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Table of contents

Black money trail: What the issue is all about and


who has been named
An Explainer on the black money debate

04

Black money list: Govt names gold trader Chimanlal, ex-Dabur exec,
miner Timblo

06

Black money: Radha Timblo had illegal Goa mines and a Pakistan connection

08

Pradip Burman named in black money case: Who is this former Dabur exec?

10

Black money list: 5 facts on Rajkot-based bullion trader, Pankaj


Chimanlal Lodhiya

11

Black money case: SITs next steps, full list of names and more

12

Disclosing names: Will it bring back black money?


Black money case: How SC managed to contradict its stand on revealing names

16

Even disclosing all names wont bring back black money to India

19

Name and shame begins but politicians wont appear on black money list

21

In pursuit of black money, Supreme Court is biting off more than it can chew

23

Black money list: BJPs modus operandi no different from previous UPA govt

25

False promises? BJPs response on black money is even worse than UPAs

27

Black Money karma: BJP has fallen into ditch it had dug for Congress

29

Economic implications of the black money probe


Fallout of black money case? India fails to attend global meet on combating
tax evasion

32

If BJP is serious about black money, it should re-examine tax treaties

34

Black money list: Assessment of names before March 2015 is impossible

36

We are back to square one in black money case: SIT chief M B Shah

38

Great black money damp squib: SIT probe destined to disappoint

39

Copyright 2012 Firstpost

Black money trail: What the issue is all


about and who has been named

Copyright 2012 Firstpost

An Explainer on the black money debate


Debobrat Ghose Oct 27, 2014

n informed, mature and realistic debate


on black money is too much to ask for in
a country where the issue attracts intense, almost emotional public reaction. It does
not help when political games and systemic
problems in the economy that aid tax evasion
and stashing of illicit money in overseas destinations get mixed up.
Finance Minister Arun Jaitley has hinted at a
former UPA ministers name figuring on a list
of names received from banks overseas and the
Congress has challenged him to go public with
all the names. But is this latest round of excitement over black money expected to yield much
beyond the routine noise? No, economists tell
Firstpost. The issue is complex and requires a
combination of strong political will, changes
in the taxation rules and a mass movement for
compliance to curb the problem, if not completely eliminate it, they argue.

Is it really possible to cart the money back to


India as the party promised?
Whats the black money debate?
In 2009, eminent lawyer Ram Jethmalani and
others filed a PIL in the SC seeking the court's
directions to help bring back black money
stashed in tax havens abroad. In January 2011,
the apex court asked why the names of those
who have stashed money in the Liechtenstein
Bank have not been disclosed and asked the
government to be more forthcoming in releasing the names. It was followed by setting up
of a Special Investigation Team (SIT) on the
courts order to act as a watch dog. In 2012,
government brought out a white paper on black
money.
In April 2014, the government disclosed to the
SC the names of 26 people who had accounts in
banks in Liechtenstein, as revealed to India by
Copyright 2012 Firstpost

German authorities. Going back on its pre-poll


commitment, the NDA government told the
SC in mid-October that it couldnt disclose the
names, as providing the names of Indian black
money holders would violate tax agreements
with nations. This led to a fierce debate between
the BJP and the Congress, especially when the
government later said it would release a few
names.
Why is it difficult to track down account
holders?
The actual account holder conceals his identity
through layering. The money is routed through
at least six layers. For example, X transfers
money from India to a tax haven there are at
least 80 of them - through hawala; thereafter, a
shell company is formed by another name in another tax haven. Its then transferred to a third
tax haven and parked in a bank under a trust.
Though the actual owner remains the same the
owner is progressively hidden behind these
multiple veils.
What is round-tripping?
A part of the black money stashed in a tax haven
gets back to India through Mauritius and other
routes such as participatory notes and gets
converted into white, giving it a legal status.
The process of funnelling back unaccounted for
wealth back to India is a multi-layered process
cleverly designed to conceal the identity of the
real players.
Is it possible to name all the Indians and
bring the money home?
No, say economists, financial and legal experts,
and government officials engaged in dealing
with this issue. Its not an easy task and not
possible to bring the black money back home,
as politicians often claim. Legally, it is very
difficult to name an account holder, unless the
person is being prosecuted and taken to court.
Moreover, other countries will stop sharing
confidential information if we start making such
information public without following international protocol, a senior bureaucrat knowledgable about the issue, shares on condition of
anonymity.

Is black money all about foreign banks?


Not really. A study shows that out of the total
black income generated, only 10 percent is kept
abroad and 90 percent remains in India. The
interest rate in foreign banks is too low to bring
any handsome returns on saving. Black money
is kept abroad for spending on luxury items, expensive jewellery, cars, buying a yacht, building
properties in cities such as Dubai, London or
in the US, investing in stock market, etc. Of the
money in India a portion is consumed in buying
gold, property, etc. A major part of this money
gets into real estate which explains why property prices stay high despite huge idle inventory.
This money is also used to fund elections. If the
government is serious about curbing black money it would be better advised to focus on India
rather than on foreign banks, say economists.
What is the estimate of Indian black
money stashed abroad?
There is no official estimate. In 2011, the government commissioned a joint study by three
think-tanks NCAER, NIPFP, NIFM to get an
estimate. The final report is yet to be submitted.
However, Washington-based Global Financial
Integrity mentioned $462bn (approx Rs 28.6
lakh crore); CBI director quoted it as $500
bn (approx Rs 31.4 lakh crore), and in 2011,
aBJP task force stated it as something between
$500bn- $1.4 trillion.
Is there any solution to this menace?
Making all the names public and trying to get
the money back may look tempting, but is a very
complicated task. The government will get distracted. The best option for the Indian government is to negotiate with tax havens and impose
30 percent tax per annum on all those accounts
having black money. Itll be an income for the
government. If someone hides it, he should be
penalised. Government is fully empowered and
is the final authority to take action against tax
evaders. Even within India, its difficult to get
back money like in the case of bank defaulters,
despite making names in public, opines economist Dr Rajiv Kumar, senior fellow, Centre for
Policy Research and director, Pahle India foundation.

Copyright 2012 Firstpost

Black money list: Govt names gold trader


Chimanlal, ex-Dabur exec, miner Timblo
FP Staff, September 24, 2013

he Central government today filed an


additional affidavit in the Supreme Court
in the black money case disclosing the
names of three persons who have stashed away
black money in foreign banks. The names revealed in the Supreme Court are: Pradip Burman, Pankaj Chimanlal and Radha S Timblo.
No politicians were named.

While Burman is the former director of Dabur,


Pankaj Chimanlal Lodhiya is a Rajkot based
bullion trader and Radha S Timblo is a Goa
based miner. The three businessman have been
charged under various sections of the Income
Tax Act and Money Laundering Act.
Centre, in its affidavit, told the Supreme Court
that it would not be able to reveal all names
unless they are prosecuted in any court of law.
The Supreme Court hearing in the case will take
place on Tuesday. It would be interesting to see
if the apex court buys the Centre's argument of
not disclosing all the names.
In 2012, the Supreme Courts CEC (Central
Empowered Committee) had noted that Goa
Government had allowed Ms Radha S Timblo
operate an illegal mine in Goa. A partnership
firm comprising Timblo Pvt Ltd, Ms Radha S
Timblo and others had managed to get a mining
lease renewed by the Goa government in blatant
violation of the law.
Reacting to the affidavit, the Burman Group
said Pradeep Burman's account was opened
when Pradeep Burman was an NRI and was
legally allowed to do so.

"Moreover, all the details regarding the account


have been voluntarily filed with the Income Tax
department and appropriate taxes have been
paid. It is unfortunate that every person having
a foreign bank account is being painted with the
same brush, added the statement released by
the Burman Group.
Bullion trader Pankaj Chimanlal Lodhiya said
he was 'shocked' as he has no foreign accounts.
The affidavit is believed to clarify governments
earlier stand of not revealing the names of those
account holders who have deposited money
in foreign banks. The other names which have
been doing the rounds, including politicians
linked to the previous UPA government, would
be revealed only if prosecution is launched
against them.
Sambit Patra, BJP Spokesperson, told CNN
IBN that today is a historical day as fat as the
fight against black money is concerned. " Arun
Jaitley had rightly maintained that we would
reveal all the names but as per the procedures
of the law. We are not adverse to revealing the
names but they will all only be released as and
when the chargesheet is filed and investigation
is over," Patra said when asked why the government had not revealed the name of UPA ministers who have stashed money abroad.
"If the Congress is sure about their credentials,
then why are they worried if the list has some
Congress names or not," asked Patra.
However, Patra's party colleague Subramanium
Swamy told CNN-IBN, "I do not know what reasons government has to release only 3 names. I
do not see any legal issues in releasing all 700
names. I hope government will release all the
names very soon. If they have an Income tax
notice, then it is a prosecution. I am sure all of
them have got IT notice."
Meanwhile, the Congress me hit back at the BJP
Copyright 2012 Firstpost

government for 'selective revelation' of names.


