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FORENSIC AUDIT



What Is a 'Forensic Audit'?

A forensic audit is an examination and evaluation of a company's financial information or a firm's or individual's financial information for use as evidence in court. A forensic audit can be conducted in order to prosecute a party for fraud, embezzlement or other financial claims. In addition, an audit may be conducted to determine negligence or even to determine how much spousal or child support an individual will have to pay.

Breaking Down 'Forensic Audit'

Forensic auditing is a specialization within the field of accounting, and forensic auditors often provide expert testimony during trial proceedings. Most large accounting firms have a forensic auditing department.

The audit covers a wide range of investigative activities performed by accountants. The process may also include serving as an expert witness in a fraud trial. A forensic audit could also cover situations that do not involve fraud or embezzlement, such as disputes related to a bankruptcy, business closures, and divorces.

What Is The Difference Between a Financial Audit And Forensic Audit?

Engaging an audit is an important strategy to run a business, and all business-owners should know to identify the times when an audit is needed. However, forensic auditing is not the same as financial audit, both in terms of objective and procedure, leaving no scope for overlap. A financial audit is aimed at mere examination of the entity’s financial statement, and adds credibility to the reported financial position and performance of a business. For example, sometimes, lenders and suppliers ask for an audited financial statement before they are willing to carry forward with the end of the deal. However, the object of a forensic audit is much beyond that. Forensic audit/accounting is a specialised branch of accounting that requires a specialized skill set for fraud detection. A forensic auditor examines a company’s system of internal controls to identify any weaknesses in the controls designed to safeguard assets and to determine whether anyone in the company has exploited control weaknesses to misappropriate assets for personal gain, including corruption, bribery, extortion, embezzlement, misappropriation, etc. It adds a legal substance to the auditing procedure. Thus, where a financial audit is done, and there is a suspect-asset-fraud, a forensic audit is done to identify that.

Characteristics Of A Good Forensic Audit Report

1. Objective / unbiased: The report should be neutral and non- judgemental.
2. Clear: The content of the report must be clearly understood.
3. Thorough: Includes all information needed to reach a conclusion.
4. Accurate: The content reflects facts as gathered.
5. Professional: Report must be professionally written and presented.
6. Timeliness: Issued within the expected timeframe.

The Process

The investigation process follows a similar path as a regular audit of financial statements. The steps can include planning, review and a report. If the investigation was undertaken to discover the presence of fraud, evidence is presented to uncover or disprove the fraud and determine the amount of the damages suffered. The findings are presented to the client — and possibly the court should the case go that far.

During the planning stage, the forensic auditing team establishes objectives, such as identifying if fraud has been committed, how long it has been going on, the parties involved, quantifying the financial loss and providing fraud prevention measures. While gathering evidence, the team collects evidence in the proper manner in order for it to be used in a court case. There are various techniques used to gather evidence. A report is produced for the client with the findings. Lastly, those involved in the forensic audit may be asked to present their findings to the court.

What Are The Things That Are Investigated In a Forensic Audit?

Corruption - Corruption is a major obstacle at corporate levels, and also to socio-economic development. It has far-reaching consequences, even total closure of the company. It can have ill-effects on the image of the business/company and jeopardize it drastically. It includes any illegitimate use of the office and its resources, or dishonest behaviour. In such instances, a forensic auditor tries to look for accounts of bribery and extortion, or anything that will amount to a conflict of interest.

Bribery – It refers to dishonestly influencing one’s role/ position to receive something, and at the same time promising something favourable to the party proving such benefit. The problem with bribery arises due to the fact, that not always does on stand in such a position to offer anything. It hampers the interest and profits of the company when one acts beyond his authority. It is also illegal to do so.

Extortion – Taking a step ahead from bribery, extortion involves the use of threat, force or violence to extract money from another party/person. This may be done on the pretence of ‘protection money’ for small businesses, sophisticated schemes of cyber extortion, etc. the identification of extortion in company finances reduces its credibility in the eyes of its clients, suppliers, etc. which is the primary reason for having a solid financial statement.

Conflict of interest – On a related note, anything, including bribery, that is done with the intention to gain personal benefit, and which is detrimental to the company, forms the objective of a forensic audit.

Asset Misappropriation - This is the most common form of fraud that is prevalent in company finances. This included misappropriation of cash, raising fake invoices, payments made to non-existing suppliers or employees, misuse of assets or theft of Inventory. It happens when people who are entrusted to manage the assets of a company/organisation, steal from it. The biggest possible detriment of such an act is that it may lead to infiltration by other organisations to take control over the control of the victim organisation. The direct hit is on the cash flow of the organisation.

