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47 Other banks in firing line :
The Deutsche Bank settlement
is part of a wider US drive to crack down on banks that help wealthy Americans
evade taxes and could herald similar settlements with other banks.
(Source : Business
Standard, dated 23-12-2010)
(Comment : What are
the authorities in India doing ? What is the outcome ?)
46 Deutsche Bank settles US
Tax case for $ 553 million
Deutsche Bank admitted
criminal wrongdoing for taking part in fraudulent tax shelters that let clients
hide billions of dollars, and agreed to pay $ 553.6 million to settle the case,
US prosecutors said on Tuesday.
The settlement is part of a
larger US government effort to crack down on banks that help wealthy Americans
evade taxes. Prosecutors last year settled with Swiss bank UBS, which paid $780
million in fines for helping clients with roughly $20 billion in assets hide
their accounts from the US Internal Revenue Service.
45 Binayak Sen — Political
dissent isn’t sedition, that’s the law
The judgment of the
Chhattisgarh trial court, sentencing Binayak Sen to life imprisonment on charges
of sedition and conspiracy, isn’t just shocking due to the concerned judge’s
apparent waiver of the gaps in the prosecution’s case. In a wider context, it
posits the spectre of intolerance against critics of state policy. The intent
behind the law on sedition in the Indian Penal Code, as introduced by the
British, was to enable the colonial state to deal with the fundamental
contradiction between the illegitimacy of its rule and its attempt to try and
legitimise that rule by criminalising those who sought to underline that
contradiction. That rupture between the state and the people it governs
disappeared, in principle, with Independence. And so the Supreme Court in 1962
defined S. 124A (on sedition) as being applicable only when there was a clear
incitement to violence or armed rebellion. Implicit in that definition is the
recognition of the Constitutional right to free speech, and political activity,
as long as it does not violate that red line of violent disaffection against the
state.
(Source : Economic
Times, dated 28-12-2010)
(Comment : Should not
we jettison the British legacy of law in such matters ?)
44 Nitish’s move to scrap
LAD fund may find more takers
As expected, the Cabinet
formally approved the proposal to abolish the Local Area Development (LAD) fund
meant for the legislators, a decision which other states may emulate. “Some
alternative arrangement will we worked out which will enable the legislators to
have a say in the approval of the schemes,” the Principal Secretary, Cabinet
Coordination department Afzal Amanullah said.
All along the Nitish
government in its previous tenure harped on the credo of good governance and in
keeping with what it promised earlier, the Cabinet formally approved a detailed
agenda for good governance. “The core issues of good governance and what the
government proposed to do in this connection have now been spelt out in the
17-page document which was placed before the Cabinet meeting,” the principal
secretary said, adding there will be zero tolerance on corruption “Already armed
with stringent laws, the government will now bring a legislation — Right to
Service Bill — to weed out corruption in the delivery of the public utility
service,” he said.
(Source : Economic Times, dated 15-12-2010)
43 E&Y
sued for hiding Lehman fraud for 7 years
New York attorney general
Andrew Cuomo sued Ernst & Young, accusing the firm of facilitating a ‘major
accounting fraud’ by helping Lehman Brothers deceive the public about its
financial condition.
For more than seven years
before Lehman declared bankruptcy in 2008, the investment bank engaged in
transactions approved by E&Y whose purpose was to move debt off its balance
sheet and make it appear less leveraged, Cuomo said. This was done through what
are known as ‘Repo 105’ transactions. “This practice was a house-of-cards
business model designed to hide billions in liabilities in the years before
Lehman collapsed,” Cuomo said on Wednesday in one of his last cases as attorney
general. “Just as troubling, a global accounting firm, tasked with auditing
Lehman’s financial statements, helped hide this crucial information from the
investing public.” The state seeks to recover more than $ 150 million in fees
collected by E&Y for performing Lehman’s work between 2001 and 2008, plus
investor damages and equitable relief, Cuomo said.
(Source : Times of India, dated 23-12-2010)
19. The currency wars — Policy intervention cannot
go against market logic
When criticised about the US administration’s
exchange-rate policy vis-à-vis the yen, former US president George H. W. Bush
apparently retorted in a fit of pique, “Let the Japanese handle their exchange
rate and we will handle ours.” Unfortunately, this bit of curious Texan logic
doesn’t quite hold in the world of currencies. One currency’s gain is
tautologically another’s loss.
The US central bank, the Federal Reserve, seems
reconciled to another round of quantitative easing (economist-speak for printing
more greenbacks) and that could lead to a further fall for the dollar. The
problem is that these cheap dollars find their way into emerging markets like
China and India (whose asset markets offer better returns), causing their
currencies to appreciate and their export competitiveness to erode. The dollar
has thus become the principal ‘carry currency’ that investors borrow in (at
virtually zero cost) and fund investments in higher-yielding assets of the
emerging markets. Europe and Japan are caught in the middle — saddled with
sluggish economies but witnessing a rapid rise in their currencies against the
dollar. Japan has tried to thwart a steady appreciation of the yen by dropping its policy interest rate close to zero and
intervening in the currency market. This hasn’t quite paid off yet.
(Source : The Business Standard, dated 11-10-2010)
The Government of India and
Finland signed a revised Agreement and Protocol for Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with respect to Taxes on Income
(Agreement). As per the revised Agreement, withholding tax rates have been
reduced on dividends from 15 to 10% and on royalties and FTS from 15 or 10% to a
uniform rate of 10%. The intention of lowering the withholding tax is to promote
greater investments, flow of technology and technical services between India and
Finland. The revised Agreement also expands the ambit of the Article concerning
exchange of information to provide effective exchange of information in line
with current international standards. The Article inter alia provides that the
States shall not deny furnishing of the requested information solely on the
ground that it does not have any domestic interest in that information or such
information is held by a bank, etc. An Article for Limitation of Benefits to the
residents of the contracting countries has also been included to prevent misuse
of the Tax Treaty.
(Source :CBDT Press Release
No. 402/92/2006-MC
(03 of 2010), dated 15-1-2010)
42 Finance
Ministry probes overseas deals for tax evasion
The finance
ministry has begun its maiden investigation into over 100 offshore ‘financial
structuring deals’, undertaken by Indian business entities in foreign tax havens
to allegedly evade the taxman’s net.
The multi-pronged
probe has been undertaken by the international taxation wing of the Income Tax
department and the foreign taxation unit in the Central Board of Direct Taxes
(CBDT).
A number of
investments and deals to the tune of hundreds of crores of rupees have already
been executed in tax havens like the Mauritius, Isle of Man, Cyprus, British
Virgin Islands and Bermuda, among others.
The finance
ministry is already working to finalise Tax Information Exchange Agreements
(TIEAs) with countries like the UAE, Kuwait, Oman, Saudi Arabia, Qatar, Jordan,
Syria, China, Indonesia, Israel, Japan, Malaysia, Mongolia, South Korea and
Vietnam.
Furthermore,
Double Taxation Avoidance Agreements (DTAAs) with more than 70 countries are
being finetuned.
The I-T department
is also looking into evasion of Tax Deducted at Source (TDS) by some companies
while making payments to purchase overseas shares, but sources declined to name
the entities involved.
(Source :
Business Standard, dated 13-12-2010)
(Comment : People
shall eagerly await the tangible outcome of the probes !)
78 Switching off mains
can reduce power bills by 30%
Be careful of
electronic devices such as mobile chargers that you think don’t consume too much
power.
Putting off your
television set with a remote control does not mean that it (along with a set-top
box) has stopped consuming electricity. Similarly, pulling the charger from your
mobile handset does not mean that power consumption stops.
Not putting off
the main switches of even the smallest electronic appliances reflects in your
monthly bill. Such negligence, say power experts, inflates power bills by
25-30%. This, says power expert Ashok Pendse, means extra consumption of 75-90
units for average monthly residential consumption of 300-350 units.
(Source : The Times of India, dated 9-7-2010)
22. Rethinking the Games — Does India need mega sports events
to encourage sports?
One positive outcome of all the negative media that the
Commonwealth Games (CWG) in New Delhi has got could well be an honest
re-examination of the relevance of such mega events for the promotion of sports
talent in India. India’s record in athletics and other sports, barring cricket
and tennis, is by and large abysmal. The country needs a wider and deeper base
of talent, and much better infrastructure as well as better professional
recognition of sporting talent before it takes on further obligations to host
such mega events. As in so many other sectors, the focus in India even in sports
has been on infrastructure rather than people. More money is spent on buildings
than on the talent that must inhabit them. This is as true for universities and
educational institutions as it is for sports facilities. While thousands of
crores are spent on roads, buildings and security, the investment in human
resources is always the last thing on the mind of those who craft budgets for
such events. It is not at all clear why the taxpayer should have forked out so
much money for a Games village or a sporting arena, or indeed for a fancy media
centre, when the benefits of such expenditure may never reach his/her ? Why
couldn’t a large campus of an existing institution, with hostel and other
facilities, have been taken over as the Games village ?
More than the Games themselves, it is the entertainment part
that seems to be sucking in dollops of money. Rs.40 crore spent on a hot air
balloon ! Rs.5 crore paid out for a theme song ! India’s political leadership
appear like later-day Mughals, throwing money at fancy stuff, without paying
attention to the basics. A more economical but efficient way of handling such
events must be thought of before more commitments are made to host such events
in the future. It is also worth pondering over why India put up a much better
show hosting the World Military Games in 2007 in Hyderabad, in which 5,000
athletes from 101 countries participated. The event covered 14 sports over a
week. Part of the reason why that event did not attract the kind of flak that
the CWG has may have to do with the fact that it was the armed forces that did
most of the organisational work, and with the event being in Hyderabad, the
Delhi-based and Delhi-centric media may not have paid much attention to all the
glitches. The other part of the reason could well be that the Military Games did
not spend such money on infrastructure as Delhi did on CWG. So, there is an
alternative Indian model of hosting a mega global event of this sort in a more
acceptable way. The bottom line about the Delhi CWG is that if some part of this
extravaganza was about building ‘brand India’, then the event has already
failed. India will have to recoup its lost shine and start all over again to get
the world to take it seriously as a modern, efficient economy.
(Source : Business Standard, dated 28-9-2010)
21. Wealth distribution — Equality or fairness ?
A list put out by Forbes India says that
India has 69 dollar-billionaires. That gives the country a near 7% share of the
world’s billionaires (said to total 1,011), whereas its share of world GDP is
just 2%, and of global poverty an embarrassing 30%. So many billionaires in the
midst of a sea of poor people is, of course, a sign of inequality, and some call
the contrast an obscenity. Comparisons are made between the wealth of a few ($
300 billion for our 69 billionaires) and the country’s GDP ($ 1,500 billion this
year); but this is like comparing apples and (say) rivers, because the first is
stock and the second is flow. If one must make comparisons, they have to be
between the stock of wealth owned by the super-rich, and the stock of wealth
that the rest of the country owns. Looked at this way, it would seem that the
billionaires own barely 3% of the total assets in the country, or less.
If that seems like an outrageous claim, start with
the value of the 280 million head of cattle that Indians own. Assuming just
`10,000 per head (most cross-bred cows go for more than `20,000), the value is
about $ 60 billion. But that is small beer when compared to the bank deposits
that people have; the total is about $ 750 billion, and a good proportion of
that belongs to individuals. But even that is small beer when you come to the
value of land, of which India has 140 million arable hectares. At the
acquisition price that Karnataka now has, of a mid-range of `25 lakh per hectare
for single-crop land, the total land value could be something like $ 7,500
billion. Add to that the value of all the houses (at least 100 million ‘pucca’
homes), and you get another large figure. And don’t forget that the billionaires
own only a fraction of the value of all listed companies (we don’t know about
the unlisted companies). Put all the numbers together, and it seems somewhat
obvious that the billionaires own only a tiny portion of the total wealth of the
country.
Still, the equality issue cannot be evaded. It used
to be said of Pakistan’s ‘22 families’ (actually about 43 families, before a
wave of nationalisations in the 1970s) that they owned nearly half of the
companies on the Karachi stock exchange. A quick study of India’s listed stock
suggests that the picture is not very different here, though you could argue
that there is greater depth. About 150 business families figure as owners among
the top 500 listed companies, and therefore have some prominence. But the top 20
own 32% of 1,800 listed companies, and the next 30 families own another 8%.
Ownership is, of course, only one of the issues.
You also have to look at market structures and, therefore, monopoly power, how
cleanly the money was made (a market economy needs entrepreneurs, after all, and
will anyone complain about N. R. Narayana Murthy becoming rich ?), whether much
of the wealth is inherited or self-created, and what connections there exist
between business and politics. You also have to look at tax issues, because the
argument is often made that India’s tax laws are kindest to the richest (no
long-term capital gains tax, no dividend tax on individuals though there is a
dividend distribution tax on companies, and so on). So, there is a fairness
agenda to be addressed, which is different from an equality agenda — and more
urgent.
(Source:Weekend Ruminations by T. N. Ninan in
Business Standard, dated 2-10-2010)
George Soros is one of the
world’s most talented currency speculators, the guy who earned a $ 1 billion
profit in 1992 when he made a huge leveraged bet that the British pound would
have to exit the European Exchange Rate Mechanism (ERM) and also the man
Malaysian Prime Minister Mahathir Mohamad had then accused of pulling down the
ringgit in 1997.
So when Soros writes in the
Financial Times that the euro may fall apart, it is but natural that people take
him seriously. The short-term movement of currencies can be a random walk amid a
lot of noise trading, but the trend over the longer term is less unpredictable.
The euro is in a mess, the
yen is the currency of a stagnant nation and the yuan is not convertible. It
seems the dollar will continue to be the preferred global currency.
(Source : Quick Edit-Mint Newspaper, dated 23-2-2010)
Ujjawal Chaudhary, a senior
Income-tax Officer who led the probe into the multicrore Madhu Koda scam, may
have been on the verge of unravelling the link between politicians and hawala
traders when he was abruptly shifted this week.
Sources said the team led by
Chaudhary, who has been taken off the Koda probe and moved to the assessment
wing, had gathered strong evidence linking politicians and others to hawala
operators engaged in laundering black money abroad. Chaudhary was transferred
when raids were on at Chaibasa in Jharkhand.
Koda’s crores :
Raids on hawala traders
yield details of bank
accounts in Switzerland, which seem to belong to politicians I-T raids in
Jharkhand provide disclosures of hundreds of crores in concealed incomes of
bureaucrats and businessmen A Kolkata-based chartered accountant admits to
helping the scamsters fudge accounts payment of Rs.4.6 crore allegedly made by
cheque to functionaries of the Koda administration by an Andhra-based
construction firm. Koda case officer was not due for transfer.
(Source : The Times of India, dated 21-2-2010)
Are your children talking to
you ? It does not seem so. The survey, conducted by the International Institute
for Population Sciences and Population Council and endorsed by the Union Health
Ministry, covered nearly 51,000 married and unmarried young males and females
from six states — Maharashtra, Andhra Pradesh, Bihar, Jharkhand, Rajasthan and
Tamil Nadu. It found that school performance, a non-sensitive topic, was the
most common area of discussion between kids and parents. In contrast, more
touchy topics, such as romantic relationships and reproduction, were rarely
discussed with either parent (only 2% of young men and 6% of young women did
so). In fact, when it came to reproductive issues, children were equally
secretive with both their parents.