The Narendra Modi government had promised
to bring back black money but recently toed
the line of the erstwhile UPA government by
informing Supreme Court that it cannot make
public such details. The government feels revealing all names without scrutiny about illegalities committed by them would be a violation
of the right to privacy as any Indian under the
RBI rules can legitimately deposit $1,25,000 in
a foreign bank per year.
But while most believe that naming and shaming will be a good deterrent, Firstpost editorin-chief R Jagannathan points out that, "the
best thing to do is not to focus so much on the
name-shame routine, but to put in place policies that prevent the generation of black money

in the first place, and offer pragmatic amnesty


schemes to bring back whatever illegal wealth is
stashed away abroad.
The first thing to realise is that black money is
as much as economic issue as a moral and ethical one. It gets generated when the laws allow
the creation of rent-seeking opportunities in
various industries (real estate, spectrum allotment, export and import regimes, special tax
breaks for certain industries, etc). Hence the
strategy should be: get the money back, and
then name and shame those who fail to bring
it in. Mere name-and-shame means no money
will come in ever. It would be a pyrrhic victory
against black money."

Copyright 2012 Firstpost

Black money: Radha Timblo had illegal


Goa mines and a Pakistan connection
FP Editors, October 27, 2014

adha Timblo, one of the names disclosed by the Centre in an affidavit to


the Supreme Court today (27 October)
in connection with illegal accounts held abroad,
has been linked to illegal iron ore mining in
Goa. The mining lease involved also has a Pakistani connection.

Mavani's mining lease was not given to anyone


till 2004, when Kamat's Directorate of Mines
contended that the Timblo family had entire
possession and control of the Mavani mining
lease since 1957. It was also contended that
there was no documentary evidence proving
that Badrudin Mavani had lost Indian citizenship when he moved to Pakistan.
In the absence of Mavani, Kamat put his signature to handing over the Mavani lease to the
Timblos for mining. To protect himself, Kamat
took an indemnity bond from the Timblos in
case Mavani or his heirs suddenly reappeared
on the scene. It seems it (the mine) was transferred to Timblos long back, Kamat claimed.

A Times of India report of December 2012,


quoting a Central Empowered Committee (CEC)
report on illegal Goa mining, noted that the
mining lease was granted in the name of an individual who had migrated to Pakistan and died
there. He was never involved in operating the
mining lease or seeking renewal of it.
Instead, the lease was allowed to be operated
illegally by a partnership firm comprising Timblo Pvt Ltd, Ms Radha S Timblo and others.
The mining lease has been renewed by the Goa
government in favour of the partnership firm
owned and controlled by the Timblo family by
disregarding and in blatant violation of Rule 37
of Mineral Concession Rules, 1960."
Raman Kirpal, a Firstpost editor at that time,
wrote an extensive story on this mining lease
as far back as September 2011. This is what he
wrote.

In Goa's Wild West kind of dubious mine ownership, illegal operations have become easy. At
most mines, details about the name, the lease
details, and survey numbers are missing from
the site. These open cast mines exist right in the
forest area - almost unseen, except by the locals
employed there. The contractors who operate
them are neither registered with Goa's Directorate of Mines, nor are they recognised under the
Mines and Minerals Regulation and Development (MMRD) Act as lessees.
In short, iron ore is often mined by people who
have no claims to the ore. Kamat ran a blind eye
to mining operations that have yet to get their
licences renewed. According to official records,
renewal applications of at least 13 active mining leases have been pending since 1988. This
means for 26 years, the Goa government has
allowed miners to extract iron ore from these
illegally. Only fresh investigations can reveal the
motive behind keeping these renewals pending
for 26 years.
Even the mines which were cleared in 1988
had a licence validity of 20 years. But when
these lessees applied for renewals in 2008, the
Copyright 2012 Firstpost

files were kept "under process".


Digambar Kamat's justification: Under the
Mineral Concession Rules, if an application for
renewal of a mining lease is not disposed of by
the state government, the period of that lease
shall be deemed to have been extended by a
further period till the state government passes
an order thereon.
By doing nothing, these leases have been made
legal till the government acts on them. What
kept his government sitting on these lease requests for 26 years? Kamat had no answers.
Firstpost believes that by keeping these renewal requests pending, Kamat has indirectly
encouraged illegal mining. Sample these:

Eighteen active mining leases have not taken


wildlife clearances under the EC. These include
Sesa Mining Corp Ltd (Vedanta), VM Salgaocar
& Bro. Pvt Ltd and MS Chowgule.
At least 34 active mines have no air and water
clearance.
It is not surprising that illegal mines, which
generated illegal profits, should now find a link
to illegal accounts abroad.
The government has given three names to the
Supreme Court, but the illegal mining activity
has rampant, and the chances of more names
beyond the Timblos surfacing are high.

Thirty-two active mining leases have no forest


clearance from the Union Ministry of Environment and Forests. Prominent among them are
VD Chowgule (five mines), VM Salgaocar (one
mine), Soc Timblo Irmaos Ltd (four mines),
Sesa Resources Ltd (one mine), Kund Kharse
(three mines, which are operated by Timblos
and Salgaocar as contractors) and Cavrem and
Curpem Mines (owned by Shaikh Mohd Issac
and Aziz SA Gofur).

Copyright 2012 Firstpost

Pradip Burman named in black money


case: Who is this former Dabur exec?
Firstbiz Staff, October 27, 2014

he government today disclosed three


names in an affidavit to the Supreme
Court in connection with illegal accounts
held abroad. One of the name that they revealed
was of Pradip Burman, the former director of
Dabur.

been voluntarily, and as per law, filed with the


Income Tax Department, and appropriate taxes
paid, wherever applicable."
The group also said it was unfortunate that
every person having a foreign bank account is
being painted with the same brush.
The Dabur Group also asserted that they followed all laws and complete details regarding
the account have been voluntarily filed with the
Income Tax Department.
Following the news, shares in Dabur India fell
as much as 9 percent.
Dabur, India's fourth largest FMCG company,
has interests in hair care, oral care, skin care,
health care, home care and food products.

According to Burman's profile in the company


page, he served as an Executive Director at
Dabur India Ltd. from 1 May, 2007 until 31
January, 2012.
Burman holds a B.Sc degree in Mechanical Engineering from MIT (USA).
As of 30 September 2014, Pradip Burman holds
3.94 lakh shares of Dabur India whose current
worth is at Rs 8.16 crore at a current price of Rs
207 per share.
Reacting to the news of Pradip Burman being
named by the government in the black money
case, a Dabur spokesperson said the account
was opened when he was an NRI.
A Dabur spokesperson said, "We wish to state
that this account was opened when he was an
NRI, and was legally allowed to open this account. We have followed all the laws and the
complete details regarding the account have
Copyright 2012 Firstpost

Black money list: 5 facts on Rajkot-based


bullion trader, Pankaj Chimanlal Lodhiya
Firstbiz Staff, October 27, 2014

fter much dithering, the government has


finally named three Swiss bank account
holders in the Supreme Court. According to the affidavit submitted by the government, the three businessmen are being probed
under the Income Tax Act and Money Laundering Act.

dhiya and his brother Shri Kaushik Chimanlal


Lodhiya.
* There are two other companies under the
group: Shreeji Ornaments Pvt Ltd, which is
engaged in manufacture and trader of diamond
jewellery, gold ornaments and silver articles,
and Shreeji Reality, engaged in construction of
residential flats.
* The company, with the long track record, is a
dominant player in the Rajkot market. In bullion trading, it has branches in Ahmedabad,
New Delhi, Jaipur, Raipur, Indore and Bangalore. It has plans to expand to south India,
mostly in Kerala. The site notes 'trust, purity
and honesty' as the groups motto.

The government is said to have a list of 138


names but has told the court that it cannot
reveal all the names unless they are prosecuted
in a court of law.
The three businessmen whose names were
submitted are Pradip Burman, former executive
director of the Dabur group, Pankaj Chimanlal
Lodhiya, a bullion trader, and Radha Timblo,
director of Goa-based company Timblo Pvt Ltd.
Here are a few facts about Pankaj Chimanlal
Lodhiya:

* Assigning BB rating to long-term fund based


bank facilities of Shreeji Trading, rating agency
ICRA had said in 2011 that the long standing
presence of the promoter in the jewellery business was a favourable for the company. It had
also noted that the company has an established
clientele base resulting in low customer concentration risk.
* Lodhiya denied to the media that he held accounts in Switzerland. He told CNN-IBN that
that he has disclosed everything to the Income
Tax Department. He also said he was shocked to
see that his has figured in the list submitted by
the government. He told TimesNow that he did
not have any political connections.

