Mumbai: Jane Street, the American investor group which is having a run-in with Indian authorities, may knock at the doors of the Singapore government in trying to resolve its tax woes here.
With the Income Tax (I-T) department questioning the tax benefits it had claimed, the Wall Street firm is understood to be working on initiating the ‘Mutually Agreed Procedure’ (MAP) — the dispute resolution mechanism under the treaty between Indian and Singapore, two persons told ET.
A part of the India-Singapore Double Taxation Avoidance Agreement (DTAA), the MAP framework allows senior officials of tax establishments of the two countries consult each other to sort out matters. Although there is no legal deadline under MAP, competent authorities strive to resolve the differences in a time-bound manner.
If the dispute is accepted under MAP, the matter would have to be pursued by Jane’s Singapore arm, a high-frequency trader which is registered as a foreign portfolio investor (FPI) with the Securities Exchange Board of India (Sebi). Jane’s other offshore vehicle that traded on Indian exchanges is an FPI from Hong Kong.
The treaty, similar to the one India has with Mauritius, spares Singapore-based FPIs from paying tax on profits from trading of listed equity futures and options.
The I-T department has invoked the ‘Multilateral Instrument-Principal Purposes Test’, another provision in the treaty, to deny the tax exemption enjoyed by Jane’s Singapore FPI. The tax department uses this feature of the treaty if it suspects that “obtaining benefit was one of the principal purposes of any arrangement.”
“The tax demand on Jane Singapore for one of the years under question, including interest amount, would be about ₹8,000 crore. Also, the department is examining the dealings between the FPI and Jane entities in India under transfer pricing regulations and related-party rules,” said one of the persons.
Under MAP rules, India’s Central Board of Direct Taxes in India and the Inland Revenue Authority of Singapore may attempt to resolve cases within 24 months.
“It makes sense. The process would be quicker compared to moving the ITAT (I-T Appellate Tribunal) followed by hearings in the higher courts which could go on for years. The assessee can also apply to suspend the tax demand,” said a lawyer. However, if the competent tax authorities in the two countries fail to find a meeting point, the matter can be pursued in the courts.
A Jane spokesperson declined to comment when asked whether Jane has approached Singapore authorities on MAP.
The tax office has built its case on the alleged arrangement that Jane had between its onshore and offshore. This stems from Sebi’s allegations that Jane used its outfits in India to manipulate prices and in the process enable the FPIs make money from their equity derivative positions.
