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44 Acts of exemplary leadership
1. Be
authentic
2. Establish
and maintain credibility
3. Create an
environment of respect and trust
4. Sense and
diagnose the work environment
5.
Communicate clearly
6.
Demonstrate common sense leadership
7. Manage
8. Inspire
hard work, attention to detail, and a commitment to quality.
(Source :
Internet news wires)
43 Indian carriers save Rs.15 cr. by
switching over to e-tickets
Within a week of shifting from carbonised air-tickets to
e-tickets, the Indian air carriers have managed to save estimated Rs.15 crore,
providing them a way to cut costs after the rise in Aviation Turbine Fuel (ATF)
prices.
(Source : Internet news wires)
42 Independent directors on audit firm
boards
U.S. Treasury panelists recommended independent directors at
auditing firms to improve their governance and transparency as well as to help
protect investors.
Currently, the largest accounting firms — Deloitte & Touche (DLTE.UL),
Ernst & Young (ERNY.UL), KPMG (KPMG.UL) and PricewaterhouseCoopers (PWC.UL) — do
not have independent directors
and are at times criticised for lacking transparency.
Panelists assembled by the Treasury Department to develop
recommendations for the industry said they were “particularly intrigued by the
idea of independent board members with duties and
responsibilities similar to those of public company non-executive board
members.”
(Source : Internet news wires)
41 Audit quality
More than three-quarters (78%) of audit committee members who
participated in a recent survey commissioned by the Center for Audit Quality
rated overall audit quality ‘very good’ or ‘excellent,’ and 82% said it has
improved in recent years.
About 53% of the audit committee members agreed that overall
audit quality is ‘very good,’ while 25% described it as ‘excellent.’ About 87%
said the risk of inaccuracies in financial statements due to fraud is ‘not very
high,’ and 60% agreed that the risk declined after the passage of the
Sarbanes-Oxley Act.
Nearly two-thirds (65%) agreed that investors should have
more confidence in the markets as a result of the 2002 law.
The Internet survey of 253 audit committee members was
conducted between Jan. 7 and Feb. 20 by The Glover Park Group. Participants in
the survey represented a range of publicly-traded companies. All served on at
least one audit committee in 2007. Six in 10 served on two or more audit
committees, and half were committee chairs. About 56% began their service as
audit committee members prior to the passage of SOX.
Nearly all of the respondents (99%) said they devote more
time to their committee work as a result of SOX. About 90% said they work more
closely with external auditors.
(Source : Internet news wires)
40 PCAOB norms
The Public Company Accounting Oversight Board today adopted
rules for annual and special reporting of information and events by accounting firms that are registered with the PCAOB.
S. 102(d) of the Sarbanes-Oxley Act of 2002 provides that
each registered public accounting firm shall submit an annual report to the
Board, and also may be required to report more frequently, to provide
information specified by the Board. The reporting requirements in the new rules
are the first such requirements adopted by the Board.
PCAOB Chairman Mark Olson said, “With today’s action, the
Board is putting in place requirements that will ensure that fundamental
information about each of the more than 1,800 firms registered with the PCAOB is kept up-to-date and that each firm promptly discloses certain
significant events. With this foundation in place, the Board can also, in the
future, add other reporting and disclosure obligations that may appropriately
serve the public interest.”
The reporting framework includes two types of reporting
obligations. First, each registered firm must annually provide basic information
about the firm and the firm’s issuer-related practice over the most recent
12-month period. Information to be reported annually includes, among other
things, information about audit reports issued by the firm during the year,
certain disciplinary history information about persons who have joined the firm,
and information about fees billed to issuer audit clients, in various categories
of services, as a percentage of the firm’s total fees billed.
Second, the rules and forms adopted by the Board identify
certain events that, if they occur with respect to a registered firm, must be
reported by the firm within 30 days. These reportable events range from such things as a change in the firm’s name or contact information to the
institution of certain types of legal, administrative, or disciplinary
proceedings against a firm or certain categories of
individuals.
The Board will make each firm’s annual and special reports
available to the public on the Board’s web site, subject to exceptions for
information that satisfies specified criteria for confidential treatment.
(Source : Internet news wires)
39 Management-oriented auditing
Today, the idea of detection or verification being the
‘be-all and end-all’ of internal auditing still prevails, but with improvements.
(It is not, however, the sole reason for internal auditing, which will be
explained in this article.)
The detailed checking to detect errors and fraud is giving
way to user-friendly systems designed to do the same thing. Internal auditors
today rely on up-to-date systems, which they have tested, to guard against
improprieties.
