The Indian tax office has asked several Mauritius-based private equity (PE) funds to share their minutes of board meetings, deal agreements, residency and addresses of directors, and names of ultimate beneficiaries amid suspicions that unnamed persons call the shots in these funds while the boards and managements of the tax haven entities merely serve as dummies.
If the income tax (I-T) department has good reasons to believe that a fund's 'place of effective management' (or POEM in tax parlance) is somewhere else-where the key decision makers are located -and not Mauritius, many funds could find themselves exposed to large tax demands.
At least seven PE funds have received notices from the international division of the Mumbai I-T office over the past two months, two sources told ET. The tax department wants to know the tax residencies of the real faces behind the Mauritius asset managers and fund investors. "Men who are controlling the funds may be in the US or even in India, while the directors in the Mauritius vehicle could just be the fronts. In that case, can these investment vehicles in Mauritius claim tax benefit under the India-Mauritius treaty?," one of them asked.
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