Financial Statement Fraud - Financial statement fraud is the deliberate misrepresentation, misstatement or omission of financial statement data for the purpose of misleading the reader and creating a false impression of an organization’s financial strength. The most common practice here is deferring revenues or expense in a different time period to give the appearance of consistent earnings or growth. Towards the other extreme, it includes overstating of revenues. It diminishes the confidence of capital markets and market participants in the reliability of financial information and decreases the effectivity of the capital market.

Most of the times, corruption and fraud in a company can be regulated and eradicated, without having to go for a forensic audit, and taking drastic legal steps thereafter. The easiest way to ensure this is to implement Anti-Money Laundering (AML) courses among employees, and also harbour an honest work environment. It is pertinent that there exists expressed reliability and accountability mechanisms to help foster such work environment, along with an environment of control. Such techniques reduce the probability of corruption in a company and its ill-effects. Prevention can be considered even at the time of recruitment by way of thorough background checks and vetting processes.

What Is The Regulatory Stance On Forensic Audit?

Reserve Bank of India

The Reserve Bank of India has made forensic audits mandatory for large advances and restructuring of accounts. In light of this, the RBI recently came up with the concept of creating a ‘forensic audit pool.’ It was reported that it wants banks to create a common pool of forensic audit firms so that they can pick one of them quickly whenever a high-value fraud needs to be investigated. The aim was to ensure that there wasn’t any wastage of time in the garb of evaluating the eligibility criteria of auditing firms. It was seen that such a step could pave way for Banks to investigate instances of high-value frauds is that banks can quickly take appropriate action, including fixing staff accountability, lodge complaints with law enforcement agencies, and invoke penal measures, such as debarring fraudulent borrowers from availing bank finance or raising funds from capital markets, explained the official.

Also, by mandating forensic audits, the RBI operationalised a Central Fraud Registry (CFR), a web-based searchable database of frauds containing data for the last 13 years, in January 2016. This was aimed at timely identification and mitigation of frauds and also serve as a potent tool for banks in making informed business decisions. Determined to ‘clean up’ the Indian banking system, the RBI also directed a self-conducted forensic audit for 10 defaulters, on top of the audits done by the Banks, ‘to know whether lenders followed established practices and processes while sanctioning those loans.’

Enforcement Directorate

The ED is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India. It is part of the Department of Revenue, Ministry of Finance. It comprises officers of the Indian Revenue Service, Indian Police Service and the Indian Administrative Service. The ED along with the Serious Fraud Investigation Office has increasingly depicted the need for and importance of forensic audits following the rise in money laundering and wilful default cases that are plaguing the banking system. The recent probe into the Mallya PMLA case by the ED to conduct forensic audits is a stunning example in this regard. This was declared in May, 2016 when the ED declared the possibility of conducting a forensic audit of the electronic platforms on which the accounts and transactions of the group companies of liquor baron Vijay Mallya were being conducted in order to take forward its money laundering probe against him in the alleged Rs 900-crore IDBI bank loan fraud case.

In another recent case, the ED seized mutual funds valued at Rs 10.35 crore under the FEMA law of a company “controlled” by businessman and former IPL Chairman Chirayu Amin in the Panama Papers Case.

Are All Chartered Accountants Equipped To Do A Forensic Audit?

Forensic audit is a specialized field within accountancy. Chartered accountants need special skills to take up forensic audit assignments. There are special courses available with modules covering fraud psychology, criminal laws and forensic tools. Forensic audit uses financial and qualitative tools to detect fraud patterns. It uses special software for financial analysis. The auditors often provide expert testimony during trial proceedings. Most large accounting firms have a forensic auditing department.

How Can Forensic Audits Prevent Generation Of Non-Performing Assets In Banks?

Such audits unearth discrepancies in financial statements. For example, in a recent case, forensic auditors found that a company with huge cash reserves had surprisingly applied for loans. Later, the company was labeled as a willful defaulter.

How Is Forensic Auditing Investigation Conducted?

Step 1 – Accepting the Investigation

A forensic audit is always assigned to an independent firm/group of investigators in order to conduct an unbiased and truthful audit and investigation. Thus, when such a firm receives an invitation to conduct an audit, their first step is to determine whether or not they have the necessary tools, skills and expertise to go forward with such an investigation. They need to do an assessment of their own training and knowledge of fraud detection and legal framework. Only when they are satisfied with such considerations, can they go ahead and accept the investigation.