* Pankaj Chimanlal Lodhiya is the proprietor


of Shreeji Trading Company, a bullion trading
company established in 1997 based in Rajkot,
Gujarat. According to the Shreeji groups website, initially it was engaged in real estate business and then forayed into bullion trading. The
website says the group was set up with help
from his father Shri Chimanlal Laljibhai LoCopyright 2012 Firstpost

Black money case: SITs next


steps, full list of names and more
Sunainaa Chadha, October 30, 2014

he sealed envelope with the names of 627


Indians holding bank accounts overseas,
against whom a probe is on to ascertain
conformity with domestic tax laws, is to be
passed on to a special team (SIT) set up under
the Supreme Court's direction.

mune from prosecution under Indian tax laws.


2. The bench asked the SIT to make use of the
information, proceed expeditiously and submit
a status report by 30 November. The court will
scrutinize the report on 3 December.
3. The income-tax department is waiting to get
the SITs permission to initiate prosecution
against around 300 people who are named on
the list. The I-T department plans to investigate them under Sections 277 (false statement
in verification) and 276D (failure to produce
documents). Some 120 of these cases are under
prosecution. The I-T department has already realised Rs 200 crore in taxes and penalties from
some of these account-holders.

The SIT, headed by Justice MB Shah, with Justice Arijit Pasayat as vice chair, was called for by
the Supreme Court by way of an order July 4,
2011, and officially notified by the government
end-May this year.
The other two envelopes pertain to information
furnished by the French government and the
action taken by the Government of India thus
far in trying to get back the illegal funds parked
by Indians in overseas banks and estimated at
between $426 billion and $1.4 trillion.
Here is all you need to know about the
case so far:
1. Attorney General Mukul Rohatgi, who said
the government would not seek modification of
the SC's 2011 order to give all names clarified that of the 627 names, only 350-odd were
residents of India against whom authorities had
issued notices. The other 270-odd individuals
were non-resident Indians (NRIs) who were im-

4. Mumbai Income Tax authorities will soon


initiate the process of ascertaining if there was
any "criminality" involved in the accounts of 90
individuals from the city whose names figure
in the list. Sources in the Directorate General
of Income Tax (Investigation) department told
PTI that of the 627 individuals named in the
list, 235 were based in the city. The list includes
people from several fields, including politicians,
real estate developers and bullion traders.
5.Head of the SIT probing the case Justice MB
Shah said that there is no new detail in the
report that has been submitted by the government. "I don't think there is anything significant
in the report. The list is the same as before. It
was known to us. We have to question the people in the list," Shah said, in an interview with
CNN IBN, adding that there is no new outcome
of the investigations that have taken place in the
past few days.
He also said that all the facts in the report were
already known to the SIT. "All these facts that
have been revealed were already known to the
members of SIT. We should be able to file a satCopyright 2012 Firstpost

isfactory report in time," he added.


According to an NDTV report, SIT has invited
information from the public and will soon release an email id where anyone can give credible
inputs on black money.
"The public can give us credible information on
black money. We will investigate that information, but we want credible inputs - do not expect
us to go on a fishing expedition," sources in the
SIT told NDTV. The panel will meet today to
work out details of its inquiry
6. A report in the Economic Times says that
the SIT team travelled to Paris and Geneva last
week but failed to convince the French and
Swiss authorities to share details of Indian account holders and the money marked in various
accounts due to legal complications.
7. Another report in DNA however said that
the list of 627 names could prove to be another
damp squib as the account holders have got
enough time to transfer the money or even close
their accounts. Moreover, it said that several
accounts had been opened in the name of
trusts abroad and thus the money could never
be traced back to the original owners in India. Citing an example, the DNA report said a
trust called Arpee Gems, which had an account
containing $100 million in HSBC's Singapore
branch, was closed immediately after the names
were made public as the account was traced
to proprietors of a leading hospital in Bandra,
Mumbai. But no charges have been filed so far
due to lack of legal evidence.
9. Meanwhile, another ET report said that bullion trader Pankajkumar Chimanlal Lodhai,
who was one of the three Swiss Bank account
holders named by the government, had lent his
name to two overseas bank accounts and had
advised a Sharjah resident to take large bets on
gold, silver and platinum futures on offshore
exchanges. ( Read the full report here)
9. And as a fallout of the black money case,
India seems to have pulled out of a multilateral
information sharing agreement that requires
a commitment to follow international standards of confidentiality for information received
relating to black money. At the meeting of the

Organization of Economic Cooperation and


Development (OECD) in Berlin on Wednesday ,
51 countries signed the Multilateral Competent
Authority Agreement to share financial data and
boost efforts to crack down on tax evasion but
India refrained from doing so.
Sources told CNN IBN India was unable to sign
the pact as there was uncertainty about disclosures and lack of clarity on the ability to comply
with the confidentiality clause.
"India's stance was likely to impact the ongoing negotiations over information sharing pact
with Switzerland and the tax compliance agreement with the US that has to be signed before
31 December. If India fails to sign the Foreign
Account Tax Compliance Act Alert (FATCA),
then it would authorise US to charge withholding tax on remittances, Indian bank operations
in US," CNN IBN reported, quoting government
sources.
The inter-governmental agreement has to be
signed by December 31 so that remittances from
the US to India aren't subjected to 30 per cent
withholding tax.
10. Lastly, Ram Jethmalani, who had filed the
public interest litigation on the matter three
years ago, told the court the citation of court
double-taxation treaties and confidentiality
clauses were a "fraud". Aam Aadmi Party leader
Arvind Kejriwal's move to intervene in the case,
with a set of names given to him from "whistle
blowers", was postponed to the next hearing of
the case.
Case history:
Directing further hearing on the matter Dec 3,
the apex court said the special team, by that
time, would submit its status report on the steps
taken by it in pursuance to this list of 627 account holders.
Rohatgi told the apex court that half of these
account holders were Indian residents and the
other half non-resident Indians and pertained
to a period up to 2006. He said action was initiated, with some of having paid the taxes and
others under investigation.

Copyright 2012 Firstpost

The top law officer requested on behalf of the


government that care be taken such that nothing impedes the Indian authorities and probe
agencies in getting information from these
countries and others on foreign accounts in
future.
Importantly, he said, the Income Tax Act had
been amended to extend the limitation period
for recovering taxes from these account holders till March 31, 2015. Earlier, the limitation
period was six years and would have expired in
2012.
All the 627 accounts in the list are at HSBC
Bank in Geneva and the details were secured
from the French government. The data was
actually stolen by a bank employee, as a result
of which the Swiss authorities declined help in
any manner, the court was told. At the same
time, HSBC Bank had said that if the Indian authorities get a no-objection certificate from the
account holders, it could then share the relevant
details. Some 50-60 of the account holders had
given their consent.
With inputs from Agencies

Copyright 2012 Firstpost

Disclosing names: Will it bring back


black money?

Copyright 2012 Firstpost

Black money case: How SC managed to


contradict its stand on revealing names
Kartikeya Tanna, October 30, 2014

n addition to the main headline-grabbing


order on Tuesday (notably oral) asking the
Modi government to provide it with all the
names of foreign account holders, the Supreme
court also said that it "cannot touch" its previous order and wont change "even a word of it".

individuals without the establishment of prima


facie grounds to accuse them of wrongdoing
would be a "violation of their rights to privacy"
and that "it is only after the state has been able
to arrive at a prima facie conclusion of wrongdoing, based on material evidence, would the
right of others in the nation to be informed
enter the picture".
However, what muddied the waters was the
courts order of 1 May 2014 which said that the
names of eight persons, against whom investigations were concluded and no evidence of
wrongdoing found, must be given to the petitioner (i.e. Ram Jethmalani and others).