They substitute their knowledge of risks, operating goals,
systems, and management drudgery of item-by-item checking. They have moved from
simple verifiers/attesters to the broad management-orientated internal auditing.
Attributes of management-orientated auditor. He is not an
internal adversary, but a ‘management confidante’ whose role is akin to an
“internal consultant’s”. He is not the dreaded internal sleuth but a management
ally. Even though his role might be likened to the ‘eyes and ears of
management’, this attribute need not be associated to a spy or a snooper.
Modern-day internal auditors do what the chief executive
officer, manager or supervisor of an organisation would do in appraising
operations if he (that is, the CEO/manager) himself had the time.
Management-orientated auditing fundamentals. To be an
effective modern-day management-orientated internal auditor, a person needs to
be aware of the following skills : (i) knowing the modern methods, (ii) the
people they deal with, (iii) the population or audit universe to cover, (iv) how
and when to communicate (entailing good interpersonal skills), (v) knowing the
professional audit standards for his guidelines, (vi) awareness of his audit
goals, vii) knowing the facts surrounding the things he is auditing, (viii)
being aware of the controls in those surroundings, (ix) the causes of deviations
in those surroundings, (x) what effects that could arise as a result of the
present situation and finally, (xi) being able to suggest improvements or
positive (not negative) corrections.
(Source : Internet news wires)
38 FM’s observations at CC & DG meeting
The Finance Minister of India, Mr. P. Chidambaram, in his
inaugural address delivered at the 24th Annual Conference of Chief Commissioners
and Directors General of Income Tax in New Delhi on
the 9th June 2008, congratulated the Income Tax Department for direct tax
collection of Rs.3.14 trillion.
He, however, observed that the quality of tax scrutiny could
further improve if tax authorities repose more trust on taxpayers and not view
every case generated by the computer-aided scrutiny selection with suspicion.
[Source : Press Release No. 402/92/2006-MC (24 of
2008) Govt. of India/Ministry of Finance 17-6-2008]
37 Education needed for move to IFRS
All eyes are on the Securities and Exchange Commission as it
prepares to issue a detailed roadmap this summer for the transition to
International Financial Reporting Standards, but some representatives gave hints
about what might be in that roadmap at a conference held by the Financial
Accounting Standards Board in New York.
FASB Chairman Bob Herz likened the move to IFRS, while
accountants continue to use U.S. generally accepted accounting principles, to
“trying to ride two horses at once.” He said FASB was in the process of updating
its memorandum of understanding with the International Accounting Standards
Board on convergence, but said it was up to the SEC to give a date for the
transition.
AICPA CEO Barry Melancon said a modification of the Tax Code
by Congress would be the best way to handle differences such as the
last-in/first-out inventory method, which is not supported in IFRS. “The LIFO
issue is primarily a tax issue,” he said. He sees growing awareness among
corporate CPAs of the move to IFRS. He believes the time is now to set a date
certain for the transition. “You converge, converge, converge, but at some
point, you have to adopt,” he said.
(Source : Internet wires)
36 E&Y : Merger volume plunged 30%
Total global deal volume weighed in at $ 1 trillion during
the first 19 weeks of 2008, down nearly 30% from $ 1.4 trillion during the same
time last year, according to a new analysis by Ernst & Young LLP’s Transaction
Advisory Services group.
Nevertheless, deal activity remains strong in emerging
markets. So far in 2008, total transaction volume surged more than 14%, to
$ 90.7 billion in the so called BRIC countries (Brazil, Russia, India, and
China).
The infrastructure, financial services, real estate, oil and
gas, media and entertainment and technology sectors lead overall transaction
volume, according to E&Y. Because of their currently undervalued assets, those
sectors also have the biggest chance to stimulate a market rebound, the firm
added.
(Source : CFO.com, 16-6-2008)
36 E&Y : Merger volume plunged 30%
Total global deal volume weighed in at $ 1 trillion during
the first 19 weeks of 2008, down nearly 30% from $ 1.4 trillion during the same
time last year, according to a new analysis by Ernst & Young LLP’s Transaction
Advisory Services group.
Nevertheless, deal activity remains strong in emerging
markets. So far in 2008, total transaction volume surged more than 14%, to
$ 90.7 billion in the so called BRIC countries (Brazil, Russia, India, and
China).
The infrastructure, financial services, real estate, oil and
gas, media and entertainment and technology sectors lead overall transaction
volume, according to E&Y. Because of their currently undervalued assets, those
sectors also have the biggest chance to stimulate a market rebound, the firm
added.
