Special Investigating Team (SIT) Recommendations on Black Money

Why in news?

• After a lull, the Supreme Court on Thursday put the spotlight back on black money by asking the Centre to give details of action taken on the special investigation team's (SIT) recommendations advocating stringent measures against 
• irregularities in capitation fees, 
• cricket, 
• stock markets and 
• trade-based money laundering.
• The SIT has recommended 
• action against misuse of exemption of long-term capital gains tax for money laundering, 
• misuse of participatory notes for money laundering, 
• generation of black money in education sector through capitation fees and donations to religious and charitable institutions, and, 
• strict monitoring of match-fixing, spot-fixing and betting in cricket matches including T20 tournaments like IPL.
• A bench of Chief Justice H L Dattu and Justices Madan B Lokur and A K Sikri asked attorney general Mukul Rohatgi, “What is the fate of these recommendations by the Supreme Courtappointed SIT? The Centre will tell us about it in the next hearing on October 28.“

Recommendations in Detail:

• The SIT had given a string of recommendations in its third report submitted to the SC in May.The Centre will now be required to inform the SC on October 28 of the action it has taken on the following recommendations: 
• To control generation of black money through huge capitation fees, mostly paid in cash, to technical and medical colleges for admissions. 
• A specific provision should be inserted in Prevention of Corruption Act to make acceptance of cash by educational institutions a punishable offence.
• Large donations, including gift of ornaments, to religious and charitable institutions should be accompanied by PAN number of the donor.
• Illegal activity of cricket betting requires to be controlled by some provisions which are deterrent to all concerned. 
• Considering the fact that large amount of black money is generated and used in this sector, it is suggested that some appropriate legislative directions or rules or regulations are required to be put in place to curb the menace of such betting.
• Ban on bulk transactions through cash. A number of European countries bar any cash transaction above a particular limit. This can be done in India.
• Concern- Implementation is a big issue especially in the wake of insufficent financial literacy and finanial inclusion.
• For holding cash currency notes, there should be a limit by prescribing a reasonable threshold, may be Rs 10 lakh or Rs 15 lakh.This will control holding of unaccounted money to a large extent.
• SEBI needs to have a unit to study unusual rise of stock prices of companies while such a rise is taking place. 
• In case it is established that stock platforms have been misused for taking long-term capital gains tax benefits, prosecution should be invariably launched.
• Concern - Differentiating between legal and illegal trading is a challenge.
• Obtaining information on `beneficial ownership' of participatory notes is of crucial importance to prevent their misuse. 
• SEBI needs to examine the issue and come up with regulations where the `final beneficial owner' of participatory notes offshore derivative instruments are known.
• Concern- The step could wither away the investors, resulting in a minor blip to the economy.
• Proactive detection of creation of shell companies, which are used to provide accommodation entries to launder black money. 
• Deterrent penal action against persons involved in creation of shell companies and providing accommodation entries needed.

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[Ref: The Times of India]