What is this order that cannot be changed and


why has the SC said so?
This requires going back to 2011. In a landmark 67-page judgment in July 2011, the court
ordered the then UPA government to disclose
names in respect of which proceedings were
initiated and constituted a Special Investigation
Team (SIT) which would take over the investigation of individuals having foreign bank accounts.
More critically, for disclosure of names against
whom no evidence of wrongdoing was found, SC
said (in Para 73) that instantaneous solutions
to systemic problems would lead to dangerous circumstances in which vigilante investigations, inquisitions and rabble rousing by masses
of other citizens could become the order of the
day.
Therefore, in Para 77, the SC categorically said
that revealing the details of bank accounts of

In other words, an earlier SC judgment talked


of violation of the right to privacy since it observed that "public dissemination of banking
details, or availability to unauthorised persons
has led to abuse", whereas the later one ordered
the Centre to disclose those very names against
whom nothing was found, to Jethmalani. These
names, as we know, found their way into the
public domain.
So much for the SCs utterance on Tuesday (28
October) that it will not change even a word of
its previous order when it has contradicted itself
repeatedly. As the author has pointed out earlier, the SC has spoken in drastically different
tunes in respect of fast-tracking cases against
politicians.
The Modi governments application earlier this
month was, among other things, to seek clarification on which order it should follow.
In fact, due to such disclosure, the Germans
wrote to India in June 2014 (as per the governments application) seeking an explanation as
to how this information about eight persons
got into the public domain. This disclosure, the
Germans wrote, clearly violated the provisions
Copyright 2012 Firstpost

of the DTAA (double tax avoidance agreement)


with Germany under which information was
shared with India.
Another issue in the SCs order of 2011 which
has created some problems in the signing of
further treaties is the interpretation of the confidentiality clause in treaties. Below is an excerpt
from the DTAA with Germany:
Any information received by a contracting
state shall be treated as secret in the same
manner as information obtained under the
domestic laws of that state and shall be disclosed only to persons or authorities (including
courts and administrative bodies) involved in
the assessment or collection of, the enforcement
or prosecution in respect of, or the determination of appeals in relation to, the taxes covered
by this agreement. Such persons or authorities
shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.
[emphasis added]
Why do I underline the word they? This is the
crux of the dispute with interpreting the confidentiality clause which has impeded Modi
governments efforts in securing further cooperation from countries.
The use of the word they implies tax assessment/enforcement officers. Ergo, only tax assessment/enforcement officers may disclose the
information in public court proceedings or in
judicial decisions. This obviously means court
proceedings relating to tax evasion.
However, instead of focusing on the word they,
the SCs order of 2011 (in Para 62) ignored it
and focused on the words public court proceedings stating that the latter words mean
proceedings before the SC in a petition such as
one filed by Ram Jethmalani. In other words,
the information received from Germany and
others could also be disclosed to the SC since it
is a court proceeding, never mind the fact that
the SC isnt hearing any case pertaining to tax
evasion and the disclosure to SC isnt by the tax
assessment/enforcement officers!
What this did was to alert nations that Indias
apex court has interpreted the confidentiality

clause broadly. This did invite some comments.


For example, after the SCs order of 2011, this
Global Forum on Transparency and Exchange
of Information for Tax Purposes report (in the
chapter on Indias compliance with the standards on page 107, para 359 onwards) referred to
the 2011 order and concluded that India should
monitor developments in this area and, if needed, take appropriate action to ensure confidentiality of the exchanged information.
Moreover, as the Centres application states, in
March 2009, when Germany provided information to India, it clearly stated that the information was subject to the confidentiality clause of
the DTAA and it further wrote in 2011 that such
information could only be used for tax purposes
as the DTAA clearly stipulates. Due to the SCs
rather broad interpretation of the confidentiality clause, the Modi government was facing
difficulties in securing further cooperation and
signing new treaties with similar clauses.
A question may, however, arise as to why a confidentiality clause is needed in a treaty that is
supposed to help nab black money holders.
The simple answer is that the list provided by
these nations is a bland list of any and every
foreign account holder in those nations banks.
It hasnt been investigated into for evasion;
indeed, it cannot be.
Therefore, before any evidence of wrongdoing is
found, the West fiercely guards an individuals
right to privacy naming and shaming isnt the
way of life. Instead, these nations have strong
investigative processes and prosecution systems
which ensure quick justice. And that is what the
West expects India to do if India is to receive
information from it adhere to confidentiality
obligations while conducting a robust investigation and prosecution to punish them.
Moreover, a direct comparison of what the US
and others could do with what India has not
done falsely draws a parallel between our and
their arm-twisting abilities. The US, for example, threatened severe penalties on foreign
banks having a presence in the US (where its
nationals had undisclosed accounts) and even
threatened economic sanctions of a damaging
kind.
Copyright 2012 Firstpost

The Modi government had two choices in the


wake of this deadlock of a kind.
One, raise its hands and give up since countries
are skeptical of entering into treaties with India,
given the SCs broad interpretation and unauthorised disclosure by petitioners; or
Two, take a huge perception risk of approaching
the SC to reconsider its incorrect interpretation
and obvious contradiction so that the judiciary
is not on a different tangent from the executive
which can jeopardise further cooperation in
international for a.
The Modi government took the latter approach.
Those who concluded that the government
wanted to protect black money holders have
quite obviously jumped on a running train. And
the SC didnt help allay those fears either. It not
only refused to have an open mind about its incorrect interpretation and glaring contradiction
between different orders, it scathingly attacked
the Modi government yesterday.
However, as todays developments in the SC
indicate, the Modi government now has to take
its arguments to the SIT. Hopefully, the SIT
will have a more open mind and the government will take this unfair attack on its chin and
persist with its efforts to end the black money
menace.

Copyright 2012 Firstpost

Even disclosing all names wont


bring back black money to India
R Jagannathan, October 28, 2014

id we wait so many years to learn that


one Chimanlal Lodhiya, a Pradip Burman and a Radha Timblo are being
prosecuted for allegedly holding illegal accounts
abroad?

are booming and interest rates are still high.


In 2006, according to the Swiss National Bank,
Indian national money with Swiss banks was
around Rs 41,400 crore. Then the din about
foreign accounts started in India, and by 2008
the money started vanishing. In that year, the
amount was whittled down to Rs 15,400 crore.
In 2013, the figure was down further to Rs
14,000 crore. Thats just about $2.25 billion.
The chances are most of that money is legitimately there.
At $2.25 billion, the Indian money in Swiss
banks will probably be less than the value of
black money sloshing around in south Mumbais real estate markets.

The problem with politicising the unearthing of


black money and reducing it to a game of nameand-shame is that you end up with zilch: after
shouting about it for five years, we have probably alerted the big crooks to move their money
elsewhere. Those who have not done so are
probably dead or dumb. Or both.
In fact, an Economic Times report last week
suggested that the Swiss banks were themselves
asking some of their clients to get a move on, as
they are embarrassed to be handling their dodgy
accounts. This may be just the dumb money
that still hasn't got the message.
Lets be clear. We are not going to get more than
a few shekels from the money allegedly stashed
abroad no matter what we do. The chances
are most of the funny money is probably back
in India right now, especially since the Indian
economy is prepped up to fare better and interest rates abroad are still down in the dumps.
Only a fool would keep his money abroad to
earn 1 percent interest when the Indian markets

The naming-and-shaming routine is thus unlikely to yield much public pleasure for the simple reason that that so much time has elapsed
since the account-holders knew their names
with the government. The mere fact that these
names were with the government means deals
have been done to clean up the trail.
The Swiss bank list allegedly containing some
700 names became public knowledge in 2008
when a former HSBC employee stole the data
and gave it to the French government. The
French government, in turn, decided to share
the details with our own government. Surprise:
2008 was when the Swiss bank amounts of Indians fell drastically. But despite having the list,
the Indian government acted cagey and decided
that it will chase the account-holders directly
for tax dues. There is good reason to suspect
that the government was not keen to disclose
the names as it would have embarrassed politicians - not just in the UPA, but NDA too - and
businessmen close to them. Now we are unlikely
to be any wiser.
Around mid-2011, The Economic Times reportCopyright 2012 Firstpost

ed that the income-tax department in Mumbai


had already "secured 17 voluntary disclosures
out of the 700 Indians having secret accounts
with HSBC Bank, Switzerland."
The question to ask is this: if the government
has already managed to get dues paid through
backroom deals with some (or many) of the
HSBC account-holders in Swiss banks, why are
we surprised that the names are not coming
out?
As far as the account-holders are concerned,
if some of them have already paid their dues
and done deals with the taxman, is it possible
to haul them up in the court of public opinion
and shame them? They can well claim a breach
of trust as they may have admitted technical
transgressions and compounded their offences
or paid their penalties.
Those who didnt do any deals would have had
ample time to move their funds elsewhere as
the Swiss National Bank numbers show and
our disclosing the names now will only lead us
to a dead end. No money, no prosecution. The
Swiss certainly are not going to confirm the
details of dead or closed accounts relating to
2008.

The very fact that one of the names disclosed Chimanlal Lodhiya - is in all TV channels denying he has a Swiss account suggests that nameand-shame is not going to lead anywhere. If he
thought he was vulnerable, he wouldn't be so
brazen about it.
In fact, the money has probably arrived in
India through several routes. The big rise in
gold imports we saw in 2011 and 2012 probably was intended to help store the money that
returned home. The unexpectedly large surge
in the export of some categories of engineering and copper products in 2010-11 may really
have been Indian money returning through the
overinvoincing route. The sharp increase in FII
inflows during those years may also partly have
been Indian money returning to our markets.
Some of it went into real estate, when it was
booming till 2012; the rest would have gone into
stocks from 2013.

The very fact that only three names have been


disclosed six years after the government got
them means the trail would have gone cold by
now. One can embarrass people by disclosing
700 names, but nothing more will come from it.