(Source : CFO.com, 16-6-2008)
34 Are speculative traders parasites or making gold from
dross ?
The global financial market has become ‘a monster,’
responsible for ‘massive destruction of assets,’ according to the President of
Germany and former head of the IMF, Horst Kohler. It ‘grotesquely’ remunerates
its executives, he added.
According to Kenneth Griffin, founder and head of the $ 20
billion Citadel Investment Group — one of the biggest and most successful
American hedge fund companies — international finance has been functioning on
the judgment of ’29-year-old kids’ who ‘control the capital markets of
America . . . young guys right out of business school.’
As a general rule, the margin required to buy an oil futures
contract is 10%. Pledge $ 10,000 and buy $ 100,000 worth of oil. Or why be a
piker ? Put up $ 100,000 and buy a million-dollar contract. The price goes up
one dollar five minutes later and you’ve made a million.
These are not transactions between producers and consumers,
when the classical economic rules would function. These trades, unregulated,
have virtually no useful economic role. They have become a form of parasitical
professional gambling that distorts the transactions between producers and
buyers.
Kohler compared the speculative bankers with alchemists, who
purported to make gold from dross. It is not a bad comparison, and our
contemporaries have, thus far, done better than their medieval counterparts, who
often ended burned at the stake.
(Source : Daily News & Analysis, 25-5-2008)
33 Ex-UBS staff charged over tax fraud
Two bankers, including a former employee of UBS, the world’s
leading wealth manager, have been charged by US authorities with helping an
American billionaire evade income taxes on about $200 million of assets
deposited in Swiss and Liechtenstein bank accounts.
(Source : Business Standard, 15-5-2008)
The new alchemists
82
$ diplomacy : China using investments to build political influence on world
stage
Flush with more than $2
trillion in foreign exchange reserves, China has directed its state firms to
scour the globe for opportunities. As it does so, China is playing by its own
rules, giving its firms an edge over US and other multinational companies bound
by internationally mandated restrictions intended to promote fair competition.
In addition, Brazil and
other developing countries, which once saw China as an ally, are now realising
that Chinese companies are competing on their own turf for resources and market
share. And some analysts say the US has been slow to perceive that China is
using investment to build political heft.
Chinese firms have bought
stakes in Brazil’s electrical grid; they are building steel mills, car plants in
that country. A simple formula, or deviously foresighted? Time will tell — and
soon.
(Source: Hindustan Times dated 27th July, 2010)
11 House Panel calls for harmonisation of
Provisions of Companies Bill with International Financial Reporting norms
The Standing Committee
of the Parliament, which thoroughly examined The Companies Bill, 2009, has
observed that there are several matters included in the Bill, which need
modification with a view to harmonising them with the International Financial
Reporting Standards (IFRS). The Committee has, therefore, desired that all such
matters requiring harmonisation with IFRS should be considered and appropriate
amendments may be made in the relevant proposals contained in the Bill. The
Standing Committee on Finance (SCF) presented its Twenty-First Report, which
pertains to the Ministry of Corporate Affairs, to the Parliament recently.
The Committee’s
examination of the subject and the replies of the Ministry received thereon
reveal that the following provisions/clauses of the Bill require modification
for achieving convergence with IFRS :
2(1)(b) :
(Definition of the term ‘accounting standard’)
46(2) : Utilisation of securities premium
account
49(1) : -do-
59(3) : Reduction of share capital
110(2) : Prescription of depreciation rates
117(1)
and
117(4) : Financial statements to comply with
accounting standards
201 :
Schemes of mergers and
amalgamations.
(Source : www.taxindiaonline.com, dated
8-9-2010)
The global forum of more than 90 countries, working towards
improving tax transparency and exchange of information, has launched the peer
review of member-nations, including India.
India is a Vice-Chair of the Peer Review Group, which is part
of the Global Forum on Transparency and Exchange of Information for Tax
Purposes.
The review, which forms part of the international fight
against cross-border tax evasion, would initially start with 18 jurisdictions,
including India, according to the Organisation for Economic Cooperation and
Development (OECD).
“We are very happy that the Global Forum is now moving to
launching the peer reviews which are a guarantee that there are major progress
towards full tax cooperation.
OECD, which coordinates activities on international tax
standards, said the reviews would be carried out in two phases.
In the first phase, regulatory framework (of each country)
would be assessed while the second phase would look into the effective
implementation in practice.
Regarding the review procedure, the official said that each
assessment team would be made of two countries and someone from the secretariat.
“The reports would be presented to the whole Peer Review
Group (30 countries) for endorsement and then to whole Global forum (over 90
countries) for approval,” the official noted.