The findings also suggest
that parents controlled the social interactions of youngsters, particularly
those involving members of the opposite sex. For example, 69% of young men and
84% of young women expected parental disapproval if they brought home a friend
of the opposite sex.
Among young women, in
contrast, statewise differences were negligible — over 90% of young women in all
the states reported parental disapproval of love marriage. Almost all those who
were interviewed had an arranged marriage. This led to only 30% of young men and
22% of young women being aware of what to expect from their married life.
Friends rather than family
were found to be the major confidants for both young men and women. Only 1% men
were found to confide in their family members while 85% did so in their friends.
In case of women, 20% confided in family and 46% in friends.
(Source : The Times of India, dated 21-2-2010)
US President Barack Obama
has said the US is facing stiff competition from India and cannot succeed if the
country continues to produce more scientists and engineers than America.
“Why is it that every other
country was promoting its tourist industry and America was not doing enough for
its own ?” Obama asked. “That’s just one example of the competition that we’re
facing on everything,” he said. “If China’s producing 40 high-speed rail lines
and we’re producing one, we’re not going to have the infrastructure of the
future,” Obama said. “If India or South Korea are producing more scientists and
engineers than we are, we will not succeed,” said the US President in his Las
Vegas speech.
The President said there was
a need to bring people together and build consensus around reforms. “Because we
know that the country that out-educates us today is going to out-compete us
tomorrow. And we don’t want that future for our young people. We’re not going to
sentence them to a lifetime of lower wages and unfulfilled dreams.”
(Source : The Times of India, dated 21-2-2010)
SEBI has allowed exchanges
to introduce currency futures in three more currencies — euro, yen and pound.
The permitted contract sizes for euro-rupee, pound-rupee and yen-rupee are 1000
euros, 1000 pounds and 1,00,000 yen, respectively. The maximum maturity of the
contract would be 12 months. The contracts would be settled in cash in rupees.
The client-level position limit has been capped at 6% of the total open interest
position.
(Source : Business Standard, dated 20-1-2010)
The Government plans to
introduce a single Foreign Direct Investment (‘FDI’) document by the end of the
financial year. The consolidated FDI document would subsume all 177 press notes
issued so far. The Government also plans to review and update the document rules
every six months. The draft document was kept open for public comments till
January 31, 2009.
(Source : Business Standard, dated 12-1-2010)
The Government has decided
to allow Indian arms of foreign firms to use internal accruals for reinvestment
in downstream sectors, provided they are reckoned as debt and comply with
relevant external commercial borrowing (‘ECB’) norms. The new regime would let
these firms, owned or controlled by foreign companies, to bring in additional
capital without breaching the foreign direct investment (‘FDI’) caps, as the
reinvested funds are not treated as equity capital. The move would ease the cash
flow of foreign companies present in India and enable them to compete with local
firms on a level-playing field.
(Source : The Financial Express, dated 27-1-2010)
The Central Board of Direct
Taxes (CBDT) has set up a committee to formulate rules for the safe harbour
provisions that would enable the Income-tax authorities to accept the transfer
pricing returns without scrutiny. The committee, which is chaired by Director
General of International Taxation, comprises senior tax officials and
representatives of trade and industry as well as Institute of Chartered
Accountants of India. Foremost among the com-mittee’s task is to set an
acceptable margin which would act as a benchmark for the industry and if the
transfer price declared by a company, engaged in that industry, is not less than
the benchmark, then the authorities would accept the return without scrutiny.
The rules, once introduced, will lend an investment-friendly image to India and
will also put an end to the requirement of collecting huge amount of data
regarding transfer pricing transactions, thereby saving time and energy.
(Source : The Economic Times, dated 11-1-2009)
The CBDT is envisaging a
system in which taxpayers do not meet any tax official for routine assessments.
Assessments are proposed to be centralised at a place where a set of officers
would supervise the assessments. Each officer will be specialising in certain
segment of the assessment process, such as giving credit, refunds, etc. Four
such Central Processing Centers (‘CPC’) would be set up soon in four major
cities where the computerised assessment of the returns will take place. Once
the CPCs are in place, the taxpayer will have to meet the Department officials
only when the returns are selected for scrutiny.
(Source : The Economic Times, dated 14-1-2010)
Now ITAT case can also be
tracked online at following site http://itat.nic.in
Click on an option “ITAT
Online” and put the appeal nos.
Maharashtra Chief Minister
Ashok Chavan may well have decreed that Shiv Sena workers would not be allowed
to run riot at cinema halls showing Shahrukh Khan’s movie, My Name is Khan. He
must, however, be resolute and put down such strong-arm tactics with force. What
is under attack is not cinema but the idea of India as a composite democracy. To
allow the attackers any leeway is to fail to defend Indian democracy. After
seemingly endless buckling down to one form of chauvinism or another, at least
one major political leader has dared to call the Shiv Sena’s bluff. The Chief
Minister must deploy the entire might of the state to defend democracy against
chauvinism operating as organised thuggery. If necessary, he must raise the ante
and take the battle directly to the Sena leadership, rather than merely act
against its foot soldiers, who behave as if they have a birthright to run Mumbai
as they like.
The people and government
must collectively show that democracy will prevail over organised violence.
(Source : The Economic Times, dated 11-2-2010)
The Central Board of Direct
Taxes (CBDT) and accounting rule-maker Institute of Chartered Accountants of
India (ICAI) have jointly constituted a study group to identify and address
direct tax issues that will affect convergence of India’s accounting standards
with International Financial Reporting Standards (IFRS).
According to reports, the
Finance Ministry is looking to introduce the DTC in the forthcoming budget
session. Apart from many aspects that are being discussed, one aspect that will
particularly come as a hurdle for IFRS convergence is towards tax treatment of
mark-to market (MTM) provisioning on derivative transactions. MTM or fair value
accounting assigns a value to a position held in a financial instrument based on
the current fair market price for the financial instrument.
(Source : The Economic Times, dated 9-1-2010)
Advances in science and
engineering have spearheaded 50 to 80% of US GDP growth for many decades. The
lack of investment in R&D, education, higher overheads and labour costs are the
new realities with only about 4% of the US workforce consisting of scientists or
engineers. Everybody knows that 20 assembly workers in Vietnam equal the price
of one in the US or that Starbucks spends more on healthcare than on coffee or
General Motors spends more on healthcare than on steel.
A report titled America’s
Competitiveness was presented to the Democratic Steering and Policy Committee of
US House of Representatives last year. It stated that “The more our children are
exposed to our educational system, the worse they perform on international
tests.” The report also found that “The private sector has all but abandoned
basic research due to market pressures to produce next-quarter profits. The
federal government’s investment in the physical sciences has been stagnant for
over twenty years. Investment in the biosciences, after a five-year period of
significant growth, is again declining.”
Alan Greenspan had stated
“If you don’t solve (the K-12 education problem) nothing else is going to matter
all that much.” An exasperated Chairman and CEO of General Electric, Jeffery
Immelt, has said : “We had more sports exercise majors graduate than electrical
engineering grads last year. If you want to be the massage capital of the world,
you’re well on the way.” China’s President Hu Jintao, on the other hand, feels
“The worldwide competition of overall national strength is actually a
competition for talents, especially for innovative talents.”
The bank closures in the US,
unemployment, inability to honour credit card or mortgage payments have turned
Goldilocks into Cinderella. Around 78 million ‘baby boomers’, born in the US
between 1946 and 1964, acquired extravagant spending habits. This “Baby Boomer
Spending” constitutes between 25 and 50% of the consumption in the US, which is
driven by consumer spending. Their divorce rate and inadequate funding for
retirement benefits is going to severely curtail their future spending and,
therefore, US GDP growth. From 2008 onwards, 10,000 additional social security
seekers are being added everyday.
Greenspan and the then
comptroller general David M. Walker had warned before the recession that not
only will US be unable to fulfil promises to retirees but will have to double
federal taxes or cut federal spending by 50%. President George Bush had declared
that social security is “headed towards bankruptcy”. The budget deficits are
likely to increase as, according to pre-recession estimates, in terms of net
present value, medicare was running $ 63 trillion short and social security $ 8
trillion short, with expenditures surpassing payroll tax receipts from 2018
onwards. Ronald Dahl, children’s author, has pointed out that Goldilocks is a
‘brazen little crook’ stealing porridge, breaking chairs and living in a
borrowed home. Cinderella, let us remember, is a hardworking young lady. Her
virtues and hard work are rewarded, even after midnight. The global economy
needs the virtues of yesterday’s Cinderella economies like India — hard work, no
frills, no needless product obsolescence, value delivery at reasonable price,
and even commonsense ethics like truth, which are much needed in preparing
healthy balance sheets of companies and nations.
(Source : The Times of India, dated 15-2-2010)
American President Barack
Obama has once again targeted US companies having their operations in India to
save taxes back home and called such businesses tax-evaders.
Accusing US companies
outsourcing business to India of following unfair business practices, he said
his proposal to tax firms shipping jobs overseas was only intended to provide a
level-playing field.
“If you are a multinational
and you are investing in India, and your workforce is in India, and your plants
and equipment are in India, but your headquarters are here, you are taking
deductions on all the expenses in India, but you are keeping your profits
outside the US, that just doesn’t seem entirely fair,” Obama said. “The same is
true where you have
companies that have 90% of their sales in the US, but are posting 90% of their
profits overseas.” “You get a sense there that the accountants have been busy,”
he said, suggesting that these companies were taking unfair advantage of current
tax laws.
(Source : The Economic Times, dated 12-2-2010)
Recovery sees senior tax
personnel switch to lucrative private sector
Over the past two months, at
least a dozen senior officers of the Income-tax Department, belonging to the
elite Indian Revenue Service (IRS), have opted for voluntary retirement, a
government scheme that allows them to quit before the statutory retirement age.
These officers are likely to end up in the private sector, most likely as
consultants, to get around rules that prevent government employees from working
within a year of quitting.
The senior-most among these
officials is V. K. Mangotra, Chief Commissioner of Income-tax in Ahmedabad.
Before taking up his most recent post, Mr. Mangotra was the Director of the
Mumbai-based transfer pricing division of the Income-tax Department that
exclusively deals with the issue of taxing cross-border transactions involving
multinational companies.
Most officers from the
government’s tax-collecting arms, who have quit in the past, have ended up
consulting for global accounting firms.
Another officer dealing with
transfer pricing, Alpana Saxena, currently based in Mumbai, has also put in her
papers.
According to I-T officials,
the prospect of earning more by consulting for and later joining either
multinational companies or the Indian arms of global accounting firms is
tempting. S. P. Singh, who resigned in 2005 as the Director of International
Taxation, Mumbai, is now a partner with Deloitte India in New Delhi. He joined
the global accounting firm a year after his retirement, having practised as a
freelance consultant in the interim. Mr. Singh told ET, “There is not much
difference between what I was doing in the Department and what I am doing now,
which is to ensure the legal accuracy of the work put out by my team. While in
the Department, I had to work on maximising revenue realisation, in Deloitte, I
have to devise the best tax structure
for the client”.
An I-T Commissioner draws a
gross salary of Rs.80,000 a month, but this shrinks to a take-home of Rs.40,000
after paying tax and other statutory deductions. A Commissioner is entitled to a
chauffeur-driven car and a house in up-market locales like South Mumbai. On the
other hand, a private firm can pay anywhere between Rs.2.5 lakh and Rs.3.5 lakh
per month to an officer who holds the rank of Commissioner.
(Source : The Times of India, dated 11-2-2010)
The Institute of Chartered
Accountants of India has informed that with a view to strengthening the process
of certification being issued by chartered accountants, they have hosted a link
http://220.227.161.82/locm.asp on ICAI website, to enable anyone to seek
confirmation to the effect that certificate received by him has been issued by a
member of the Institute holding full-time Certificate of Practice (i.e., a
member authorised to issue such a certificate). This will ensure that none of
the authorities act on the certificates issued either by non-members or members
not holding Certificate of Practice.
(Source : www.taxguru.in posted on 16-2-2010)
reason should be recorded by the collegium and conveyed to him.
On a day when he publicly
admitted he couldn’t “pretend not to be hurt” on not making it to the SC, the
widely acclaimed judge told TOI, “The systemic problem in the collegium is lack
of transparency. There is too much secrecy. No reasons are recorded for
rejecting any one. The only way the collegium system can be improved is by
making it more
transparent.”
Justice Shah is the author
of two landmark verdicts (on decriminalisation of consensual homosexuality
between adults and applicability of Right to Information Act on the Chief
Justice of India). The SC collegium ignored him for elevation despite his being
one of the senior-most judges in the country. The decision has drawn a lot of
criticism, including from top jurists like Fali S. Nariman and former Chief
Justice J. S. Verma who described him as “one of the finest judges in the
country.”
(Source : The Times of India, dated 12-2-2010)
The US and the UK have moved
‘substantially’ closer to losing their AAA credit ratings, as the cost of
servicing their debt rose, according to Moody’s Investors Service.
The governments of the two
economies must balance bringing down their debt burdens without damaging growth
by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of
sovereign risk at Moody’s in London, said in a interview.
Under the ratings company’s
so-called baseline scenario, the US will spend more on debt service, as a
percentage of revenue this year than any other top-rated country except the UK,
and will be the biggest spender from 2011 to 2013, Moody’s said in a report.
“We expect the situation to
further deteriorate in terms of the key ratings metrics before they start
stabilising,” Cailleteau said. “This story is not going to stop at the end of
the year. There is inertia in the deterioration of credit metrics.”
The US government will spend
about 7% of its revenue servicing debt in 2010 and almost 11% in 2013, according
to the baseline scenario of moderate economic recovery, fiscal adjustments in
line with government plans and a gradual increase in interest rates, Moody’s
said. Under its adverse scenario, which assumes 0.5% lower growth each year,
less fiscal adjustment and a stronger interest rate shock, the US will be paying
about 15% of revenue in interest payments, more than the 14% limit that would
lead to a downgrade to AA, Moody’s said. The UK is likely to spend 7% of revenue
servicing debt this year and 9% in 2013, rising to almost 12% under the adverse
scenario, Moody’s said. Financing costs above 10% put countries outside of the
AAA category into a so-called debt reversibility band, the size of which depends
on the ability and willingness of nations to reduce their debt burden by raising
taxes or reducing spending.
(Source : The Economic Times, dated 17-3-2010)
The Finance Ministry said it
is awaiting clarification from Department of Industrial Policy and Promotion (DIPP)
on the new foreign direct investment norms issued by it a year back, popularly
called the Press Notes 2 and 3.
“We are still in dialogue
with DIPP (on the issue). It is coming out with a comprehensive draft on the FDI
framework. Before that gets notified, we are hopeful these issues will get
clarified,” said Govind Mohan, Joint Secretary in the Finance Ministry, on
Monday at the inauguration of an e-filing facility for applications to the
Foreign Investment Promotion Board.
DIPP had last year issued
Press Notes 2 and 3 which replaced the earlier proportionate method of computing
foreign indirect equity by the parameter of beneficial ownership and control of
entities at each stage of investment.
It later also issued Press
Note 4 to clarify some of these issues. The Press Note 2 of 2009, issued on
February 13, redefined foreign ownership of Indian companies. An Indian company
means, in the context of Press Note 2, a company incorporated in India.
As per the new policy,
foreign investments of all types — FDI, portfolio or foreign institutional
investments, NRI investments, GDRs and ADRs, foreign currency convertible bonds
and preference shares —are taken into account while determining ownership of an
Indian company.
