Tracking a new offshore trail, the Income Tax Department has sent notices to four prominent Delhi-based individuals for investments in the Merrill Lynch Bank and Trust Company in the Cayman Islands.
Tax officials told The Indian Express that they unearthed the new link following a search conducted last year on premises linked to a Baroda-based industrialist involved in the chemical business. Subsequently, the I-T Department obtained details of his investments and foreign bank accounts through the DTA (double taxation agreement) with Cayman Islands. In the process, it also received details of the four other Indians with investments in the same bank at George Town, Grand Cayman.
The four, who have since appeared before the Income Tax (investigations) unit in New Delhi following issuance of summons, are Jitendra Mehra, a director with Essar Group; Sunil Kant Munjal, joint managing director, Hero MotoCorp Ltd; Gurcharan Das, writer and former CEO of Procter & Gamble, India; and Ravinder Nath, aviation and international affairs lawyer.
Details accessed by The Indian Express highlight an interesting pattern to all five cases: Trusts set up in the Cayman Islands more than a decade ago and assets transferred to banks in other parts of the world.
The Central Board of Direct Taxes (CBDT), after meeting these individuals, has sent communications seeking account details to the banks concerned in Switzerland and Singapore.
For instance, the notice sent to Mehra states that information has been received “through legal channels” that a Trust deed was executed in April 2005 with him as a Trustee — the fund was held by a company called “Rajvin Ltd” and transferred to an entity called “Clariden Leu” in Singapore in 2011.
Since this information was not declared by Mehra in his tax returns, the I-T Department has asked him for the source of funds and whether income accrued from the Trust was disclosed between 2006-2013 or during the compliance window made available by the Government in 2015.So far, details received by the I-T Department include the “peak” amounts maintained in accounts — $1.55 million in the case of Mehra. Requests have been dispatched through the FTTR (Foreign Tax and Tax Research) unit for more details.
Contacted by The Indian Express, Mehra said, “I have nothing to do with the Trust since 2011. It does not belong to me but to my son who is an NRI. All this has been explained to the Income Tax Department when I visited them in response to their summons earlier this year.”
In the case of Gurcharan Das, the Department has information of a Trust called “Courage Rights” being set up in 1995, through Merrill Lynch Bank and Trust Company, in which he was the Protector. In this case, the “peak” amount shown in information received by the I-T Department is $2.77 million.
Das has informed I-T officials that he has been an NRI for several years and that he was “renounced” from the Trust in 2015.
In a detailed response to The Indian Express, Das said: “I have no beneficial interest in the Trust and the bank account. I worked for 30 years with a multinational company in five countries and took early retirement in 1995 when I returned home to become a full-time writer. My savings were left in a Trust, created from my tax-paid income when I was a non-resident, and so the question of any Indian tax does not arise. For many years after that, I was a Non-Resident or NOR (Not Ordinarily Resident). The Trust that I had created was later modified and this is the Trust you have referred to — Courage Rights Trust — which is based in the UK.
“This Trust owns a company (Orange Key) which houses the original savings. The company has never declared any dividend; neither has the Trust distributed any income to warrant disclosure; nor has it had any taxable income. I have never been a Trustee, and my wife and I no longer have any financial interest in the Trust. My son, who is an NRI and lives in Singapore, is the sole beneficiary of the Trust. All the information above was shared with Indian tax authorities.”
In the case of Munjal, information with the I-T Department shows that the “peak” amount in the Cayman Islands entity was $1.65 million and that the Trust was created in 1998 by him and his wife. Records show that the funds were later moved to an account to Switzerland. As in the other cases, a communication has been sent through the FTTR division for more details.
When contacted, Munjal told The Indian Express, “I have no comments to make in this matter. There is nothing much in it and I am in touch with the tax authorities.”
In the case of lawyer Nath, the “peak” amount in the Cayman Islands Trust, set up in 1999, was $6.07 million. Records show that Trust was revoked in 2012 and funds moved to Switzerland. Again, communications have been sent by the I-T Department through the FTTR unit to Switzerland — a final view on tax liability and penalties will be based on the reply. Nath did not speak to The Indian Express despite several requests over phone and mail for comment.
In April, as part of a separate probe on similar lines, the I-T Department had started sending detailed questionnaires to all Indian clients linked to offshore entities set up by Panamanian law firm Mossack Fonseca who were named by The Indian Express as part of an ongoing investigation called The Panama Papers.