The Narendra Modi government is planning to define shell companies, which have been the centre of money laundering for a long time in India.\u00a0Union Minister P P Chaudhary said has said that the government will "very soon" come out with a definition for shell companies amid the crackdown on entities indulging in financial irregularities. It's a\u00a0multi-pronged action plan that is being implemented in the fight against the black money menace, the absence of a proper and uniform definition for shell companies under the legal framework is hampering investigations, PTI reported.\u00a0Obscuring ownership, excessive leveraging, rotation in transactions with no apparent business purpose, majority of shares held by other companies and disproportionate investment in shares of other companies are among the criteria for a shell company. What shell companies are In simpler words, shell companies can be defined as companies tailormade for tax evasion and money laundering. Internationally, shell companies are without active business operations or significant assets, but they are sometimes used illegitimately to disguise business ownership or transfer of assets from law enforcement or the public. These companies can be legal or illegal depending on a country's law. In India, they are not yet illegal.\u00a0Shell companies come under the radar once they are found any one of these three laws: Benami Transaction (Prohibition) Amendment Act 2016, The Prevention of Money Laundering Act 2002, and The Companies Act, 2013. How shell companies operate Let's take an example:\u00a0A company X is a registered company with SEBI. It needs to purchase shoes worth Rs 10,000 crore, but it wants to show an inflated bill of Rs 20,000 core. How does the company do it? It sets up a shell company Y in a tax-haven country. After that company\u00a0X sells its shoes\u00a0to Y, and then again buys it back for Rs 20,000 crore. While Y is a bogus company set up by X and the cash that actually spent was Rs 10,000 crore, in the books, an expenditure of Rs 20,000 crore was showed.\u00a0Similar kind of embezzlement is done through a complex web of a series of shell companies. What happened so far Last September, 10 months after demonetisation, the Finance Ministry said that it has deregistered over 2.09 lakh companies and initiated action to restrict their bank account operations with an aim to curb illicit fund flows and tax evasion. However, later in May, the Income Tax Department filed appeals for "restoration" of these firms are required to recover tax dues and "protect the legitimate interests of revenue". The cash department was\u00a0The tax department is concerned that crores of rupees of its "legitimate" taxes are being stuck after these shell firms were deregistered.