Offshore trusts first in searches tied to probe in Pandora Papers

What is significant is that following the dispatch of notices to “almost all” Indians named in the collaborative investigation by The Indian Express and International Consortium of Investigative Journalists (ICIJ), the Government’s probe team, supervised by a Multi Agency Group (MAG), has started action first on offshore trust-owning individuals and companies named in Pandora Papers.

The MAG was set up by the Government on the day The Indian Express published its first report on Pandora Papers in tandem with 150 media outlets, detailing offshore ownerships contained in 11.9 million leaked files.

What distinguished Pandora Papers from previous ICIJ offshore investigations was the unveiling of thousands of offshore trusts set up in tax havens — evidently, as an opaque structure for its beneficiaries and to avoid or reduce inheritance and estate taxes.

Indians are required to declare any association with an offshore trust — be it as a Settlor, Trustee or Beneficiary — in the Foreign Asset (FA) declaration section of their Income Tax returns. If they fail to do so, they are liable for stiff penalties and fines under the 2015 Black Money Act.

While it is early days yet, probe officers say they are finding a pattern of either non-disclosure or partial disclosure of offshore trusts linked to Indians named in Pandora Papers.

In the case of Satish Sharma’s family members, the FAIU conducted search operations in Delhi, Mumbai and Goa early this month.

Records investigated by The Indian Express in Pandora Papers showed that Satish Sharma was Protector of two trusts: Jan Zegers Trust, incorporated in 1995 in Cayman Islands with at least 10 members of his family shown as beneficiaries, and JZ II Trust in New Zealand in which his wife Sterre Sharma was listed as beneficiary.

The trusts, records revealed, had several underlying offshore companies and properties in France and Singapore that were linked as assets.

Similarly, the records showed how members of the Hiranandani family set up a BVI entity called Solitaire Trust. The trust had as many as 25 offshore companies linked to it — the shareholding of these companies was transferred to it — with assets totaling $60 million in 2017.

Last week, searches were conducted by the IT Department in this connection in Mumbai, Bengaluru and Chennai with the company issuing a statement subsequently that the trust and its assets were “bonafide and in compliance with law”.

Officials told The Indian Express that with a plethora of leads on dozens of complex trust structures detailed in Pandora Papers under the scanner, action could be in the offing against more Indians named in the records.

They, however, pointed to the challenging nature of the investigations due to multiple jurisdictions in which the offshore trusts could be holding assets and bank accounts — and the divergence of laws governing these structures in India and countries of their formation.

A September 2021 Income Tax Appellate Tribunal (ITAT) order in the Yashovardhan Birla case, in which the industrialist was given relief since he was not the “substantial owner” of the family’s offshore trusts, is also being seen as a possible complication in future for the Black Money Act and, therefore, cases probed under Pandora Papers.