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Kolkata is shell companies' favourite address, taxmen plan major crackdown

Taxmen say almost 90% of such firms are in the city, plan crackdown

Namrata Acharya  |  Kolkata 

Shell firms' favourite address: Kolkata

has turned out to be India’s own haven, thanks to the presence of a large number of companies (the term for formal existence but with close to no operations or assets).

The income-(I-T) department is now planning a major crackdown on such companies here. This is part of a recent initiative by the central to put a curb on ‘paper companies’, to unearth undisclosed money. Arijit Pasayat, vice-chairman of the Special Investigation Team on such money (it was appointed by the Supreme Court) comes here on Tuesday to meet I-T officials.

“Almost, 90 per cent of companies are in Hence, it will be a major activity centre for the government’s planned crackdown on such companies,” said a senior I-T official.

The reason why is the preferred choice of venue is said to be easy availability of professionals in this type of activity, with an established network.

“The effective rate is around 24 per cent. Hence, for earned capital of Rs 1 crore, one pays Rs 24 lakh as tax. In Kolkata, one pays Rs 50,000-70,000 to the entry operator to form a company through a structured transaction and save on taxes,” said an official.

The method is somewhat like this. If one needs to convert Rs 1 crore capital from ‘black’ (hidden) to ‘white’, the original owner of the money will give Rs 1 lakh to an entry operator, who’d divide the sum into 10,000 shares of Rs 10 each. Each of the shares would then be sold at an exorbitant premium of around Rs 1,000 to directors of This would instantly increase the value of the company from Rs 1 lakh to Rs 1 crore. Through a network of fake companies, the money then moves to the original owner. The entry operator charges a fee. Often, the ‘directors’ of these companies are daily-wage earners like tea sellers or office guards.

The more the capital, the higher the cost of registration for opening such a company. Thus, opening one with Rs 1 lakh capital would require much less of registration fee than opening one with a capital of Rs 1 crore.

“In Kolkata, there is a community of chartered accountants (CAs), and it is easy to find ‘directors’, who for Rs 5,000 will sign anywhere. There are brokers and entry operators; they run many companies from a single premise and a laptop,” said an official of the I-T department.

According to sources, the department has identified at least 150,000 in this city, with nearly 6,000 allegedly involved. Subrata Kumar Das, chief commissioner of I-T here would not comment on the issue.

According to informal estimates, about 75 per cent of the professionals involved in opening in Kolkata are not even professional “Setting one up does not even require A person with a basic knowledge of finance can undertake such transactions. A CA only certifies the books, not the company,” said a source.

This apart, the cost of hiring a CA is three to four times lower in Kolkata than in Mumbai.

Recently, the Prime Minister’s Office formed a task force to prevent the formation of shell companies. In a statement, it had said that a sample survey found Rs 1,238 crore in cash was deposited in these entities during November-December. And, that 559 beneficiaries laundered money to the extent of Rs 3,900 crore with the help of 54 professionals.

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First Published: Tue, February 14 2017. 08:54 IST
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