Thursday, April 4, 2013

Black Money Exposure ------Confirms How Formation of Dummy Company Helps In Tax Evasion

Indian Express-ICIJ probe: Vijay Mallya, Ravikant Ruia in tax havens  

The 612 Indians on the list of those who have invested in tax havens such as the British Virgin Islands include two MPs, a former royal and top industrialists. RITU SARIN puts together details of 20 among them

Mirchandani is the founder of popular consumer electronics firm Onida. Mirchandani and his wife, Soni, opened a BVI company called Strong Wing Overseas Ltd in 2006 with an authorised capital of $50,000. Both are directors and shareholders of the company.
Mirchandani, however, said he did not recall opening such a BVI entity. "The personal details in the papers are mine. Maybe someone else has opened the company in my name," he said when shown the documents.
Teja is the eldest son of Ramalinga Raju, the disgraced former chairman of Satyam Computers Ltd. Teja is said to be the brain behind Maytas Infrastructure, whose planned merger with the software giant went on to unravel the alleged corporate fraud that sent Ramalinga Raju to jail for 32 months.
The Rajus set up two BVI companies, Global Network Overseas and Stapley Universal Limited. Teja Raju is listed as the beneficial owner of both but records show their current status as "defunct". Each company was registered with an authorised capital of $50,000.
Teja Raju denied any link with the companies. "Looks like a case of mistaken identity," he said.
An NRI, Ruia is vice-chairman of the Essar group, which has interests in steel, oil, gas and power. His company has been embroiled in the alleged irregularities in the telecom spectrum allocation of 2001-02; last month, a special court named Ruia an accused.
He has registered three firms in the BVI and his daughter Smiti is a shareholder in two of them. Also, one of Ruia's flagship companies, Essar Power, has five BVI accounts with their authorised capitals ranging from $100 to $100,000.
Essar officials said that of the eight companies, five were liquidated in 2011 and 2012 and three are "existing and operational". They said necessary filings and compliance have been done in India in accordance with laws and Smiti has declared her holding in Paprika Properties Ltd and Paprika Holdings Management Ltd in her wealth tax returns. "These companies were started as SPVs to make investments and are in the knowledge of the authorities concerned," Essar said.
Bangalore-based Karuturi is the chairman of Karuturi Global Ltd, the largest producer of cut-roses in the world. He has diversified into farming and has leased 300,000 hectares of land in Ethiopia to produce cereals and edible oil.
In 2007, Karuturi registered companies in tax havens and with huge authorised capitals. He is shareholder or beneficial owner of six companies that have a collective authorised capital of $2.2 million. His wife, Anitha, is also a shareholder in one company, Maxworth Investment Ltd.
Reached in Ethiopia, Karuturi said he did not recall the companies and did not respond to subsequent calls.
The other MP on the list, Mallya registered a BVI company called Venture New Holding in 2006 with an authorised share capital of $50,000. Mallya, who has been in the news for the trouble over his Kingfisher Airlines and with the tax authorities, is the beneficial owner of the firm.
"Dr Mallya is a non-resident Indian with business activities in different parts of the world. It is common practice to use BVI registered companies in connection with such activities which are not confined to India alone. All disclosures in regard to Dr Mallya's wealth have been duly made to Parliament," a UB group spokesperson said.
Gaddam is a Congress MP from the Peddapalle reserved constituency in Andhra Pradesh. The seat was earlier represented by his father, former union minister G Venkatswamy. Gaddam, who has a MBBS degree, is an industrialist and owns asbestos firm Visaka Industries. He is also chairman of CII's Andhra Pradesh chapter.
Gaddam and his wife, Saroja, became directors and shareholders of British Virgin Islands (BVI) company Belrose Universal Ltd in 2009. The address mentioned in documents is the official Hyderabad address that is also mentioned in his Parliamentary records.
Reached for his comment, Gaddam said he was not aware of the existence of any such offshore company. "I do not remember being involved with such a company and have no connection with it," he said.
Son of Ludhiana-based business tycoon Vidya Sagar Oswal, Abhey is chairman of Oswal Agro Mills and Oswal Chemicals and Fertilizers and managing director of Oswal Spinning and Weaving Mills. In 1999, tax authorities raided his establishments for suspected evasion.
He is one of the biggest Indian players on the BVI list. Starting in 2006, he registered 11 companies in Samoa and the BVI and controlled them through the Rising Wealth Trust, registered in the Cook Islands. While the trust owns shares in several of the companies, Abhey owns shares in others. Abhey is the protector of the trust and his son Shael is the settler. The combined authorised capital of the 11 companies is $5.3 million.
"I have not registered any offshore firms. You must be in the knowledge of business entities of my son Shael Oswal, who is a Singapore resident and an NRI. My companies or myself have no relation whatsoever with his business or business entities," Abhey said.
Son of top industrialist K K Modi, who owns the diversified Modi Enterprises, Samir is an executive director in Godfrey Philips. He pushed the group's diversification by launching a string of new ventures such as Modicare, Colorbar and Twenty Four Seven.
His BVI company is called Gilvin Rock Enterprise Limited. He and his wife, Shivani, are joint directors and shareholders in the firm ,which has an authorised capital of $50,000. "The company was set up as a route for investments but hasn't done any business or trade transactions," he said.
Chetan Burman is a fifth-generation member of the Burman family, which owns the Rs 1,500 crore ayurvedic and food products brand Dabur. He was executive director of Dabur Nepal but has now branched out into other ventures.
Burman registered a BVI company in 2007 called Heavenly Bloom World Ltd. He is both director and shareholder of the company, which started with an authorised capital of $50,000.
Burman said the BVI firm was set up to route exports, mainly of honey, through Singapore but that plan didn't take off. "The company was set up through a verbal communication since I wanted to make Singapore the export hub for my products. But no trade transactions actually materialised and the company has thus remained dormant," he said.
