Singapore rejects India's request to provide black money information

• The tax authority in India seized documents from an Indian national ("the Indian national") and three other persons allegedly associated with him.

• The tax authority in India believed that the documents indicated the existence of undeclared incomes and of bank accounts ("the Accounts") in overseas jurisdictions. This was in violation of India's tax laws.


• The tax authority in India suspected that monies constituting the Indian national's undeclared income were remitted to the Accounts. It therefore sent a request for information ("the Request") to the Comptroller on 12 September 2011 under Art. 28(1) of the DTAA.

• The Comptroller of Income-Tax in Singapore then applied for an order requiring the Defendant Bank in Singapore to, inter alia, produce bank records and information on the Accounts (Account 1 and Account 2) from 1 January 2008 to date including :

(a) documents pertaining to the opening of the Accounts;
(b) documents executed by the account holder(s) and the beneficial owner(s);
(c) bank statements for the Accounts, paying-in and disbursement slips, written remittance orders, remittance request forms, records of deposits, withdrawals, and the credit and debit entries of the Accounts;
(d) correspondence exchanged and instructions given by the account holder(s) and beneficial owner(s) to the Defendant for the operation of the Accounts;
(e) documents containing the name and address of the persons or entities who have paid or withdrawn monies from the Accounts, or to whom major amounts have been credited to from monies in the Accounts; and
(f) transaction details of the Accounts if either Account 1 or Account 2 is a wealth management account.

Held
• Article 28(1) of the Agreement as amended by the Second Protocol provides that "the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of [the Agreement] or to the administration or enforcement of the domestic laws concerning taxes... imposed on behalf of the Contracting States ...".

• The words foreseeably relevant requires the Comptroller (on behalf of the requesting state) to show some clear and specific evidence that there is a connection between the information requested and the enforcement of the requesting state's tax laws.

• Foreseeably relevant has to be interpreted in the light of the following statement of Hon'ble Minister for Finance of Singapore in Singapore's Parliament :
"…….Spurious or frivolous requests for information will not be acceded to. Further, it does not allow for what is called "fishing expeditions" – it requires requests for information to be specific, detailed and relevant to the tax affairs of the taxpayer in question. Consistent with the tax Standard, we will only provide assistance where there is a genuine case at hand, and the requested information is specific and relevant to the case…….".

• In the present case, the tax authority in India alleged that the Indian national transferred monies to Account 1 and Account 2. It should be noted that Company X and Company Y are not the subjects of any investigations by the tax authority in India, nor entities incorporated in India.

• The court has a duty to ensure that there is sufficient evidence of the connection between the Indian national and the two companies and the foreseeable relevance of the information requested to the investigations on the Indian national.

• In relation to Company X, the tax authority in India relied on an unsigned transfer instruction ("the first transfer instruction") allegedly issued by the Indian national as evidence that the Indian national remitted monies to Company X's bank accounts in Singapore. The tax authority in India also relied on the first transfer instruction as evidence of the connection between the Indian national and Company X. The Indian national has not admitted to any connection between him and Company X. In relation to Company Y, the tax authority in India also relied on an unsigned transfer instruction ("the second transfer instruction") as evidence that the Indian national remitted monies to Account 2. Again, the tax authority in India claimed that the second transfer instruction was evidence of the connection between Company Y and the Indian national for the purposes of the investigations. The second transfer instruction was a letter to Bank S to transfer monies to an account purportedly held by Company Y with a bank in Dubai. There was no evidence that monies had been transferred to or from Account 2 at all.

• The Request and the supporting evidence was not sufficiently clear and specific for me to say that the information requested would be foreseeably relevant to the enforcement of India's tax laws and the ongoing investigations on the Indian national.

• Even if a tenuous connection between the Indian national and Company X and Company Y could have been shown such that the requirement of foreseeable relevance was satisfied, consideration as to whether the application was justified is a process that envisages more evidence than presently adduced. This should include evidence of the use of the Accounts for the purposes complained of in India.

• The application was dismissed without prejudice to the Comptroller making a fresh application, if further information is provided to the Comptroller. - [2012] 22 taxmann.com 36 (HC - Singapore)
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