As per the new guidelines
the ownership of a number of banks such as ICICI Bank, HDFC Bank, Development
Credit Bank came under question, forcing the central bank and Finance Ministry
to seek a clarification. Not only this, there are concerns in various quarters
that the new norms may lead to breach of sectoral caps.
Under the current rules, as
long as an Indian promoter holds at least 51% stake in any operating-cum
investing company, the company would be considered an Indian entity and the
entire investment it makes in a subsidiary would be considered local investment.
This could allow such companies to invest in sectors in excess of sectoral FDI
caps or invest in sectors where foreign investment is not allowed. On the other
hand, the downstream investment of a company that has more than 51% foreign
stake will all be considered foreign investment.
The RBI had also raised the
issue of breach of sectoral FDI caps as foreign investors using a multilayered
structure can easily take their holding to much more than the sectoral cap if
their stake in the operating-cum-investing company is below 49%.
The Finance Ministry had in
December 2009 written to DIPP to clarify some of these contentious issues that
have also been raised by some other ministries. Recently, the Telecom Regulatory
Authority of India had put out a discussion paper on the impact of these new FDI
norms on the broadcasting sector. Puzzling Press Notes 2 & 3 raised questions
regarding the ownership of a number of banks such as ICICI Bank and HDFC Bank.
There are concerns in various quarters that the new norms may lead to breach of
sectoral caps.
(Source : The Economic Times, dated 17-3-2010)
The Central Board of Direct
Taxes (CBDT) today directed its field formation to levy the highest penal rate
of tax on TDS (tax deducted at source) defaulters. Following a sharp shortfall
in revenue from TDS collection, the Income-tax Department has launched a massive
drive across the country to detect and inquire into TDS payments of companies —
especially on payments made and salaries disbursed. Tax searches have revealed
that several small and medium-scale companies deducted tax on various payments,
but failed to deposit the amount with the Department. In such cases, it has been
decided by the Board that the departments can charge the highest level of penal
rate of tax — that is 300%. Besides, the Income-tax Department has disallowed
all expenses incurred by third-party administrator companies (TPAs) across the
board. The existing practice is to deduct the expenses from the total earnings
before arriving at the taxable income. Department officials said the decision to
disallow the expenses have been taken since they do not deduct tax while paying
premium to the insurance companies.
The Department has raised
around Rs.117 crore in TDS amount from six TPAs. The disallowance of expenses
comes u/s.40I(a)(i) of the Income-tax Act, 1961 that is invoked for non-payment
of TDS. Officials said a similar amount has been disallowed as deduction from
income.
(Source : Business Standard, dated 13-3-2010)
Finance Minister Pranab
Mukherjee has asked Indian Revenue Service officials to consider taxpayers as
important stakeholders in nation-building and to administer taxes with a human
approach. He was addressing the 63rd batch of IRS trainees last evening.
Mr. Mukherjee pointed out
that the shift in policy whereby taxpayers are not seen as adversaries has
resulted in a significant growth in tax collection during the past decade. He
asked the trainee officers to imbibe this approach in their daily working.
The Finance Minister said
that direct taxes collection has increased by ten times during the past decade.
He also pointed out that the share of direct taxes is now more than 55%.
The Finance Minister
reminded the officials that it was due to increased tax buoyancy and collection
efforts of Revenue departments that the government was able to waive off the
loans to farmers amounting to Rs.71,000 crores.
(Source : www.taxindiaonline.com dated 12-3-2010)
(Compiler’s Note :
Let us see how much impact this makes on the attitude of the Revenue officials)
41 PM-Seize the Moment
So the country is in a mess,
our institutions stand tarnished in the public eye, and the government faces a
credibility crisis. People are right to be both disillusioned and worried about
where matters are headed. The transition from unreal optimism to cynical gloom
in just a few weeks is breathtaking. This is a time for leadership, not
vacillation and hiding in corners.
What are the issues to be
addressed ? First is the quite incredible paralysis of Parliament, with
belief in the efficacy of its functioning so low that there is no discernible
public response to the loss of a whole session; what kind of democracy do we
have that it does not matter if Parliament is non-functional ? Second is
the growth of crony capitalism into a national cancer that corrupts any and
everything in sight. The third is linked to the second, namely the shady
sourcing of election funds — which, in turn, has become a cover story for
unchecked loot on an unprecedented scale. Fourth is the chaotic style
that has come to mark coalition governments, whereby each minister thinks he is
a law unto himself. And fifth is the state of affairs in the judiciary,
with even the Supreme Court and former chief justices coming under a cloud.
There is a second set of
five troubling issues. One is the steady emaciation and co-option, if not
downright subversion, of supposedly autonomous institutions that could keep the
rich and powerful in check, like the Central Bureau of Investigation, the Lok
Ayuktas, the Central Vigilance Commission . . . .; the result is not only that
the country’s rulers are effectively above the law, but also that they can
invade the privacy of private citizens through gross actions like telephone
tapping. Two, there is the suborning of the bureaucracy, which now mostly
comprises willing accomplices in the shenanigans of political masters, and which
asserts itself only to corner privileges for itself. Third is the defence brass,
whose reputation and image have taken a severe knock after the Adarsh scandal,
not to mention the general assumption of its involvement in corrupt purchase
deals. Fourth is the media, whose credibility has reached its lowest point ever,
in the wake of paid news scandals and now the Radia tapes which show up some
leading media personages as completely compromised individuals. And last, there
is the growing feeling that the state’s capacity to deliver is fundamentally
deficient, at a time when the state is being asked to do ever more.
These 10 overlapping crises
— involving politicians, civil servants, judges, businessmen, armed service
officers, journalists and publishers — have boiled over at the end of a long
process of deterioration in efficacy levels and standards of probity. It has
reached the point where business cannot go on as usual; the system must be
rescued because it is at risk — many countries that seemed on a rapid growth
track have been arrested in mid-stride by corrosion from within, resulting in
violent implosion. Think Indonesia.
But with such a daunting
list of challenges, you could be forgiven for asking where one begins. In fact,
though, the task is not very difficult. All that the prime minister and other
leaders need to do is to tap the latent desire for a change from today’s
dreadful situation. If they are seen doing that, there will be a groundswell of
support that itself creates an environment which facilitates other corrective
action. The specific steps are in themselves not difficult to design. If our
leaders cannot or will not take these steps, then they deserve to go. The
country deserves better.
(Source : Business Standard, dated 18-12-2010)
40 Vision
When you can clearly see
where you’re going, you greatly improve your chances of getting there. The more
clearly you can visualise your goals, the more likely you are to reach them.
It’s slow and difficult to make any progress, and even when you arrive you may
not know you are there. Yet when goals are clear, specific, and filled with rich
details, all kinds of great opportunities for moving towards them will continue
to come in view. —
Anonymous
To
believe in the things you can see and touch is no belief at all. But to believe
in the unseen is both a triumph and a blessing. — Bob Proctor
Vision without action is a dream. Action without vision is simply passing time.
Action with vision is making a positive difference. — Joel Barker
58
Tax Department slams BCCI, says its activities are commercial
The Board of Control for Cricket in India (BCCI) has become
totally commercial and all its activities are being carried on commercial lines.
Cricket is only incidental to its scheme of things. It is more into prize money
for every run or wicket, which is nothing short of a gimmick.
This is what the income-tax department has to say about the
BCCI in its assessment order dated December 30 last year, while disallowing tax
exemptions for the BCCI. The exemptions were earlier being granted on the
grounds that promoting cricket was a charitable activity.
The BCCI’s net income for 2006-07 was Rs 274.86 crores. The
I-T assessment order means that the body will have to pay Rs 120 crores as tax
plus the yet-to-be-quantified penalty amount.
The exemption for BCCI from being taxed was there till
2006-2007 and was withdrawn after the cricket body amended its memorandum and
rules twice. The added objectives included establishing coaching academies and
holding 20-over matches. Income-tax norms stipulate that the changed objectives
should be brought to its notice; this, say I-T officials, was not done by the
BCCI.
The order further says: The conduct of certain activities and
receipt of income from these activities clearly show that these activities are
totally commercial and there is no element of charity in the conduct of the BCCI.
It is evident that the major income arises not from the game of cricket but from
the business of cricket. The order adds: The characteristics of volume,
frequency and regularity of the activities accompanied by profit motive on the
part of the assessee have been held to indicate an intention to continue the
activity as business. The I-T order also says that BCCI’s rules are very
stringent and that it imposes a blanket ban on unapproved tournaments. The BCCI
is exercising complete control over the revenue of tournaments and is not
interested in the promotion of cricket, the order says. The money recovered by
way of media rights and sponsorship is not only to meet the expenses of
organising tournaments but is bound to create a huge surplus. And the surplus
generated by the BCCI is shared with players instead of being used for promoting
the game, the order says, adding that only 8% is spent on promotion of sports.
The BCCI has not developed any infrastructure nor has it built any stadium or
other amenities. Referring to the IPL, a BCCI wing that organises the hugely
popular T-20, the assessment order says: Acts indicate the intention.
Referring to an agreement between the BCCI and Nimbus
Communications for coverage of its events from March 1, 2006 to March 31, 2010,
where the BCCI intended to generate revenue through mobile rights, official film
rights, fixed media rights and public exhibition rights, the I-T department has
said: The very foundation of the agreement is based on commercial exploitation
and benefit which explains the colossal amount of media rights fees of Rs
2,724.2 crore paid by Nimbus. In its sponsorship agreement with Nike, the BCCI
was entitled to Rs 45 lakhs and Rs 58 lakhs as compensation for every
international one-day and test match respectively. Besides this, the BCCI was
paid minimum guarantee royalty of Rs 13.5 crores for 2007 and performance
bonuses which came to Rs 1 crore.
The investments of the BCCI (fixed deposits with banks) have
also witnessed a jump of 36.74% in the last two years (from Rs 545 crores to Rs
745 crores). In the same period, the fixed assets have seen a rise of 179 per
cent (from Rs 3.3 crores to Rs 9.4 crores). According to the income and
expenditure account for the year 2008-2009, BCCI’s income was Rs 726 crores,
down from Rs 1,000 crores in 2007-2008; but this will be audited only in
December 2010.
(Source: The Times of India, dated 14.01.2010)
57
Govt Panel to Push Reforms in Foreign Investment Norms
The government is looking to rationalise existing norms of
foreign portfolio and NRI investment, a move that is to have a major impact on
the flow of venture capital and private equity money into the country. A working
group of industry experts has been formed which includes members of both the
government as also the industry, to consider reforms.
Among the top issues in the agenda for the working group will
be to review the existing policy on foreign inflows (other than Foreign Direct
Investments) and ways to attract more foreign investment and reduce policy
hurdles while maintaining the “Know Your Customer” (KYC) requirements.
The group will also identify challenges in meeting the
financing needs of the Indian economy through foreign investment. It would look
at various forms of foreign investment including investment in listed and
unlisted equity, derivatives and debt, including the markets for government
bonds, corporate bonds and external commercial borrowings.
The group will also re-examine the rationale of taxation of
transactions through the STT and stamp duty. Although the government has in the
past refrained from scrapping STT, despite demands from capital market
participants, any change in the policy related to STT will have a major impact
on the stock markets.
(Source: Internet & Media Reports, dated 14.01.2010)
56
Accounting norms (AS-11) under Bombay HC scanner
The union government’s move to suspend Accounting Standards
11, allowing companies to show foreign currency liabilities as assets, has come
under the Bombay High Court’s scanner. The petition, filed by an organisation of
city-based legal experts, “Just Society”, has claimed that this permits firms
that might otherwise be sick to “paint a rosy picture”.
The government had introduced AS 11 in 2006, which required
companies to record foreign currency monetary assets and liabilities at the
exchange rate on the balance sheet date. Last year, in the midst of the global
recession and swings in the exchange rate, the Confederation of Indian Industry
and the Associated Chambers of Commerce and Industry of India made
representations to the government, according to the petitioner.
Subsequently, the National Advisory Committee on Accounting
Standards (NACAS), a government-appointed body, suspended the implementation of
AS 11.
(Source: The Times of India, dated 13.01.2010)
55
Transfer Pricing – CBDT panel to formulate safe harbour provisions
The Central Board of Direct Taxes (CBDT) has set up a
committee to formulate rules for the safe harbour provisions—a set of rules that
would enable the income tax (I-T) authorities to accept the transfer pricing
returns without scrutiny.
Foremost among the committee’s tasks is to set an acceptable
margin which would act as a benchmark for the industry. For example, if the safe
harbour rules stipulate that the margin in a particular industry is 20%, and if
the transfer price declared by a company engaged in that industry is not less
than the margin, the I-T authorities would accept the return without questions.
The rules, once introduced, will lend an investment friendly
image to India. It will also put an end to the requirement of collecting huge
amounts of data regarding transfer pricing transactions, thereby saving time and
energy.
(Source: The Economic Times, dated 11.01.2010)
53
Tax records of politicians under scrutiny
The Finance Ministry and the Central Board of Direct Taxes (CBDT)
have initiated a process of verification of the income-tax returns of all MPs
whose records are not available with the income-tax department, and to help them
verify whether they have paid appropriate taxes or not.
The decision has been taken by the Finance Ministry after
they found that many of them have paid partly or no taxes at all; and many of
their PAN details are not available with the department. So, it becomes really
tough for the department to ascertain their actual income. Those who are found
to be purposely involved in tax evasion will invite a heavy penalty and
scrutiny.
(Source: Internet & Media Reports, dated 05.01.2010)
54
Govt to match netas’ I-T returns
The finance ministry has quietly initiated a process of
opening up the income-tax files of politicians belonging to all parties and
tallying their income statements with the affidavits filed by them with the
Election Commission during the 2009 parliamentary polls.
Verification of the assets declared by the Lok Sabha
candidates, many of whom have now become MPs and even ministers, will help the
department to assess if they had paid appropriate taxes as declared in their
statements with the two different authorities.
The finance ministry initiated the exercise after it found
that many of the candidates had made astounding declarations in their affidavits
to the EC, while initial scrutiny revealed that some of them had paid paltry or
no taxes. However, as many as 50% of the candidates in the 2009 LS polls had not
furnished their Permanent Account Numbers, making it difficult for the
department to ascertain the actual income of these people.
The department will be scrutinizing the I-T returns of all
Lok Sabha candidates irrespective of whether they ended up winning or not. A
letter from the Central Board of Direct Taxes (CBDT) has been circulated to all
those MPs whose records are not available with the I-T department or whose PAN
have not matched with the department’s records.
The details sought pertain to assessment years 2006-07 and
2007-08. The letter said: A verification exercise is being carried out by the
I-T Department, Ministry of Finance, in respect of affidavits filled by you at
the time of filing nomination for the general elections 2009.
For fear of being disqualified if statements made in the
affidavits were found to be untrue when elected, candidates had made some
astounding declarations. One candidate declared assets worth more than Rs 600
crores, while those having assets between Rs 100 crores and Rs 200 crores were
found in dozens during the 2009 polls.
(Source: Internet & Media Reports, dated 04.01.2010)
(Note: One sincerely hopes that vested interests are
not successful in sabotaging the whole exercise.)
52
Foreign arms of Indian cos under tax net likely – Introduction of CFC Rules
The forthcoming budget may contain provisions for taxing the
undistributed dividends of foreign corporations that are controlled or owned by
Indian companies. Controlled Foreign Corporations (CFCs) laws enable the
authorities to tax the income of a resident derived from a foreign corporation.