Step 2 – Planning the Investigation

Planning the investigation is the key step in a forensic audit. The auditor(s) must carefully ascertain the goal of the audit so being conducted, and to carefully determine the procedure to achieve it, through the use of effective tools and techniques. Before planning the investigation, they should be clear on the final categories of the report, which are as follows,

· Identifying the type of fraud that has been operating, how long it has been operating for, and how the fraud has been concealed

· Identifying the fraudster(s) involved

· Quantifying the financial loss suffered by the client

· Gathering evidence to be used in court proceedings

· Providing advice to prevent the recurrence of the fraud.

Fraud Triangle and Fraud Risk : A fraud triangle is a tool used in forensic auditing that explains three interrelated elements that assist the commission of fraud- Pressure (motive), opportunity (ability to carry out the fraud) and rationalization (justification of dishonest intentions). Fraud risk is the vulnerability a company/organisation has to those who are capable of overcoming the three elements in the fraud triangle. Fraud risk assessment is the identification of fraud risks that exist in the company/organisation. The planning involves the formulation of techniques and procedures that align with the fraud risk and fraud risk management.

Planning also includes the identification of the best way/mode to gather evidence. Thus, it is necessary that ample research is done regarding certain investigative, analytical, and technology-based techniques, and also related legal process, with regard to the outcome of such investigation.

Step 3 – Gathering Evidence

In forensic auditing specific procedures are carried out in order to produce evidence. Audit techniques and procedures are used to identify and to gather evidence to prove, for example, how long have fraudulent activities existed and carried out in the organization, and how it was conducted and concealed by the perpetrators. In order to continue, it is pertinent that the planning stage has been thoroughly understood by the investigating team, who are skilled in collecting the necessary evidence.

The investigators can use the following techniques to gather evidence,

· Testing controls to gather evidence which identifies the weaknesses, which allowed the fraud to be perpetrated

· Using analytical procedures to compare trends over time or to provide comparatives between different segments of the business

· Applying computer-assisted audit techniques, for example, to identify the timing and location of relevant details being altered in the computer system

· Discussions and interviews with employees

· Substantive techniques such as reconciliations, cash counts and reviews of documentation.

Forensic Data Analysis (FDA): FDA is the technology used to conduct fraud investigations; the process by which evidence is gathered, summarized and compared with existing different sets of data. The aim here is to detect any anomalies in the data and identify the pattern of such anomalies to indicate fraudulent activity. Such an analysis requires three kinds of expertise,

· Data analyst to perform the technical steps and write the queries

·Team member with extensive experience of the processes and internal controls in the relevant area of the investigated company

· A forensic scientist who is familiar with patterns of fraudulent behaviour

Step 4 – Reporting – A report is required so that it can be presented to client about the fraud. The report would have the findings of the investigation done, evidence so collected in summarised form, loopholes that caused the fraud and how internal controls can be improved to prevent such frauds in future. The report needs to be presented to client so that they can proceed to file a legal case against fraudster.

Step 5 – Court Proceedings – Investigations done by auditor would obviously lead to legal proceedings against suspected fraudster. The team that carried out the Forensic auditor need to be presented during the court proceedings as they would be required to explain the evidence collected and how suspect was identified. They are required to simplify the complex accounting issues and explain in layman language so that people who have no understanding about the accounting terms can also understand the fraud that was carried on by the suspect.

To summarize, a forensic audit is a detailed engagement which requires expertise of not only accounting and auditing procedures but also expert knowledge and experience about the legal framework. A Forensic auditor is required to have understanding of various frauds that can be carried out and also how the evidence needs to be collected. Having a understanding of legal framework and ability to face the court and the stress put in by defense counsel is also required.

Auditing for Quality Control

While many associated auditing with finding flaws, it can be just as important to strengthen a company’s already good business practices. Many companies self-audit on a regular basis to make sure that production and workflows are running smoothly without waste. By presenting regular audits of sound financial practices, a company improves its standing for shareholders, clients and customers, and the report generated by the audit gives executives a better sense for the internal finances of the business.

Of course, this can lead to a downside if the auditing company itself is committing fraud or if it is in collusion with the company or its managers to falsify reports. In this case, a forensic audit may be requested by a judge or an outside company to either determine the lost income as a result of a fraudulent report or to determine the damage that falsified reports caused to shareholders, clients or employees.

