Last Updated:
According to reports, I-T department has questioned Jane Street India staff as part of its probe into the US trading firm’s operations; Details
Sebi barred Jane Street from participating in Indian markets on July 4, accusing it of manipulating stock indices through derivatives trades.
Jane Street Probe: The income tax (I-T) department has summoned EY, the auditor of Jane Street’s Indian arm, and recorded sworn statements from two employees and a director of the local entity as part of its probe into the US investor, The Economic Times (ET) reported.
According to ET, the tax office is trying to piece together details on who exercised control over Jane’s Indian subsidiary after a six-day survey failed to extract adequate information from offshore servers.
Focus on ‘Control’
“The department’s focus is to know where Jane Street’s Indian subsidiary received its instructions from,” a person familiar with the matter told ET. Officials are examining EY’s letter of engagement, the sources of its data, and the nature of its interactions with Jane’s global teams.
If investigators can establish that Jane India was merely executing instructions from the parent group, the I-T department could move to disallow its losses, preventing the firm from carrying them forward against future profits. While this may be a relatively small win, ET noted, it could set the stage for a bigger challenge: questioning treaty benefits enjoyed by Jane’s Singapore and Hong Kong entities.
Treaty Angle
A second source told ET that the taxman would need to build a case showing that Jane Street’s India, Singapore, and Hong Kong outfits acted in collusion to avoid taxes, which would constitute an “impermissible avoidance arrangement.” Treaty benefits, the person added, can only be claimed for bona fide transactions.
The regulator has alleged that Jane used its Indian arm to take positions in cash and stock futures, while its Singapore and Hong Kong FPIs—registered with Sebi—took large bets in equity options. This allegedly influenced market prices, allowing the FPIs to make hefty profits, most of which were booked in Singapore, where such derivative gains are tax-exempt under the India-Singapore treaty.
“Establishing that Jane’s India operations were an extension of its overseas business may be comparatively easier than denying treaty benefits and imposing tax on Jane Singapore. However, proving Jane India was a sham would certainly help Sebi,” a senior lawyer told ET.
SEBI Link
ET reported that the I-T probe may have been triggered in part at the instance of Sebi, which counts senior IRS officer Kamlesh Varshney as a whole-time member.
Jane Street, according to sources, has hired New York law firm Sullivan & Cromwell for advice. A legal expert told ET that foreign investors often use top legal help to decide what information can be shared with authorities. If data is withheld on privacy grounds, it must be backed with justification. Only later could Indian authorities approach Singapore and Hong Kong counterparts under information-sharing agreements, ET said.
Jane Street Not Cooperating With Indian Tax Authorities
Global trading firm Jane Street is not cooperating with the Income Tax Department in its ongoing probe, according to ANI sources.
Officials told the agency that the investigation has been hampered by limited access to key servers located outside India. “Access to the servers is being blocked,” one of the sources said.
Although Indian company law requires firms to maintain local accounts, Jane Street’s financial records are reportedly housed overseas, adding to the complications. The US-based proprietary trading firm also has only a small team in India, and those employees have provided little assistance, ANI reported.
The lack of cooperation has slowed the progress of the inquiry. This comes after the Securities and Exchange Board of India (SEBI), on July 4, issued an interim order accusing Jane Street Group of index manipulation and directing it to return Rs 4,843.57 crore in alleged unlawful gains.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
Read More
Source link
[ad_3]
