Law:

Section:

(a) Protection of Economic Reforms Act (XII of 1992)-- ----Ss. 5 & 9---Foreign currency accounts---Scope, extent of protection and immunity granted to such accounts by Protection of Economic Reforms Act, 1992--=Provisions of S.5, Protection of Economic Reforms Act, 1992, not only grant full immunity to holders of foreign currency accounts but also provide complete secrecy in respect of transactions in those accounts---While cl. (1) of S.5 of the Act would grant immunity to holders of foreign currency accounts its cl. (2) would exempt balance in foreign currency accounts and income arising therefrom from wealth tax and income-tax; its cl. (3) ordains that complete secrecy in respect of foreign currency accounts would be maintained by the Banks; and its cl. (4) prohibits State Bank and all other Banks from imposing any restriction on deposit in and withdrawal from foreign currency accounts---In addition thereto, restrictions if any, already in force, would stand withdrawn--Provisions of S.5(1), Protection of Economic Reforms Act, 1992, thus, on the face of it, grants immunity to holders of foreign exchange from any inquiry by Taxation Authorities as to the source of financing of foreign currency accounts---Such immunity was not subject to any conditions imposed by S.9 of the Act which applied to transactions other than those in foreign currency--Provision of S.5(3), Protection of Economic Reforms Act, 1992 specifically deals with question of secrecy so far as foreign currency accounts were concerned, while general provision in S.9 was related to secrecy of Banking transactions and, thus, not applicable to foreign currency accounts---Protection granted by S.9 of the Act which was limited to bona fide Banking transactions was applicable to transactions other than in foreign currency accounts---Foreign currency accounts and holders thereof, would, thus, have complete immunity from inquiry and scrutiny and complete secrecy must be maintained in respect of those accounts which could not be violated by any agency or functionary. Elahi Cotton Mills Ltd. v. Federation of Pakistan and others PLD 1997 SC 582 = 1997 PTD 1555; R.K. Garg v. Union of India and others…

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