Copyright 2012 Firstpost

Name and shame begins but politicians

wont appear on black money list


K Yatish Rajawat, October 28, 2014

he government today announced three


names, two of them unknown and one
from the well known Dabur family
Pradip Burman. The government has been
under pressure to disclose names but disclosure
of this information is extremely powerful.

As long as the government controls or manages the disclosure it had enormous power over
a very large section of people and the black
economy. Once the names are out the government, and more importantly bureaucrats in the
finance ministry who have access to this information will command enormous clout.
While the BJP spokesperson made it a political issue and stated the discomfort of Congress
on disclosing the names, the truth is it is not
the Congress which is uncomfortable but every
businessman who has in the past dealt with
Swiss banks is feeling uncomfortable. Though,
over the last five years, especially after the leak
of the HSBC list and pressure on Swiss banks to
disclose, most black money has shifted to other
countries.
For instance, a very powerful political family of
Haryana started diversifying its bank accounts
away from Switzerland to other countries.
They started putting their money like Russian

Oligarchs in banks in East Europe and South


America. These banks would promise complete
confidentiality and are small enough to escape
global scrutiny. At the last count the family had
shipped money to 53 odd countries across the
world. So it is unlikely that very many big politicians who were aware of the Supreme Court
case and have been careful will be named.
But coming back to the point of disclosure, once
the names have been disclosed there will be
media attention, but for some of these operators it may not result in loss of reputation. In a
small town like Rajkot, where Pankaj Chimanlal
Lodhiya resides the disclosure led to rush of TV
cameras and will lend him notoriety and fame.
Chimanlal comes from a family of jewelers
and his father is much more well known in the
community. Pankajbhai has denied having any
foreign bank accounts as a bullion trader it is
unlikely to work without them. The big issue is
that post this disclosure what is the action that
the SC takes or has any other department of the
government already taken action.
BJP spokesperson said, today that,We are not
adverse to revealing the names but they will all
only be released as and when the chargesheet is
filed and investigation is over."
From this statement it means that a chargesheet
has also been filed against the three people who
have been named today.
The chargesheet would be interesting as it
would reveal the intent and seriousness of the
government to pursue these cases. This is the
second lever of power. Once the information
is disclosed, all the accused will rush to Delhi.
Others who fear their names may also be on the
list will rush to prevent the chargesheets from
being filed.
The phone lines to power brokers in Delhi are
Copyright 2012 Firstpost

already burning as the biggest fear of a businessman has been triggered. A witch-hunt has
begun and the bureaucrats controlling the list,
the ones deciding the chargesheet are the most
powerful people in India.

The disclosure of names, the chargesheets and


the witch-hunt just helps corrupt bureaucrats,
not the country. It gives too much power to a
very small section of people and will not result
in anything but forgotten headlines.

Will this result in the money coming back to


India? Will the disclosure of names be followed
by action to ensure that the money flows back?
These are the two most important things. Holding a foreign bank account is not a crime if the
income has been disclosed and tax been paid.
As per RBI rules an Indian can legitimately deposit $1,25,000 in a foreign bank per year.
The name and shame game can only last for a
while, it can create headlines and show that the
government has acted. For a while the government has shifted the pressure on disclosure by
feeding the media or the public three names.
But the bigger issue is the fear psychosis that
will now grip the underground black economy.
Will the government use the fear psychosis to
its benefit in pushing through a well designed
voluntary disclosure of income scheme? In
June I had argued for bringing in a disclosure
of income scheme that would help bringing Rs
100,000 odd crores of money slashed abroad.

Copyright 2012 Firstpost

In pursuit of black money, Supreme


Court is biting off more than it can chew
R Jagannathan, October 29, 2014

as the Supreme Court bitten off more


than it can chew in the illegal foreign
accounts case?

It is difficult to escape the impression that the


apex court is playing to the public gallery, given
the high emotions and expectations aroused
in the public mind about huge hoards of black
money held abroad. The Supreme Court itself
does not seem sure whether it is just interested
in a name-and-shame routine, or believes it can
get the money back on its own, since governments (both UPA and NDA) have been pussyfooting around the issue.

the rule of law? Can the court guarantee that no


reputation will be damaged unfairly in the process?
Two, is the court aware of the way it is riding
roughshod over the executive? Consider what
the Chief Justice, HL Dattu, said yesterday (28
October) in open court when the governments
counsel pointed out that it had to respect the
understandings reached with foreign countries
on sharing tax information: You do not do
anything. Just pass the information of account
holders to us and we will pass an order for further probe, Business Standard reported. The
Hindu quoted the bench thus: We will decide
whether to order a CBI or an income tax probe
or entrust the probe to some other agency. We
cant leave the issue of bringing back black
money to the government.
This is appalling. Is it the courts job to tell who
does what? If you ask the man on the street,
surely he will say yes, since the credibility of
politicians is low in this matter. But, as Attorney
General Mukul Rohatgi, pointed out: Then the
court must also take the responsibility of getting
information in the future.

While no one needs to hold a brief for reluctant


governments and illegal account holders, there
are a few areas of disquiet, given the way the
Supreme Court has handled the issue so far.
One, while it is par-for-the-course for politicians to make wild accusations against individuals during election-time, the courts job is not to
pander to public expectations, but protect the
constitution. In this whole name-and-shame
game, has the court given adequate thought to
the possibility that some of the 627 names on
the HSBC Swiss bank list of account-holders
may be legitimate? Is their right to privacy and
reputation not important in a country run by

Three, there are implications for policy. As


I have repeatedly noted, black money is defined by what a policy calls legal or illegal. A
changed law can make what was illegal earlier
legal today. There can be legitimate Swiss bank
accounts and illegitimate ones. Moreover, a
government interested in pursuing a pragmatic
policy may want to offer amnesty to former tax
evaders and illegal account holders even while
closing the loopholes to prevent future evasion.
By getting directly into the game of locating
black money, the court may be tying the governments hands forever in this area. The higher
courts have upheld amnesty schemes in the
past, and almost every year there is some kind
of amnesty scheme underway. The amnesty for
Copyright 2012 Firstpost

service tax evaders was available last year and


this year. Will the court now say go after these
crooks?
Four, tax treaties and agreements with foreign
governments are bang in the executives domain
and that of the legislature. Can the Supreme
Court muscle into it just like that? What precedent is it setting for the future? Any populist
judge can then order the government to do this
and that without regard to the separation of
powers that are enshrined in the constitution.

The Supreme Court should not need reminding


that in India the constitution is supreme, not
the courts or the executive or the legislature.
Each of the arms has its own space and rights
and responsibilities. If elected politicians cannot
be trusted to do their public duty, why should
we believe judges appointed by an opaque collegium system can?
The apex court should ponder over where it is
taking the country. It should not try and extend
its brief to untenable areas.

Five, in the normal course of things, agencies


such as the Enforcement Directorate, the Directorate of Revenue Intelligence and the tax authorities should be autonomous to do their job,
while nominally remaining under the executive.
Now, many of these agencies are being directed
by a court-appointed SIT. Maybe, in this case,
it a good thing, but there are pitfalls ahead: how
will these agencies be accountable to anyone
if the court can by its own orders make them
report to someone it chooses?

Copyright 2012 Firstpost

Black money list: BJPs modus operandi

no different from previous UPA govt


Debobrat Ghose, October 28, 2014

ew Delhi: How different is the BJP-led


NDA government from the UPA when
it comes to approach towards black
money? Not much. The government on Monday disclosed seven names before the Supreme
Court, but this falls way short of the expectation
the government raised during its election campaign.

