In a six-page opinion sent to the Ministry of Finance on January 13, Attorney General Mukul Rohatgi said the government can sign confidentiality agreements with foreign governments in order to receive information on foreign bank account holders and black money, and such information can be shared with courts or relevant tax tribunals.
The AG’s opinion was sought after Germany registered its protest after a list of account holders in LGT bank in Liechtenstein — shared with India under a tax treaty — was handed over to the Supreme Court in a sealed cover in April last year.
The AG asked the government to inform the German authorities that the Supreme Court and high courts are “constitutional bodies” which also function as tax courts and hence no agreement was breached by sharing the information. The government was assured that despite confidentiality agreements, it can share such information with the courts or tax tribunals.
The AG cited various laws to state that while information received under a treaty has to “be treated as secret as per domestic law”, it can only be “disclosed to persons, authorities (including courts and administrative bodies) involved in assessment, collection, enforcement, prosecution, determination or appeals in relation to taxes covered by the treaty and to the oversight bodies”.
He explained that while proceedings before Income Tax authorities are not public and hence information shared with them cannot be made public, including under the RTI Act, once the matter reaches judicial bodies like the Income Tax Appellate Tribunal (ITAT) and the courts, the information can become public. Thereafter, the information may be “used by other law enforcement agencies dealing with corruption, money laundering, terrorist financing etc,” he said.
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The government was also apprehensive about whether, in view of the continuing furore over black money parked abroad and the clamour to make the names that it receives from foreign governments public, it should go ahead and sign an inter-government agreement (IGA) with confidentiality clauses with the US under the Foreign Account Tax Compliance Act.
”It would be constitutional to sign the proposed IGA between India and US and the MCAA with the ‘confidentiality’ provisions. Significantly, the SIT in its report dated 1/12/2014 to the Hon’ble Supreme Court had stated that the Government of India can enter into tax agreements as adopted/ accepted internationally. The Government of India can confirm to the treaty partners that it would respect confidentiality provisions. The government can surely give this assurance,” Rohatgi said in his reply to the finance ministry.
The AG also pointed out that the Supreme Court and high courts are competent to deal with tax-related matters. ”The oversight bodies referred to in the treaties in the present case would be the SIT constituted by the Hon’ble Supreme Court, and in my opinion disclosure of information to SIT would not violate provisions of the treaties,” he said.
Rohatgi also suggested amendments to various sections of the Income Tax Act, 1961 to “specifically deal with the treaty obligations, particularly in view of the proposed IGA and MCAA”.