How Are Forensic Audits Used in Court?

Forensic audits are presented as evidence by a prosecutor or by a lawyer representing an interested party. Because finance is a complex discipline, the jargon used by forensic auditors to describe a company’s financial position is often highly precise. This either requires a prosecutor or lawyer to call upon expert witnesses to explain the significance of the audit in layman’s terms or to have the auditor do so himself or herself in order to build a case.

Scope of Forensic Accounting in India:

1. RBI Red Flagged Accounts needs forensic, in coming period RBI may make it compulsory for advances above certain threshold.

2. Serious Fraud Investigation Office established under the Companies Act, 2013 could also provide investigation assignments for Forensic Accountants.

3. Economic Offences Wings also require help of experienced Chartered Accountants in Forensics.

4.There are many internal frauds happening in Corporates nowadays.

5. Forensic services are also required during the course of Due Diligence in case of Mergers & Acquisitions.

6. Cyber Forensics is one of the growing field.

7. Forensic Accounting and Auditing has a huge scope in India as per the current market scenario.

With regards to qualification one may do the Certificate Course on Forensic Accounting and Fraud Prevention (FAFP) offered by ICAI after clearing your CA Exams. One may also pursue Diploma in Systems Audit (DISA) which may be helpful. Certified Fraud Examiner (CFE) is also a worthy credential for a Forensic Accountant. It requires Bachelor’s in any field with 2 years fraud related experience.

Challenges

Like all other types of audit and investigation assignments forensic audit in banks too have its own gambit of hindrances and challenges which a forensic auditor experiences during the course of the assignment. The list of challenges are not exhaustive (may be an indicative one) since it varies with the clients as well as with the nature of assignment along with the perspective of the person conducting the forensic job. Details of such challenges are widely available both in hard and in soft form which may be read by the interested readers.

Learn-Unlearn-Relearn

The above subject might look like a bit confusing for those who are new to this field. But for experienced and veterans this is a very well known phenomenon which is the very basic requirement of a forensic auditor. “Learn-Unlearn-Relearn” in simple terms may be defined as “changing your outlook from the normal audit and investigation and think something out of the box”. To me this is the most important challenge of the forensic auditor. Being professionals we are mainly focused with the standards issued by the various authorities and legal requirements along with the effect on the financials. But for the forensic auditors, the basic thing which comes first to his mind is the authenticity of the facts and records produced or gathered by him during the course of the assignment.

For professionals like us who have in the field of audit and allied services, gathered knowledge with the passage of time to serve the profession, this is the first part i.e. “learn”. In order to cope up with the areas of forensic audit, we need to change our basic line of thinking and have to change ourselves to look into things from a different angle, i.e.”Unlearn”. In order to complete the job effectively, we need to learn the techniques of forensic audit to deliver results successfully to our clients which can be used as an evidence in the Court of law successfully, this is “Relearn”.

Interviewing

Because forensic auditors must often follow long and winding paths through the financial records they peruse, they may find that pools of money travel through various departments, companies and entities. Following these trails requires interviewing many types of people, ranging from other accountants to managers to CEOs. A big challenge, therefore, is knowing whom to interview and how to conduct an interview that helps the auditor solve the case, reveal fraud or recover money.

Court Presence

Unlike general auditors, who may work in relative solitude their whole careers, forensic auditors may be called to the witness stand in Court cases. This presents a huge challenge to aspiring forensic auditors who might be called upon to give and defend testimony. Many people are simply uncomfortable expressing their stories before a Courtroom or when they are crossed-examined by an intimidating attorney.

Specialised Skills

Forensic auditors should be able to simplify and communicate information, and not just as it relates to Court cases. They need to be able to translate abstract numbers into written or oral reports that non-accountants can understand. Forensic auditors also need a certain amount of investigative intuition that may not be easy to learn within a very short period of time.

Content of Forensic Audit Report:

1. Covering letter : Usages Restriction clause can be mentioned here according to the situation demands and to avoid further legal complications.

2. Main Report

a) Introduction / Background : Brief fact of cases, name of both parties, business or work.

