Case Law Details
Renu T Tharani Vs DCIT (ITAT Mumbai)
The assessee is not a public personality like Mother Terresa that some unknown person, with complete anonymity, will settle a trust to give her US $ 4 million, and in any case, Cayman Islands is not known for philanthropists operating from there; if Cayman Islands is known for anything relevant, it is known for an atmosphere conducive to hiding unaccounted wealth and money laundering, and that does not advance the case of the assessee. This is a jurisdiction which has double the number of companies than resident, most of which remain only on paper, and it will be no naïve to believe that these companies are located here, in a country with around 65,000 residents, for bonafide core activities, rather than the benefits of anonymity, secrecy and liberal tax laws. Cayman Island is one of the few jurisdictions in the world where public records of the beneficiaries of firms and companies, like GWU Investments Ltd, are not maintained, and it is only with effect from 2023, that is if the promises made by the Government of Cayman Islands can be believed at face value, that such public records will be maintained. That is an ideal situation, as on now, for holding the unaccounted monies through a web of proxy corporate entities. The only persons who are privy to vital information about these transactions are the persons who are privy to these transactions- maybe as owner, as settlor, as beneficiaries or as facilitators or even as accomplices in these manoeuvrings, and when they decline to share the correct information, and thwart further probe in the matter, investigations reach a cul-de-sac. The assessee before us is closely involved with the transaction and it is unconceivable that the assessee will have no direct knowledge of the owners of the underlying company and settlors of the trust which has her, as she herself puts it, as beneficiary of such a huge amount. This inference is all the more justified when we take into account the fact that the assessee has been non-cooperative and has declined to sign the consent waiver. One of the arguments raised by the assessee, as set out in a chart showing arguments of the assessee- below paragraph 20 earlier in this order, that the assessee could not have performed the impossible act of signing consent waiver because she was not owner of the account is too naïve and frivolous to be even taken seriously. If the assessee was indeed not the owner of the account, there was all the more reason to sign the consent waiver form because it would have established that fact when the HSBC Private Bank (Suisse) Geneva was to decline the information on the basis of that consent waiver. A consent waiver signed by the assessee would have been infructuous in that case, and it could not have done any harm to the assessee. Consent waiver form does not prejudice the claim of the assessee that he does not own the account in question; all it does is, as can be seen from the extracts from consent waiver form format reproduced earlier, is that it waiver assessee‟s rights, if any, under the data protection and banking secrecy laws. The plea of the assessee, as noted earlier, is fit, if at all it is fit for anything, only to be rejected. It is only elementary that direct evidence of illegal transactions of the assessee, as indicated by Hon‟ble Supreme Court in the case of Sumati Dayal (supra), “would be rarely available” as such transactions “take place in secret”, and therefore, simply on the ground that such direct evidence is not brought on record by the revenue authorities, the assessee cannot go scot free. As observed by Hon‟ble Supreme Court in the said case, “it is upon the alleger to prove that it is so, ignores the reality”. When we follow the path, as laid down by Hon‟ble Supreme Court in the case of Sumati Dayal (supra), by “considering surrounding circumstances and applying the test of human probabilities”and donot take “a superficial approach to the problem”, the inescapable conclusion is that the explanation of the assessee is only fit to be rejected. In the present case, there is even direct evidence available on record. As the base note categorically states, this is “synthèse individuelle” (individual synthesis, in literal meaning, which refers to „individual‟s profile‟) and name of the person is Renu Tikamdas Tharani, and her address is under the heading “Adresses de la personne physique”(i.e. addresses of the natural person). In the heading “Profils client lies a la personne”(i.e. customer profiles linked to the person), GWU Investments Limited is shown as Nom du profil client (customer profile name) but then the same note shows nature de profil (i.e. profile nature) as Nominatif (nominative, or nominal) and that the Détails du lien ( i.e. link details) between the individual and the company is that of “beneficiary/ beneficial ownership”. It is important to note that the reference to “link details”is in respect of customer profile name, which is stated to be GWU Investments Limited, and only an individual can be beneficiary of the company or beneficial owner of the company, and not the other way round. There is no reference to Tharani Family Trust at this stage and in this section of the base note. That comes at the fag end of the base note under the heading “personnes légales liées”( i.e. related legal persons). Clearly, therefore, the link details, or “détails du lien”, are between the individual and GWU Investments Limited, and these link details clearly show that the assessee is a beneficiary and beneficial owner of the GWU Investments Ltd.