This is irrespective of whether the profit/dividend of the foreign entity is
transferred to India or not.
Countries adopt CFC laws mainly for checking the probable
loss of revenue arising from the transfer of profit of foreign corporations to
offshore havens, such as the Isle of Man and Cayman Islands.
CFC laws are in force in at least 25 countries with varying
rules and regulations. In the US, for instance, 50 per cent of the voting rights
or 50 per cent of the value of shares constitutes a CFC.
The Indian tax authorities think it is time India had a law
that will tax the profits of foreign corporations that are controlled by Indian
companies. Since cross-border acquisitions by Indian companies have been on the
rise in the recent past, the government may find it difficult to ignore the
demand of the tax authorities.
(Source: The Economic Times, dated 05.01.2010)
51
Finmin opposes FDI maths, wants review
Under the new rules for indirect foreign investments, issued
through Press Notes 2 and 3 last year, all investments by an Indian-owned and
controlled company will be classified as domestic investments, even if the
company has significant foreign stakes. The earlier norms counted only the
proportionate amount as FDI in the downstream subsidiary.
For example, if a 51 per cent Indian-owned company floats a
subsidiary with a 50 per cent stake, and the balance 50 per cent is held by
foreign investors, its entire 50 per cent investment in the subsidiary would be
counted as local investment under the new norm. This will allow the company to
invest in any sector, even those closed to foreign investment.
In telecom, for instance, which has a foreign investment
limit of 74 per cent, companies can now get foreign investment above the allowed
cap through a multilayered subsidiary structure. The flip side for companies is
that the total investments of those with more than 50 per cent foreign holding
in a subsidiary would be counted as foreign investment.
Leading Indian banks such as ICICI Bank, HDFC Bank and
Development Credit Bank would be considered foreign for the same reason.
Investments of these banks in a subsidiary would also be classified foreign.
This is not only a check on their investments in sectors with limits on foreign
investments, but also branch expansion.
Though the finance ministry had written to the DIPP earlier,
the communications were largely centred around the impact of the new FDI norms
on the banking sector. The ministry’s missives came after the RBI highlighted
the implications of the new norms on the banking sector.
(Source: The Economic Times, dated 05.01.2010)
67 Inquiries mount after PwC ‘failed to notice’ mistakes
PricewaterhouseCoopers is facing an inquiry by accounting
regulators into its failure to notice that JP Morgan was paying up to £ 16
billion of clients’ money into the wrong bank accounts.
Last week the Financial Services Authority fined the
investment bank £ 33.3 million — the largest penalty that the City regulator has
imposed — for breaches of client money rules under which customers’ funds became
mixed with the bank’s own cash over a seven-year period.
PwC, JP Morgan’s auditor, is now likely to be drawn into
another inquiry by the two professional bodies that oversee accountants, the
Financial Reporting Council and the Institute of Chartered Accountants in
England and Wales.
In addition to serving as principal auditor, PwC was retained
by JP Morgan to produce an annual client asset returns report — a yearly
certification to prove that customers’ funds were being effectively ring-fenced
and therefore protected in the event of the bank’s collapse. But PwC signed off
the client report even though JP Morgan was in breach of the rules.
It is understood that the FSA plans to pass on the details of
its own investigation to both the FRC and ICAEW, which will then determine
whether any further action is necessary.
The money at risk in this case consisted of funds held by
customers of JP Morgan’s futures and options business — a sum that varied from
£1.3 billion
to £15.7 billion between 2002 and July 2009, when the breach
came to light. PwC did not comment.
(Source : The Times, UK, 7-6-2010)
66 HC ruling on bounced cheques rattles traders
The Bombay High Court judgment that the drawer of a bounced
cheque cannot be prosecuted if the instrument was issued only as a security has
thrown traders into a tizzy.
Suppliers who were used to granting credit for series of
transactions against a single cheque are now unsure of how good this security
is. Debtors on their part while issuing the cheque are making it in the covering
letter that the cheque is being issued as a security and not to meet any debt
obligation.
In the past, lenders have used this Act to initiate criminal
prosecution against borrowers who have found it difficult to pay their
instalments. Now debtors are taking shelter under the judgment on cheques issued
as security.
The Bombay High Court held that the debtor cannot be
prosecuted under the Negotiable Instruments Act if cheques, issued only as
collateral security for loan, bounces. According to news reports, the judgment
was issued by Justice P. R. Borkar on a petition filed by Ahmednagar-based
Ramkrishna Urban Co-operative Credit Society against a debtor.
(Source : The Economic Times, dated 13-3-2010)
65 CAs, CSs told to report all suspicious fund transfers
The Government has asked chartered accountants, cost
accountants and company secretaries to directly report to the Home Ministry
cases of suspicious fund movements in and out of companies, as it looks to crack
down on money laundering and terror funding.
The Home Ministry, through the Ministry of Corporate Affairs,
has asked the Institute of Chartered Accountants of India (ICAI), Institute of
Company Secretaries of India (ICSI) and the Institute of Cost and Works
Accountants of India (ICWAI) to ensure that their members report any instances
of diversion of funds directly without any procedural formalities.
Incidences should be reported directly to a designated e-mail
as also be conveyed through fax to the Home Ministry. Such cases will be handled
by a senior Home Ministry official, whose telephone number has also been shared.
The move is aimed at sensitising professionals of their
responsibilities u/s.51A of the Unlawful Activities (Prevention) Act, which aims
at preventing routing of terror funds through domestic firms.
Suspicious activities include cases where a dubious
individual or entity approaching them for investing into financial instruments
or immovable property or arrange for incorporating a company as a director,
shareholder or partner.
(Source : The Economic Times, dated 24-4-2010)
The Delhi High Court has quashed the Institute of Chartered
Accountants of India (ICAI) decision against auditor P. Ramakrishna in the
Global Trust Bank (GTB) case. The decision comes as a relief for Mr. P.
Ramakrishna, who is a partner in Lovelock & Lewes, a network affiliate of
Price-Waterhouse. ICAI held Ramakrishna guilty of professional misconduct in the
Global Trust Bank probe.
Sources said ICAI proceeded under old disciplinary norms in
the case. The minutes of the case hearing by ICAI was not ready before the Delhi
High Court. Seth Dua & Associates represented P. Ramakrishna in this case. The
Delhi High Court said ICAI’s decision on P. Ramakrishna is not legally tenable.
It wants the case to be handled by Director (Discipline), ICAI.
The High Court wants ICAI to now proceed under amended S. 21
of the CA Act. ICAI had allegedly proceeded under the unamended CA Act. The
Court has asked ICAI to pay costs of Rs.10,000 to Ramakrishna within four weeks.
When contacted Amarjit Chopra, President, ICAI said they will
appeal against today’s decision in the High Court.
(Source : www.moneycontrol.com, dated 20-4-2010)
(Note : Does it tell a tale of the state of affairs in ICAI —
of lack of due diligence and application of mind by our elected representatives
in Central Council ?)
63 CAs turn preferred financial whizkids
While MBAs are being hired for select functions, CAs are
being looked upon as decision-makers. Chartered Accountants, the nuts and bolts
professionals in the world of finance, are scoring brownie points over suave MBA
finance graduates as India Inc gets increasingly risk-averse in a post-slowdown
environment.
Companies are focussing more on risk-compliance than pursuing
ambitious targets as they recover from an 18-month economic downturn, paving the
way for recruitment of more CAs, perceived to have core competence in financial
matters.
Thus, CAs are currently being accepted as business leaders
who could take up roles beyond auditing and financial management. While MBAs are
being hired for purely sales, marketing or international trade functions, CAs
are increasingly being looked upon as decision-makers.
Due to complexities of accountings and prospective taxation
regime like GST and IFRS (International Financial Reporting Standards),
companies need CAs as MBAs don’t study these subjects. CAs are now assuming
advisory roles as well. If CAs have to take a decision about an M&A deal, their
skills are useful during the due diligence process. The CA curriculum too has
seen some specialisation over the past decade with the development of the
financial services sector. However, CAs need to acquire skills in management
planning and strategic thinking.
(Source : The Economic Times, dated 12-4-2010)
62 On road to GST, states okay single truck permit
Transport Ministers agree to national permit of
Rs.15,000/annum per truck. Inter-State transport of goods is set to become
hassle-free and cheaper with the state governments agreeing to give up their
powers to issue separate transport permits.
Transporters would now have to pay an annual fee of Rs.15,000
per truck for moving across the country, according to the new rule agreed to by
the states’ transport ministers. The new national permit regime will strengthen
the efforts to obtain a national market for goods and services through the
proposed goods and services tax or GST that seeks to create a seamless pan-India
market.
(Source : The Economic Times, dated 17-4-2010)
61 CBDT wants jail term for tax evaders
Tax evasion could land you behind bars if the country’s
direct taxes authority has its way. The CBDT wants to prosecute tax evaders
under the tough anti-terror financing law, even as it looks to adopt a more
friendly approach towards honest taxpayers. It has proposed to the Department of
Revenue to bring offences such as concealment of income, not filing income-tax
returns, failure to deposit tax deducted at source and giving false evidence
under the ambit of the Prevention of Money Laundering Act or PMLA. If these
offences become scheduled offences under the anti-money laundering law, they
will invite rigorous imprisonment of three to seven years and a fine of up to
Rs.5 lakh. The trial will be faster in the case of offences under PMLA as these
are tried in special courts and the accused has to prove that he is not guilty.
“The Board has written to the Department of Revenue to include these as
predicate offence under the PMLA,” a Finance Ministry official said.
(Source : The Economic Times, dated 5-4-2010)
60 Trip to tax havens in govt crosshairs
The Income-tax Department is keeping a tight vigil on
Indians, notably the ones suspected of owning bank accounts, visiting tax
paradises, such as Switzerland, Cayman Islands, Mauritius and the Bahamas, as it
amplifies efforts to trace tax evasion and slush funds tucked away abroad.
India is part of a long lineup of countries, including the
US, pursuing tax transparency across the globe. The Government is in talks with
20 tax havens including the Bahamas, Monaco, Panama, Seychelles, St. Kitts &
Nevis and the Maldives for new treaties that promise to exchange information
more openly.
The Government also recently posted two senior Indian Revenue
Service officers as first secretaries at its missions in Singapore and
Mauritius, which are hotbeds of investments into India.
Agents and officials of foreign banks that offer services and
facilitated the opening of bank accounts are also on the Government’s radar.
The Tax Department also plans to create divisions and post
officers at the Indian missions in the US, the UK, the Netherlands, Japan,
Cyprus, Germany, France and the UAE for raising the vigil on evaders and greater
exchange of information.
(Source : The Economic Times, dated 28-4-2010)
(Note : Those who hold black money abroad of such large
magnitude, are smarter than our Revenue officials. They also have friends in
high places who are hand in glove with such persons and accord them full
protection from any action ! ! !)
58 State of Marathi Manoos when Maharashtra turns fifty
Before 1960, a bulk of commercial activity was in the hands
of non-Maharashtrians : Gujaratis, Marwaris, Khojas, Bohras, Sindhis, Parsis and
Punjabis. That is true today as well.
With the exception of the Kirloskars, no Marathi-owned
company figures prominently in the country’s corporate world. The Marathas, who
dominate politics and therefore hold the bureaucracy in a tight grip, have done
pretty well for themselves. Political clout has enabled them to operate in areas
where the resources of the state can be manipulated for personal gain: real
estate, agricultural cooperatives and educational institutions.
In national politics, too, there is no Maharashtrian with an
all-India appeal. That requires a reputation for intellectual rigour, personal
integrity and a steadfast commitment to a set of ideas and principles. The last
politician with such a reputation was Y. B. Chavan. Much the same conspicuous
absence can be found in areas of scientific and artistic endeavour. How many
Marathi-speakers have emerged as national, let alone international, icons? In
some fields notably classical music and cricket you can cite three or four
names. Add to that a couple of scientists and writers. In the upper echelons of
the armed forces and civil services, in think tanks and prestigious
universities, in the national media and in the entertainment business too,
Maharashtrians are few and far between.
Unable or unwilling to accept why things have come to this
pass above all, an aversion to risk and adventure most Maharashtrians prefer to
rail against the world. Those who exploit Marathi grievances for short-term
political gains are content to promote vada-pao, force shop-owners to put up
signs in Marathi and compel taxi drivers from outside the state to speak the
language. Such swagger in an urban, increasingly cosmopolitan India invites
ridicule.
(Source:Extracts from an article by
Shri Dilip Padgaonkar in The Times of India, dated 30-4-2010)
59 201 Technical and Management Institutes are illegal
Many private institutions have been imparting technical and
management courses without the mandatory approval from the All India Council for
Technical Education, HRD Minister Kapil Sibal informed Lok Sabha. There are in
all 201 such institutions across the country.
The big names include Indian School of Business, Hyderabad;
ICFAI Business School, Delhi, Gurgaon and Chandigarh; Ansal Institute of
Technology, Gurgaon; Indian Institute of Planning and Management, Delhi; K. R.
Mangalam Global Institute of Management, New Delhi; J. K. Business School,
Gurgaon; M. B. Birla Institute of Management Bharatiya Vidya Bhavan, Bangalore;
and Sikkim Manipal University, Bangalore.
Maharashtra tops the list with 74 such institutions followed
by 24 in Delhi, 22 in Karnataka, 19 in Tamil Nadu and 13 each in UP and Bengal.
Besides, the UGC has identified 21 fake universities running in violation of
provisions of the UGC Act, he said. The 21 fake universities include eight in UP
and seven in Delhi, Sibal said.
(Source : The Times of India, dated 29-4-2010)
(Note : What penal action has the Govt. taken ? What about
documented rampant corruption in AICTE ?)
57 Changes in Indian Visa Regulations for expats
India has changed the rules concerning work visas for
foreigners to remove the ceiling on the number of foreigners a company can hire
as well as the minimum stipulated salary.
Though the new rules are designed to favour skilled workers
and have an ‘Indians first’ bias, they should please expats who are willing to
work here but were hindered by the cap on the number of foreigners who could
have been hired, as well as the minimum salary requirement. Indian companies had
to limit their foreign recruitments to 1% of their total workforce and pay them
annual salaries of $ 25,000.
The rules are sure to be welcomed by the non-governmental
organisations (NGOs) in India who have been allowed to hire, just like a private
concern, ‘skilled’ foreigners.
In the old regime, NGOs were not allowed to hire foreigners
forcing those who were still willing to work for such organisations to come to
India on tourist visa to work as volunteers for a limited period.
(Source : The Times of India, dated 8-7-2010)
56 Won’t dump US Treasuries : China
China ruled out the ‘nuclear’ option of dumping its vast
holdings of US Treasury securities but called on Washington to be a responsible
guardian of the dollar.
In the third in a series of statements explaining its work to
the Chinese public, the State Administration of Foreign Exchange (SAFE) sought
to allay concerns in the outside world that arise whenever Beijing shifts its
holdings of US government debt.
In a series of questions and answers posted on its website,
www.safe.gov.cn, SAFE asked rhetorically whether China would use its $ 2.45
trillion stockpile of reserves, the world’s largest, as a ‘nuclear weapon’. SAFE
said such concerns were completely unwarranted.
(Source : The Times of India, dated 8-7-2010)
55 Hard-up Italy to sell treasures
Italy is preparing to sell thousands of national treasures,
including islands in the Venice lagoon and on the Emerald coast of Sardinia, to
pay back spiralling debts.
