Sources told FE that sharing names of these account holders with the SC before their prosecution does not amount to breach of the confidentiality clause in tax treaties as the SC is part of the agencies with which data received under tax treaties can be shared.
Despite its efforts till last week not to disclose details of alleged black money holders received from other countries under tax treaties until their prosecution, the finance ministry is likely to take a position in the ongoing and future treaty negotiations that the confidentiality clause cant be interpreted to mean that the data should be withheld from the countrys apex court.
Sources said with this stance, the ministry will go ahead with signing a deal with the US by this December to exchange details of investments held in each country by people of the other in a bid to counter tax evasion. In case India does not sign an information sharing deal with the US under Americas Foreign Account Tax Compliance Act, banks in India have the option to sign individual agreements with the US IRS to share details of Americans Indian investments and escape a 30% withholding tax on the remittances due to these banks from American financial institutions.
Information received under treaties can be used only for tax purposes, which means sharing it with agencies administering tax statutes including the SC is permitted. It does not cover certain tribunals, explained a person privy to the governments thinking. So long as the SC maintains the confidentiality of the data given to it, sharing the details with the court in sealed or open document does not amount to any treaty violation, said the person.
Another person in the know of the things said the ministrys fears of violating tax treaties was an explanation given to the court why it had chosen not to make public the names of the foreign account holders before complaints were registered against them. Sharing data with the SC did not mean the countrys ability to sign tax treaties was actually impaired, said the person.
Sources also said the government can take the view that names, whose guilt was yet to be established, was revealed to the court on judicial directions in the interest of larger public good, which prevails over individual liberties.
The ministry has sought a clarification from the SC that the executive was free to sign data sharing deals in future in which a commitment to disclose the received information only as part of court proceedings could be given. It told SC that without such a commitment, there was no prospect of receiving data on foreign account holders. The request was scheduled to be heard on Wednesday, but it was not.