Disclosure of list of persons having Black Money (Kala Dhan) in SWISS Banks and secrecy restrictions under Double Taxation Avoidance Agreement (DTAA) and International Treaties/Conventions

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A lot of controversy has arisen on the subject of non-disclosure or selective-disclosure of those having black money (kala dhan) in SWISS Banks. Earlier Congress Government led by Manmohan Singh has maintained that the information available with the Govt. is confidential and can not be made public due to provisions of Double Taxation Avoidance Agreements (DTAA). Despite the fact that BJP who had fiercely opposed and criticised Congress on non-disclosure of the list now quoting the restrictions of international tax treaties and conventions. However Finance Minister Shri Arun Jaitley has reiterated that once the charges are framed, all names shall be disclosed. Also CBDT has filed a request for clarification on sharing of information on black money with the Supreme Court of India in this regard.

Now what seems instrumental are:

(A)    Agreement between the Republic of India and the Swiss Confederation for the Avoidance Of Double Taxation with respect to taxes on income

(B)    United Nations Convention against Corruption

What are Double Taxation Avoidance Agreements
As the name itself suggest, DTAA is an agreement between two countries with the basic purpose to avoid double taxation of the same income. It must be borne in mind that it is not an agreement to share information on black money. However the information exchanged under the agreement might lead to discovery of black money.

Restrictions under DTAA with Swiss Confederation on disclosing information on Black Money
The Article 26(2) of DTAA contains some important provisions in this regard which are categorized as under:

(a)    Any information received under exchange of information by a Contracting State shall be treated as secret as under their domestic laws and shall be disclosed only to persons or authorities concerned with the assessment, prosecution or appeals It has been provided that such authorities/persons shall not use the information for other purposes.

(b)    Such authorities may disclose the information in public court proceedings or in judicial decisions.

(c)    Information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use.

It can be seen that as per DTAA, there are conditions of secrecy and some restrictions on disclosing the information. However there are exceptions for disclosure in public court proceedings or with permission of the SWISS Confederation as in (b) and (c) above .

Now it is to be seen whether the investigation carried out by Special Investigation Team (SIT) on the orders of the Supreme Court on writ petition 176/2009 filed by Shri Ram Jethmalanai would constitute “public court proceedings” or not. The matter is listed for hearing on 28-10-2014. Further, The Indian Government has not specified whether it has asked for authorization for disclosure as per (c) above or not.

United Nations Convention against Corruption
Under the UN Convention against corruption, countries have agreed to cooperate with one another against corruption, including prevention, investigation, and the prosecution of offenders. Countries are bound by the Convention to render specific forms of mutual legal assistance in gathering and transferring evidence for use in court, to extradite offenders.

Under Article 43 of Chapter IV related to International Cooperation, Countries shall cooperate in criminal matters and consider assisting each other in investigations of and proceedings in civil and administrative matters relating to corruption. The Convention was entered into force on 14 December 2005 and presently both Swiss federation and India are its parties.

Whether the Government had sought the information from Swiss Confederation under the provisions of the UN Convention against Corruption is not known.

CBDT Request for clarification to Supreme Court Click Here >>
DTAA with Swiss Confederation Click Here >>
UN Convention against Corruption Click Here >>