Black money law: CAs & Assessees riled over ambiguity in rules

Print Posted Date : 10-Aug-2015 , 07:44:51 am | Posted By CASANSAAR

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New Delhi is slowly coming under pressure to remove the anomalies in black money rules as more and more people ask for a realistic law that would encourage disclosure of foreign assets and not unleash a reign of tax terror.

Members of the apex body of accounting professionals, the Institute of Chartered Accountants of India, will discuss with senior officials of the finance ministry and Central Board of Direct Taxes this week to spell out the ambiguities; senior tax professionals have written to the designated commissioner, pointing out issues that require clarification, while the Confederation of Indian Industry is preparing its views that will be soon submitted to the government.

"There are practical problems... We have requested the revenue secretary and CBDT chief to participate in a workshop in Delhi where the issues will be raised. After this, we will make a written submission and also hold a meeting in Mumbai," ICAI President Manoj Fadnis told ET.

Many keen to use one-time window

Four senior chartered accountants ET spoke to said several individuals are keen to take advantage of the one-time compliance window, declare their undisclosed foreign assets and come clean by paying 60% of the amount as tax and penalty, but the government has to clear the fog on matters that are holding back assessees.

The subject concerns hundreds of wellheeled individuals with different backgrounds — diamond merchants, top multinational executives, Bollywood personalities, professionals, builders as well as members of old business houses.

Dilip Lakhani, a senior chartered accountant who was among the first to write to CBDT about the ambiguities, said, "Let me give you an actual case. A senior MNC officer, who received a bonus of $1 million, invested $300,000 out of the bonus amount to subscribe to ESOPs (employee stock option plan). This was never disclosed.

Now, he wants to disclose this. His investment of $300,000 is today worth $2 million. According to the rules, he has to pay 60% on the $1 million bonus as well as pay 60% on the $2 million value of the stock. Now, if he is not allowed a deduction of $300,000, it would amount to double taxation."

According to Nihar Jambusaria, who heads ICAI's committee on international taxation, among the questions that remain unanswered are:

valuation (on which 60% is to be paid) of unlisted equity shares is complex as assessees will have to find out the fair market value (FMV) of all the assets that the investee company holds;

while the rules provide that FMV of a foreign bank account shall be the sum of all the deposits made in the bank since the date of opening of the account, statements beyond past 10 years are normally not available with banks;

properties acquired abroad, as per the rules, will be taxed on the basis of a report of a valuer who is recognised by the particular foreign government — here, clarification is required regarding the evidence the assessee will have to produce to prove that the valuer is indeed recognised by that foreign government. Also, three months is too short a time to complete valuation.

Black money law gives no immunity to entities (that declare foreign assets) from indirect tax authorities. Some of the manufacturing companies and partnership firms which had declared undisclosed assets under the Voluntary Disclosure of Income Scheme of 1997 later received notices from excise authorities, recalls Lakhani.

Also, there are people who are looking for immunity of a different kind: these individuals fear relatives and partners, with whom there are ongoing disputes, could lay claim on wealth that is now declared. They are reluctant to reveal hidden assets till the government assures the information shared on foreign assets cannot be used by anyone as evidence in court of law. (Economic Times)

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