MNC staff availed of VDIS in 1997: CAG

By Our Special Correspondent

NEW DELHI, AUG. 26. The Comptroller and Auditor General of India (CAG) has found that a number of employees of foreign multinational companies (MNCs) had availed of the Voluntary Disclosure of Income Scheme (VDIS) in 1997, despite the fact that the companies were supposed to deduct tax at source under the Tax Deducted at Source (TDS) provisions. Surprisingly, some public sector companies had also availed of the VDIS, in spite of being considered Government organisations.

The CAG audit into the VDIS revealed that 235 declarants belonging to MNCs declared an aggregate amount of Rs. 70.15 crores.

All the employees who availed of the scheme were of foreign origin and 188 out of the 235 stated in their declaration forms that they were existing assessees under the Indian Income Tax Act.

However, only 98 of them quoted Personal Account Number (PAN) or the alternate GIR number and most of them quoted office and residential addresses of firms of chartered accounts or advocates. In many instances, residence addresses were the same for a large number of employees.

Since many Japanese MNCs had come under Income Tax scrutiny for failure to comply with the provisions, the CAG audit particularly looked into the details of 163 declarants belonging to that country. These declarants were associated with companies such as Itochu Corporation, Fujitsu Corporation, Mohali (near Chandigarh), Fujitsu Opel, Bhopal, Fujitsu Limited., New Delhi, Honda Motor Company, Tokyo, Sumitomo Corporation, Denso Corporation, New Delhi, Anritsu Corporation, New Delhi, NEC Corporation, New Delhi, CIASIB Ghaziabad, Mitsui & Company, New Delhi, Care of S.P. Puri & Company, New Delhi, Care of S. R. Batliboi & Company (Japanese nationals), Japan Radio Company and 20 more residents of Japan. The total amount declared came out to Rs. 46.62 crores.

A further scrutiny of the declarations of the MNC employees under the VDIS revealed that all them declared only unaccounted cash for various assessment years. Consequently, the CAG has said that ``the failure of the Income Tax Department to monitor this important class of tax deductors in respect of employees' salaries and other perquisites enabled their employees to declare Rs. 70.13 crores and pay tax at the rate of 30 per cent only vis- a-vis the higher rate of tax applicable to the relevant assessment year in addition to penalty with interest there on.''

Some employees of foreign banks had also availed of the VDIS scheme. Of the total 72 declarants, 17 were employees of the Banque Nationale de Paris while 55 were from the Sanwa Bank of Japan. The total amount declared was Rs. 23.52 crores.

The CAG audit also found that seven public sector corporations had availed of the VDIS, including one Central public sector undertaking, while the rest were State corporations. The total amount declared by them amounted to Rs. 49.38 crores while the tax paid was Rs. 16.89 crores.

While noting that public sector corporations availed of the VDIS, the CAG has said,``in this connection it is relevant to mention that the employees of the public sector undertakings are covered by the definition of the term `public servant' and they exercise their functions with the authority and force of the State.

The board of directors of a public sector undertaking also consists of nominated Government officials who discharge their functions as members of the board at the pleasure of the Governor of the State or the President of India. It is therefore expected that the affairs of such undertakings are conducted in a transparent manner and the accounts submitted for audit disclose all the transactions carried out by the undertaking. As such, it would not be expected that such undertakings would generate unaccounted income,'' the CAG has said.

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