The islands and other landmark properties on a provisional
‘for sale’ list are worth more than £ 2.5 billion. They include palaces and
castles, former convents, lighthouses and aqueducts, as well as leases on
beaches, rivers, lakes and Alpine summits.
(Source : The Times of India, dated 5-7-2010)
54 Why can’t Indian politicians retire if work gets tiring ?
The Union Minister for Food, Civil Supplies and Agriculture,
Sharad Pawar, who also doubled as President of the Board of Control for Cricket
in India (BCCI) and has now become President of the International Cricket
Council (ICC), has reportedly pleaded with Prime Minister Manmohan Singh that
his ministerial burdens be reduced so that he can devote more of his time to his
cricketing responsibilities. The Prime Minister should request Mr. Pawar to
choose between Government and cricket. Mr. Pawar will not be any less popular in
his home state of Maharashtra, or any less respected as an elder statesman or
any less influential in Indian politics if he ceased to be a Union Minister.
Indeed, his popularity may shoot up if he prefers to give up his ministerial
perks and devotes the rest of his life to promoting cricket in India and around
the world. He could make cricket an Olympian sport ! He could get a bigger
audience for Indian Premier League matches compared to World Cup soccer. There
are so many new frontiers to be crossed and Mr. Pawar could become a global
mentor for cricket. Why should he seek to keep his Cabinet berth if he does not
have the time and energy for it ? Mr. Pawar says he needs more hands in his
ministry. There are already too many ministers in India and most junior
ministers complain that they have no work. Indeed, even senior ministers
complain these days of not having much work ! Mr. Pawar has been widely
criticised for keeping one foot in cricket and one eye on Maharashtra even as he
had his other foot in the Union Government and the other eye on the top job in
Delhi. No one can grudge a politician such political ambition. But when a
minister says he wants less work in Government to be able to devote more time to
cricket, then one must ask whether it is not time to force a choice on him. With
just nine members in the Parliament, and some of them willing to return to the
parent Congress party, Mr. Pawar demands too much generosity from the Prime
Minister, who, in fact, has been among his limited circle of well-wishers in the
Congress party. Rather than push the Prime Minister into being even more
generous, Mr. Pawar should think of retiring from Government, asking someone
younger, perhaps his daughter, to take his place. When Mr. Pawar took charge of
agriculture in 2004, the Prime Minister asked him to repeat in the rest of India
the developmental miracle he had wrought in his home constituency of Baramati.
Regretfully, he has failed on that score and Indian agriculture has suffered due
to neglect. The so-called Second Green Revolution is yet to take off, and food
price inflation has hurt. Perhaps a change of hands at the Food and Agriculture
Ministry can help.
(Source : Business Standard, dated 7-7-2010)
53 Quota seats go abegging at IITs
Nearly 700 seats reserved for scheduled castes (SCs),
scheduled tribes (STs) and other backward classes (OBCs) are lying vacant at the
Indian Institutes of Technology (IITs) this year after the first allotment of
seats.
The IITs had set aside 2,570 seats for OBCs, but only 2,023
were filled, according to T. S. Natarajan, Chairman of the Joint Entrance
Examination (JEE) at IIT Madras — the institute which conducted the JEE this
year. Of the 2,570 seats under the OBC category, 78 (around 3%) are reserved for
students with physical disabilities. Of the remaining 2,492 seats, only 2,023
have been filled.
(Source : Business Standard, dated 5-7-2010)
[Will meritocracy ever flourish in our country ? There are no
statistics available as to how many quota candidates fail or drop out of IITs ?
All at the cost of deserving students belonging to so-called upper castes ?]
52 Media companies oppose service tax on copyright services
PVR Pictures, Balaji Telefilms, Yash Raj Films and UTV Motion
Pictures have moved the Delhi High Court against the Government’s recent
decision to levy service tax on copyright services.
The Finance Ministry introduced the tax for the first time on
July 1, 2010. PVR Pictures, in its petition, alleged that copyrights are treated
as goods and the transfer of copyrights are treated as sale of goods, which
falls within the domain of taxation by States under Article 246, and not the
Union.
The company said treating copyright as goods as well as a
service is ultra vires (beyond the powers of) the Constitution of India and
contravenes Articles 14, 19(1)(g), 265 and 300A of the Constitution.
(Source : Business Standard, dated 8-7-2010)
The existentialist dilemma before Indian democracy is stark :
it cannot co-exist with financial honesty. It does not matter if you are
personally incorruptible; you have to be institutionally corrupt in order to
engage in the business of democracy. The moral code of elections is
uncomplicated : Don’t ask. Don’t tell. And for God’s sake don’t get caught.
— M. J. Akbar
in India Today, dated 10-1-2011
51 Centre forms task force to curb misuse of subsidies
To curb the misuse of subsidised kerosene, cooking gas (LPG)
and fertilisers, the Centre has constituted an inter-ministerial task force
under Unique Identification Authority of India (UIDAI) Chairman Nandan Nilekani.
The team of experts will work to evolve a mechanism for
direct subsidy transfer and give its interim report within four months. Several
Government committees in the past, including the Kirit Parikh committee, had
recommended direct transfer of subsidies. States such as Haryana and Madhya
Pradesh are close to implementing a direct subsidy transfer for grains.
The Government had formed the task force in light of the
‘overwhelming evidence’ that the present policy of giving subsidy on kerosene
was resulting in ‘waste, leakage, adulteration and inefficiency’, the statement
said. The Government provides kerosene at subsidised prices to below-poverty
line families under the Public Distribution System. “Therefore, it is imperative
that the system of delivering the subsidised kerosene be reformed urgently,” it
added.
“Similarly, the system of provision and delivery of
subsidised LPG to intended beneficiaries needs to be reformed. The current
subsidy on kerosene is Rs.20.56 per litre while the same on domestic LPG is
Rs.356 per cylinder. This leaves a massive scope for black marketing in these
essential commodities,” the statement said.
(Source : Business Standard, dated 15-2-2011)
74 ICSI told to suggest
changes in LLP Structure:
The
Ministry of Corporate Affairs has asked the Institute of Company Secretaries of
India (ICSI) to suggest changes to make the limited liability partnership (LLP)
model more suitable for the small and medium sector enterprises in the country.
Converting to an LLP structure will also help SME units get easier access to
credit from banks, the official said. LLP’s registrations were opened in April
last year but the response has been very poor, with only 677 entities being
registered till date. The official further points out that the present number
mainly comprises big consulting groups and law firms, with a relatively small
portion of small-sized entities and new entrants showing interest. “This (LLP
form of business) is a fantastic new opportunity and will inevitably give a
whole new profile to the MSME sector.
It will
be possible for the sector to reach out to venture capital. This can be the
stepping stone for partners becoming much larger industrialists and logging
bigger growth,” Minister for Corporate Affairs Salman Khurshid had earlier said,
on the advantages for SMEs to leverage out from the LLP model. The report of the
task force on SMEs, which was recently presented to Prime Minister Manmohan
Singh, had highlighted the need for giving wide publicity to the LLP model,
which it said will provide SMEs an interim solution to move from the informal to
the formal economy.
(Source:
The Economic
Times dated 06.02.2009)
73 Top-level vacancies frustrating tax targets: CBDT
Three
weeks to go before presentation of India’s national budget and the finance
ministry called for urgent steps to fill top-level vacancies in the direct tax
administration as delays were affecting the realisation of targets.
Central
Board of Direct Taxes (CBDT) Chairman S.S.N. Moorthy has even written to the
chairman of Union Public Service Commission requesting an urgent meeting of what
is called the departmental promotion committee for filling up the vacancies.
In the
letter, Moorthy says after the recent promotion of some officials to the grade
of chief commissioners, the vacancies in the posts of commissioners of income
tax had gone up to as high as 71.
Some of
these vacancies are in key circles of the tax administration in large metros
such as Mumbai, New Delhi and Chennai, which account for the bulk of the
country’s direct tax collections.
“Needless to say, this is adversely affecting the efforts of the department in
meeting the revenue collection targets,” the tax board chief says in the letter
to Union Public Service Commission Chairman D.P. Agarwal.
The
letter also comes against the backdrop of Finance Minister Pranab Mukherjee
directing the Income Tax Department to make all efforts to achieve the revised
collection target of Rs.4,000 billion by the end of this fiscal.
India’s
direct tax collections have been just Rs.2,500 billion in the first nine months
of this fiscal, growing at 8.5 per cent over the corresponding period of the
previous year. In fact, personal income tax has actually seen a decline of 0.41
per cent. This has obviously made the tax administration jittery.
Senior
officials said one of the main ways to enhance tax collections would be by
regular sharing of information among the commissionerates and developing a
common database. But vacancies at the top slots are frustrating such efforts.
Revenue
Secretary Sunil Mitra is also holding an urgent meeting with 18 chief
commissioners of income tax here to review the shortfall in tax collections and
find ways to make it up.
(Source:
www.topnews.in dated 05.02.2010)
(Compiler’s
Note:
Revenue collection will increase when taxpayers are treated with respect and
trust due to a worthy customer. Today, an honest tax payer is the most harassed
lot as he finds himself unable to deal with the corrupt officials and has to
face time consuming and costly litigation. A dishonest taxpayer has the money to
smoothen his way. The FM should inculcate the habit amongst his officers to
treat the taxpayer with trust and respect. Otherwise, he will be killing the
goose which lays the golden egg!!!)
S&P
threatened to downgrade Japan’s rating unless the world’s second-largest economy
took more steps to rein in its mounting public debt.
The
warning by Standard & Poor’s, which cut its outlook for Japan’s sovereign rating
for the first time since 2002, reflected concerns that the government’s efforts
to trim its mounting public debt were proceeding too slowly.
S&P
retained its long-term credit rating for Japan of AA, defined by the agency as a
very strong capacity to meet financial commitments, but said it had revised the
outlook associated with that rating from stable to negative. The AA rating puts
Japan in the same category as Slovenia, Chile and Ireland, according to S&P’s
website.
(Source:
The Times of India dated 28.01.2010)
72 Learn technology in your
language:
Spoken
Tutorials, a technology that explains software applications in your mother
tongue, will be launched by the Indian Institute of Technology – Bombay.
Nowadays, software applications find use in everyday living. For example, to
book a train ticket online one can log on to www.spoken-tutorial.org and get a
demonstration on steps to book an e-ticket with a commentary in a language of
one’s choice.
The
technology developed by IIT-B will now allow non-English speakers to negotiate
the information highway.
The
technology will soon be introduced in educational institutions across the
country by the National Mission on Education through Information and
Communication Technology (NMEICT), an initiative of the Human Resource
Development Ministry.
(Source:
Hindustan Times dated 26.01.2010)
70 SMEs to be exempt from IFRS:
Small
and medium enterprises (SMEs) in the country will not have to prepare their
accounts as per the International Financial Reporting Standards (IFRS) from
April 1, 2011, saving them significant cost of switching to the more rigorous
accounting standards. A government-constituted core panel on IFRS has decided to
exempt SMEs from the first phase of convergence falling due in 2011.
Convergence to IFRS is a costly exercise which includes an overhaul of
operational and IT processes apart from training costs. A small enterprise, for
this exemption, is likely to be one where the investment in plant and machinery
is more than Rs 25,00,000 but does not exceed Rs 5 crore.
A medium
enterprise is one where investment in plant and machinery is more than Rs 5
crore but does not exceed Rs 10 crore.
Recently, a core committee of the government finalised the road map for IFRS
convergence in India. The ICAI has said that all entities having net worth in
excess of Rs 1,000 crore will have to follow IFRS. The list also includes all
NSE and BSE listed companies, entities having foreign borrowings of more than Rs
500 crore, insurance entities, mutual funds, venture capital funds and all
scheduled banks having operations outside India.
(Source:
The Economic
Times dated 25.01.2010)
69 CBDT seeks report on Mumbai
I-T refund scam:
The
Central Board of Direct Taxes (CBDT) has sought a detailed report from the field
formation in Mumbai over the reported “income- tax refund scam” in that
jurisdiction. No insider of the Income-Tax Department has been identified in any
wrong doing. “It looks as if some external people were involved, but we have to
wait for the complete information,” official sources said. Indications are that
the findings of the report, once obtained, will be placed before the Finance
Minister. CBDT also maintained that the amount involved was not as high as Rs 41
crore as reported in certain sections of the media. Meanwhile, a CBI spokesman
said that the matter has come to the notice of the investigation agency.
However, no case has been registered as yet. “Only if a case is registered can
an investigation begin. More details can be shared only if a case is
registered,” the spokesman added.
(Source:
The Hindu Business Line Newspaper dated 25.01.2010)
(Compiler’s
Note: The issue
arises: Can we trust the safety and security of confidential financial data
which assessees upload on the Department’s website, if the Department cannot
protect its own interest?)
68 RCom wants action against
its special auditor:
Reliance
Communications (RCom) has asked the Department of Telecommunications (DoT) to
take action against its special auditor, Parakh & Co, for alleged breach of
confidentiality and misconduct. It has also asked DoT to scrap Parakh’s report,
saying the conclusions are incorrect, unilateral and biased.
The
audit report, commissioned by the DoT, had alleged that RCom had hidden revenues
of Rs 2,799 crore for the financial years 2006-07 and 2007-08, costing the
government Rs 315 crore in licence and spectrum fees that are charged as a
percentage of revenue.
The
auditor also said RCom inflated wireless revenue by 23 per cent or Rs 2,915
crore, to Rs 15,213 crore in the report to shareholders in 2007-08.
The
terms of reference did not require the auditor to make observations on
consolidated financial statements. Moreover, they have finalised the report
without any discussion or communication with us, the company said.
(Source:
Internet & Media Reports dated 25.01.2010)
67 Licences of Entities Would
Be Revoked If TheyzSource Funds From India –Mauritius:
The Financial Services Commission of Mauritius has imposed a
stringent set of conditions on Mauritius-based companies investing in India in a
bid to allay fears about round-tripping of funds. The Mauritian government has
also warned that licences of entities investing in India would be revoked if
they source funds from India. The move provides a new turn to the lingering
debate over allegations of Indian corporates using the Mauritius route to escape
capital gains tax. Mauritius is the top source of foreign direct investment (FDI)
flowing into India. During the first seven months of the current financial year,
nearly $8 billion of the $18 billion FDI flowing into India came from Mauritius.
An annual audit of Mauritius-based entities investing in India has been made
mandatory, said Milan J N Meetrabhan, chief executive of the Financial Services
Commission of Mauritius. The Indian side has been apprised of the steps taken to
check round-tripping, and Mauritius hopes that this will take care of the
concerns about tax evasion.
The move is significant since it comes at a time when the
government is planning to review all double taxation avoidance treaties to plug
loopholes. Also, the direct taxes code which is to replace the I-T Act next year
proposes a number of changes in the country’s tax laws, including some that will
nix the capital gains tax exemption enjoyed by investing through havens.
A Mauritian team headed by Dr Rama Sithanen, Vice Prime
Minister and Minister of Finance and Economic Empowerment, met FM Pranab
Mukherjee. Mr. Sithanen said that FDI was flowing into India through Mauritius
not because of the tax benefit only. There are a number of other countries with
more attractive tax treaties with India, but so much investment is not flowing
through them. Mauritius is preferred because we have a transparent regulatory
system and a sound financial sector, he emphasised.
