Black money parked in tax havens abroad will be taxable income under the Direct Taxes Code Bill, the Centre told the Supreme Court on Wednesday, spelling out a host of measures to retrieve it. The government also informed the apex court that it has completed negotiations for Tax Informations Exchange Agreement with 10 countries where the money is believed to have been stashed.
The ten countries are Bahamas, Bermuda, British Virgin Island, Isle of Man, Cayman Island, British island of Jersey, Monaco, St Kitts and Nevis, Argentina and Marshall Island.
Cabinet approval has been granted in relation to eight of these agreements, it said.
“It is submitted that the central government has proposed new provisions for unearthing black money in the Direct Taxes Code Bill by defining taxable assets as inclusive of the deposits in banks located outside India in case of individuals and such bank deposits not recorded in the books of account in case of others,” an additional affidavit filed by the Ministry of Finance said.
The affidavit comes in the wake of searching questions posed by a bench of justices B Sudershan Reddy and S S Nijjar on a PIL filed by eminent jurist Ram Jethmalanai and others, seeking retrieval of black money stashed in banks abroad.
The government said it has initiated the process of negotiations with 65 countries to amend the existing Double Taxation Avoidance Agreement and broaden the scope of the article concerning exchange of information.
It admitted that it did not conduct any fresh study on black money so far due to the reason that credibility of any estimate of such money was doubtful and transactions by their very nature were ‘unrecorded, unreported, complex and layered.’
“However, keeping in view the recent international and domestic developments, a study has now been proposed to be conducted by the Finance Ministry for a thorough assessment/survey of unaccounted income/wealth both inside and outside the country, particularly bringing out the nature of activities engendering money laundering with its ramifications on national security.”
The government submitted that in view of the stringent measures required to deal with undisclosed foreign bank accounts and cross-border transactions, the Central Board of Direct Taxes has asked the Income Tax authorities that in specified categories of cases, prosecution proceedings may be initiated immediately after completing the assessment or reassessment.
“It is submitted that once prosecution is launched in such cases, the information will be available for use by other law enforcement agencies and will also become available in the public domain,” the affidavit added.