The income-tax department has won the first round in a dispute involving capital gains dues of over Rs 820 crore (Rs 8.2 billion) against the Shiv Nadar-promoted HCL Corporation.

The Income Tax Appellate Tribunal has asked HCL Corporation to pay Rs 100 crore (Rs 1 billion) in the next three months and thereafter Rs 15 crore (Rs 150 million) every month pending the final outcome of the case.

The tax department had earlier raised a demand of Rs 820.44 crore (Rs 8.2 billion) on Slocum Investments, the HCL group holding company owned by Nadar.

According to an order issued by the office of the Commissioner of Income Tax on December 3, the company had concealed income from capital gains.

HCL Corporation had filed an appeal with the tribunal seeking a stay. When contacted, senior company officials said the tribunal had asked the company to make the interim payment till the final outcome of the case. The tribunal will start hearing the case from March.

The company said in a statement, "HCL Corporation is the holding company of HCL Technologies and HCL Info System. By way of clarification, this dispute is completely unrelated to HCL Infosystems or HCL Technologies This has no impact on the investors and shareholders, board of directors or employees of the two companies."

The I-T department had alleged that HCL Corporation had manipulated the price of the company's shares to take advantage of capital gains tax norms and increase its equity in the company at a lower price. The department had raided the HCL group's offices in January, 2002.

HCL Corporation, Slocum Investments and Shiv Nadar Investments sold 7 million shares of HCL Consulting (now HCL Technologies) to Mauritius-based Wintech Investments, an overseas corporate body, at a price of Rs 50 per share in 1999.

Wintech Investments, owned by Shiv Nadar's brother SN Balakrishanan, is now known as HCL Holdings. HCL Technologies was subsequently listed on the stock exchange in December, 1999. HCL Corporation and Shiv Nadar Investments were merged into Slocum Investments in August 2001.

In Mauritius, capital gains tax is not applicable on a certain class of overseas investors. According to tax authorities, the clause ensured that the company did not lose control over HCL Consulting.

The actual price of an HCL Consulting share of face value Rs 10 in 1999 was much more than the price (Rs 50) at which they were sold.

According to tax department sources, the management was aware of the fact that if the shares of HCL Consulting were parked in a tax haven without losing control over the company, it would save the holding company from the incidence of capital gains tax in India.

Tax authorities said the management knew that the stock would be listed at a much higher value. Since the valuation was not done by a reputed firm, the shares were transferred at a lower value, resulting in lower capital gains tax on the appellant company, they added.