Understandably, the naming of lesser known


businessmen and no politician has raised a
fierce debate both in the political circle and in
public. Even the UPA government had disclosed
to the SC the names of 26 people with accounts
in banks in Liechtenstein.
If economists, financial and legal experts, and
the top government officials engaged in dealing
with the issue of black money are to be believed,
it's only a political game that is playing out. It
has buried the substantive aspects of the issue.
Its not an easy task to bring the black money
back home, as political opponents often claim.
Legally, it is very difficult to name an account
holder, unless the person is being prosecuted
and taken to court. Moreover, other countries
will stop sharing confidential information if we
start making such information public without
following international protocol," a senior of-

ficial in the know of the issue, shared on condition of anonymity. Even, Finance Minister Arun
Jaitley has said, "Government will reveal those
names against whom evidences are available."
As per an agency report, the government
had asserted that it had no intention to withhold names of people who have parked black
money in tax havens, but such names could be
disclosed only if evidence of tax evasion and
wrongdoing against the account holder gets
established.
"There is no provision under the Income Tax
Act related to the disclosure of information on
black money. Currently, the DTAA between
India and Switzerland does not cover the clause
pertaining to the automatic exchange of information, thereby enabling India to obtain
information related to suspicious transactions
by Indians in Switzerland. Further, under such
agreement disclosure of the information obtained can be made to courts only for the purpose of determination of the taxation matter in
question. Such an agreement is subject to negotiations between the two countries, explained
chartered accountant and consultant Abhishek
Aneja.
So, the primary question is of time how long
would it take for the government to establish
tax evasion against all those named in the list?
And, whether the country will ever get to know
who these people are only petty businessmen
or politicians, or the real powerful men?
"Black income is generated by violating the
countrys law in a systematic manner. A trio
comprising corrupt politicians, bureaucracy and
a section of judiciary helps the corrupt to earn
black money, who may be from this trio or businessmen, corporates, etc. So, the list may have
names from all these categories. Itll need a
strong political will," said professor of economics at JNU, Arun Kumar.
Copyright 2012 Firstpost

Whether its the Congress, the Left, the Aam


Aadmi Party or even a section within the BJP
all have questioned the governments decision
to selectively name the account holders. They
find no difference between the modus operandi of the previous UPA government and the
present NDA government.
"The country would like to know the whole list,
whereas the government is withholding names
by announcing only three. Why?" questioned
Communist Party of India (CPI) leader Gurudas
Dasgupta.
"Government has to answer a lot of questions as
there is reluctance on its part to give out all the
names, which shows that the government lacks
the political will and determination to fulfil its
election promises. Why are the names of politicians not being revealed as claimed by the
BJP? national secretary, CPI, D Raja asked.
"Indian government procured the list from
French and German governments. So there is
legal obstacle in naming the persons on the list.
Here, the governments intention to do so is
important and only it can tell why three persons

have been named, BJP leader Subramanian


Swamy told a news channel.
On selectively naming individuals before the
SC, AAP chief Arvind Kejriwal alleged on a TV
channel: Earlier, when the Congress didnt
disclose the names, the BJP made a lot of hue
and cry, and promised that it would bring back
the black money within 100 days of coming to
power. Now, probably after seeing the list and
finding its own men there, who spent thousands
of crores to fund the election, the NDA government isnt disclosing the complete list.
However, a section sounded optimistic on the
issue. "Its a good start but a lot needs to be
done. No one will let it go, if the government
names account holders selectively, said senior
fellow, Centre for Policy Research and director,
Pahle India Foundation, Rajiv Kumar.
Baba Ramdev stated Mondays development
as the tip of an iceberg. "Its the first big step
taken by the Modi government and much bigger
things will follow as promised," he said.

Copyright 2012 Firstpost

False promises? BJPs response on black

money is even worse than UPAs


G Pramod Kumar, October 29, 2014

ne party that made the biggest political capital out of the much fabled black
money issue in India is the BJP when in
2009, the then PM-aspirant LK Advani declared
that he would bring back to the country all the
offshore wealth stashed away by Indians in 100
days.
Advani didnt become the PM and the BJP
easily escaped defaulting on its promise. After five years of incessantly charging the UPA
with shielding black-money holders, the party
repeated its promise on the issue before the
elections in 2014. This time, the BJP president
Rajnath Singh repeated what Advani had said.
This time, however, the party won the elections
and they had a deadline at hand. "Imagine what
we could do with all that money! We could build
roads, electricity grids, flood barriers this
money is the money of the people, Advani had
said.
But what came out of that promise on Monday
was a damp squib. A terrible anticlimax of all
the promises and hype that they had dished our
for years - three insignificant names and perhaps even more insignificant amounts of money. What shocked the nation was BJPs response
when asked about other names, the quantum
of black money, and all the promises they had
made.
The party said that it was legally bound not to
name and shame. It can only disclose names
to a court, that too after filing charge-sheets
against the black money holders.
The names will have to be preceded by investigations. Its a time consuming process.
But, what about all the hype that you had created and the grand promise you had made that
you would bring back the money in a certain
number of days?

Why dont you at least disclose the names that


the Germans and the French (of the Swiss accounts) gave you?
Sorry, we cannot because we are legally bound
not to disclose the names outside the court
But, this is exactly what the UPA had said.
And all your allegations of inaction against the
UPA?
It will take time. Unlike the UPA, we are serious about it. We are taking steps. We had set up
a task force and its working.
On Monday, all the BJP spokespersons sounded
exactly like the Congress leaders starting with
the former finance minister Pranab Kumar
Mukherjee when he had said that because of
the double taxation treaties with the countries
concerned, the government couldn't disclose
the names of people with foreign bank accounts.
He held firm while the opposition went for the
jugular. His successor P Chidamabaram also
followed the same line.
Now, the BJP is not only parroting the same
line, but is even swaggering about it. If not
earlier, the BJP may have realised at least now
that black money allegedly stashed away by
Indians abroad is a nebulous idea that can be
used to deceive a lot of Indians with first world
aspirations. If there is indeed lot of money
siphoned out of the country, it had happened
for decades and people who had done it knew
how to protect it. Most of them would be people
with political connections, people with criminal
background and those with businesses. The tax
havens, which otherwise claim to be clean countries such as Switzerland, Singapore and Mauritius, would not do a thing to touch this money.
Its also foolish to assume that the money has
been static in these banks. They would have
moved on in different forms and could have
Copyright 2012 Firstpost

even come back to the country as investments.


The estimates themselves are staggering which
have even surprised the Swiss.
The most common estimate that the BJP brandished in its kala dhan campaign was that up
to US$ 1.4 trillion from India was stashed away
in Switzerland. The Swiss Bankers Association
had termed this "at best pure speculation and
at worst pure fantasy. "Where are they getting these numbers? Some of the figures being
thrown around about 'black' money allegedly
held by Indians in Swiss banks are quite incredible, James Nason at the Swiss Bankers
Association had reportedly asked. What both
the BJP and the other bring back black money
campaigners such as Ram Dev had effectively
done was fanning the wild imagination of people - both professionals and amateurs - regarding the quantum of black money abroad.

Investment in Indian stock market by participatory notes s is another way of bringing back the
money. So, the trillion, or a quarter of it, that
poor Indians are salivating about is an abstraction, a fantasy. Even if there is real money, that
too in the billions, how would India ever lay
its hands on them? Did BJP have a plan when
they sold those fantasies? All that the party had
promised in its manifesto was a task force. Lets
get real. At least do something to stem the phenomenon from now. Curb political and corporate corruption.
And please tell Indians that holding a bank
account in a foreign country isnt illegal and
it doesnt mean that it is to stash away black
money. Thats why hundreds of names that foreign banks may hand over may finally boil down
to an embarrassing three or a handful.

How much exactly is stashed away and is there


a way to estimate it other than blind speculations? According to the government of India
white paper on black money (2012), which
quotes estimates by GFI (Global Financial Integrity), between 1948 and 2008, $ 232.2 billion had been shifted out of India, which would
have become $ 462 billion with standard rate
of returns. The while paper, significantly makes
the comment that it needs to be ascertained if
the money is indeed stashed abroad or had been
partly round-tripped. By government of Indias
own admission, a lot of this money could have
come back.
According to Department of Industrial Policy
and Promotion (DIPP) data, from 2001 to 2011,
41.8 percent of the entire FDI in India was from
Mauritius. The next big inflow was from Singapore (9.17 percent).
The white paper notes: Mauritius and Singapore with their small economies cannot be the
sources of such huge investments and it is apparent that the investments are routed through
these jurisdictions for avoidance of taxes and/
or for concealing the identities from the revenue
authorities of the ultimate investors, many of
whom could actually be Indian residents, who
have invested in their own companies, though a
process known as round tripping.

Copyright 2012 Firstpost

Black Money karma: BJP has fallen

into ditch it had dug for Congress


MK Venu, October 30, 2014

he BJP government has fallen into the


ditch it had painstakingly dug for the
Congress on the issue of bringing black
money from abroad.
After making the much publicised election
promise of bringing black money from abroad
and revealing the names of the culprits "within
100 days of coming to power", the government
is now running for cover, not knowing where to
hide.

