Religare Enterprises Ltd (REL), Pune-based Kotle Patil Developers Limited (KPDL), Jindal Steel & Power, Apollo Hospitals and GMR have been named in a long list of companies which allegedly benefitted from partnerships with multinationals in Mauritius without paying capital gains tax, and remitted funds through the FDI route in India. An investigation carried out by the International Consortium of Investigative Journalists (ICIJ) and The Indian Express reveals a study of data from Conyers Dill & Pearman, a law firm that started its operations from Bahamas way back in 1928 and Mauritius in 2009.
Conyers claims to be a leading international law firm with a broad client base including FTSE 100 and Fortune 500 companies, international finance houses and asset managers. The firm specialises in investments in Bermuda, British Virgin Islands and the Cayman Islands. The report says these Indian companies benefitted from the Double Taxation Avoidance Agreement (DTAA) signed between India and Mauritius in 1982. The pact allowed any Indian company to seek tax residency in Mauritius and thus pay zero capital gains tax.
As a result of the treaty, Mauritius soon became a major destination of re-routing investment back to India, without paying any capital gains tax. The growing investments through this route also led to several cases of round-tripping, abuse of the agreement, thus forcing the Indian government to finally impose 'capital gains tax' in 2016 by amending the 1983 DTAA agreement. After the DTAA amendment, it became useless for Indian companies to re-route funds through Mauritius, and it soon lost a tag of the country with the highest FDI in India. As per the report, India saw a 44 per cent decline in FDI from Mauritius in FY19 alone.
The Conyers data reveals Religare allegedly routed funds into an offshore company in Jersey, the largest of the Channel Islands between England and France. Malvinder and Shivinder-owned REL allegedly used a web of companies to route funds into this Jersey firm, which was solely owned by the Singh brothers and their spouses Japna Malvinder Singh and Aditi Shivinder Singh. Taking the benefit of the DTAA, they incorporated several companies in tax havens to raise funds and re-routed funds back to India.
Similarly, Kolte Patil Developers Limited and US-based Portman Holdings LLC also allegedly invested $20 million in $200 million worth India Real Estate Fund set up in FY11. Conyers was a legal adviser to both KPDL and Portman to carry out their real estate projects in India. The data also reveals Jindal Steel and Power Ltd placing orders for four bulk carriers worth $108 million via a Mauritian company in 2012. US-based Mayo Clinic and its subsidiary Mayo Clinic also allegedly used the Mauritius route to partner with Apollo Hospitals and GMR to set up a high-end Hospital near Hyderabad airport, says the report, adding the project could not see the light of the day.
In reply to the allegations, Dharmendar Sesungkur, Mauritius Minister of Financial Services and Good Governance, told the daily that Mauritius was a "cooperative and clean jurisdiction". The Indian government officials, who spoke on the condition of anonymity, also agreed that the DTAA signed with Mauritius in 1983 had led to "treaty shopping".
Edited by Manoj Sharma