Finance Minister P Chidambaram said in the Lok Sabha on Tuesday that the Income Tax department would move the Supreme Court on the case regarding 43 mills which went against the department in the Madras high court in which his lawyer wife had appeared as senior counsel.

Making a statement in the Lok Sabha, the minister also said that the insinuation that the Cholapuram, Tamil Nadu-based Sri Karpagambal Mills Limited, said to be owned by Chidambaram's brother, was among the 43 mills in the income tax case before the Madras high court was false.

"The insinuation is false. Forty-three mills were involved in the case before the Madras high court and Sri Karpagambal Mills does not figure in the list of 43 mills," Chidambaram said, adding that the Central Board for Direct Taxes has also clarified this point.

He said that the case in which his wife Nalini had appeared, involved a 'pure question of law' -- whether expenditure on replacement of machinery would be accounted as revenue expenditure or capital expenditure -- and the question was decided by the Supreme Court as early as in 1967.

What Nalini Chidambaram said in June 2004

"The department seems to have decided to re-agitate the matter," he said, adding that the department lost the case before the Commissioners of Income Tax (Appeal), again before the Income Tax Appellate Tribunal, and now before the Madras high court.

A few weeks ago, he said, the department had sent the papers to the department of law for filing an appeal to the Supreme Court and appeals are being filed.

Chidambaram said that the principle of the law laid down in the case does not apply to textile mills alone, but to all companies and firms like paper mills, steel mills and sugar mills, which replaced machinery.

Making the statement in response to the Opposition members query, Chidambaram made it clear that he had no knowledge of his lawyer wife being the special counsel in the case at any stage during the relevant period and it came to his notice for the first time only when the matter was attempted to be raised in the Rajya Sabha.

"I believe that none of my respected colleagues in the House would seriously think that had the matter been brought to my notice I would have allowed it to proceed an inch further," he said.

Meet the Real P Chidambaram

"Let me make it clear, categorically and respectfully, that had the matter been brought to my notice at any time earlier, I would have ensured that the proposal to engage Nalini Chidambaram was nipped in the bud and not proceeded any further," he said.

Giving details relating to the engagement of his lawyer wife as special counsel, Chidambaram said that the CBDT had issued a statement on August 26 on the circumstances under which Pushya Sitaraman, senior standing counsel of the IT department, Chennai, had hired Nalini with the approval of the board.

CBDT had stated that proposals for engagement of counsel are not submitted to the finance minister and in this case also, the file was not put up to the finance minister, he said.

"I may add that when CBDT engaged me in January 2004 in the same case, the file was not put up to the then finance minister (Jaswant Singh)," he said.

Chidambaram said the CBDT has admitted that it was a lapse on their part not to have informed him of the proposed engagement of his wife before they granted approval for the same. The board has also expressed regret.

The minister said his wife had also issued a statement narrating the circumstances under which Pushya Sitaraman persuaded her to accept the engagement.

"She said she had done so with the obligation to a sister lawyer," he said, adding that she also pointed out that since 1996 she had voluntary refrained from appearing for or against the department and that this was the sole case in which she had been engaged as a special counsel.

Chidambaram said Pushya Sitaraman too had issued a statement on August 26 and all these statements contained the entire facts.

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