due from Sahara Group as it pertained to the period before the acquisition.

While paying Sahara the instalment of Rs137 crore last March, Jet deducted Rs 37 crore against the IT dues. Again in 2009, Jet had deducted another Rs50 crore towards tax liability.