Fate of huge corpus of funds deposited by around 250 entities remains uncertain
MUMBAI, MARCH 15
Market regulator SEBI is yet to take a decision on the money held up in escrow accounts for nearly three years in the case of alleged bogus tax evasion via use of the stock exchange platform.
From 2014, SEBI actively undertook investigations into suspected tax evasion under the long-term capital gains tax scheme and even published a list of entities that may have misused capital gains provisions to evade ₹34,000 crore in taxes under the LTCG scheme. SEBI passed interim orders against several entities and directed them to desist from buying or selling the shares under its scanner. A few months later, SEBI allowed those entities to sell their shares but asked them to deposit 75 per cent of their sales realisation in an escrow account.
A turning point in the case came in early 2017 when SEBI went on the backfoot and wrote to the Directorate of Income Tax that it cannot impound or disgorge gains generated by entities trying to launder undisclosed income through stock market transactions as tax evasion was outside its purview. Since then, there has been no direction from the regulator on the huge sums of money lying in the escrow accounts of hundreds of persons according to its earlier directions, sources told BusinessLine.
Relief for 1,000
“There were around 1,260 entities or people against whom interim orders were passed by SEBI in the matter, of which around 1,000 got relief and their money was released. But there are around 250 entities against whom the interim directions still continue and who have their money lying in escrow accounts,” the source said.
SEBI had issued show cause notices against most of these 250 entities under its Prevention of Fraudulent and Unfair Trade Practices (PFUTP) norms and the fate of the money lying in the escrow accounts remains uncertain as their is no direction with regard to impounding or disgorgement of this money, the sources said.
SEBI did not reply to an email query on the issue. Profit on sale of shares of listed companies where securities transaction tax has been paid does not attract LTCG if the investment was held for more than 12 months. But SEBI and the tax department suspected the provision was being misused by rigging the share prices and holding on to the investment for a little over a year.