Other countries that would be included in the peer review
process are Australia, Barbados, Bermuda, Botswana, Canada, Cayman Islands,
Denmark, Germany, Ireland, Jamaica, Jersey, Mauritius, Monaco, Norway, Panama,
Qatar, Trinidad & Tobago.
Apart from India, Japan, Singapore and Jersey are also
Vice-Chairs of the Peer Review Group. These countries have been chosen for a
three-year period. The Group would be chaired by France.
The review process is in response to the G-20 leaders’ call
to improve tax transparency worldwide, during their Pittsburgh Summit in
September 2009.
“This is the most comprehensive, in-depth review on
international tax co-operation ever . . . With these reviews we are putting
international tax co-operation under a magnifying glass. The peer review process
will identify jurisdictions that are not implementing the standards. These will
be provided with guidance on the changes required and a deadline to report back
on the improvements they have made,” the Global Forum’s Chair Mike Rawstron said
recently.
Meanwhile, the issue of exchanging tax information between
nations came into limelight after G-20 leaders pledged to crackdown on tax
havens during their London Summit in April last year.
(Source : Business Standard, dated 21-3-2010)
The Naxalite crime at Dantewada is a chilling reminder of how
political extremists are using tribal grievances as cover in their violent
attempt to overthrow the Indian republic.
There have been angry calls to escalate the conflict and send
in the army. But while gunfire will have to be met with gunfire, the authorities
should take care not to further alienate tribals, which is just what the
Naxalites want.
Their hero Mao Zedong once said : “The guerilla must swim in
the people as the fish swims in the sea.” Our India must try hard to win back
the confidence of tribal India.
Development activity is one answer. Business groups can play
a role here. The tribal areas are rich in minerals, but companies have cynically
ignored tribal interests in the rush to get mining rights, preferring to bribe
politicians instead. Mining camps run behind barbed wires are no answer.
Companies should reach out to tribals and try to understand their genuine
grievances, not as fashionable CSR, but as a core business strategy —even if it
costs lots of money.
(Source : Quick Edit in Mint, dated 8-4-2010)
OECD estimates $11 tn parked in tax havens
The
Organisation for Economic Cooperation and Development (OECD) has estimated
that about $11 trillion, more than 10 times the amount committed by G-20
leaders to revive the world economy, is held in tax havens, even as it
released the black list of non-cooperative nations. Estimates of the
value of assets held in tax havens range from $1.7 trillion to $11.5 trillion,
the OECD said while naming Malaysia, the Philippines, Uruguay and Costa Rica
as countries that have not agreed to implement international tax standards.
Mauritius, the country from where large amounts of investments are routed
to India, figures among the nations that have substantially implemented tax
standards. Among the countries that have committed themselves to the
internationally agreed tax standards but have not yet implemented them are
Singapore, Switzerland, Bahamas, Bermuda, British Virgin Islands, and Cayman
islands.(Source : Media
Reports & Internet, 03.04.2009)
Income-tax files throw up tough posers for political
parties
Did the
Bharatiya Janata Party spend the money collected in the name of the Gujarat
Relief Fund on itself ?Why did the
Income-tax (I-T) Department take a sudden U-turn to grant Income-tax exemption
to the Congress ? How can leaders of the Communist Party of India justify
purchase of shares in private limited companies with party funds ? And how can
political parties contest elections in Bihar when they are either bankrupt or
have meagre funds ?Questions,
and more questions, came up as DNA carried out an exhaustive analysis of the
I-T returns filed by the country’s major political parties seeking tax
exemption. These returns have for years remained secret, but thanks to recent
efforts and many spirited appeals by the Association for Democratic Reforms,
an NGO working for improving transparency in the electoral process, the
details are now tumbling out.Over the
past several days, DNA has been combing through these returns with the
assistance of experts. Several startling facts have emerged, foremost being
the callousness with which the I-T Department has been scrutinising these
returns. There are huge gaps in the claims of many political parties in their
I-T returns. How could the bankrupt RJD of Lalu Prasad contest elections in
Bihar year after year ? How was it possible for the Janata Dal (United) to
fight elections in Bihar with assets worth just a few lakh rupees ? The BJP’s
balance sheets for 2001-06 show that it collected Rs.2.68 crore as a ‘Gujarat
Relief Fund’ during this period, but not a single paisa from that was
disbursed for relief. Also, it’s not clear if this relief fund is part of
BJP’s net worth of Rs.102.70 crore in the financial year 2005-06.There were
two I-T cases pending against the Congress. Soon after the Congress-led United
Progressive Allian’The balance sheet of 2001-02 shows that the AO raised tax
demands of Rs.1.80 crore and Rs.14.79 lakh, respectively, on the two
donations. Strangely, the Congress returns do not show who donated these
amounts. In 2002-03, when the BJP-led NDA was still in power, the Assessing
Officer increased the tax demand on these donations to Rs.2.57 crore and
Rs.18.12 lakh, respectively. The Congress went in for fresh appeal to the CIT
(Appeals). Within months of coming to power, the party got a favourable order.
