Govt policy aimed at more action against shell companies

In the Budget for 2017-18, the government has proposed to impose a 10 per cent long-term capital gains tax on those who have invested in unlisted stocks but not paid the securities transaction tax after 2004. In a small sample analysis of shell companies, it was found that Rs 1,238 crore in cash was deposited in these entities during November and December (demonetisation was announced on November 8 and holders were asked to deposit in banks the cash in denomentation of scrapped Rs500 and Rs 1,000 currency notes till December 31).

The government has decided to impose “harsh punitive” action that will include freezing of bank accounts and striking off the names of dormant companies. Their investments in real estate could also come under the scanner, as the government has also decided to invoke the Benami Transactions (Prohibition) Amendment Act.

A task force has been set up under co-chairmanship of revenue secretary Hasmukh Adhia and corporate affairs secretary Tapan Ray to monitor actions against deviant shell companies by various enforcement agencies. The members will be from various regulatory ministries and enforcement agencies. The regulatory ministry concerned will ensure disciplinary action is initiated against professionals abetting such malpractices and operations.

The basic approach is to prevent money laundering and tax evasion. The government will use technology to identify shell companies. A data base on these companies and their directors would be built by pulling information from various agencies.

There are about 1.5 million registered companies but only 600,000 file annual returns.

A database on these companies and their directors would be built by pulling information from various agencies