(Source:
Economic Times, dated 20.01.2010)
65 Get up, sitting for long
can kill you – Even Exercising Won’t Help If You Spend Hrs At Office Desk Or
Watching TV:
Here’s a
new warning from health experts: Sitting is deadly. Scientists are increasingly
warning that sitting for prolonged periods — even if you exercise regularly —
could be bad for your health. And it doesn’t matter where the sitting takes
place — at office, at school, in the car or before a computer or TV — just the
number of hours it occurs.
In an
editorial published this week in the
British Journal of
Sports Medicine,
Elin Ekblom-Bak of the Swedish School of Sport and Health Sciences suggested
that authorities rethink how they
define physical activity to highlight the dangers of
sitting.
“After
four hours of sitting, the body starts to send harmful signals,” Ekblom-Bak
said. She explained that genes regulating the amount of glucose and fat in the
body start to shut down.
(Source: The Times of India dated 22.10.2010)
66 ICAI finds Haribhakti & Co
guilty of negligence – As Karvy auditor:
The accounting regulator is finally swinging into action in
the multiple demat account scam that was detected over three years ago.
The disciplinary committee of the Institute of Chartered
Accountants of India (ICAI) has found the internal auditors — Haribhakti & Co —
guilty of negligence, while checking the books of Karvy Depository Participant.
ICAI’s disciplinary committee has found one audit partner and
an audit manager of Haribhakti guilty.
But sources said of the three charges that were framed,
Haribhakti has been found guilty on only one charge.
Shailesh Haribhakti, a senior partner of the chartered
accountancy firm, refused to comment, saying “it would be premature”. The
central council of ICAI, which is the highest decision-making body of ICAI, will
now either ratify or overrule the report of the disciplinary committee. The
central council is likely to decide the fate of the two auditors next month. To
give a brief background of the case, the Securities and Exchange Board of India
had unearthed a multiple demat accounts scam in the year 2006.
A person named Roopalben Panchal opened thousands of demat
accounts and illegally cornered shares in various IPOs.
Sebi, in its April 2006 order, among others, faulted the
internal auditors of Karvy – Haribhakti, for failing to detect thousands of
demat accounts being opened with the same address.
(Source:
www.taguru.in & www.bloombergtv.com
dated 19.01.2010)
Politicians, property dealers and industrialists-turned-politicians dominate the
list of those who owned the 44 deemed universities that are set to lose ‘deemed’
status in the coming days.
D Y
Patil, Governor of Tripura, is an old Congress hand and runs an education empire
in Maharashtra. Only one of his institutes — D Y Patil Medical
College, Kolhapur — will lose deemed status.
Then,
there is S Jagatharakshakan of DMK, Minister of State, Information &
Broadcasting, whose Bharath Institute of Higher Education & Research will lose
deemed status. BIHER has six constituent institutions involved in teaching
medical and dental science, nursing, physiotherapy and engineering.
Another
one from DMK stable is former Union minister M Thambidurai who runs St Peter’s
Institute of Higher Education and Research in Chennai. It has 1,051 students
enrolled in engineering, computer science, electronics and IT at
undergraduate/postgraduate level and also research. AIADMK leader A C Shanmugham
runs Dr MGR Educational and Research Institute and has dental and engineering
colleges affiliated to it with more than 6,000 students on its rolls.
Santosh
University in Ghaziabad is run by P Mahalingam, personal physician to BSP
founder Kanshi Ram. It has 800 students on its rolls and claims to have three
colleges teaching medical, dental and paramedical sciences. BLDE University,
Bijapur, Karnataka is run by Congress MLA M V Patil. It has a medical college
named after Patil’s father late B M Patil and has nearly 400 students on its
rolls. Former Congress MP R L Jalappa is at the helm of Sri Devraj Urs Academy
of Higher Education & Research, Kolar in Karnataka. Industrialist M A M
Ramaswamy, a member of Rajya Sabha and belonging to JD(S), runs Chettinad
Academy of Research and Education. It has two constituent institutes, a hospital
and research institute and a nursing college.
If it’s
Haryana, it has to be a property dealer. No wonder Maharishi Markendeshwar
University, Mullana, with a host of engineering and medical colleges as its
constituents, is run by Tarsem Garg who started as a property dealer and
graduated to become education entrepreneur.
(Source: The
Times of India dated 20.01.2010)
(Compiler’s Note:
The above is an incomplete
list. The remaining must also be owned/controlled/managed by vested interests.
In such a situation, is policy reform or corrective action possible?)
63 Deemed Below Par: India’s
university education system needs an overhaul
We have an acute paucity of quality colleges and universities
in this country. Those already established can barely meet the growing demand
for higher education. Given this situation, government must welcome private
investors who could lend muscle to efforts to scale up the higher education
sector. But such a move would not suit many of our politicians who have a
substantial stake in perpetuating the licence raj in this sector. They often use
their clout to flout norms and unfairly profit from the business of higher
education, arm twisting governing bodies that are meant to be unbiased and independent to do
their bidding. Competition from genuinely interested parties is thus viewed as a
threat by our netas.
The concept of a deemed university itself is a questionable
category and must be done away with. Either a university is autonomous or is
state-run – there is no need for a nebulous in-between category. The
inconsistencies marking deemed universities are there for all to see: They have
the freedom to make profits but are also given huge central government and UGC
grants. Universities and colleges must be given the freedom to run their own
affairs if they are not funded by the union or state exchequers. Instead of
doling out large sums of money, which may go unaccounted for, the government
would do well to make it easier for those seeking to enter the education sector
establish themselves. This could be done by, for instance, allocating land
speedily and eliminating red tape.
(Source: The
Times of India dated 21.01.2010)
PM
Manmohan Singh called junior ministers for a rare interaction. Within minutes,
however, he realised he was face to face with a band of unemployed workers. By
the end of the 45-minute session, he had promised to take up their case with the
Cabinet ministers who were in the line of fire.
The
interaction was a long sob story with MoS after MoS lamenting that their seniors
were not giving them enough work, that ‘babus’ were more powerful and that they
wanted more. The PM called junior ministers the energy pool, asking them to
focus on flagship schemes and use technology to improve governance.
The
juniors have been a perennially disgruntled lot, saddled with insufficient work
or unacceptable quality of it. This was true of both the NDA rule and UPA-1. The
story does not appear to have changed in UPA-2. The aggrieved ministers said
that as they do not go to the Planning Commission or attend Cabinet meetings,
they be allowed to give inputs in policy-making and, at least, be informed about
decisions.
The PM
looked grim when told that many ministers don’t even get to see official files.
Panabaka Lakshmi, it is learnt, said she had seen just one solitary file in
eight months. An exasperated MoS asked why could he not be trusted with a file.
The case of the Trinamool underlined an irony. E Ahmed and K H Muniappa, both
deputy to party chief Mamata Banerjee in the Rail Ministry expressed their
unhappiness.
(Source: The
Times of India dated 20.01.2010)
(Compiler’s Note:
The situation in various
States is no better. No wonder the pace of reforms and implementation is so
slow!)
61 Bar councils under RTI Act
purview: CIC
The bar councils are open to public scrutiny under the Right
To Information (RTI) Act and should set-up a mechanism to facilitate processing
of applications directed to them under the transparency law, the Central
Information Commission has held.
The Bar Council of India and Bar Council of Punjab and
Haryana had rejected several RTI applications saying though they were set-up
under the Advocates Act, 1961 they did not get direct or indirect funding from
the government, hence are out of the purview of the RTI Act.
However, the commission in a recent order held that the
councils might not have been financed by the central or state governments but
they were setup under an Act passed by Parliament and hence they are covered by
the RTI act.
(Source:
www.dnaindia.com, dated 19.01.2010)
60 RBI notifies
relaxation in remittance norms
The Reserve Bank of India has notified relaxation
in remittance norms regarding salary earned by foreign nationals employed in
India by a foreign company or an Indian citizen employed by a foreign company
outside India. These individuals, according to the RBI, may open, hold and
maintain a foreign currency account with a bank outside India and receive the
whole salary payable to him for the services rendered to the
office/branch/subsidiary/joint venture in India of such foreign company, by
credit to such account, provided that income-tax chargeable under the Income-tax
Act, 1961, is paid on the entire salary as accrued in India. Hitherto, the
amount that could be credited to the foreign currency account with a bank
outside India could not exceed 75 per cent of the salary accrued to or received
by the expatriate or Indian national from the foreign company. Further, the RBI
said that a citizen of a foreign State resident in India employed with a company
incorporated in India may open, hold and maintain a foreign currency account
with a bank outside India and remit the whole salary received in India in Indian
rupees, to such account, for the services rendered to the Indian company,
provided that income-tax chargeable under the Income-tax Act, 1961 is paid on
the entire salary accrued in India. The relaxation in the remittance norm by the
RBI follows the Government notifying the same through a Gazette notification.
(Source:
The Hindu Business Line
Paper
dated 19.01.2010)
59 Another law, more trouble
When governments say they want to protect wages, they often
end up killing employment. They, of course, deny that, but that is what minimum
wages and legalized job security imply. The Union Labour Ministry plans to amend
the Contract Labour (Regulation and Abolition) Act, 1970. This amendment will
allow Labour Commissioners and other officials to fix minimum wages for seasonal
workers. You may say that a law that prescribes minimum wages will only make
people get their due. Instead, it leads to incentives that are detrimental to
the workers.
It will permit appointed officials to harass employers.
Worse, it will permit collusion between firms and officials. If you take the law
and the officials out of the equation, then wages are set by the market. A firm
requiring labourers will have to pay market wages if it wants to get workers.
But with officials in the picture, as the new amendment will ensure, chances are
that they will pay much less. Official collusion and loopholes will ensure that.
(Source:
Mint Newspaper
dated 19.01.2010)
54 Perceptives
“Start by listening, because all too often the United States
starts by dictating.”
— U.S. President Barack Obama, speaking to Al Arabiya news
channel in his first interview with a foreign news outlet, on his instructions
to his new Middle-East envoy.
“That’s cheap for what I do . . . . You’ve got to whet my
appetite to get me onboard.”
— Thomas Taylor, a member of Britain’s House of Lords,
caught on tape telling undercover reporters (posing as lobbyist) that
companies will pay him more than $ 140,000 a year to amend legislation.
“All nations have found themselves in the same boat.”
— Russian Prime Minister Vladimir Putin, exhorting his
colleagues at the davos “economic egotism” because of the economic crisis.
“We have been in business for 300 years. We were hit by the
phylloxera insect in the 19th century that destroyed our vines. . . . we have
faced two world wars. I see the crisis as a challenging but constructive event.”
— Dominique
Heriard Dubreuil, Chairman of the Remy Cointreau Group – the producer of Remy
Martin cognac and Piper-Heidsieck champagne — taking the long view on the
current economic malaise.
(Source : Newsweek,
26-1-2009 and 9-2-2009)
52 Govt. to allow foreign MNCs to impose
annual service fee
The Government is considering a proposal to allow foreign
multinationals to impose an ‘annual service fee’ on their Indian subsidiary for
providing management services. The foreign direct investment (FDI) policy, while
allowing payment of royalty, licence fee and technical know-how fee, does not
provide for payment of annual service fee by Indian subsidiaries.
If allowed, this may become another important source of
income for foreign multinational companies from their Indian arms. The issue
came up in the last meeting of foreign investment promotion board (FIPB), when
it took up the proposal of Canada-based potato and French-fry major McCain Foods
for removal of restriction on payment of service fees by McCain India, a major
supplier of cut-potatoes to fast food giants like McDonalds and KFC in India.
The board deferred its decision on the proposal and referred
it to the Reserve Bank of India (RBI) as it has foreign exchange implications.
Mc Cain Canada has a management fee arrangement with group
companies/subsidiaries in order to facilitate the operations of its group
companies and to cover the cost of providing general management services.
McCain India has not made any payment so far in respect of
services provided to it by McCain Canada in view of restriction imposed by the
Government in 1995 in their original approval. “The approval was subject to the
condition that no service fee shall be paid by the Indian subsidiary company,”
an official in the Department of Industrial Policy and Promotion said.
The board’s decision on the company’s request for allowing
payment of service fee to parent company is being watched closely by the
industry, since it will set a precedent for other multinational companies that
charge such fees from subsidiaries in other countries. Arguing its case, the
foreign food processing firm has pointed out that the condition was imposed in
1995 when there were strict foreign exchange control regulations.
A senior official in the DIPP said that the RBI will have to
take a final view on whether an annual service charge could be allowed under
regulations of Foreign Exchange Management Act (FEMA). “If the fee is in the
form of royalty or technical know-how fee, then it can be allowed. Because, in
the present environment, there are no restrictions under the FEMA for companies
intending to make payments towards constancy or services.
FEMA also permits payments towards service fee/ consultancy
fees of up to $ 1 million per project without apex bank’s prior approval,” the
DIPP official said. He also said that introduction of annual service fee in FEMA
may require the RBI to increase the limit of remittances payable to foreign
companies. The various forms of management services provided by international
parent companies to their subsidiaries in various countries include corporate
secretarial services, insurance services, legal advice, pension plan management,
engineering services and other corporate information services. McCain Canada
calculates the quantum of service fee chargeable to the subsidiary based on
actual expenses incurred by it on managing its international operations.
(Source : The Economic Times, 27-1-2009)
53 Offshore tax shelters much too inviting
American companies, especially those receiving federal aid,
should be expected to pay a fair share of U.S. taxes.
Pretty well buried under all the hoopla of President Barack
Obama’s inaugural was a report last week that could help the U.S. Treasury tame
its way-out-of-whack balance sheet. The Government Accountability Office report
looked at U.S. companies that stash money in foreign countries to shelter them
from U.S. taxes.
U.S. Sen. Carl Levin, D-Mich., who requested the report along
with fellow Democratic Sen. Byron Dorgan of North Dakota, estimates that such
companies are avoiding $ 100 billion in U.S. taxes. And many of them — including
Bank of America and Citigroup — have lately been on the receiving end of
billions of dollars in federal bailout money or fat federal government
contracts.
Now, $ 100 billion may seem like pocket change when you’re
running a trillion-dollar budget deficit and carrying a $ 10.4-trillion national
debt. But you know, every billion counts when you are trying to spend your way
out of a recession. Unfortunately, this offshoring of taxable assets is entirely
legal, which Levin and Dorgan hope to do something about.
Common sense, not to mention common decency, would seem to
dictate that if you take tax dollars you also pay your full share of tax bills.
According to the report by the GAO, which is the
congressional watchdog agency on government programmes and spending, 83 of the
100 largest publicly traded U.S. corporations and 63 of the 100 largest publicly
traded companies with government contracts have subsidiaries in places that are
regarded as tax havens. There is no official definition of such places, but they
have common characteristics, such as no or low local taxes, political stability,
laws that keep financial dealings secret, and a tendency to promote themselves
in the right circles as great places to keep your money out of reach of Uncle
Sam or other tax-grabbing governments.
Bermuda, for example, has no income tax on foreign earnings
and allows foreign companies to incorporate there under an ‘exempt’ status. Plus
the island is not a bad place to have to go to visit your money. The British
Virgin Islands, the Cayman Islands, Switzerland and Luxembourg are among other
places that attract extraordinary amounts of foreign corporate capital. None of
the countries identified in the GAO report as tax havens appears to have much in
the way of a military or other things that take a lot of tax dollars. When they
have emergencies, they probably just call us.
To be fair, the GAO report says some companies have
legitimate business reasons to operate in places that also happen to have
favorable tax and privacy laws.
