UK asks govt to recover tax from Indian bizman

In a seldom-used provision of the law, the British tax office has asked the Indian government and the Income tax (I-T) department to recover tax of an Indian who had left the UK years ago and is now settled in India.The treaty between the two countries allows revenue authorities in the UK to approach the taxman here to claim unpaid tax. Typically, this is done once the dispute has reached a closure and the taxpayer in question is left with no legal option.

While other central agencies enforcing anti money-laundering regulations and criminal code often reach out to their foreign peers in locating and even attaching overseas assets of fugitives, employing treaty convention in seeking assistance for tax collection is uncommon.

In this instance, involving an outstanding tax claim of over 200,000 on an Indian businessman, the HM Revenue and Customs (UK) has written to Indian authorities to recover the amount. The claims pertain to the period between 2015 and 2017.

“The tax department is enforcing the tax demand of another country under the rule published in its manual. If the assessee is of the position that the same is not payable, he would have no choice but to pursue legal recourse in order to stop the tax recovery officer (TRO) from enforcing such a demand in another country. It’s crucial to verify whether such a demand has reached a finality in the other country,” said Rajesh P. Shah, partner at the CA firm Jayantilal Thakkar & Company.

According to the I-T manual, Section 228A (1) of the Income-tax Act empowers the TRO to recover the amount and remit the recovered amount after deducting expenses in connection with recovery proceedings. In cases, where a view has been taken that such taxes are indeed due in the requesting country, steps for attaching the assets of the taxpayer, for example, a bank account may be taken.However, under the procedure that must precede any such action — and which the tax officials have to follow in the present case — the TRO would contact the person with the request to clear the unpaid tax and obtain evidence of the payment. If the taxpayer insists that no amount is outstanding (or a lesser amount is due), the I-T official will examine such a declaration (by the assessee) and ask the UK tax office to provide further information in substantiating its claim.According to Ashish Mehta, partner at the law firm Khaitan & Co, “India has tax treaties with countries like the UK and Belgium that enable mutual assistance in collection of taxes. While these mechanisms have been in place for some time and were rarely invoked, there is increased administrative focus recently, on account of movement of taxpayers across borders.”