Lok Sabha Question No. 896 (UNSTARRED), answered on 2015-07-24
Subject: Tax Evasion
Ministry: FINANCE
Asked by: SONA RAM CHOUDHARY, KRUPAL BALAJI TUMANE, ARVIND GANPAT SAWANT

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

**LOK    SABHA**

**unSTARRED QUESTION  NO.896**

TO BE ANSWERED ON FRIDAY, THE  24 TH JULY,2015

2 nd Shravana, 1937 (SAKA)

**TAX EVASION**

896. COL. SONARAM CHOUDHARY:

SHRI  KRUPAL BALAJI TUMANE:

SHRI  ARVIND SAWANT

Will the Minister of FINANCE be pleased to state:

(a) whether the Government has taken note of Indian Companies including big corporate houses involved in violation of Foreign Exchange Management Act (FEMA), tax evasion of direct and indirect taxes including Central Excise and Service Tax and Money Laundering by investing in shell companies registered in tax haven countries;

(b) if so, the details thereof, company-wise along with the estimated amount of loss to the exchequer through the above violations during the last three years and the current year; and

(c) the action taken by the Government against the erring companies along with preventive steps taken/being taken in this regard?

**ANSWER**

**MINISTER OF STATE IN THE MINISTRY OF FINANCE**

**(JAYANT SINHA)**

(a)  : Detection of tax evasion is an ongoing process  as and  when it is noticed. Further, action  against Indian companies involved in money laundering in violation of the provisions of Foreign Exchange  Management Act (FEMA), tax evasion of direct  and indirect taxes   including Central Excise and Service Tax is also an ongoing process.

(b) & (c):  The estimated amount of loss to the exchequer company-wise in violation of the provisions of direct and indirect tax laws is not maintained centrally. However, a case involving provisions of Foreign Exchange Management Act, 1999 is being investigated by  the Directorate of Enforcement where money was transferred out of India by investing in Overseas Shell Companies registered in Tax Havens.  In this extent case, a Show Cause Notice under FEMA, 1999 was issued to the Indian company for transferring U.S.$ 13.6 million to the overseas shell companies registered in Marshall Island. In specific cases of investigation into offshore tax avoidance/evasion, information is also requested by the Government  from partner countries under applicable tax treaties when  comes to its notice. Action is also taken on information about offshore tax evasion received under automatic/ spontaneous exchange of information.

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In addition to above, the Government has taken various steps which  inter alia   include putting in place robust legislative and administrative frameworks, systems and processes with due focus on capacity building and integration of information and its mining through extensive use of information technology.

Some of the major steps taken by the Government in this regard  are as under:

(i) A comprehensive new law titled ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’ has been enacted to specifically deal with the issue of black money stashed abroad;

(ii) The Finance Act, 2015 has amended relevant provisions of the Income-tax Act, 1961 to prohibit acceptance or payment of any amount as advance or otherwise of Rs.20,000 or more in cash in relation to purchase of immovable property;

(iii)  India is now a leading force in the efforts to forge a multi-lateral regime for proactive sharing of financial information known as Automatic Exchange of Information (AEOI) aimed at assisting the global efforts to combat tax evasion. Agreement for information sharing with the USA under the Foreign Account Tax Compliance Act (FATCA) has been signed;

(iv) While focusing upon non-intrusive measures, due emphasis has been given on enforcement measures in high impact cases with a view to prosecute the offenders at the earliest possible for credible deterrence against tax evasion;

(v) Renegotiation of Double Taxation Avoidance Agreements (DTAAs) with other countries to bring the Articles on Exchange of Information to International Standards and expanding India’s treaty network by signing new DTAAs and Tax Information Exchange Agreements (TIEAs) with many jurisdictions to facilitate the exchange of information and to bring transparency;

(vi) Proactively engaging with foreign governments for exchange of information under DTAAs/TIEAs/Multilateral Convention, etc.

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