Why Forensic Audit required.

b) Outlining the Terms of Reference of Appointment Letter - Redraft the Terms of Reference if the Scope of work has been enlarged / reduced in the course of Investigation

c) Methodology of Reporting / Reporting Pattern:

·        Areas Covered – Extent of checking : Bone of discontent :
·        Period covered. Depends …not fixed….
·        Specific functions areas covered
·        % Of total records checked
·         Bedford's Law
·        RSF (Relative Size Factor) = largest / 2nd largest
·        Use of software : ACL /Idea/ encase
·        Disk Imaging

d) Auditing Techniques Adopted in the Investigation: Carefully narrate this area – do no elaborate much. If forensic auditing techniques had not been adopted then mention it also.
This will be an example of the Liability Exclusion Clause. Mention apart from general audit techniques, what other specific audit techniques had been adopted.

Mention the positions with whom you have carried out the discussions and other interviewing.

If any interrogation had been carried out the mention it in suitable context. Mention the Confession documents if any. Also mention that it is no way limiting your scope of work and extent of checking.

Public and authentic data Source: -

1.MCA
2.Income Tax papers
3.Registrar office documents
4.Labortary report
5.Expert Advice : Clinic Report : age of documents / Hand Writing

e) Books and records / documents reviewed / examined:

Basis of reporting. Narrate with reference to manual and computerized records.
External documents / evidences , if any :

3rd Party: Bank statements etc

f) Detailed Observations in each area of work under following heads:

I ) Modus Operandi of Fraud : Common Term
II) Nature of Fraud
III) Quantum Involved

g) Responsibility Fixation :Direct Beneficiary and Indirect Beneficiary Try to highlight the persons who have the direct and indirect involvement in the scheme of manipulation / fraud. Carefully draft this area.

h) Determination of Total Quantum of Fraud and The Amount/ Further Amount to be recovered from the Perpetrator.

Summation of quantum of fraud for each area. Deduct the amount already recovered from the total quantum of fraud. Forensic Auditor need not suggest the Management to initiate criminal proceeding / sack / transfer of the persons involved in fraud. This is the duty of the appointing authority.

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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.





Dtaa between India and Saint Kitts And Nevis



ANNEXURE
AGREEMENT
BETWEEN
THE GOVERNMENT OF THE REPUBLIC OF INDIA
AND
THE GOVERNMENT OF SAINT KITTS AND NEVIS
FOR
THE EXCHANGE OF INFORMATION
RELATING TO TAXES

The Government of the Republic of India and the Government of Saint Kitts and Nevis, desiring to facilitate the exchange of information with respect to taxes, have agreed as follows:

ARTICLE 1
OBJECT AND SCOPE OF THE AGREEMENT

The competent authorities of the Contracting Parties shall provide assistance through exchange of information that is foreseeably relevant to the administration and enforcement of the domestic laws of the Contracting Parties concerning taxes covered by this Agreement. Such information shall include information that is foreseeably relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters. Information shall be exchanged in accordance with the provisions of this Agreement and shall be treated as confidential in the manner provided in Article 8. The rights and safeguards secured to persons by the laws or administrative practice of the requested Party remain applicable to the extent that they do not unduly prevent or delay effective exchange of information.

ARTICLE 2
JURISDICTION

Information shall be exchanged in accordance with this Agreement without regard to whether the person to whom the information relates is, or whether the information is held by, a resident of a Contracting Party. However, a Requested Party is not obliged to provide information which is neither held by its authorities nor is in the possession or control of persons who are within its territorial jurisdiction.

ARTICLE 3
TAXES COVERED

1. The taxes which are the subject of this Agreement are:

(a) in India, taxes of every kind and description imposed by the Central Government or the Governments of political subdivisions or local authorities, irrespective of the manner in which they are levied;

(b) in Saint Kitts and Nevis,taxes of every kind and description imposed by the Central /Federal Government or the Governments of political subdivisions or local authorities, irrespective of the manner in which they are levied.

2. This Agreement shall also apply to any identical or substantially similar taxes imposed after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting Parties shall notify each other of any substantial changes to the taxation and related information gathering measures which may affect the obligations of that Party pursuant to this Agreement.

ARTICLE 4
DEFINITIONS

1. For the purposes of this Agreement, unless otherwise defined:

(a) the term "India" means the territory of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdiction, according to the Indian law and in accordance with international law, including the U.N. Convention on the Law of the Sea;

(b) the term "Saint Kitts and Nevis" means the twin island Federation of Saint Kitts (Saint Christopher and Nevis) and when used in a geographical sense, means the territory or territories of Saint Kitts and Nevis;

(c) the term "Contracting Party" means India or Saint Kitts and Nevisas the context requires;

(d) the term "competent authority" means
(i) in the case of India, the Finance Minister, Government of India, or its authorized representative;
(ii) in the case of Saint Kitts and Nevis, the Ministry of Finance, the Government of Saint Kitts and Nevis or its authorised representative;