But does insurance giant AIG, for example, recipient of $ 85
billion in federal bailout money, really need five subsidiaries in Bermuda and
three in Switzerland, as listed in the GAO report ? Does Boeing need six in
Bermuda and 16 in the U.S. Virgin Islands ? The report shows Midland-based Dow
Chemical with 35 subsidiary operations in countries identified as tax havens,
Ford with two, General Motors with 11, and GMAC — in which the U.S. Treasury now
has a $ 5-billion stake — with two, one in Bermuda and the other in Switzerland.
How many car loans can you make in such places ?
There are those who will say that if the United States had
more reasonable tax laws, Uncle Sam wouldn’t be driving all this money into
offshore shelters. But there are those, too, who will say that no business will
pass up an opportunity to cut its own taxes.
Back in 2007, when Levin first started raising this issue
through the permanent sub-committee on investigations that he chairs, he had an
ally in the Senate behind legislation to at least make the companies disclose
their financial offshoring, which could have had an impact on their ability to
secure federal help. Levin’s bill was cosponsored by the junior Senator from
Illinois, a Democrat named Barack Obama.
So something tells that while the GAO report didn’t make much
of a splash, it will not be the last word on this issue.
(Source : Internet, 25-1-2009)
18. Delay as stratagem — The Supreme Court makes
a serious attempt to wake up slumbering babus who do not appeal in lost cases
When the revenue departments sleep over cases they
had lost in the courts and do not appeal for long, it is difficult to tell
whether it is just red tape or something else. Their lethargy causes losses to
the government and gains to tax dodgers.
The new chief justice of India (CJI) started his
stint in the Supreme Court a few months ago with a strict code for the indolent
babus. Some appeals are filed after a delay of a thousand and one nights. He has
ordered investigation into the delays in some gross cases. His campaign is
expected to nudge bureaucrats to move appeals faster. On the part of the
assessees, the CJI has insisted on them paying a substantial part of the tax
demand before hearing their late appeals.
The judges stated : “We feel that the beneficiary
of the judgment may be hand-in-glove with the officials in the government
department who deal with the files, and files are suppressed for a long period,
and then the appeal before the High Court or the Supreme Court is filed after a
long delay to get the appeal dismissed on the ground of delay. Huge amounts of
public money or public property may be involved and the government will be the
loser on the technical point of limitation in such cases. This racket has been
going on for a long time. Now the time has come that this racket is ended and
the officials responsible given severe punishment.”
Last year, the Court asked the Karnataka Government
to pay INR10,00,000 for filing an appeal after a delay of 14 years (State of
Karnataka v. Moideen Kunhi). It also asked the government to take action against
“every person responsible for the alleged fraud and delay in pursuing legal
remedies”.
In another case, State of Delhi v. Ahmed Jaan, the
court passed a similar order. The Courts go by the maxim : “Equity aids the
vigilant, not those who slumber on their rights.” Therefore, the Limitation Act
specifies the delays permissible in filing different types of petitions. The
Companies Act and most other legislation have similar clauses setting time
limits to press claims. Stale claims do not impress the judiciary.
(Source:Extracts from
M. J. Anthony’s Column ‘Out of Court’ in The Business Standard, dated
13-10-2010)
Morningstar
India, a wholly owned subsidiary of Nasdaqlisted Morningstar Inc., recently
launched above new Web site for individual investors in India. The Indian
initiative offers free access to research and commentary on fund industry
news, fund-specific news, and fund reports written by Morningstar India’s fund
analyst team.The visitors
can view Morningstar Rating for funds and the Morningstar Style Box
designation for the funds they research, along with local index data to track
fund from performance against the market. They can also search the site’s
database of more than 1,150 Indian domestic funds using various tracking and
analysing tools.Morningstar
offers an extensive line of Internet, software and print- based products and
services for individuals, financial advisors and institutions. The company
provides data on nearly 3,25,000 investment offerings, including stocks,
mutual funds, etc. along with real time global market data on more than four
million equities, indexes, futures, options, commodities, and precious metals,
in addition to foreign exchange and treasury markets.(Source :
Business India Magazine, 6-9-2009)
Google for videos
Every minute thousands of videos are uploaded on sites like YouTube, Hulu and
many others, much like millions of Web pages being added every day. So, how do
you find your information in all this heap ? www.blinkx.com has built a
reputation as the remote control for the video Web. With an index of over 35
million hours of searchable video and more than 530 media partnerships,
including national broadcasters, commercial media giants, and private video
libraries, it has cemented its position as the premier destination for online
TV. The site pioneered video search on the net that uses a unique combination
of patented conceptual search, speech recognition and video analysis software
to efficiently, automatically and accurately find and qualify online video.
The site, which earned much of its $ 14 million revenue from advertisements in
2008-09, is pushing ahead with its indexed video database to enlarge usage. No
wonder, in August 2009, the site broke into the top 10 most popular video
sites, listed by a recent Nielsen Video Census report of video usage in the
USA. Go for it.(Source :
Business India Magazine, 18-10-2009)
News you can use :
Click to
Health — www.bolohealth.com
This site is newest portal dedicated to health and wellness information,
launched in July, 2009. The site’s home page is packed with information on
diverse aspects of heath including pregnancy and women’s heath, skin, hair and
beauty, diet nutrition and fitness, sex and relationships, children’s heath
and parenting and much more. Then there is a search engine to facilitate
information on various health conditions organised alphabetically.
Interestingly, the portal is interactive wherein users can interact with the
site’s panel of doctors and health professional, create networks and forums
with like-minded health enthusiasts and even start their own blogs on topics
of their interest.
Apart from features and quizzes prepared by medical writers, the site also has
a depository of health related slide shows and videos, health calculators and
a search facility to locate doctors and hospitals. The portal’s offering in
terms of its content and the relevance of information to the Indian audiences
makes it an interesting visit.(Source :
Business India Magazine, 18-10-2009)
Video tape of a will is legal, says Delhi HC
In
a ruling that might make settlement of a disputed will easier, the Delhi high
court on Friday admitted video recording of a will as legally admissible
evidence.
While deciding a 1985 case seeking grant of a will, the court was pleasantly
surprised to find that it had been duly videographed, making the task of the
court easier. The making of the video of the execution of the last will in
this case has made the task of this court easier in arriving at its conclusion
as to its genuineness, Justice S. Muralidhar noted in his verdict. He went on
to suggest that the Delhi government make a video recording of the entire
process of execution of a will at the time of registration in order to make
the courts’ task easier and more transparent.(Source :
Internet & Media Reports, 12-10-2009)
Ernst & Young raided amid fraud probe in Hong
Kong
The Hong Kong offices of accounting giant Ernst & Young were raided by police
as part of a fraud investigation linked to the city’s biggest corporate
collapse, local media said on Wednesday.
The search, which occurred on Tuesday, came after Ernst & Young was accused in
court earlier this month of falsifying documents to shield itself from a
negligence claim brought by the liquidators of electronics company Akai
Holdings, the South China Morning Post reported.
The lawsuit ended last week with an out-of-court settlement, with Ernst &
Young paying the liquidators, Borrelli Walsh, hundreds of millions of Hong
Kong dollars, according to the Post.
Police only confirmed the Commercial Crime Bureau of the Hong Kong Police
Force searched offices of an accounting firm Tuesday and took away some
documents in connection to a ‘suspected forgery’ case, spokeswoman Candice Siu
said. She did not identify the firm.
Siu said a 41-year-old man surnamed Dang was also arrested. The Post
identified the man as Edmund Dang, one of Ernst & Young’s partners in Hong
Kong.
Ernst & Young’s spokeswoman in Hong Kong did not immediately respond to calls
seeking comment.
Akai was liquidated in August 2000 and left creditors with debts of more than
$ 1 billion, making it the city’s biggest corporate liquidation.(Source :
Associated Press, 30-9-2009)
The Sebi
panel on disclosure and accounting standards has suggested that listed firms
must submit audited balance sheets every six months against the current
practice of doing it once a year.Wiser after
the Rs.7,136 crore Satyam Computer Services Ltd. fraud, a committee of capital
market regulator Securities and Exchange Board of India, or Sebi, on Monday
recommended a slew of measures to make financial reporting by listed firms
more transparent and less confusing for investors.The Sebi
panel on disclosure and accounting standards has suggested that listed firms
must submit audited balance sheets every six months against the current
practice of doing it once a year.“. . . . A
more frequent disclosure of the asset-liability position of companies would
assist the shareholders in assessing the financial health of the companies,
thereby helping them in making informed investment decisions,” the panel said
in a discussion paper on the Sebi website.The paper is
open for public comments till 25 September. In one of the biggest accounting
scandals in Indian corporate history, B. Ramalinga Raju, founder and former
chairman of Satyam, confessed on 7 January to having fudged the company’s
account books to the tune of Rs.7,136 crore over several years.The panel is
also in favour of reducing the time available for companies to file their
audited financial results from 60 days to 45 days for each of the first three
quarters of a fiscal year. For the last quarter and full year, firms can
continue to follow the 60-day norm.The audited
consolidated annual earnings need to be reported within 60 days instead of the
earlier 90.“When
companies report unaudited numbers, in many cases, a lot of variation is found
when final numbers are released at the end of the year and investors often
have an annual surprise. Half-yearly audit will reduce such surprises to a
great extent,” said Suresh Surana, director, Astute Consulting and Business
Services Pvt. Ltd, a Mumbai-based consulting firm.While it is
good news for investors, for auditors it will mean more work and more
stringent timelines, he said.The Sebi
panel has also suggested that from now on, companies with subsidiaries should
report only consolidated earnings and such reports should give details about
turnover, profit after tax and profit before tax on a stand-alone basis as a
footnote. Companies now report both stand-alone and consolidated results,
often confusing investors.Many firms
with subsidiaries file their consolidated results on the exchanges long after
they file their stand-alone numbers.“In the
light of the various options given to listed entities, it was seen that
several categories of financial results in respect of a particular period for
an entity were disseminated in public domain, which tends to confuse the
investors at large,” the committee said.At the end
of the last quarter, listed firms have an option to either submit un-audited
last quarter financial results within one month from the end of the last
quarter or go for consolidated audited results for the full year after 90
days.So, if a
firm opts to submit annual audited results in lieu of last quarter financial
results, there is no information available in the public domain about its
financials for about five months or more, and this could make the shares of
the firm prone to insider trading, the panel has pointed out.It has made
the audit committee of a company responsible for ensuring that the chief
financial officer (CFO) of a company “has the necessary accounting or related
financial management expertise”.Surana of
Astute Consulting said the role of CFOs has become very demanding and will be
more difficult with the international financial reporting standards coming
into effect from April 2011.Following
the Satyam scam, its chief financial officer Srinivas Vadlamani along with
Ramalinga Raju, his brother and Satyam’s former managing director B. Rama Raju,
and two Price Waterhouse auditors Srinivas Talluri and S. Gopalakrishnan were
arrested. They continue to be in jail even as investigations by various
agencies, including Sebi and the Central Bureau of Investigation, have been
on.(Source :
Internet & Media Reports, 12-10-2009)
Has a bank
turned down your loan application citing poor credit history ? Now you can
check why your credit record worked against you and seek recourse by obtaining
a copy of your credit report.All you need
to do is fill up an application form available at Credit Information Bureau
(India) or Cibil’s website, attach a draft for Rs.142 and an identity proof
and mail it to Cibil. The report would reach you within a week.Credit
scores, which are used by banks to assess an applicant’s creditworthiness is
new to India, with Cibil, which started operations around five years ago,
being the sole service provider at present, though it could soon have
competition from three other players.While only
banking records were available at present, the information provider has
started pilot projects with Bharti Airtel and Vodafone to include data related
to telephone bill payments as well, Thukral said. Going forward, information
from general insurance companies would also be included, he said.From the
database covering over 140 million accounts, the agency provides a credit
score between 300 and 900 for banks to enable the lenders to decide on whether
a loan could be sanctioned or not.In the past,
several individuals have complained that their credit records were not updated
affecting their overall score. On its part, Cibil blamed banks for not
updating the records, but customers could do little to find out how the
problem arose.But the
Cibil Credit Report, launched a month ago, would help individuals find out the
exact causes. The report provides details such as identification (Permanent
Account Number, passport number, voter identity card number), address and
contact details, along with the date when you moved in. It also provides the
list of all your bank accounts, the zero balance accounts, the approved credit
limit on your cards and the outstanding and overdue balance. Further, there
are details of all loans that you have availed, including those already
repaid.Besides,
details for the last three years for each loan is given, which provides a
month-wise status — ranging from standard, overdue, special mention account,
sub-standard or doubtful.In addition,
the report provides the list of enquiries made in recent months along with the
purpose for which an enquiry was made. While the name of the bank is not
given, the date of enquiry, the purpose (whether it is for a credit card or a
home loan) and the amount is provided.While the
process was manual at present, Cibil has tied up with a business process
outsourcing outfit, and by the end of the current financial year, would put in
place payment gateways to enable online payments.Meanwhile,
the agency today announced the launch of Cibil Locate Plus, which will help
lenders update their customer contact information. The new product will
provide information such as customer identification details, customer contact
addresses along with the reported dates and all the customer contact numbers
available in the database.(Source :
The Economic Times, 18-9-2009)
Another financial crisis inevitable : Greenspan
Another
global financial crisis is inevitable because human nature always reverts to
‘speculative excesses’ during a period of sustained prosperity, former U.S.
Federal Reserve Chairman Alan Greenspan said.“The crisis
will happen again but it will be different,” he told BBC Two’s “The Love of
Money” television series.“That is the
unquenchable capability of human beings when confronted with long periods of
prosperity to presume that that will continue,” he said.Greenspan,
speaking to the BBC to mark the first anniversary of the fall of U.S.
investment bank Lehman Brothers, said Britain will be hit worse than the U.S.
by the subsequent worldwide financial crisis and global recession because it
has a globally-focussed economy.(Source :
Business Standard, 11-9-2009)
Swiss banks offer to tax Indian, other foreign
clients
Pressed hard for giving access to details of money stashed away by Indians and
other overseas clients with them, Swiss banks have offered to tax this wealth
on behalf of the respective foreign governments.
India, where there have been long-running demands for concrete actions to
bring back the black money lying in highly secretive Swiss banks, will begin
talks in December for a new tax treaty with Switzerland so that it could get
details about the defaulters.
Besides India, a number of other countries are also said to be looking at
similar treaties, while the US recently reached an agreement for giving access
to close to 4,450 bank accounts of Americans with Swiss banking major UBS.As
an alternative to the information exchange, Swiss banks have mooted the idea
of a ‘universal withholding tax’ — wherein they would tax the earnings
generated from the wealth of foreigners deposited with them and transfer the
proceeds to the government of the concerned country — and is currently
discussing the same with the relevant authorities.
Out of this, about 694 billion Swiss francs (over Rs.30,00,000 crore) were
held by foreign private clients.
The Swiss banks have offered to charge tax directly at source on behalf of the
foreign country with which a taxation agreement is in place. The revenue would
be forwarded to the Swiss Federal Tax Administration for passing on to the
client’s country of domicile. However, the concerned client’s identity would
not be revealed.
Under this system, the foreign country would have a guarantee that all
investment income — and not just a small portion as at present — received by
their taxpayers via a Swiss paying agent would be subject to taxation.
