The income-tax department has said in its post-search appraisal note that the Anand Rathi group of companies indulged in inter-group trading to 'reduce the incidence of tax.' The department in its investigation report for the group said, "During the course of search, it was observed that the sister concerns of Anand Rathi Securities Pvt Ltd (ARSPL) viz., Amit Capital, Gerard Veigas, Rathi Global Finance Ltd (RGFL) have indulged in share trading and arbitrage with an intention to pass profit and loss on a self-serving basis."
In response, Anand Rathi said, "We will explain our position to (the) assessing officer." "We have not taken the inter-group transaction path to evade tax. There no other form of evasion of tax as well," he said.
The department , however, said that a close scrutiny of the accounts of these sister concerns of ARSPL have revealed that "the companies may have done speculative trading in the garb of arbitrage." As there should not be any arbitrage loss in such transactions, any transaction which shows such a loss is deliberate and superficial and this fact has to be confirmed by verifying the actual delivery of shares, the department concludes.
The department said the group had been asked to provide the profit/loss figures under the heading of delivery-based trading, speculative trading and arbitrage. "The assessee has not been able to provide these details," the report said.
The department, however, observed several trade transactions resulting in profit to one group company and loss to the other. It said, "This is a device that was adopted by the assessee (Anand Rathi Group) to transfer profit/loss form one sister concern to another or one client to another as per convenience with an objective to manipulate the income/loss to reduce the tax incidence."
The department said that in arbitrage operation, a person buys the stock in one exchange, where the price is low, and sells on other exchange where the price is high. "It is highly unlikely that two different persons will enter into different type of trade, that is, either buy or sell at a given point of time on one exchange," the report said.