(e) the term "person" includes an individual, a company, a body of persons and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting Parties;

(f) the term "company" means anybody corporate or any entity that is treated as a body corporate for tax purposes;

(g) the term "publicly traded company" means any company whose principal class of shares is listed on a recognised stock exchange provided its listed shares can be readily purchased or sold by the public. Shares can be purchased or sold "by the public" if the purchase or sale of shares is not implicitly or explicitly restricted to a limited group of investors;

(h) the term "principal class of shares" means the class or classes of shares representing a majority of the voting power and value of the company;

(i) the term "tax" means any tax to which this Agreement applies;

(j) the term "recognised stock exchange" means

(i) in India, the National Stock Exchange, the Bombay Stock Exchange, and any other stock exchange recognised by the Securities and Exchange Board of India;
(ii) in Saint Kitts and Nevis, the Eastern Caribbean Securities Exchange and any other stock exchange recognised by the Eastern Caribbean Securities Commission; and
(iii) any other stock exchange which the competent authorities agree to recognise for the purposes of this Agreement;

(k) the term "collective investment fund or scheme" means any pooled investment vehicle, irrespective of legal form;

(l) the term "public collective investment fund or scheme" means any collective investment fund or scheme provided the units, shares or other interests in the fund or scheme can be readily purchased, sold or redeemed by the public. Units, shares or other interests in the fund or scheme can be readily purchased, sold or redeemed "by the public" if the purchase, sale or redemption is not implicitly or explicitly restricted to a limited group of investors;

(m) the term "requesting Party" means the Contracting Party submitting a request for information to, or having received information from, the requested Party;

(n) the term "requested Party" means the Contracting Party which is requested to provide information or which has provided information;

(o) the term "information gathering measures" means laws and administrative or judicial procedures that enable a Contracting Party to obtain and provide the requested information;

(p) the term "information" means any fact, statement, document or record in whatever form.

2. As regards the application of this Agreement at any time by a Contracting Party, any term not defined therein shall, unless the context otherwise requires or the competent authorities agree to a common meaning pursuant to the provisions of Article 11 of this Agreement, have the meaning that it has at that time under the law of that Party, any meaning under the applicable tax laws of that Party prevailing over a meaning given to the term under other laws of that Party.

ARTICLE 5
EXCHANGE OF INFORMATION UPON REQUEST

1. The competent authority of the requested Party shall provide upon request information for the purposes referred to in Article 1. Such information shall be exchanged without regard to whether the requested Party needs such information for its own tax purposes or whether the conduct being investigated would constitute a crime under the laws of the requested Party if such conduct occurred in the requested Party.

2. If the information in the possession of the competent authority of the requested Party is not sufficient to enable it to comply with the request for information, that Party shall use all relevant information gathering measures to provide the requesting Party with the information requested, notwithstanding that the requested Party may not need such information for its own tax purposes.

3. If specifically requested by the competent authority of the requesting Party, the competent authority of the requested Party shall provide information under this Article, to the extent allowable under its domestic laws, in the form of depositions of witnesses and authenticated copies of original records.

4. Each Contracting Party shall ensure that its competent authority, for the purposes of this Agreement, has the authority to obtain and provide upon request:

(a) information held by banks, other financial institutions, and any person, including nominees and trustees, acting in an agency or fiduciary capacity;

(b) information regarding the legal and beneficial ownership of companies, partnerships, collective investment funds or schemes, trusts, foundations, "Anstalten" and other persons, including, within the constraints of Article 2, ownership information on all such persons in an ownership chain; in the case of collective investment funds or schemes, information on shares, units and other interests; in the case of trusts, information on settlors, trustees and beneficiaries; in the case of foundations, information on founders, members of the foundation council and beneficiaries; and equivalent information in case of entities that are neither trusts nor foundations.

5. This Agreement does not create an obligation on the Contracting Parties to obtain or provide ownership information with respect to publicly traded companies or public collective investment funds or schemes unless such information can be obtained without giving rise to disproportionate difficulties.