While we have noted the claim of the assessee that she is a discretionary beneficiary of Tharani Family Trust, that fact does not find mention in the base note. As we have clearly analyzed above, the base note shows that the assessee was beneficial owner or beneficiary of GWU Investments Ltd. We may add that in the remand report filed by the Assessing Officer, there is a reference to some unsigned draft copy of the trust deed having been filed before him but neither this deed is authentic nor is it placed before us in the paper-book. The assessee has not submitted the trust deed or any related papers but merely referred to a somewhat tentative claim made in a letter between one Mahesh Tharani, apparently a relative of the assessee and the HSBC Private Bank (Suisse) SA- an organization with a globally established track record of hoodwinking tax authorities worldwide. All that this letter, addressed to one Mahesh Tharani, states is 3As per the request of director, we hereby confirm that, GWU Investments Ltd was holder of the account 1414771. According to our records GWU Investments Ltd. Used to be an underlying company of the Tharani Family Trust for which M rs. Renu Tharani was a discretionary beneficiary. To the best of our knowledge, The Tharani Family Trust was terminated and none of the assets deposited with HSBC Private Bank (Suisse) SA were distributed to M rs. Renu Tharani‘. It is not clear as to how is the director, and of which company; if Mahesh Tharani was a director of GWU Investments Ltd, when he could share this letter, he could have as well shared the information. If he is not the director, he would have at least known the director because director requested the Bank to provide this information to Tharani. Nothing is clear, nor does the assessee throw any light on the same. Be that as it may, this letter does not show deny, nor show any material to controvert, what is stated in the base note i.e. GWU Investments Ltd and the assessee are linked as beneficial owner. There is no dispute that account was in the nominal name of GSW Investments Ltd but the question is who is the natural person beneficial owner thereof. As for the Trust, there is no corroborative evidence about the statement, but nothing turns thereon as well. The assessee being discretionary beneficiary owner of the trust, and beneficial owner of the underlying company, is not mutually exclusive anyway but the claim of the assessee being a discretionary beneficiary of the trust is without even minimal evidence. There is another letter from HSBC Private Bank (Suisse) SA to the assessee which states that “Further to your request, we hereby confirm that you, M rs Renu Tharani, are not the holder nor, to the best of our knowledge, the beneficial owner of any account opened in the books of HSBC Private Bank (Suisse) SA. However, you are a discretionary beneficiary of a trust called the Tharani family Trust for which HSBC Guyerzeller Trust Company, acts as trustee. No bank account is maintained in the name of the trustee, and we confirm that you are not, nor have your even been, an authorized signatory on the bank account held in the name of the trust‟s underlying company”. As for the first statement made in this letter, it does not show why the base note records assessee as the beneficial owner of the company, and how does the bank reconcile these two conflicting positions taken. As regards the assessee being a discretionary beneficiary, nothing turns on it anyway for the reasons we have discussed earlier in this paragraph. As for assessee not being authorised signatory for GWU Investments Ltd, that is not even the case of the assessee or the position taken in the base note. An HSBC entity, i.e, HSBC Guyerzeller Trust Company, being a trustee for Tharani Family Trust shows that if it was indeed desired by the assessee, trust deed would have been available with the HSBC entity. It‟s a also a coincidence that with all this available all this available information, neither the assessee asks for the trust deed nor does the HSBC share the same. On the contrary, assessee, in one of the communications to the Assessing Officer, specifically states her inability to furnish the same. What these letters state may have some truth- half truth or technical truth, but then these qualified truths are only different forms of falsehood in entirety. There is something seriously amiss in all this; something is rotten in the State of Denmark. There is a series of coincidences, right from the HSBC account being closed after the information contained in the base note coming out and to the underlying company being removed from the name of Register of Companies in Cayman Island, right from assessee living in complete denial about any knowledge about a HSBC Private Bank (Suisse) SA account in her name to her lack of information about the company which is holding US $ 4 million for her, and, despite assessee being purportedly so clean in her affairs, her thwarting any efforts of the income tax department to get at the truth by declining to sign the consent waiver form. It is wholly un-understandable as to how can assessee, on one hand, seek to treat a cleverly worded private letter from HSBC Private Bank (Suisse) SA as gospel truth, and, on the other hand, effectively stall, by declining consent waiver and by stating half truths- even if her statements have an element of truth, the Assessing Officer obtaining direct information from the same organization. There is no meeting ground in this approach. In any case, for the reasons set out above and as evident from the base note, the assessee is beneficial owner of GWU Investments Ltd, Cayman Islands. There is nothing to controvert this fact stated in the base note, and since the assessee has declined consent waiver in this case, the assessee cannot decline correctness of the details obtained from the HSBC Private Bank (Suisse) SA.
As regards the repeated references to Hon‟ble Supreme Court‟s judgment in the case of Estate of HMM Vikramsinhji of Gonda (supra), it is important to understand that it was a case in which a discretionary trust was settled by the assessee and the limited question for adjudication was taxability of income of the trust, after the death of the settlor and in the hands of the beneficiary. It was in this context that Hon‟ble Supreme Court held that the question of taxation in the hands of the beneficiary arises only when he receives the money because, as Their Lordships noted, (Adiscretionary trust is one which gives a beneficiary no right to any part of the income of the trust property, but vests in the trustees a discretionary power to pay him, or apply for his benefit, such part of the income as they think fit. The trustees must exercise their discretion as and when the income becomes available, but if they fail to distribute in due time, the power is not extinguished so that they can distribute later. They have no power to bind themselves for the future. The beneficiary thus has no more than a hope that the discretion will be exercised in his favour.‘ These observations have no relevance in the present context. Firstly, neither there is any trust deed before us, nor the question before us pertains to taxability of income of the trust. Secondly, beyond a mention in the base note as a personnes légales liées”(i.e. related legal persons), there is no evidence even about existence, leave aside nature, of the trust. Thirdly, the point of taxability here is beneficial ownership of GWU Investments Ltd, a Cayman Island based company, by the assessee. Finally, even if there is a dispute about the alleged trust, the dispute is with respect of taxability of funds found with the trust and the source thereof. Clearly, therefore, the issue adjudicated upon in the said decision has no relevance in the present context. The very reliance on the said decision presupposes that the assessee was discretionary beneficiary simplicitor of a discretionary family trust, and nothing more- an assumption which is far from established on the facts of this case.
As regards the question of income which can be brought to tax in the hands of the assessee being a non-resident and certain errors in computations on account of duplicity of entries etc, we have noted that the learned CIT(A) has given certain directions which we have reproduced below paragraph 18 of this order, and neither these directions are challenged nor any infirmities are shown therein. Obviously, therefore, there is no occasion, or even prayer, for interference in the same.
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