The new tax would be of a final nature in legal terms; in other words it would
constitute a definitive tax assessment. After the bank in Switzerland has
deducted the tax, the bank client would — from the perspective of his home tax
authorities — automatically have fulfilled his tax obligations with regard to
this income”.
Another advantage would be that foreign countries could be offered the same
tax treatment for those of their citizens with bank accounts in Switzerland.
Apart from charging withholding tax, the proposed model would also levy a
retention tax on dividends, income from collective investments and capital
gains.A
domestic withholding tax system is already in place in Switzerland for many
decades, whereby 35% of the annual interest paid on a savings account in a
Swiss bank is with held and forwarded to the Swiss tax authorities.
The tax is applicable to anyone receiving interest or dividends from a
Swiss-domiciled source, irrespective of their own domicile.(Source :
Business Standard, 27-9-2009)
US, EU envoys protest India’s tax demands
In a
remarkable demonstration of solidarity in economic diplomacy, ambassadors and
high commissioners of seven rich countries have jointly protested against
features of what they term India’s ‘retrograde’ tax regime.The
ambassadors of the US, the Netherlands and Spain, high commissioners of UK,
New Zealand and Australia and head of European Commission delegation, have
written to finance minister Pranab Mukherjee seeking an appointment, while
expressing their anxiety over the ‘‘growing unpredictability in India’s tax
policies’’ that are creating ‘unquantifiable risk in investment planning.’The letter
has been marked to commerce minister Anand Sharma, deputy chairman of Planning
Commission Montek Singh Ahluwalia, cabinet secretary K. M. Chandrasekhar as
well as the secretaries of external affairs, finance, DIPP and commerce &
industry ministries.The envoys’
concern pertains to application of punitive tax liabilities on deals with
retrospective effect. Their anxiety was triggered by the $ 2-billion tax
controversy involving Vodafone’s $ 12-billion buyout of Hutchison’s stake in
Hutch-Essar, and includes tax troubles in deals like SabMiller’s acquisition
of Foster’s Indian beer business, Aditya Birla Nuvo’s acquisition of shares in
Idea Cellular from AT&T Mauritius, transfer of GECIS Global (Luxembourg)
shares by GE to a consortium of US private equity funds and Vedanta’s
acquisition of Sesa Goa shares held by Mitsui through a UK holding company.(Source :
The Times of India, 14-10-2009)
23. America’s wars
The book raises a troubling thought : What is it that,
generation after generation, impels America’s best and the brightest to lead
their country into war, with little clarity regarding national interests and war
aims, but pursued with an extraordinary passion and firepower that destroy the
lives of thousands of its soldiers and leave behind a horrendous debris of
devastated nations and cities, wrecked societies and broken peoples that take
decades to repair and heal ?
(Source: Extracts from Book Review by Talmiz Ahmad, a Diplomat,
of “Obama’s Wars” by Bob Woodward in
If the online Gujarati lexicon has proved a boon for
translators or writers, this bunch of five 20-something girls ought to take
the credit. Their love for their mother tongue is phenomenal and so is their
passion for language. Hence, with the help of technology they have made words
available at your fingertips.Sumaiya Vohra, Padma Javad, Maitri Shah, Shruti Amin and
Deval Vyas run an IT firm which handles jobs of researching and compiling
Gujarati words. After digitizing ‘Bhagwadgomandal’ — a major dictionary of
Gujarati language — their recent achievement was to put ‘lokkosh’, a Gujarati
lexicon, online.(Source : The Times of India, 29-10-2009)
Vishal Information Technologies, a BSE/NSE-listed digital
content solution company, recently unveiled www.coralhub.com, an online book
market place that offers facility to buy and sell books on the Net. Booklovers
can browse mote than 3 million titles using a customer-friendly, simple-to-use
interface that displays the book title with brief synopsis, author, discounted
price, and ISBN number. The ‘Sell Books’ section of the site allows users to
sell old books to those looking for a specific title at an affordable price.
The customers are not charged any shipping cost for delivery across India.(Source : Business India Magazine, 1-11-2009)
A couple of months back the RBI had issued detailed
guidelines on inoperative or dormant bank accounts — savings as well as
current account. It had stated that if there are no transactions in the
account for a period over two years, it is to be treated as dormant. Further,
for the purpose of classifying an account as inoperative, both the types of
transactions i.e., debit as well as credit transactions induced at the
instance of customers as well as third party should be considered.RBI now states that there may be instances where the
customer has given a mandate for crediting the interest on Fixed Deposit
account to the Savings Bank account and there are no other operations in the
Savings Bank account. Some doubts have arisen whether such an account is to be
treated as inoperative account after two years.In this connection, the Banker of the Banks has clarified
that since the interest on Fixed Deposit account is credited to the Savings
Bank accounts as per the mandate of the customer, the same should be treated
as a customer induced transaction. As such, the account should be treated as
operative account as long as the interest on Fixed Deposit account is credited
to the Savings Bank account. The Savings Bank account can be treated as
inoperative account only after two years from the date of the last credit
entry of the interest on Fixed Deposit account.(Source : Internet & Media Reports, 4-11-2009)
Recently, the excise and service tax department unveiled
the Automation of Central Excise and Service Tax (ACES), a workflow-based
application software available at www.aces.gov.in. An application-based
facility, ACES would be installed at all the Central excise centres in
Bangalore and Hyderabad initially and throughout the country by end-2009,
enabling the assessees to do all transactions with the department through the
Net. ACES would completely replace the current mode of manual filing of
returns, payment of taxes, seeking of refund and rebate on duties, helping
assessees obtain registration under Central excise/service tax and also view
and track status of their document online. Some of the services offered online
include registration, filing and tracking of documents, e-mails of
business-related issues, payment of Central excise and service tax and a help
line.(Source : Business India Magazine, 1-11-2009)
Heavy mobile phone users face a higher risk of developing
cancers, according to a landmark international study overseen by the WHO.Even though the conclusion of the research will be revealed
only later this year, a preliminary breakdown of the results found a
‘significantly increased risk’ of some brain tumours ‘related to use of mobile
phones for a period of 10 years or more’ in some studies.The conclusion of the £ 20 million study, while not
definitive, will undermine assurances that the devices are safe. Several
countries, notably France, have started strengthening warnings in this regard
and American politicians are urgently investigating the risks.The Interphone inquiry has been probing the link between
exposure to mobile phones and three types of brain tumour and a tumour of the
salivary gland. The landmark international project carried out research in 13
countries, interviewing tumour sufferers and people in good health to see
whether their mobile phone use differed. It questioned about 12,800 people
between 2000 and 2004, the report said.However, a breakdown of the latest findings shows that six
of eight Interphone studies found some rise in the risk of glioma (the most
common brain tumour), with one finding a 39% increase.(Source : The Times of India, 25-10-2009)
51 Cooking oils fail health test
Trans fat, a known trigger for heart attacks, causing
thousands of premature deaths globally every year, has been found in
tremendously high quantities in almost all popular Indian cooking oils.
Laboratory tests conducted by Delhi-based Centre for Science
and Environment (CSE) on seven vanaspati brands, 21 different brands of
vegetable oils (soyabean, sunflower, groundnut, mustard, coconut, olive, sesame
and palm), desi ghee and butter available in Indian markets found that trans fat
levels were five to 12 times higher than the world’s recommended standards in
all vanaspati brands.
According to the latest recommendations, trans fat in oil
should not exceed 2% of the total oil. However, the study found trans fat levels
to be as high as 23.7% in the case of Panghat vanaspati brand and 23.31% in the
case of Raag vanaspati. Rath vanaspati had 15.9% trans fat, Gagan had 14.8%,
Jindal had 13.7% while Gemini had 12.7% trans fat content.
Interestingly, the lowest trans fats level was found in desi
ghee and in Amul butter — 5.3% and 3.73%, respectively.
Trans fat occurs when liquid oils solidify by partial
hydrogenation, a process that stretches food shelf life and changes safe
unsaturated fat into a killer. It is known to increase bad LDL cholesterol,
triglycerides and insulin levels and reduces beneficial HDL cholesterol. Trans
fats also trigger cancer, diabetes, immune dysfunction, obesity and reproductive
problems.
In 2005, all restaurants in California went trans fat free
voluntarily. In 2008, the US government made it mandatory. The following year,
even New York banned trans fat. Scientists say an increase of 5 gm of trans fat
a day is equivalent to a 25% increased risk of cardiovascular diseases.
Shockingly, say CSE researchers, even while Indian food
regulators have accepted trans fat as a serious health concern, they are
delaying setting the standard, presumably under pressure from the edible oil
industry. As a result, India has no regulation to check the content of trans fat
in oil.
In 2004, the Health Ministry’s oils and fats sub-committee,
under the Central Committee for Food Standards, begun discussions on a standard
for trans fat. In January 2008, the sub-committee forwarded its recommendations
to the Central Committee for Standards. But the Central Committee is still
awaiting more data and information.
(Source : The Times of India, 4-2-2009)
17. HC dismisses IT Dept. appeals due to delay
The Bombay High Court recently dismissed 40 appeals filed by
the Income-tax (IT) Department challenging 40 orders of the IT Tribunal, for not
filing its papers in time. The IT Department cited shortage of stamp papers as
reason for the delay. The Court dismissed the applications which were filed
after a delay of over one year.
The Court, however, held that a delay of one year in filing
an appeal was not inordinate in case of a department like IT that undertakes
‘large-scale litigation.’
The Court however allowed those applications seeking
condonation of delay between six days to 345 days, on the ground that they
provided a ‘reasonable explanation’ for the delay in filing appeal.
IT Department contended that every time the Department
receives an order from the IT Tribunal, a scrutiny report is prepared and sent
to the higher officials for approval.
(Source : Internet, 7-10-2008)
16. Barack Obama, the President-elect of USA delivered one of the
finest speeches (extempore) on November 5, on winning the Presidential election.
It moved many with its sheer poetry. Hereunder are some extracts of the speech,
which readers would cherish to read.
Hello, Chicago ! If there is anyone out there who still
doubts that America is a place where all things are possible, who still wonders
if the dream of our founders is alive in our time, who still questions the power
of our democracy, tonight is your answer. It’s the answer told by lines that
stretched around schools and churches in numbers this nation has never seen, by
people who waited three hours and four hours, many for the first time in their
lives, because they believed that this time must be different, that their voices
could be that difference.
It’s the answer spoken by young and old, rich and poor,
Democrat and Republican, black, white, Hispanic, Asian, Native American, gay,
straight, disabled and not disabled. Americans who sent a message to the world
that we have never been just a collection of individuals or a collection of red
States and blue States.
We are, and always will be, the United States of America.
It’s the answer that led those who’ve been told for so long by so many to be
cynical and fearful and doubtful about what we can achieve to put their hands on
the arc of history and bend it once toward the hope of a better day.
It’s been a long time coming, but tonight, because of what we
did on this date in this election at this defining moment change has come to
America.
I was never the likeliest candidate for this office. We
didn’t start with much money or many endorsements. It was built by working men
and women who dug into what little savings they had to give $ 5 and $ 10 and
$ 20 to the cause.
It drew strength from the not-so-young people who braved the
bitter cold and scorching heat to knock on doors of strangers, and from the
millions of Americans who volunteered and organised and proved that more than
two centuries later a government of the people, by the people, and for the
people has not perished from the Earth. This is your victory.
And I know you didn’t do this just to win an election. And I
know you didn’t do it for me. You did it because you understand the enormity of
the task that lies ahead. For even as we celebrate tonight, we know the
challenges that tomorrow will bring are the greatest of our life-time — two
wars, a planet in peril, the worst financial crisis in a century.
The road ahead will be long. Our climb will be steep. We may
not get there in one year or even in one term. But, America, I have never been
more hopeful than I am tonight that we will get there.
But I will always be honest with you about the challenges we
face. I will listen to you, especially when we disagree. And, above all, I will
ask you to join in the work of remaking this nation, the only way it’s been done
in America for 221 years — block by block, brick by brick, calloused hand by
calloused hand.
What began 21 months ago in the depths of winter cannot end
on this autumn night. This victory alone is not the change we seek. It is only
the chance for us to make the change. And that cannot happen if we go back to
the way things were. It can’t happen without you, without a new spirit of
service, a new spirit of sacrifice.
Tonight we proved once more that the true strength of our
nation comes not from the might of our arms or the scale of our wealth, but from
the enduring power of our ideals : democracy, liberty, opportunity and
unyielding hope. That’s the true genius of America.
Yes we can change. America, we have come so far. We have seen
so much. But there is so much more to do. So tonight, let us ask ourselves — if
our children should live to see the next century; if my daughters should be so
lucky to live as long as Ann Nixon Cooper,* what change will they see ? What
progress will we have made ?
This is our chance to answer that call. This is our moment.
This is our time, to put our people back to work and open doors of opportunity
for our kids; to restore prosperity and promote the cause of peace; to reclaim
the American dream and reaffirm that fundamental truth, that, out of many, we
are one; that while we breathe, we hope. And where we are met with cynicism and
doubts and those who tell us that we can’t, we will respond with that timeless
creed that sums up the spirit of a people : Yes, we can.
* Ann Nixon Cooper is 106 years old. In this election, she
touched her finger to a screen, and cast her vote, because after 106 years in
America, through the best of times and the darkest of hours, she knows how
America can change.
(Source : Livenint, 6-11-2008)
The Securities and Exchange
Board of India (SEBI) is considering amendments to regulations with regard to
pledging of shares by promoters of listed firms to include their holding
companies too.
The regulator was examining if
promoters can be asked to disclose pledging of a holding company shares with
banks and non-banking finance companies (NBFCs).
In the aftermath of the Satyam Computers fiasco, Sebi had mandated that
promoters of listed companies disclose the amount of shares they had pledged.
The shares of holding companies were, however, kept out of the purview of this
guideline as holding companies were not listed on exchanges.
Disclosing information about
shares of holding companies involves the risk of divulging vital information
about the monetary value of their shares and the firm’s holding pattern in
subsidiary firms that are listed. Any fall in the valuation of shares of holding
companies, if pledged, would result in lenders asking the promoters to top up
their margins. In case the promoters fail to do so, the lenders may sell the
pledged shares to recover their dues.This raises the hazard of effecting a
change in ownership, and the market regulator has received representations that
such risks need to be communicated to investors. Sebi is currently examining
possibilities and consequences of any such amendment. The issue is quite complex
as holding companies are generally unlisted and, hence, don’t fall under Sebi’s
purview.
(Source : The Business
Standard, 14-3-2009)
Auditors may get powers to
refuse signing a company’s accounts if these are not found to be in order. A
special group constituted by the Institute of Chartered Accountants of India
(ICAI), the statutory body regulating the profession in India, is veering round
to the view that the Institute should push for statutory backing to such a move.
Company balance sheets could
soon acquire a new look, with the Government asking ICAI to suggest ways to
strengthen reporting norms following Satyam Computer Services founder Ramalinga
Raju’s shock confession to long-term financial fraud on January 7. ICAI sources
said the mandate from the Government was to ensure that company managements did
not use notes to accounts as a cover-up for misdemeanors.
Currently, auditors may only
qualify accounts if managements are unwilling to accept the discrepancies they
point out. “If the law mandates that the management has to incorporate the
effects of the qualifications, the situation will be completely different. This
will also help us penalise auditors for lapses,” said an ICAI source privy to
the discussions.
“Over the next few months you
will see steps such as those initiated by the US after the Enron and Worldcom
controversies,” another MCA official said.
(Source : Business Standard,
9-3-2009)
