Lok Sabha Question No. 399 (STARRED), answered on 2016-08-12
Subject: Shell Companies
Ministry: FINANCE
Asked by: RAJ KUMAR SINGH

## *399. SHRI R.K. SINGH:

## Will the Minister of FINANCE be pleased to state:

- (a) whether there are credible reports of many Indians having set up shell  companies in Panama and remitting funds to those shell companies, and if so, the details thereof and the status of investigation;
- (b) whether  investment  in  the  shell  companies  comes  under  the  ambit  of  financial fraud whereby money from companies in India is being siphoned off abroad for personal use under the guise of investment in shares and if so, the details thereof;
- (c) whether the Government has plans to tighten the laws and regulations to ensure that this will not happen in future and if so, the details thereof; and
- (d) the  punitive  action  taken/being  taken  by  the  Government  to  prosecute  those  who have remitted money abroad to shell companies under false pretence?

ANSWER FINANCE MINISTER (SHRI ARUN JAITLEY)

- (a) to (d): A statement is laid on the table of the House.

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA STARRED QUESTION No.*399

TO BE ANSWERED ON FRIDAY, THE 12 TH  AUGUST, 2016

SHRAVANA 21, 1938 (SAKA)

## SHELL COMPANIES

## STATEMENT REFERRED TO IN REPLY TO LOK SABHA STARRED QUESTION NO. *399, RAISED BY SHRI R.K. SINGH, HON'BLE MEMBER OF PARLIAMENT, FOR REPLY ON 12 TH  AUGUST, 2016

Information about certain offshore  entities  held  by  various  Indian  persons  had  appeared  in media, earlier this year. Such information is attributed to be part of 'Panama Papers' leaks. The  International  Consortium  of  Investigative  Journalists  (ICIJ),  a  Washington  based organization  which  has  reportedly  made  the  revelations,  has  put  a  caveat  on  its  website (www.icij.org) by mentioning that it should not be assumed that everyone who appears in the Panama Papers is involved in tax avoidance or evasion and there are legitimate reasons to create  a  company  in  an  offshore  jurisdiction  and  many  people  declare  them  to  their  tax authorities when that is required.

The  Government  has  taken  necessary  measures  for  expeditious  investigation,  including through enhanced international cooperation, in the cases of Indian persons allegedly having undisclosed foreign assets and whose names are reportedly included in Panama Papers leaks. A  Multi-Agency  Group  was  constituted  on  4 th April  2016,  inter  alia,  for  facilitating  coordinated  and  speedy  investigation  in  these  cases.  The  Group  consists  of  the  officers  of Investigation  Division  of  the  Central  Board  of  Direct  Taxes  (CBDT),  Foreign  Tax  &  Tax Research  Division  of  CBDT,  Enforcement  Directorate  (ED),  Financial  Intelligence  Unit (FIU) and Reserve Bank of India, and its Convener is Member (Investigation), CBDT. It has been  asked  to  report  the  progress  in  such  cases  on  regular  basis.  Further  course  of  action under  the  laws  dealing  with  direct  taxes,  foreign  exchange  regulations  etc,  depends  upon outcome of the investigation in respective cases.

In  recent  years,  the  Government  has  taken  several  measures,  both  by  way  of  policy-level initiatives as well as through more effective enforcement action on the ground, to effectively deal  with  the  issue  of  black  money,  particularly  black  money  stashed  away  abroad.  These measures include  enactment of  a  comprehensive  law  on  black  money  -  The  Black  Money (Undisclosed  Foreign  Income  and  Assets)  and  Imposition  of  Tax  Act,  2015  containing stringent penal provisions. The new law has also made the offence of wilful attempt to evade tax, etc. in relation to undisclosed foreign income and assets a Scheduled Offence under the Prevention of Money-laundering Act, 2002 (PMLA). This enables attachment and confiscation of the proceeds of crime of wilful attempt to evade such tax, etc. i.e. the black money stashed  abroad,  eventually  leading  to  recovery  of  such  undisclosed  foreign  income and assets/black money stashed abroad. Further, where property/proceeds of crime is taken or held outside the country, PMLA has been amended through the Finance Act, 2015 enabling attachment and confiscation of property equivalent in value held within the country.

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