M A I N   N E W S

‘Fly-by-night operators to blame’

NEW DELHI, April 5 (PTI) —Finance Minister Yashwant Sinha today charged fly-by-night operators with spreading rumours that the government proposed to tax foreign institutional investors (FIIs) leading to the stock market tumble in the country.

‘‘It is a frivolous rumour,’’ Mr Sinha said, adding unlike in several other countries FIIs had confidence in India.

During the southeast Asian currency crisis several FIIs left those countries but they did not do so in the case of India, he said, wondering why serving IT notices to individual operators, who were subject to scrutiny, should spread panic.

The government yesterday put on hold all action against Mauritius-based FIIs pending a detailed examination after stock markets crashed on reports of government move to tax these funds. The Bombay Stock Exchange (BSE) Sensex crashed by 361 points, the second biggest fall in history, amidst reports that the government was withdrawing the tax benefits to such FIIs.

Mr Sinha also ruled out modification of the Indo-Mauritius tax treaty but said the tax authorities were examining ‘a very limited’ number of foreign firms managing a small amount in the country who might have been evading tax using the Mauritian route.

‘‘There is no scope for misunderstanding and there is no question of modifying the tax treaty with Mauritius,’’ the minister said.

Terming the stock market fluctuations as ‘widely speculative’, Mr Sinha said: ‘‘I regret to say that some people spread baseless information.’’

Asked if the government proposed to take steps against manipulators, he said it was for ‘‘SEBI to see who are manipulating’’.

Meanwhile, a statement issued by the office of the Chief Commissioner of Income Tax in Mumbai, said reports about Mauritius-based FIIs being denied tax benefits as also the huge amounts involved in tax liability were ‘‘entirely unfounded’’.

‘‘The impression that appears to be prevailing about a blanket denial of tax benefits to Mauritius-based FIIs or about the huge amounts involved in tax demands are entirely unfounded’’, the statement said.

In view of prevailing doubts and uncertainties regarding the likely impact on other investors from Mauritius, the Central Board of Direct Taxes (CBDT) has directed the field authorities that pending a detailed examination of the grounds on which tax benefits have not been allowed to some companies, all action against the FIIs be put on hold, it said.

‘‘This should completely remove the current apprehensions’’, the statement said.

It further stated that out of the nearly 150 Mauritius-based companies who had invested in India, tax benefits under the Indo-Mauritius treaty had already been allowed to 24 companies, while they had not been allowed in 24 other cases in view of the specific facts of each case by the assessing authorities.