CA Sansaar
Shah Rukh’s CA gets ED summons over KKR share case
PrintTHE Enforcement Directorate (ED) has summoned the chartered accountant (CA) of Bollywood actor Shah Rukh Khan after the latter failed to furnish a satisfactory reply when asked why he adopted a “wrong method” of undervaluing shares of his IPL franchise. The CA’s statement is likely to be recorded in a fortnight. On November 10, the agency had questioned the actor in connection with the ongoing investigations into irregularities in the Indian Premier League (IPL).
The ED is investigating two separate sales of shares by IPL franchise Kolkata Knight Riders (KKR) in 2009 and 2010 to Sea Island Investment Ltd, a Mauritius-based company owned by actor Juhi Chawla’s father-in-law Mahendra Mehta.
Khan’s IPL franchise Kolkata Knight Riders Sports Private Limited (KRSPL), a start-up, was formed with him owning 10,000 shares initially. As many as 40 lakh shares were later given to Juhi Chawla, while Mehta’s company was issued 50 lakh shares at Rs 10 per share. Subsequently, Chawla transferred her shares too to Mehta’s company.
KRSPL has now two crore shares, of which Khan owns 1.1 crore shares and Mehta’s company owns 90 lakh shares. The actor was quizzed for over three hours on the transfer of 50 lakh shares at Rs 10 per share against a much higher market value. According to sources, the actor used the ‘present asset value (PAV)’ instead of ‘perceived earning capacity value (PECV)’, resulting in lesser value per share while evaluating his shares.
“The actor was not able to give a satisfactory reply when quizzed on why he undervalued his shares while selling it to Mehta’s company. KRSPL is a start-up and a PAV method is generally used during the liquidation of firms. The actor claims that he did so on the advice of his chartered accountant. We have now summoned him to explain why he advised the actor to undervalue his shares,” said a senior ED official.
The agency’s allegation that the actor undervalued his shares is based on a report submitted by chartered accountancy firm Chokshi & Chokshi LLP. Chokshi & Chokshi was appointed to audit the value of the equity shares of certain IPL franchises to arrive at the correct valuation of the shares sold.
The agency has submitted its finding, concluding that the price of the shares in Khan’s case should have been between Rs 70 and Rs 85. “Going by the evaluation done by the external auditor, the shares were undervalued 7-8 times. We will now quiz the chartered accountant on this and if he too fails to give a satisfactory reply, we will issue a show-cause notice to Khan,” added the official.
The actor had been summoned in May too but he had sought time to appear before the investigating agency. When contacted for a response, Khan’s spokesperson declined to comment. (Indian Express)
The ED is investigating two separate sales of shares by IPL franchise Kolkata Knight Riders (KKR) in 2009 and 2010 to Sea Island Investment Ltd, a Mauritius-based company owned by actor Juhi Chawla’s father-in-law Mahendra Mehta.
Khan’s IPL franchise Kolkata Knight Riders Sports Private Limited (KRSPL), a start-up, was formed with him owning 10,000 shares initially. As many as 40 lakh shares were later given to Juhi Chawla, while Mehta’s company was issued 50 lakh shares at Rs 10 per share. Subsequently, Chawla transferred her shares too to Mehta’s company.
KRSPL has now two crore shares, of which Khan owns 1.1 crore shares and Mehta’s company owns 90 lakh shares. The actor was quizzed for over three hours on the transfer of 50 lakh shares at Rs 10 per share against a much higher market value. According to sources, the actor used the ‘present asset value (PAV)’ instead of ‘perceived earning capacity value (PECV)’, resulting in lesser value per share while evaluating his shares.
“The actor was not able to give a satisfactory reply when quizzed on why he undervalued his shares while selling it to Mehta’s company. KRSPL is a start-up and a PAV method is generally used during the liquidation of firms. The actor claims that he did so on the advice of his chartered accountant. We have now summoned him to explain why he advised the actor to undervalue his shares,” said a senior ED official.
The agency’s allegation that the actor undervalued his shares is based on a report submitted by chartered accountancy firm Chokshi & Chokshi LLP. Chokshi & Chokshi was appointed to audit the value of the equity shares of certain IPL franchises to arrive at the correct valuation of the shares sold.
The agency has submitted its finding, concluding that the price of the shares in Khan’s case should have been between Rs 70 and Rs 85. “Going by the evaluation done by the external auditor, the shares were undervalued 7-8 times. We will now quiz the chartered accountant on this and if he too fails to give a satisfactory reply, we will issue a show-cause notice to Khan,” added the official.
The actor had been summoned in May too but he had sought time to appear before the investigating agency. When contacted for a response, Khan’s spokesperson declined to comment. (Indian Express)
Category : International Taxation | Comments : 1 | Hits : 2738
Comments
CA.Subhash Chandra Podder
19-Nov-2015 , 05:21:53 pmLET US SEE THE RESULT.