States: Andhra Pradesh: Wrath of Grapes

India Today, April 26, 1999
April 26, 1999

ANDHRA PRADESH
Wrath of Grapes

Income-tax authorities gun for Jayalalitha as she claims exemption for fruit she never grew.

By K M Thomas

J Jayalalitha Call it a case of bad tax planning. If J. Jayalalitha's income-tax returns are to be believed, between 1987 and 1993 she earned a tax-free Rs 60 lakh from the sale of grapes grown on a 30-acre farm she owned in the Jedi Metla area of Secunderabad. Trouble is, the Income Tax (IT) Department claims to have evidence to show there was no cultivation on the farm during those years. The farm itself came into Jayalalitha's possession in 1991. "No doubt the country is prospering," declares Chief Minister M. Karunanidhi with typically caustic wit. "We have grapes without cultivating them and Rs 10 lakh profit without selling anything."

Though she took over in 1991 Jayalalitha claims income from the farm since 1987 It's not just the missing grapes. The Enforcement Directorate (ED) and the Directorate of Vigilance and Anti-Corruption now have documents indicating the AIADMK supremo and her associates have over Rs 600 crore invested in tax havens across the world, including the Cayman Islands, Switzerland, Canary Islands and Lugano.

Sour grapes for the Centre? After all, the latest spat between Jayalalitha and taxmen occurred even as she readied to withdraw support to the Vajpayee Government, leading to speculation that a vindictive Centre was hounding its former ally. But a senior BJP leader hinted at more revelations that have the potential to damage her politically. "More skeletons will come tumbling out of the closets. We will make sure she has no face to show."

IT officials say they have had an eye on the Metla farm for some time now. The farm came under suspicion because it came into Jayalalitha's possession only after she became chief minister of Tamil Nadu. It was purchased jointly in 1978 for Rs 12 lakh by Jayalalitha and M.G. Ramachandran, with MGR pitching in over two thirds of the price. Since MGR held the controlling interest, his representatives managed the farm till 1991. During this period, according to Jayalalitha's own written accounts in the department's possession, she was in dire straits financially. She had apparently even hypothecated her car -- a gift from MGR -- to a bank for Rs 2 lakh. To now claim an annual income of Rs 10 lakh from the farm for that period is laughable, say IT officials.

Indeed, the entire situation is rather farcical. Investigations by the IT department show there was no grape cultivation on the Metla farm till 1997, several years after the period for which Jayalalitha is claiming a tax exemption (there is no levy on agricultural income). In 1993, when she filed the disputed IT returns, Jayalalitha was asked to furnish details of the production and sale of grapes. She promptly submitted six bills of Rs 10 lakh each from a commission agent in Hyderabad for 1987-93.

That's where the yarn began unravelling. The Agricultural Produce Marketing Society in Hyderabad, the nodal agency for the buying and selling of all agricultural produce in Andhra Pradesh, has no evidence of any such transactions. And the agent has admitted in a written statement he was paid Rs 1.2 lakh for issuing fake invoices.

The evidence was growing. The Agricultural Market Yard in Hyderabad maintains all records relating to produce: from the farmer's name, the size and details of the harvest to the date and time it is brought to the yard, the name of the representative accompanying the produce -- even the registration number of the vehicle in which it is brought to the yard. There is no entry for the Jedi Metla farm until 1997. The Andhra Pradesh Horticulture Department has also confirmed that the farm was cultivated for the first time in 1997-98. And the supreme irony: describing herself as a "small farmer", Jayalalitha last year availed of a Rs 2 lakh subsidy to instal drip irrigation on the farm.

This isn't the first time she's been troubled by pesky tax problems. When she was chief minister, Jayalalitha brushed away charges of account manipulation, declaring in the state Assembly that it was a matter to be resolved by her and the IT Department. Last year, the IT Department asked her to file fresh returns for 1993-94, citing irregularities in the earlier document. When the then Union minister of state for finance R.K. Kumar (an AIADMK member) failed to help her, he was summarily dismissed -- following Jayalalitha's directive, Kumar resigned from the Government. Jayalalitha then turned to the prime minister, raising the issue at a coordination committee meeting. It doesn't seem to have helped.

And now that the BJP Government has turned hostile, it is unlikely to do Jayalalitha any favours. So far, the discovery of Rs 600 crore discovered overseas has not been followed up, even though ED officials have said they can complete all investigations in three months. But Jayalalitha may well emerge from this unscathed. She has already made money from nothing. For someone who entertains hopes of becoming prime minister with just 18 MPs, nothing, it would appear, is impossible.

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