The CPI(M) had disclosed donations worth only Rs.27.70 lakh to the Election
Commission between 2003 and 2007, placing it among India’s poorest national
parties. DNA has published a series of reports on donations declared by
political parties to the Commission.But the
CPI(M) is among the richest parties in the country. According to its returns,
the party’s donations, a majority of which are below Rs.20,000 each, add up to
a whopping Rs.84.84 crore between 2001 and 2006.For the CPI,
the returns bring up some uncomfor-table questions. The party’s auditor, Pune-based
P. G. Bhagwat, has stated that several private equity shares running into
lakhs have been purcha-sed by CPI leaders. The auditors have, however, not
given out names of the CPI leaders in whose names the shares were purchased.
What makes things more suspicious is that 2 of the private firms, both based
in Mumbai, are shown to have closed business.(Source : DNA,
Media Reports & Internet, 06.04.2009 )
The Department of Industrial Policy and Promotion (DIPP) would soon come out with a clarification stating Press Note 1 of 2005 would not be applicable in cases where joint ventures involving foreign companies do not exist anymore. Press Note 1 makes it mandatory for a foreign company to get a no-objection certificate from its Indian partner before setting up a new business in the country in the same field. The Department is bringing out the clarification to clear confusion among foreign investors as they tend to seek Foreign Investment Promotion Board’s (FIPB’s) approval pertaining to PN-1 even if they have discontinued their partnerships.
The Income-tax (I-T) Department has sent a notice to Tata Industries, raising a demand of Rs.298 crore on capital gains on the sale of shares in Idea Cellular, held through a wholly-owned Mauritius-based subsidiary, Apex Investments, to Birla TMT Holdings in India.
In this connection, the Department depended on the Securities Exchange Commission (SEC) filings made by US-based Cingular AT&T, the merged entity of Cingular Wireless and AT&T, when it sold its shareholding in Idea.
Earlier, the international tax division of the Department had sent a show-cause notice to the company for not paying tax deducted at source (TDS) on payments made to Cingular AT&T.
The Department has also said that the transaction violates Foreign Exchange Management Act (FEMA) regulations on overseas investments by Indian companies in joint ventures and wholly-owned subsidiaries.
These investments, according to the notice, have also violated telecom regulations in India since Tata Industries held two licences simultaneously – one directly and the other through substantial holdings in Idea, which it has now exited, the report said. Officials said the Enforcement Directorate, which is responsible for enforcing exchange control laws, was also being asked to look into the issue. In a response to a questionnaire, a Tata Industries official said, “TIL has received an order from the I-T Department under Section 143(3) of the IT Act for assessment year 2007-08. TIL has filed an appeal with CIT Appeals and the hearing is awaited”.
(Source : The Times of India, 19.03.2009)
Welcoming the outcome of the G20 meeting, OECD Secretary General Angel Gurria said, “Recent developments reinforce the status of the OECD standard as the international benchmark and represent significant steps towards a level playing field. We now have an ambitious agenda, that the OECD is well placed to deliver on. I am confident that we can turn these new commitments into concrete actions to strengthen the integrity and transparency of the financial system”.
OECD’s future challenges :
Politics behind listing of tax havens : Since China and France locked horns over naming of tax havens, US President Obama had to broker a peace. And that is how Hong Kong and Macau escaped from being named as non-compliant tax havens. They were in the declaration mentioned only as China’s Special Administrative Regions. Even Swtizerland was named as a non-compliant ‘financial centre’ rather than tax haven. Three other tax havens which escaped the dragnet prepared by the OECD are Isle of Man, Guernsey and Jersey.
Three European Union Members which have been put in the gray list are Belgium, Austria and Luxembourg. All of them have protested but agreed to legislative amendments to peel off banking secrecy regulations.
(Source : Media Reports & Internet, 05.04.2009)
The Central Board of Direct Taxes (CBDT) has set up a special task force to suggest ways to prevent abuse of double taxation avoidance agreements (DTAAs), said a government official, who did not wish to be identified. The task force would look at the prevalent global best practices adopted by the US and others to see how they can be replicated here and ensure India’s tax treaties are transparent and promote information-sharing.