6. The competent authority of the requesting Party shall provide the following information to the competent authority of the requested Party when making a request for information under the Agreement to demonstrate the foreseeable relevance of the information to the request:

(a) the identity of the person under examination or investigation;

(b) the period for which information is requested;

(c) the nature of the information requested and the form in which the requesting Party would prefer to receive it ;

(d) the tax purpose for which the information is sought;

(e) grounds for believing that the information requested is present in the requested Party or is in the possession or control of a person within the jurisdiction of the requested Party;

(f) to the extent known, the name and address of any person believed to be in possession or control of the requested information;

(g) a statement that the request is in conformity with the laws and administrative practices of the requesting Party, that if the requested information was within the jurisdiction of the requesting Party then the competent authority of the requesting Party would be able to obtain the information under the laws of the requesting Party or in the normal course of administrative practice and that it is in conformity with this Agreement;

(h) a statement that the requesting Party has pursued all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties.

7. The competent authority of the requested Party shall forward the requested information as promptly as possible to the requesting Party. To ensure a prompt response, the competent authority of the requested Party shall:

(a) Confirm receipt of a request in writing to the competent authority of the requesting Party and shall notify the competent authority of the requesting Party of deficiencies in the request, if any, within 60 days of the receipt of the request.

(b) If the competent authority of the requested Party has been unable to obtain and provide the information within 90 days of receipt of the request, including if it encounters obstacles in furnishing the information or it refuses to furnish the information, it shall immediately inform the requesting Party, explaining the reason for its inability, the nature of the obstacles or the reasons for its refusal.

ARTICLE 6
TAX EXAMINATIONS ABROAD

1. At the request of the competent authority of the requesting Party, the requested Party may allow representatives of the competent authority of the requesting Party to enter the territory of the requested Party, to the extent permitted under its domestic laws, to interview individuals and examine records with the prior written consent of the individuals or other persons concerned. The competent authority of the requesting Party shall notify the competent authority of the requested Party of the time and place of the intended meeting with the individuals concerned.

2. At the request of the competent authority of the requesting Party, the requested Party may allow representatives of the competent authority of the requesting Party to be present at the appropriate part of a tax examination in the requested Party, in which case the competent authority of the requested Party conducting the examination shall, as soon as possible, notify the competent authority of the requesting Party about the time and place of the examination, the authority or official designated to carry out the examination and the procedures and conditions required by the requested Party for the conduct of the examination. All decisions with respect to the conduct of the tax examination shall be made by the Party conducting the examination.

ARTICLE 7
POSSIBILITY OF DECLINING A REQUEST FOR INFORMATION

1. The competent authority of the requested Party may decline to assist:

(a) where the request is not made in conformity with this Agreement; or

(b) where the requesting Party has not pursued all means available in its own territory to obtain the information, except where recourse to such means would give rise to disproportionate difficulty; or

(c) where disclosure of the information would be contrary to public policy (ordre public) of the requested Party.

2. This Agreement shall not impose on a Contracting Party the obligation:

(i) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, provided that information described in paragraph 4 of Article 5 shall not be treated as such a secret or trade process merely because it meets the criteria in that paragraph; or

(ii) to obtain or provide information, which would reveal confidential communications between a client and an attorney, solicitor or other admitted legal representative where such communications are:
(a) produced for the purposes of seeking or providing legal advice or
(b) produced for the purposes of use in existing or contemplated legal proceedings; or

(iii) to carry out administrative measures at variance with its laws and administrative practices, provided nothing in this subparagraph shall affect the obligations of a Contracting Party under paragraph 4 of Article 5.

3. A request for information shall not be refused on the ground that the tax claim giving rise to the request is disputed.

4. The requested Party shall not be required to obtain and provide information which the requesting Party would be unable to obtain in similar circumstances under its own laws for the purpose of the administration or enforcement of its own tax laws or in response to a valid request from the requested Party under this Agreement.

5. The requested Party may decline a request for information if the information is requested by the requesting Party to administer or enforce a provision of the tax law of the requesting Party, or any requirement connected therewith, which discriminates against a national of the requested party as compared with a national of the requesting Party in the same circumstances.

ARTICLE 8
CONFIDENTIALITY

Any information received by a Contracting Party under this Agreement shall be treated as confidential and may be disclosed only to persons or authorities (including courts and administrative bodies) in the jurisdiction of the Contracting Party concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Agreement. Such persons or authorities shall use such information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. The information may not be disclosed to any other person or entity or authority or any other jurisdiction (including a foreign Government) without the express written consent of the competent authority of the Requested Party.

ARTICLE 9
COSTS

1. Unless the competent authorities of the Contracting Parties otherwise agree, ordinary costs incurred in providing assistance shall be borne by the Requested Party, and, subject to the provisions of this Article, extraordinary costs incurred in providing assistance shall, if they exceed USD 500, be borne by the Requesting Party.

