Offshore accounts case: HSBC account holders fear attachment of their assets
MUMBAI: April is turning out to be the cruellest month for HSBC Geneva account-holders in India. Till now, only one — a Mumbai-based senior professional — among the thousands named on the list based on stolen data has been able to obtain a clean chit from Swiss authorities. Most others have rushed to appeal against the tax demand, some have promised to pay in instalments, while a few are planning to move a writ before the Bombay High Court this week to hold back the Income Tax (I-T) department from attaching their bank accounts — a step the taxman can take if an assessee fails to pay up within a month.
In a curious case, the Swiss Federal Tax Administration (SFTA), in a letter dated March 23, told the senior professional concerned that he and his wife, whose names figure on the list, are not beneficiaries of the trust that had an account with HSBC Geneva. Though he was only the trust’s protector — a person who is responsible for safeguarding the interest of the beneficiaries — he was wrongly named as a beneficiary on the list India received from France. An Indian professional can be a protector in an overseas trust — it is similar to being a director on the board of a foreign company.
The said professional has submitted a copy of the letter — jointly signed by Miek Haller, deputy director, service for exchange of information, SFTA, and Nina Ulrich, a lawyer — to the I-T department. The Swiss officials also said the actual beneficiaries in this case are third parties with addresses in Canada and England and there does not appear to be an “apparent nexus” with those under jurisdiction of Indian tax authorities. However, the person requested anonymity as the tax office is yet to clear his name.
But most others pulled up by the I-T department in the HSBC case have been less lucky. Those who agreed to share information with the tax office hoping they would be treated less harshly are facing prosecution, while others are taking legal recourse.
Their main arguments are: the entire investigation is based on stolen data, beneficiaries have received no money from the trust, and those named had no opportunity to cross-examine the Frenchman who had stolen the information and shared it with the French government.
However, they may find themselves on a considerably weaker ground with the Swiss tax administration agreeing to share data on bank accounts that have been operational since April 1, 2011.
The information on the Mumbaibased professional’s link with the offshore trust was part of the details on 50 accounts sought by New Delhi from Switzerland in January under the treaty between the two countries. In at least five cases, the information shared by the Swiss authorities match with the names and numbers mentioned on the stolen list.
According to Dilip Lakhani, a senior chartered accountant, the department is moving fast, while many assesses are awaiting the fine print, the black money law and the window it provides to come clean.
“Individuals with direct numbered accounts are the most vulnerable. They have nowhere to hide. Those that are beneficiaries of a trust can still point to a Supreme Court ruling that says a beneficiary who has received no payout from the trust cannot be taxed for the funds or income of the trust,” said a lawyer familiar with the subject. In at least 11 cases, the I-T office has treated the entire money lying with the trust as undisclosed income of the trustees.
“If there is $10 million in the trust’s account and there are three beneficiaries, they have added $10 million each as income of the three trustees, thereby, indicating an additional income of $30 million, which is not the case,” said the person. But according to a tax department official, since the assessing officer is unaware of the trust deed and in what proportion the funds are to be shared, the whole amount is added to the income of beneficiaries.