India’s attempts to amend the treaty with Mauritius, from where the country receives 43% of its foreign investments, have so far met with tremendous diplomatic resistance from the island nation.
The just-concluded G-20 summit on global financial crisis in London had raised the pitch on scrapping DTAAs. DTAAs are pacts between two countries that seek to eliminate double taxation of income or gains arising in one country and paid to residents or companies of the other country. The idea is to ensure that the same income is not taxed twice.
However, in some cases, these treaties are misused to avoid taxes, leading to a loss of revenue to a country’s exchequer. This is called treaty shopping, where residents of a third country take advantage of a tax treaty between two countries by routing their investments from there to avoid taxation. As per some available estimates, India loses more than $600 million every year in revenues on account of the DTAA with Mauritius.
New Delhi had also considered a limitation of benefit clause in the treaty, to prevent ineligible entities from taking advantage, the official said. Through this clause, the government can put in conditions such as listing on the local stock exchange in any of the countries, ceiling on turnover and cap on expenditure for carrying out operations in one of the contracting States.
The crackdown on tax havens is already being hailed as one of the good things to come out of the financial crisis. Rightly so. Now that punitive tax rates have disappeared, there’s no justification for errant rich states, pesky principalities and dodgy developing nations to profit from helping the rich of the world stay that way.
Looking at the threatened sanctions, it’s easy to see why the tax havens rolled over. The ‘toolbox’ of counter-measures includes cutting off aid to poor countries, withholding taxes on cross-border payments and not allowing tax deductions for business expenses in the bad lands. That’s enough to change tax evasion from a national profit centre to an economic disaster.
The G20’s success is welcome, but raises two impertinent questions. First, considering how quickly the promises of compliance came once the G20 nations got tough, why did it take so long ? The answer is simple. Politicians weren’t really keen to put substantial pressure on Switzerland, Luxembourg, Andorra, Vanuatu and the like. Tax havens — like offshore havens for gambling, prostitution and other vices — are fun to condemn but pleasant to use. Second, will the G20 nations stick to their resolve ? Post-crisis resolutions could easily prove as durable as the typical New Year variety. The newly beefed up global Financial Stability Board and the OECD’s Financial Action Task Force are supposed to ensure enforcement. They should work fast and hard to establish good habits. Otherwise, politicians and their rich friends will once again discover the need for a safe haven from populist extremists.
The Ministry of Corporate Affairs (MCA) has started registering firms under the newly-enacted Limited Liability Partnership (LLP) Act. However, a flow of applications is unlikely till tax laws are changed, say experts. At present, the Income-tax Act does not recognise LLP firms.
A limited liability entity is a hybrid of existing partnership firms and full-fledged companies. A minimum of two partners will be required for formation of an LLP and there will not be any limit to the number of partners, unlike the current limit of 20 members in a partnership firm.
On the other hand, in the traditional law on a partnership firm, every partner is liable, jointly with all other partners and also severally, for all acts of the firm done while he is a partner, irrespective of his stake.
India recognises several forms of business entities, including sole proprietorship, Hindu Undivided Families, partnership firms (which provide flexibility, but with unlimited liability jointly or severally) and companies, which have limited liability but far less flexibility and high compliance requirements.
Under the LLP model, chartered accountants, company secretaries or even advocates can set up multi-disciplinary firms that will act as ‘one-stop’ shop for people to avail of various professional services. Existing laws impose the restriction that these professional services cannot be carried out through companies, but only through partnership firms.
The Income-tax law does not recognise an LLP. There are two ways to tax an LLP : The first is to tax only the partners and not the firm. This is followed in the US under what is called a ‘pass- through vehicle.’ The second way it to tax an LLP firm on the lines of corporates.
Both the Corporate Affairs Ministry and the Parliamentary panel had recommended that companies and firms be exempted from capital gains tax for the purpose of conversion to LLP.
The ICAI Act hasn’t recognised LLP but it is being considered by the Council. A group has given draft recommendations to the Council, which would come out with a regulation soon.
(Source : Business Standard, 05.04.2009)
10 CVC Report — A plan to curb corruption
It’s a truism that corruption is pervasive in
India. An equally troubling aspect is that our leaders, administrators and civil
society are aware of the problem. And in spite of a plethora of laws to control
the problem, it only continues to grow.
Now the Central Vigilance Commission (CVC) has
issued a national anti-corruption strategy that it hopes will make a difference.