2. The competent authorities will consult each other, in advance, in any particular case where extraordinary costs are likely to exceed USD 500 to determine whether the Requesting party will continue to pursue the request and bear the cost.

3. The competent authorities shall consult from time to time with regard to this Article.

4. Ordinary costs include internal administration costs, any minor external costs and overhead expenses incurred by the Requested Party in reviewing and responding to information requests submitted by the Requested Party. Examples of extraordinary costs incurred in providing assistance include, but are not limited to the following:

(a) reasonable fees charged by third parties for copying documents on behalf of the Requested Party;

(b) reasonable costs of engaging interpreters, translators or other agreed experts;

(c) reasonable costs of conveying documents to the Requesting Party;

(d) reasonable litigation costs of the Requested Party in relation to a specific request for information; and

(e) reasonable costs for obtaining deposition or testimony.

ARTICLE 10
IMPLEMENTATION LEGISLATION

The Contracting Parties shall enact any legislation necessary to comply with, and give effect to, the terms of the Agreement. Such legislation shall be enacted within six months of entry into force of this Agreement.

ARTICLE 11
MUTUAL AGREEMENT PROCEDURE

1. Where difficulties or doubts arise between the Contracting Parties regarding the implementation or interpretation of the Agreement, the competent authorities shall endeavour to resolve the matter by mutual agreement. In addition, the competent authorities of the Contracting Parties may mutually agree on the procedures to be used under Articles 5, 6 and 9 of this Agreement.

2. The competent authorities of the Contracting Parties may communicate with each other directly for purposes of reaching agreement under this Article.

ARTICLE 12
OTHER INTERNATIONAL AGREEMENTS OR ARRANGEMENTS

The possibilities of assistance provided by this agreement do not limit, nor are they limited by, those contained in existing international agreements or other arrangements between the Contracting Parties which relate to co-operation in tax matters.

ARTICLE 13
ENTRY INTO FORCE

1. The Contracting Parties shall notify each other in writing, through diplomatic channels, of the completion of the procedures required by the respective laws for the entry into force of this Agreement.

2. This Agreement shall enter into force on the date of the later of the notifications referred to in paragraph 1 of this Article and shall thereupon have effect forthwith.

ARTICLE 14
TERMINATION

1. This Agreement shall remain in force until terminated by either Contracting Party.

2. Either Contracting Party may, after the expiry of three years from the date of its entry into force, terminate the Agreement by serving a written notice of termination to the other Contracting Party through diplomatic channels.

3. Such termination shall become effective on the first day of the month following the expiration of a period of six months after the date of receipt of notice of termination by the other Contracting Party. All requests received up to the effective date of termination shall be dealt with in accordance with the provisions of the Agreement.

4. Following termination of the Agreement Contracting Parties shall remain bound by the provisions of Article 8 with respect to any information obtained under this Agreement.

In witness whereof, the undersigned, being duly authorised thereto, have signed this Agreement.

DONE in duplicate at New York on 11th November, 2014 each in the Hindi and English languages, both texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.

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UPDATES

SECTION 90 OF THE INCOME-TAX ACT, 1961 - DOUBLE TAXATION AGREEMENT - SIGNING OF AGREEMENT FOR EXCHANGE OF INFORMATION RELATING TO TAXES BETWEEN GOVERNMENT OF INDIA AND GOVERNMENT OF SAINT KITTS AND NEVIS

NOTIFICATION NO. SO 2488(E) [NO.62/2016 (F.NO.503/09/2009-FTD-I)], DATED 21-7-2016
Whereas, an Agreement between the Government of the Republic of India and the Government of Saint Kitts and Nevis was signed at New York on the 11th November, 2014 (hereinafter referred to as the said Agreement);
And whereas, the date for the entry into force of the said Agreement is the 2nd day of February, 2016 being the date of the later of the notifications of the completion of the procedures as required by the respective laws for entry into force of the said Agreement, in accordance with the provisions of article 13 of the said Agreement.
And whereas, paragraph 2 of the article 13 of the said Agreement provides that the provisions of the said Agreement shall have effect forthwith from the date for the entry into force;
Now, therefore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of the Agreement between the Government of the Republic of India and the Government of Saint Kitts and Nevis for the Exchange of Information relating to taxes, as set out in the said agreement, appended as Annexure hereto, shall be given effect to in the Union of India with effect from the 2nd day of February, 2016


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