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Premier art houses under I-T scannerViews: 207
Feb 28, 2009 9:16 am Premier art houses under I-T scanner
sachin kaluskar http://www.livemint.com/2009/02/24234446/Premier-art-houses-under-IT-s.html?h=A1

Art houses can use these fictitious purchase bills to set an inflated benchmark price for works by artists, causing genuine investors to pay more.

Khushboo Narayan

Mumbai: An investigation into the business practices of Osian’s and Saffronart Management Corp., two of India’s premier art houses, has revealed several irregularities in their account books, including a possible attempt to rig the price of artworks and dupe investors, according to an income-tax (I-T) department official involved in the probe.
The two houses—both set up in 2000—separately denied any wrongdoing, claiming all their transactions were transparent, well documented and in line with the law.
Busted? Osian’s chairman Neville Tuli with a statue of Sean Connery. Tuli has denied allegations of any wrongdoing at the art house. Natasha Hemrajani / HTThe I-T department’s “appraisal report”, previewed by Mint, reveals that Osian’s had obtained fake purchase bills worth Rs15 crore for artworks. The department, which started a probe into alleged tax evasion in 2007, questioned three persons who provided Osian’s with such bills and admitted they were fake, the official said.
“Fake purchase bills can be used to inflate the price of art by lesser known artists. This is the easiest form of manipulation of prices in the art world. The technique is similar to that used in the stock market to rig the share prices of any company,” said the official, who didn’t want to be named.
Art houses can use these fictitious purchase bills to set an inflated benchmark price for works by artists, causing genuine investors to pay more, according to the official. “Some of the art galleries have inflated the price of certain artists up to as much as 700%,” the official said. The assessment wing of the I-T department in Mumbai is evaluating the extent of suspected tax evasion by the two houses.
On Saffronart, the report said the art house had paid royalty to an associate firm, Planet Saffronart Management Corp., in the British Virgin Islands, to reduce its tax liability. The report also said Planet Saffronart had given Rs11 crore to Saffronart for acquiring its intellectual property rights.
Also See Under Suspicion (Graphic)
The department investigated such transactions and found them not in line with the law, said the official. “We have also found a lot of cash transactions in Saffronart,” he said.
The report also said at least 18 investors, who had invested Rs10 lakh and above each in Osian’s Art Fund, could not explain the source of the money they had put in the fund.
An art fund is like a mutual fund where investors do not pick the individual investment vehicles and instead invest in a pool of artworks. Typically, high net worth individuals invest in such funds. The minimum investment in some funds is pegged at Rs25 lakh.
The I-T department has alleged that Osian’s was involved in synchronized trading and rigging of prices of art.

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