There is much to be said in favour of the report : It high-lights the issue very
well and makes a series of thoughtful solutions. But that is just about what CVC
can do. The levers that can ameliorate the problem lie elsewhere.
The matter is clearly highlighted in section III
of the report where CVC talks about the strategy to address political and
administrative corruption. The problem of funding electoral and other
expenditures of political parties is highlighted clearly. Insensitivity of civil
servants and their remoteness from citizens at large is also discussed.
The CVC’s solution to these problems is threefold.
One, strengthening political will to confront corruption; two, building ethical
competence in public officials; and finally, strengthening administrative
reforms. This is like putting the cart before the horse. If political will did
exist, then the matter would have been sorted out a long time ago.
By putting a large part of the onus on
strengthening of political will, CVC has taken the problem in a different,
psychological, direction. That is a different and intractable issue.
The solutions are fine on paper, as is the
Prevention of Corruption Act, 1988. The reality is very different and altogether
nasty.
(Source : The Mint, dated 30-8-2010)
(Can legal and administrative measures alone
eliminate corruption ?)
9 National Rural Employment Guarantee Scheme — A
joke worth Rs.1
Here’s the cruel underbelly of modern India :
Villagers in Rajasthan’s Tonk district are paid `1 per day for work under the
Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), and a State
Minister justifies it as consistent with the work done.
The political apathy and corruption that cause such
incidents are well known. But at issue are MGNREGS’ structural weaknesses which
make rooting corruption out a tough task. Why was the work not supervised for
quantity and quality ? Perhaps because, as a recent report suggests, village
leaders in the state discourage third-party supervision of MGNREGS.
Supervision is also required at higher levels — not
even the smallest amount of work justifies a wage of `1 per day. The problem is
little political will exists to undertake the high cost of monitoring
corruption. The results are conflicting responsibilities and interests for the
administration, and a cruel joke for the poor.
(Source : Quick Edit in The Mint Newspaper,
dated
30-8-2010)
[Is the cost incurred by our nation on our
non-performing MPs and MLAs and other political representatives justified ?]
8 SC — Damages for road deaths without deciding on
guilty
In two judgments last
week, the Supreme Court (SC) ruled that in road accidents, insurance companies
should pay compensation under the ‘no-fault liability’ clause in the Motor
Vehicles Act, irrespective of the circumstances of the deaths. In one appeal,
Indra Devi v. Bagada Ram, the death was invited by the negligence of the
deceased driver himself. The Rajasthan HC asked the recipients of the
compensation to return the amount with interest to New India Assurance Co. as
the claimants were not entitled to the amount. The SC set aside the High Court
order and asserted the ‘no-fault liability’ u/s.140 of the Act did not depend
upon the conduct of the driver or the victim. In the second case, Eshwarappa
v. CS Gurushanthappa, the drunk driver and his four friends died while
rashly driving to a temple without informing the car-owner. The Accidents
Tribunal denied any compensation. However, the SC ruled even in such cases,
‘no-fault liability’ cannot be avoided.
(Source : The
Business Standard, dated 23-8-2010)
7 Eight gifts that do not cost a penny !
1. The gift of
listening :
But you must REALLY
listen.No interrupting, no
daydreaming,No planning your
response.Just listening.
2. The gift of
affection :
Be generous with
appropriate hugs,Kisses, pats on the
back, and handholds.Let these small
actions demonstrate theLove you have for
family and friends.
3. The gift of
laughter :
Clip cartoons.
Share articles and
funny stories.Your gift will say,
“I love to laugh with you.”
4. The gift of a
written note :
It can be a simple
“Thanks for the
help” note or a full sonnet.A brief, handwritten
note may be rememberedFor a lifetime, and
may even change a life.
5. The gift of a
compliment :
A simple and
sincere,“You look great in
red,”“You did a super
job,”Or “That was a
wonderful meal”Can make someone’s
day.
6. The gift of a
favour :
Every day, go out of
your wayTo do something
kind.
7. The gift of
solitude :
There are times when
we want nothing betterThan to be left
alone.Be sensitive to
those times and giveThe gift of solitude
to others.
8. The gift of a
cheerful disposition :
The easiest way to
feel good isTo extend a kind
word to someone.Really, it’s not
that hard to say,“Hello” or “Thank
You”.
(Source :
Internet)
5 With Rs.75K crore stuck in disputes, Tax
Department proposes e-solutions
The Income-tax Department has proposed a national
e-management system for quick disposal of tax disputes, with more than `75,000
crore, an amount close to a fifth of the Government’s annual direct tax
collections, locked in litigations.
The new system will allow the Tax Department to
make optimum use of its workforce, reduce painful wait for the disposal of tax
appeals and free up resources quickly.