In January 2008, members of the former royal family of Baroda opened a BVI firm with an authorised capital of $50,000. The directors and shareholders of the company, called Brentwood Consulting Limited, are Gaekwad Radhikaraje Samarjitsinh, wife of Samarjitsinh Gaekwad, and her sister Kumari Meenal. The Laxmi Vilas Palace, one of the largest residences in the country, is given as Radhikaraje's address in documents.
She did not respond to questions sent to her.
The founder of MRF Tyres, the late K M Mammen Mappillai, was among those on the list of 18 people who had accounts in the European tax haven of Liechtenstein. It has now come to light that members of the MRF family registered a BVI company, Moon Mist Enterprise Limited, in 2007 with an authorised capital of $50,000. Its directors are Mammen Mappillai's two sons, MRF chairman Kandathil Mammen and its MD Arun Mammen. Kandathil's son Rahul Mammen Mappillai, also an MRF director, is the third shareholder.
Rahul did not respond to questions sent to him.
Dhingra is vice-chairman of Berger Paints, the second largest paint manufacturer in the country. In the BVI, Dhingra is the beneficial owner of a company called Crossley Hill Corporation. It was incorporated in 2008 with an authorised capital of $50,000.
Dhingra, however, denied any links with the company. "I have nothing to do with this company even though the address being quoted by you is my address. You must have got wrong documentation," Dhingra said.
The Mehtas are prominent Mumbai-based diamond traders, with a base in Belgium, and are facing allegations and action for parking money in offshore accounts. Rashmi is the son of patriarch Kirtilal Mehta and Bhavin is Rashmi's son. Some of their relatives, including Rashmi's brother Prabodh Mehta, were named in the list of 18 Indians who had accounts in the LGT Liechtenstein Bank. In April 2011, the family was raided by tax authorities and their tax evasion cases are under assessment.
Rashmi and Bhavin are directors and shareholders in a BVI company called Bapaji Inc. The company was incorporated in 2004. Another BVI company, called Dimension Worldwide Ltd, is linked to the Mehta
family but its status is described as "defunct".
The Mehtas did not respond to questions sent to them in Belgium.
Known as the Papad King, Murugesu is the chairman of the Lanson Group, involved in the manufacture and export of papads. The group also owns Lanson Toyota, a Toyota car dealership of which Reeta, Murugesu's wife, is the joint MD. They also own a biotech firm called Lanson Biotech involved in ayurvedic research.
Murugesu and Reeta are joint shareholders in a Hong Kong-registered Portcullis TrustNet company called Ready On Company Limited. The company was "sold" to the couple in 2008 and began with an authorised capital of HK $10,000.
Murugesu confirmed having set up the company. "We started the company for better tax planning but with full tax now required to be paid by export units like ours, no trading through it really materialised. We just thought it is better to pay full taxes," he said.
Breaking away from his family business of cotton trading and textiles, Murugesan launched the now-defunct Paramount Airways, a niche airline catering to the southern sector, and was its MD at the age of 28. He started five BVI companies in 2008, each with an authorised capital of $50,000. He is director and shareholder in all of them.
Thiagarajan confirmed the existence of the five BVI companies but clarified that they are "wholly owned" subsidiaries of Indian companies of the Paramount group and not individual holdings. "The BVI companies were opened with the aim of getting foreign investments in the textile business but that did not happen. So these are just companies on paper with very little or hardly any capital. Since the investments did not come in we did not activate the companies," he said.
Doshi is the chairman of Premier Ltd, formerly Premier Automobiles Ltd, one of India's oldest automobile manufacturers. He opened a BVI company called McGuffin Ltd in 2006 with an authorised share capital of $50,000 and is named as the beneficial owner.
"McGuffin Ltd has invested FDI in our Indian company with prior approval of the RBI. We regularly file all the required disclosures with the RBI as per their rules. All details of McGuffin have been given to the income-tax authorities as part of my local company's routine tax assessment, including audited balance sheets, shareholders list certified by auditors and details of investments made by it. All remittances by McGuffin have been made through HDFC Bank after due KYC checks," Doshi said.
Lohia is the CEO of Chamong Tee Exports, one of India's largest tea exporters. Lohia registered Golden Charm Universal and Golden Success Offshore Inc in the BVI in 2007 but these are now shown as "defunct".
Lohia did not respond to questions sent to him.
One of the three daughters of the late jute baron Arun Bajoria, Meenakshi and her husband Sharad Kumar Jatia are among the claimants to Bajoria's empire, valued at Rs 2,500 crore and the subject of family disputes.
The couple are named jointly as directors and shareholders in two BVI companies, Supreme Bonus Enterprises Limited and Plazzo International Management Ltd. Each was acquired in 2007-2008 with an authorised capital of $50,000. She did not respond to questions.
Mittal is a co-founder and vice-chairman of Indiabulls, the country's first e-commerce and Internet brokerage company.
BVI documents show Mittal registered a company named Alta Vista Development Corporation in 2008. He is both director and shareholder in the company, which began with an authorised capital of $50,000. He did not respond to questions put to him.
They are heirs to the 150-year old Khatau empire. Panna is the wife of Sunit Khatau, the late chairman of the group who was shot dead in 1994. She is chairman of their flagship textile firm, Khatau Makanji Spinning and Weaving Company. Neesha and Reena are her daughters and directors of the company.
In 2007, the three registered four companies in the BVI through Portcullis TrustNet and are either together or individually named as beneficial owners of the firms. In each case, the authorised capital is $50,000. Neesha did not respond to questions sent to her.
Global media probe finds 612 Indians among thousands with firms in tax havens
Global media probe finds 612 Indians among thousands with firms in tax havens. (Reuters)

