Yes Bank Co-Founder Rana Kapoor has told the Enforcement Directorate that he was “forced” to buy an M F Husain painting from Priyanka Gandhi Vadra by the late Congress leader Murli Deora and the sale proceeds were utilized by the Gandhi family for the treatment of Sonia Gandhi in New York. The transaction reportedly happened in 2010.
Rana Kapoor has been cooling his heels in jail for more than two years now with his bail applications being repeatedly rejected with the Enforcement Directorate charging him with money laundering. He is alleged to have been the fence that ate the crop---piling the bank he founded with bad debts for a mess of pottage. He is alleged to have received kickbacks for sanctioning loans to the most uncreditworthy persons. So much so, he became their lender of last resort.
The Congress Party has bridled with indignation while questioning the credibility of statements made by a person languishing in jail. The purpose of this article is not to delve into the polemics of the issue--more specifically the motive behind the sale of painting by Priyanka Gandhi to Rana Kapoor; but to highlight the fact that the so-called esoteric items of art like paintings, drawings, archaeological collections and other works of art-like sculptures lend themselves to surreptitious payments to camouflage ulterior motives and questionable transactions.
Exaggerated valuations
Exaggerated valuations aren’t unique to the Indian IPO market but very much an integral part of the rarified and exotic world of fine arts, kitsch as well as surreal. Be that as it may.
With effect from April 1, 2008, such works of art have ceased to be personal effects, capital gains from which were till then exempt from tax. So, Priyanka Gandhi Vadra would have been obliged to pay capital gains tax on the amount of Rs 2 crore she reportedly got from Rana Kapoor. Be that as it may again. Jewelry, too, is out of the favoured list. In other words, capital gains from transfer of jewelry too are taxable at par with works of art like paintings etc.
Avoiding paying tax
It is another matter that intrepid and never-say-die tax planners are latching onto an escape route---convert your gold into vessels so that they continue to pass muster, and enjoy exemption, as personal effects.
Despite denial of wiggle-room to avoid tax, works of art have always beckoned hush-hush payments and receipts. Bribes, hush money, speed money, kickbacks and other variants of illegal gratification lend themselves admirably for camouflaging as genuine transactions of sale of art the value of which lesser mortals cannot understand or fathom! So, influence can be bought by agreeing to buy, say a sculpture from the influence peddler for a mind-boggling sum.
Law enforcers often are at their wits’ end. The exaggerated and overvalued camouflage is difficult to be ripped apart with the world of art remaining in the realm of bewildering speculation as to its true worth. Anyone questioning the valuations is disdainfully dismissed off as a bohemian and lacking in appreciation and refined tastes! But the fact remains that in the world of wheeling-dealing, art lends a verisimilitude of genuineness to transactions that smack of shadiness to those in the know and seasoned sleuths.
Cryptocurrencies, NFTs join bandwagon
Joining the world of esoteric and exotic arts now are cryptocurrencies and non-fungible tokens (NFT). Bitcoins’ stratospheric valuations despite being totally unregulated, with no underlying assets and no body to be kicked or no soul to be damned, have raised eyebrows and engendered a strong worldview---that they are more often than used to settle transactions in the netherworld away from authorities’ gaze thanks to their anonymity.
The new kid on the block NFT, too, has raised similar eyebrows and concerns. Yours truly had pointed out in these columns that the tweet, which said, “just setting up my twttr,” posted by Twitter Founder and CEO Jack Dorsey on March 21, 2006 fetched him a massive $2.9 million when he sold it as a nonfungible token (NFT) and that closer home, the celebrity in perpetuity, Amitabh Bachchan got a staggering Rs 7.15 crore from NFT auction that included recitals of Madhushala, a famous collection of poems written by his father and recorded in the actor's voice, besides posters and images. Surely there is something that doesn’t meet the eye.
It cannot be that the buyers are simply starry-eyed. In share market this tendency is explained away as belief in the lulling notion that there is a greater fool out there---if I paid Rs 1,000 for a dud, there would soon be a greater fool who would shell out Rs 1,500 to me! There is a view in knowledgeable quarters that like with Bitcoins, NFT too comes handy in money laundering. BTW, with Elon Musk stealing the thunder from Jack Dorsey by buying his baby Twitter for a whopping $ 45 billion, the buyer of NFT embodying an inane inaugural tweet by its founder must be feeling shortchanged.
Capital gains tax on arts
In 2008, the government did the wise thing---honorable or dishonorable and legal or illegal the transactions may be, let us tax the capital gains from the rarified world of arts. Now the Finance Minister Nirmala Sitharaman too has set store by the theory that the exchequer should not be unduly bothered with the legality or otherwise of transactions in the virtual world and instead should merrily collect tax from them.
And by the way, overvalued arts are not the only counter in the world of wheeling and dealing. Advertising agency commission and consultancy fees are other variants in the repertoire of crooks and their benefactors. Bribes can assume the form of sinecures.
(S Murlidharan is a veteran columnist and tweets @smurlidharan)
