Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 29th February, 2020

PRESS RELEASE

Income Tax Department conducts search on prominent metal processing and financing group in Tamil Nadu

On 25-02-2020, the Income Tax Department conducted a search in the case of a prominent business group based in Chennai dealing in the business of non-ferrous metal processing in lead, copper and aluminium and Money Lending activities. The group is said to have reported a turnover of more than a thousand crore and engaged in a number of businesses such as plastic manufacture and financing activities.

The highlight of the search is the discovery of hidden cloud servers other than the servers regularly used by the group for accounting, containing unaccounted transaction details often referred by the group as “kaccha” accounts. Similarly, large amount of encrypted data was retrieved from a pen drive which was tracked and obtained from a third party premise. The pen drive and the database was decrypted to gather information about the unaccounted capital accumulated by the group. Evidences were also gathered for the introduction of unaccounted funds as bogus share premium in one of the group companies.

Large number of property documents, Promissory notes, post dated cheques taken as collateral security etc in the money lending business were recovered during the search and have been seized.  As per evidence detected during the search, the search action resulted in cash seizure of Rs. 1 crore and detection of unaccounted income exceeding Rs. 400 crore. The investigations are still ongoing and the Department is in the process of finalizing the proceedings.

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.

 

Ministry of Finance

Searches conducted by the Income Tax Department lead to detection of unaccounted income of more than Rs. 2000 crore

Dated: 13^th FEB 2020

Income Tax Department carried out Search and Seizure action on 6th February 2020 at Hyderabad, Vijaywada, Cuddapah, Vishakhapatnam, Delhi and Pune. More than 40 premises were covered.

The search action included three prominent infrastructure groups based in Andhra Pradesh and Telangana. Investigations led to busting of a major racket of cash generation through bogus sub-contractors, over-invoicing and bogus billing. Several incriminating documents and loose papers were found and seized during the search, apart from emails, WhatsApp messages and unexplained foreign transactions unearthed during the search.

Search operation was also carried out on close associates including ex-personal secretary of a prominent person and incriminating evidence seized.

The search operations revealed that Infrastructure companies had sub-contracted work to several non-existent/bogus entities. Preliminary estimates suggest siphoning of more than Rs. 2000 crore through transactions that were layered through multiple entities with the last in the chain being small entities with turnover less than Rs. 2 crore to avoid maintenance of books of accounts and tax audits etc. Such entities were either not found at their registered address or were found to be shell entities. Several such sub-contractors were controlled by the principal contractors with all their ITR filings and other compliances being done from the IP addresses of main corporate office.

FDI receipts of several crores in the group companies of one of the Infrastructure companies is suspected to be round-tripping of its unaccounted funds.

Unexplained cash of Rs. 85 lakh and Jewellery worth Rs. 71 lakh have been seized. More than 25 bank lockers have been restrained.

*****

RM/KMN
(Release ID: 1603150)

 

Cabinet approves protocol amending the Agreement between India and Sri Lanka for avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Dated: 12 FEB 2020

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved the Signing and Ratification of the Protocol amending the Agreement between India and Sri Lanka for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

Impact:

Updation of preamble text and inclusion of Principal Purpose Test, a general anti abuse provision in the Double Taxation Avoidance Agreement (DTAA) will result in curbing of tax planning strategies which exploit gaps and mismatches in tax rules.

Details:

i) The existing DTAA between India and Sri Lanka was signed on 22nd January, 2013 and entered into force on 22nd October, 2013.

ii) India and Sri Lanka are members of the Inclusive Framework and as such are required to implement the minimum standards under G-20 OECD BEPS Action Reports in respect of their DTAAs with Inclusive Framework countries. Minimum standards under BEPS Action 6 can be met through the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) or through agreement bilaterally.

iii) India is a signatory to the MLI. However, Sri Lanka is not a signatory to the MLI as of now. Therefore, amendment of the India-Sri Lanka DTAA bilaterally is required to update the Preamble and also to insert Principal Purpose Test (PPT) provisions to meet the minimum standards on treaty abuse under Action 6 of G-20 OECD Base Erosion & Profit Shifting (BEPS) Project.

Background:

The existing Double Taxation Avoidance Agreement (DTAA) between India and Sri Lanka was signed on 22nd January, 2013 and entered into force on 22nd October, 2013. India and Sri Lanka are members of the Inclusive Framework and as such are required to implement the minimum standards under G-20 OECD BEPS Action Reports in respect of their DTAAs with Inclusive Framework countries. Minimum standards under BEPS Action 6 can be met through the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) or through agreement bilaterally. India is a signatory to the MLI.

******

VRRK/SC

(Release ID: 1602925)

 

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Dated: 6th February, 2020

PRESS RELEASE

Income Tax Department conducts search on prominent persons in Film Industry in Tamil Nadu

On 05-02-2020, the Income Tax Department conducted a search in the case of 4 major players in the Film Industry including a Producer, a prominent Actor, his Distributor and Financier based in Tamil Nadu. The common thread among all these entities was the success of a recent film which was a box office hit collecting around Rs. 300 crore. About 38 premises of the group were covered in search and survey actions spread over Chennai and Madurai.

The highlight of the search is the seizure of unaccounted cash of about Rs. 77 crore from hideouts and secret places located at Chennai and Madurai, purportedly belonging to the financier. Large number of property documents, Promissory notes, post dated cheques taken as collateral security were recovered during the search and have been seized. As per evidence detected during the search, it is estimated that the concealment in this case is likely to exceed Rs. 300 crore.

The distributor, who is a part of the group searched, is also a builder. All documents in original, belonging to the distributor have been recovered from a hideout place, which was the house of his friend. Scrutiny of the evidence so unearthed is under progress.

The producer, who is also a part of the group searched, is into film production, distribution and film exhibiting Multiplexes and has produced several films. Analysis of the accounts available in the office premises is under process. Evidences of actual receipts and expenses booked and remuneration paid to Artists is under investigation.

In the context of the issues of the prominent Actor, it is stated, that, his investment in immovable properties and remuneration received from the said Producer for acting in the film is the subject matter of investigation in the present search. Searches in some of the premises are still continuing.

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT

 

Ministry of Finance

CBDT issues clarification on the applicability of TDS provisions on Mutual Fund dividend

Dated: 04.02.2020

The Finance Bill, 2020 proposed to remove Dividend Distribution Tax (DDT) at the level of Company/ Mutual Fund and proposed to tax the same in the hands of share/unit holder. It was also proposed to levy TDS at the rate of 10% on the dividend/ income paid by the Company/Mutual Fund to its share/unit holder if the amount of such dividend/ income exceeds five thousand rupees in a Financial Year.

Queries have been received to the effect that whether under the proposed section 194K, the Mutual Fund would be required to deduct TDS also on the capital gains arising on redemption of units. It is hereby clarified that under the proposed section, a Mutual Fund shall be required to deduct TDS @ 10% only on dividend payment and no tax shall be required to be deducted by the Mutual Fund on income which is in the nature of capital gains. Necessary clarification, if required, shall be proposed in the relevant provision of the law.

****

RM/KMN

(Release ID: 1601957)