The Supreme Court has further embarrassed


the government by rejecting the Attorney General's argument that the full list of about 700
Indians with illegal foreign bank accounts cannot be disclosed until investigations are completed and charges framed. After the SC's stern
intervention, the government has had to submit
the full list in a sealed cover to the apex court.
The list will also be provided to the SC-directed
SIT, formed recently to investigate all aspects of
black money generation in India and abroad.
The SC order, deeply embarrassing for the
government, has been publicly welcomed by
BJP's own senior party leaders like Subramaniam Swamy. Even Ram Jethmalani, who had
campaigned on the black money issue, has said
only the Supreme Court can be depended on to

deliver justice.
Last week finance minister Arun Jaitley told a
TV channel that some names would cause the
Congress party embarrassment. As it turned
out, one Goa mining company, whose name was
made public, has funded the BJP nine times
since 2004. It has given the BJP twice as much
funding as the Congress. So was Jaitley aware of
all the facts, one wonders!
This, in fact, is the crux of the whole black
money issue. The Goa based mining company
gave just over Rs.1 crore to the BJP.
But there are much bigger fish in this game who
generate billions of dollars of black money every
year and regularly fund the cash component of
election funding for the bigger national parties. Will the BJP government ever bring the
big companies, which fund elections with pure
cash, under investigation? Most unlikely.
Therefore, an elaborate charade of bringing
back black money is being played by successive
governments. These days a new mythology is
being created-- that of leaders who are "personally clean" even though they run organisations
which get thousands of crores of slush funds.
This "personal cleanliness" of individual leaders
is the most bogus narrative and this new theme
being propagated by the faithful because there
is a yearning for clean politics in a system which
perpetrates its very opposite.
So where does the BJP-led crusade against
black money go from here? It goes nowhere,
really. For now the list of about 700 allegedly
illegal account holders is lying in a sealed cover
with the Supreme Court and the Special Investigation Team headed by a retired judge.
The SIT, under the apex court's monitoring, will
further probe the individuals named as owners
Copyright 2012 Firstpost

of these accounts. Most of them are businessmen, and bit players at that. The SIT will have
to establish the illegality of these accounts and
frame charges over the next few months. The
names cannot be revealed before that.
The government told the Supreme Court that
it will become difficult for India to sigh future
treaties on information sharing with other
countries if the names are revealed before
gathering evidence and making out a reasonably
foolproof case.
Surely Arun Jaitley knew this legality when the
BJP, as opposition, was screaming from the
rooftops promising to publicly produce all the
names and the money in their accounts within
100 days of coming to power.
For now, the BJP has got trapped in its own
hyped-up rhetoric around black money. Its
initial bravado about revealing some names
was based on a list of account holders in HSBC,
Switzerland. This list was stolen by an HSBC
employee on a particular day in 2006. So the
accounts reveal the status of funds on just that
particular day. Not before or after that date. In a
sense, this list has very sketchy and inadequate
information.
There is no way the government can come up
with anything substantive in the next one year.
As for the much publicised $500 billion of black
money allegedly lying in tax havens, even the
Sangh Parivar faithfuls are becoming increasingly skeptical about it.
In effect ,the BJP has truly made a mockery of
its much publicised election commitment that it
will reveal the identities of all Indians who have
black money stashed in illegal accounts abroad.

Meanwhile, Arun Jaitley will now have to deal


with another 1000 page report on black money
brought out by the finance ministry's think tank
NIPFP.
This report had been submitted to Jaitley as
well as the SIT on black money. Broadly the report says the black money generated in India for
over two decades since 1980 ranges from 45%
to 70% of GDP every year. That puts annual
black money generation within India at over $ 1
trillion or close to $ 3 billion a day! The SITwill
try to probe sectors where black money is being
produced and report to SC. SC may in turn put
pressure on the government, which will become
a new headache for the NDA.
The best way out for Jaitley is to first attack
domestic generation of black money so that the
incremental bleeding is controlled.
Later India must try to do special agreements
with foreign governments to get its legitimate
share of tax on black money held by Indians
abroad. Britain has done this with the Swiss
government in the past.
Black money held by British citizens in foreign
accounts were taxed at the current rate and
handed over to the UK exchequer. India must
decide whether it wants its share of tax from
foreign havens which can then be distributed
among the poor as promised by the BJP. That
will be the most logical course to follow.
MK Venu is Executive Editor of the Amar Ujala
Group

The ultimate irony,of course, is that finance


minister Arun Jaitley's position before the
Supreme Court on black money is the same as
that of UPA's. Jaitley is now saying India can't
resort to any "adventurism" while dealing with
international treaty obligations on information
sharing. This is exactly what Pranab Mukherjee and P.Chidambaram had been repeating ad
nauseam as finance ministers under the UPA
regime.

Copyright 2012 Firstpost

Economic implications of the black


money probe

Copyright 2012 Firstpost

Fallout of black money case? India fails to attend

global meet on combating tax evasion


Agencies, October 30, 2014

Cooperation and Development (OECD), 51


countries signed the agreement to share financial data and boost efforts to crack down on tax
evasion.

Official sources said that India was not able to


attend the Berlin meeting where it was to sign a
multilateral competent authority agreement and
intended first information exchange date.

The signatories to the agreement include most


European Union nations as well as tax havens
like Liechenstein, British Virgin Island and the
Cayman Island. They will begin automatically
exchanging data collected by financial institutions as early as 2017, the OECD said.

Government of India had to give an international commitment that it would follow international standards on information received. Late
night reports indicate that India was not able to
attend that meet, they said without citing any
reasons for the absence.

New Delhi also fears that treaties for exchange


of information on black money holders with
countries like USA, Germany and Switzerland
may be delayed on grounds of breach of confidentiality if names of account-holders are
disclosed improperly.

At the meeting of the Organization of Economic

Government fears emanate against the back-

ndia on Wednesday failed to attend an


OECD meeting in Berlin where a multilateral agreement requiring a commitment to
follow international standards of confidentiality
for information received relating to black money was signed.

Copyright 2012 Firstpost

drop of the raging debate in the country over


disclosure of names of black money holders in
foreign banks given by other governments and
entities.
On a day the government provided to the Supreme Court a list of 627 individuals who have
accounts in HSBC Bank, Geneva, government
sources feared adverse consequences if the
names get disclosed or come to public domain.
They point out that when the Supreme Court
gave an order on May 1 this year asking for disclosure of 8 names, against whom investigations
were concluded, to be given to petitioner Ram
Jethmalani despite the fact that no evidence of
wrong doing was found against them, there was
a contradiction with an earlier order.

It had also said that only after the state arrives


as a prima facie conclusion of wrong doing
based on material evidence only then would a
question arise on the right of the public to be
informed.
After the 8 names got into public domain, Germany wrote to India in June this year expressing surprise at this revelation and asked India to
provide an explanation of how this information
was disclosed.

The Court had earlier in 2011 clearly stated that


disclosure of names against whom no evidence
of wrong-doing was found would lead to "dangerous circumstances".

Copyright 2012 Firstpost

If BJP is serious about black money,

it should re-examine tax treaties


G Pramod Kumar, October 30, 2014

n Wednesday, when the Supreme Court


accepted and handed over the sealed
envelope from the government carrying
the Swiss bank account details of Indians to the
special investigation team, what seems to have
won is the concern over the double taxation
avoidance treaty (DTAT) and many such agreements that the country has signed, or going to
sign, with other countries.

the disclosure of the names without prosecution


might hamper signing of an impending agreement with the US that is important for investments the Foreign Account Tax Compliance
Act (FATCA) because it contains a confidentiality clause. "In the absence of the inter-governmental agreement related to FATCA, all remittances, including payments for exports, would
face a 30% withholding tax," the report said.
There are many such treaties under operation
and many more may be in the pipeline which
at times of national importance such as the
present case naming of black money holders
constrain Indias interests.

Before the elections, under an onslaught of


allegations by the BJP and other opposition
parities, the UPA had expressed it helplessness
in disclosing the names of alleged offshore black
money holders citing these treaties, but the
opposition was brutal. Give us power, we will
name them and bring back the money was
what the BJP had said.
The BJP came to power, but started singing the
same UPA tune on black money we cannot
disclose the names because DTAT, other bilateral trade and investment treaties, and some
of the agreements for investments that are in
the pipeline. The nation indeed called the BJPs
bluff, but the question remained why does India
sign the treaties such as DTAT in forms that
might ultimately harm its interests?
On Wednesday, the Times of India reported that

Till 2004, India has signed 85 bilateral tax


treaties, including 70 comprehensive tax agreements and 15 limited tax agreements. The treaties differ depending on the economic status of
the contracting state. The bilateral tax treaties
are based on two multilateral tax conventions
such as The Model Tax Convention on Income
and on Capital (Organization for Economic
Cooperation and Development, 1963) and the
United Nations Model Double Taxation Convention between Developed and Developing
Countries, 1980.
Confidentiality clauses in these treaties and
their supremacy to domestic law are what have
prevented both the UPA and the BJP from
disclosing the list. The upcoming treaty with the
US, as reported by TOI, will also have a confidentiality clause.
The main purpose of these treaties is to avoid
double taxation and fiscal evasion while promoting foreign investment. The three players
in the process are the host country, the home
country and the investor.
The main problem, as academic literature that
analyses Indias tax treaties shows, is that the
Copyright 2012 Firstpost

Indian domestic tax law, such as the Indian Income Tax Act, allows these treaties more importance, whenever it is subject to interpretation
although according to the Indian Constitution,
an international agreement comes into force
only after its enactment by the Indian Parliament. But, in the case of tax treaties, it becomes
law as soon as thy are signed by the other country and notified by the Centre. In short, a bilateral tax treaty supersedes Indian law when it
comes to obligations of India with the partner
country. How many Indians know this?
This is the risk of the bilateral treaties although
they are necessary for promoting business and
investment. Since the Parliament is not taken
into confidence while formulating and signing
such treaties, there should be more transparency, information and national debate around
them. A government, whether its the UPA or
the BJP, should not be vested with all the power
to negotiate with countries and sign agreements
that make the domestic law irrelevant. Had they
gone through the parliament, the elected representatives as well as the country would have had
a chance to look at the pitfalls. The argument is
not against the bilateral treaties, but for being
cautious and more participatory.