In the biggest global expose of its kind on offshore investments and secret financial transactions, an international group of investigative journalists has found details of more than 1.2 lakh offshore entities and trusts belonging to individuals and companies in more than 170 countries and territories, including India.
These individuals and companies include politicians, the mega rich and tax offenders, among others, who have invested in tax havens such as the British Virgin Islands, the Cook Islands, Samoa and other offshore hideaways.

The 612 Indians in this list include two members of Parliament — Lok Sabha Congress MP Vivekanand Gaddam and RS member Vijay Mallya — and several industrialists such as Ravikant Ruia, Samir Modi, Chetan Burman, Abhey Kumar Oswal, Rahul Mammen Mappillai, Teja Raju, Saurabh Mittal and Vinod Doshi.

The list also includes businessmen who have had a brush with authorities such as the Income-Tax department and the CBI. Several of the offshore investments were made in possible violation of RBI and FEMA rules.

Details of these transactions were contained in 2.5 million secret files and accounted for more than 260 gigabytes of data. They were obtained by the International Consortium of Investigative Journalists (ICIJ) and their total size is more than 160 times larger than the leak of the US State Department documents by Wikileaks in 2010.
Based in Washington DC, ICIJ ( is an independent network of reporters who work together on cross-border investigations.
ICIJ collaborated with 38 media organisations around the world, including the The Indian Express, for this ambitious global project and to analyse the documents. The other media partners include The Washington Post in the US, The Guardian and BBC in Britain, Le Monde in France and the Canadian Broadcasting Corporation.
The secret files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how financial secrecy has spread aggressively around the globe. They represent the biggest stockpile of inside information about the offshore system ever obtained by a media organisation.
Besides several well-known Indians, the lists include American doctors and dentists, middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, East European and Indonesian billionaires, Russian corporate executives and international arms dealers.

These people used international financial services providers such as the Portcullis Trustnet (PTN) of Singapore and the Commonwealth Trust Limited (CTL) in the British Virgin Islands to register offshore companies in tax havens. PTN and CTL, it has been found, have helped tens of thousands of people set up off-shore companies, personal financial trusts and hard-to-trace bank accounts.

Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. The stolen asset recovery initiative, a programme of the Wold Bank and the United Nations, has estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $ 1.6 trillion a year.

On the other hand, offshore defenders counter that most offshore patrons are engaged in legitimate business transactions. Offshore centres, they say, allow companies and individuals to diversify their investments, force commercial alliances across national borders and do business in entrepreneur-friendly zones that eschew the heavy rules and redtape of the onshore world.
The 15-month long investigation has found that alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging and political corruption to thrive. The expose has also thrown light on the functioning of "nominee directors'' in offshore companies, several of whom have also been engaged by Indian patrons of offshore companies.

For instance, a cluster of 28 "sham directors'' have been identified as having served as the on-paper representatives of more than 21,000 companies between them, with some individual directors representing as many as 4,000 companies each.
The expose comes shortly after a list of 18 Indians who had bank accounts in the LGT Liechtenstein Bank and around 700 Indians who had accounts in HSBC in Geneva became public. In both cases, account holders were prosecuted and paid penalties to Income-Tax authorities for deposits they had made abroad without paying taxes in India.

Incidentally, India had signed a double taxation treaty called the Tax Information Exchange Agreement with the BVI in 2011 to check tax evasion and money laundering from the tax haven. Finance ministry officials said that similar agreements are in the process of being drafted with the Cook Islands and Samoa.
While the Liberalized Remittance Scheme 2012 permits Indians to deposit up to $200,000 abroad annually, the RBI has made it clear that this does not include deposits in tax havens. "As yet, the $200,000 facility for remittances abroad is not applicable for individuals to open accounts or companies in tax havens," a RBI spokesperson told The Indian Express.

Auditors said the legality of holding offshore accounts and registering offshore companies is complex. The RBI restriction on individuals incorporating companies abroad, they said, can be easily circumvented if an offshore company is first incorporated and the shareholding then transfered to the beneficial owner.
In the cases under scrunity, documents show that both patterns have been followed. The date of incorporation and the date of the patrons being appointed shareholders/directors is either identical — which is a violation of RBI guidelines — or is a month or so later. If it is the latter, these individuals can say they just acquired shares of an offshore company.
However, with individuals debarred from using LRS for setting up companies, even the remittance dispatched by them for setting up an offshore entity can be a violation. Under rules of the Foreign Exchange Management Act (FEMA), the use of the offshore route to bring in FDI is also prohibitted and is a violation of Section 8 of the act.
There is also a restraint on individuals setting up offshore companies without the prior approval of the RBI.

* 15-month investigation based on 260 GB data in 2.5 million secret files including 2 million emails covering nearly 30 years

* Data had details of over 1.2 lakh offshore firms/trusts and 12,000 agents

* Owners, benefactors of offshore accounts spread across more than 170 countries, territories

* 86 ICIJ journalists from 38 media organisations in 46 countries collaborated in investigation

* Data found 28 'sham directors' who together represented 21,000 firms

What is Black Money

Black Money in India, in Indian banks and invested in real estate sector is many many times greater than total of black money parked in various foreign banks including that in Swiss Bank. UPA Government in Delhi has been making various lame excuses for its failure in declaration of black money held in foreign banks as National assets. But do they fail to stop game of black money in India itself.

It may be difficult for the government to force foreign banks to declare details of account holders. But I am unable to understand why government in not interested to strengthen control mechanism on financial transactions to stop continuous escalation in black money racket in India and why government fails to unearth black money from Indian market and why does it fail to punish real perpetrators of black money.

War against Black Money

Government should make efforts to reduce creation of black money in following ways.

First and foremost is very simple solution to the problem of black money and it is minimizing cash transaction. As per company rules all payment above value of Rs.20000 should be through cheque but still companies are making purchases in cash .Ramdeo Baba has right pointed out that notes of Rs.500 and Rs.1000 should be demoetised.Even Rs100 note should be demonetized. Politicians always talk of poor farmers, small traders to continue their earning through evil means. More than 90 percent of population of India does not earn 100 rupees a day; more than 50 % of population does not earn even Rs.20 a day. As such they will not face any problem. In developed countries like USA, 99 percent of sale and purchase take place through cards or bank cheques and after giving acceptable identity only. In India 90 percent of sale and purchase takes place in cash.


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Rehan Rehan said...

Think back to the first time you ever heard of BVI Company Formation . I find my self constantly drawn back to the subject of BVI Company Formation . Remarkably BVI Company Formation is heralded by shopkeepers and investment bankers alike, leading many to state that it is important to remember that ‘what goes up must come down.’ Inevitably feelings run deep amongst the over 50, whom I can say no more about due to legal restrictions

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