The Income Tax (I-T) department, which is investigating the origin of funds invested in Indian Premier League (IPL) teams, has run into a road block as most of the team owners have refused to part with their funding details. The I-T department’s problems stem from the fact that most of the IPL team owners, though of Indian origin, are citizens of other countries.The Indian I-T department has no legal authority to seek details of the finances of persons who are fiscal residents or taxpayers of other countries.
Investments in IPL teams sometimes consist of a series of convoluted transactions routed through more than one offshore destination. As a result, the I-T department find itself in a piquant situation. They need details of these investments, but they cannot persuade the investors to give details. The details could help the department ascertain whether the funds invested in these teams have originated from India. In the event of any such finding, the I-T authorities can ask for tax to be paid in India, and in some cases with interest and penalty too.
An I-T source said the only investor who has given full details of his investment is Jay Mehta of Kolkata Knigth Riders (KKR).
The source in the I-T department said: “We will report these developments to the finance ministry. And it is the call of the government to take a policy decision in future on incorporating laws empowering the Indian tax authorities to access such information.”
An I-T source said: “We are in an unenviable situation. Anybody can invest in India and when we ask for details of these, we have no powers to make them comply.”
The controversy around the investment into the IPL teams and the inability of the Indian tax regime to access the investment related information coincides with the rising demand from within India for regenerating the tax treaties with other countries, including Switzerland, with a stress on better transparency and an easy exchange of information.