The point is also about political will than political rhetoric. If the BJP is serious about black
money, will it take a re-look at some of the bilateral tax treaties? Or will it at least stop signing
such treaties without informing the parliament?
The confidentiality clause will continue to hamper Indias efforts in tracking and recovering
black money held abroad.
The governments of the day may like these treaties because they help them conceal the inconvenient truth such as who all hold black money
in overseas banks.

Copyright 2012 Firstpost

Black money list: Assessment of names

before March 2015 is impossible


S Murlidharan, October 30, 2014

he Attorney General, Mukul Rohatgi,


while handing over the sealed covers
detailing the foreign bank accounts of
627 persons, seems to have added that the last
date of assessment in all these cases is 15 March
2015, since the bank details of the persons
named relate to 2006.

The limitation period of nine years perhaps


stems from the chapter in the income tax law
dealing with reassessment. Reassessment can
be done only after serving a notice on the defaulter. After hearing the defaulter's reply, reassessment proceedings would start, culminating
in a demand notice. It's already October, and
the Special Investigation Team (SIT) has an
unenviable task - just five months. And these
five months are not fully available, given the fact
that the Commissioner of Income-Tax would
have to step in once the SIT submits its findings.
This means even if the SIT swings into action
and works overtime it would have to sift the
grain from the chaff within two to three months,
an impossible task given that it may have to
make a couple of sporadic visits to Switzerland
and other places. And the concerned commissioners would thereafter have to complete the
reassessment proceedings.
There is no time limit for issuing notices for re-

assessment when the assessee has been remiss


in not filing his return or has not cared to give
honest and complete details or when his assets
are abroad. Therefore, the law must be amended out of abundant caution that in cases of black
money unearthed abroad by the SIT or any
other government apparatus, the law of limitation would apply if at all only after the assessee
has replied to the show cause notice.
One wonders how the Attorney General figured
that the assessments would have to be completed by 15 March 2015 when the process of
reassessment has not even been kickstarted.
Anyway, it would be perfectly in order for the
government to make a clarificatory amendment
harking back to 1961 a la the Vodafone amendment. The retrospective Vodafone amendment was assailed by foreign investors and a
large section of the Indian commentariat on
the ground that in fiscal laws, where ones tax
fortunes are at stake, retrospective amendments
are simply not on.
This is a fair point, though there is an equally
persuasive view that the Indian law was openended enough all through to catch income
earned abroad when there was a connection between a transaction consummated abroad and
underlying Indian assets.
In the black money issue, on the other hand,
there are a lot of extenuating reasons for the
government making a retrospective amendment. First, the present government has taken
over only a few months ago. Second, those who
do illegal acts cannot take shelter behind laws
meant for legal transactions. Thirdly, the Indian
government got possession of the bank account
details only in 2012 and, therefore, the law of
limitation at worst should start from that date.
It is significant to note that half of the 627
names disclosed are of Indians and the other
Copyright 2012 Firstpost

half are NRIs. The needle of suspicion is obviously on the first half because the law does not
allow an Indian resident to open foreign bank
accounts. Assuming the SIT zeroes in on these
300-and-odd names, it would still be an impossible task to take the cases to their logical conclusion by 31 March 2015.
Clearly, an ordinance making a retrospective
amendment is in order. Otherwise, it would be
a hasty job with attendant consequences---open
to attack by the assessees on grounds of conjectures and slipshod work characterising the
assessments.
It is also curious that the Attorney General
has had an income tax fixation. Illicit money
stashed away abroad has ramifications transcending the income tax law. One wonders if
there is a law of limitation to heckle the SIT in
such cases.

Copyright 2012 Firstpost

We are back to square one in black

money case: SIT chief M B Shah


FP Staff, October 29, 2014

n Wednesday, the government submitted the entire list of black money account holders to the Supreme Court.
The documents include 627 names and status
report of their investigation in these cases.
Later in the day, in an exclusive interview with
CNN IBN, Special Investigation Team (SIT)
chairman former Justice M B Shah said that the
developments in the black money case in the
last few days are insignificant.
"We are back to square one. The government
has submitted the same list which was submitted to us last June. All the facts that have been
revealed in the black money list were already
known to the SIT," said the Justice Shah.

Finance Minister Arun Jaitley on Tuesday had


said it will be up to the judges to decide whether
to make the names public. "There is nobody that
the government wants to protect," he said.
The names as sought by the Supreme Court had
already been given to the Special Investigation
Team (SIT) appointed by the government at the
behest of the apex court.
The primary purpose of this exercise is to ascertain who among the individuals and the entities
named hold such accounts in contravention of
Indian laws and what kind of proceedings can
be initiated to prosecute them and get back any
ill-gotten money.

But the SIT chief also asserted that it does not


seem that the government is trying to protect
anyone. Justice Shah said the report will be
ready in time.
Copyright 2012 Firstpost

Great black money damp squib:


SIT probe destined to disappoint

FP Staff, October 30, 2014

he Supreme Court may have given the


names of the 627 persons who held accounts in the Geneva branch of HSBC
Bank to the Chairman and the Vice-Chairman
of the Special Investigation Team (SIT) but
according to reports, you shouldn't be holding
your breath for any big names or amounts to be
revealed any time soon.

According to the ToI report, the accounts were


mostly opened between 1999 and 2005 and the
amounts in them ranged between Rs five to Rs
10 crore. Given the uproar on the issue, most of
the account holders are believed to have already
emptied the accounts, which means that even
if the government is able to freeze them, they
will not contain the hundreds of crores that the
government is hoping to find.
A DNA report says that the list includes the
names of 150 account holders who have already
paid fines. And in other cases, the accounts
have been opened in the names of trusts located
abroad and the money cannot be traced back to
those who own the accounts in India.

The Times of India quoted unnamed sources as


saying that it was unlikely that any large sums
of money were going to be uncovered from the
approximately 350 Indian nationals named on
the list since the accounts were too old, while
the remainder were non-resident Indians,
against whom no action could be taken.
Attorney General Mukul Rohatgi had informed
the Supreme Court on Wednesday that 350
persons were residents of India and would face
action but a lot of them had already confessed to
having excess money in the account and agreed
to pay the required tax or penalty.
Rohatgi said that details of account holders
which were supplied by the French government to the Centre in 2011 are from 2006. Most
transactions in those accounts took place during
1999 and 2000 and the last date for completion
and assessment in all these cases is 31 March,
2015.

The report cited the example of a trust called


Arpee Gems which reportedly had an account in
HSBC's Singapore branch and contained closed
to $100 million, but was shut soon after a list
of 700 account details were leaked. However,
while the account was reportedly traced back to
a Mumbai family, little action has been taken on
it.
Meanwhile Income Tax authorities in Mumbai
were quoted as saying that they will soon initiate the process of ascertaining if there was any
"criminality" involved in the accounts of 90
individuals from the financial capital whose
names figure in the list.
Sources in the Directorate General of Income
Tax (Investigation) department told PTI that of
the 627 individuals named in the list, 235 were
based in the city.
"We have got confirmation of the accounts of
about 90 individuals from Swiss authorities
and will begin the process of ascertaining if any
criminality was involved," sources said. However, even they cautioned that merely having an
account abroad did not constitute any illegality.
Copyright 2012 Firstpost

The Supreme Court keeping the names of account holders secret is being seen as a win-win
situation for all concerned.
From possibly kicking India out of a pact to
have access to information on tax evaders to
affecting remittances from the US, revealing the
names of account holders could have a greater
impact on Indian enforcement authorities in the
future, in a pursuit that may yield few gains.
But even if the names are revealed by the SIT by
the November-end, as Firstpost's R Jagannathan had noted, most of the black money is probably already back in India or elsewhere given
that the Indian economy has been doing better
than most of its global peers.

As he points out, in 2006, according to the


Swiss National Bank, Indian national money
with Swiss banks was around Rs 41,400 crore
but by 2008 the money started vanishing and
went down to just Rs 15,400 crore. In 2013, the
figure was down further to Rs 14,000 crore,
around $2.25 billion, which could even be there
legitimately and is far less than the black money
in the country's economy.
"One can embarrass people by disclosing 700
names, but nothing more will come from it," he
noted.
with PTI inputs

Copyright 2012 Firstpost

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