The system would track the entire life cycle of
appeals to ensure expeditious settlement through a more equitable distribution.
More than 1.78 lakh appeals were pending with the
Commissioner Appeals (Income-tax), the first level of litigation, as on February
1, 2010, with amounts locked-up running into several thousands of crores.
(Source : The Economic Times, dated 30-8-2010)
(In our view, the real issues are lack of knowledge
and expertise, productivity and integrity in the Appellate machinery and
non-adherence to the decisions of the Higher Courts leading to repetitive
appeals.)
6 An obituary of Common Sense printed in the London
Times
Today we mourn the passing of a beloved old friend,
Common Sense, who has been with us for many years. No one knows for sure how old
he was, since his birth records were long ago lost in bureaucratic red tape. He
will be remembered as having cultivated such valuable lessons as :
Common Sense lived by
simple, sound financial policies (don’t spend more than you can earn) and
reliable strategies (adults, not children, are in charge).
His health began to
deteriorate rapidly when well-intentioned but overbearing regulations were set
in place. Reports of a 6-year-old boy charged with sexual harassment for kissing
a classmate; teens suspended from school for using mouthwash after lunch; and a
teacher fired for reprimanding an unruly student, only worsened his condition.
Common Sense lost
ground when parents attacked teachers for doing the job that they themselves had
failed to do in disciplining their unruly children.
It declined even
further when schools were required to get parental consent to administer sun
lotion or an aspirin to a student; but could not inform parents when a student
became pregnant and wanted to have an abortion.
Common Sense lost the
will to live as the churches became businesses; and criminals received better
treatment than their victims.
Common Sense took a beating when you couldn’t defend yourself from a burglar in
your own home and the burglar could sue you for assault.
Common Sense finally gave up the will to live, after a woman failed to realise
that a steaming cup of coffee was hot. She spilled a little in her lap, and was
promptly awarded a huge settlement.
Common Sense was
preceded in death, by his parents, Truth and Trust, by his wife, Discretion, by
his daughter, Responsibility, and by his son, Reason.
He is survived by his
4 stepbrothers :
I Know My Rights
I Want It Now
Someone Else Is To
Blame
I’m A Victim
Not many attended his
funeral because so few realised he was gone. If you still remember him, pass
this on. If not, join the majority and do nothing.
(Source :
Internet)
4 I-T ex-official moves SC to make declaration of
foreign bank A/cs mandatory while filing returns
The Supreme Court has admitted a petition, filed by
a retired Chief Commissioner of Income-tax, which suggests that a legislation be
made to make it mandatory for taxpayers to declare offshore bank accounts while
filing annual returns. The premise behind the suggestion is to enable the
Government to take effective measures to seize wealth parked in Swiss and other
offshore bank accounts by Indian residents.
The petitioner is KVM Pai, retired Chief
Commissioner of Income tax, Mumbai and the suggestion it contains is in
consonance with the recent legislation passed in the US making it compulsory for
US residents to declare their offshore bank accounts, even if such declarations
do not yield any tax revenue. Mr. Pai also pitches for the setting up of an
intelligence unit under the auspices of the Income-tax administration to help
detect those who have illegal deposits in offshore banks and corroborate the
data with the information furnished in their tax returns.
Quoting a 1980 study carried out by International
Monetary Fund (IMF), Mr. Pai pointed out that Indians hold the largest share of
deposits in Swiss banks. Referring to other studies quoted in the petition, he
points out that there are deposits worth $ 11.6 trillion in tax havens. One such
reference relates to Raymond Baker’s ‘Capitalism’s Achilles Heel’ which holds
that half the world’s slush money lying in tax havens belongs to Indians. Mr.
Baker has recently estimated the annual capital flight to tax havens at $1
trillion per year.
Mr. Pai also states in his petition that the
governments of France and the US have been successful in securing the release of
huge unreported funds from Swiss banks belonging to US residents but the Indian
Government did not make any such serious effort except for scheduling meetings
with Swiss authorities.
Recently, due to pressure from the US and the UK,
the Swiss government agreed to disclose the names of account holders, but only
if the respective governments formally ask for it. It is understood that the
Swiss government has agreed to provide France the details of 3,000 French
customers who have deposits worth $ 4.3 billion in Swiss accounts and the US
government with details of 4,450 customers having $ 18 billion in deposits.
(Source : The Economic Times, dated 30-8-2010)
3 Return of double-dip fears — Jackson Hole
conference shows US still not out of the hole
We have come a long way from the ‘Great Panic of
2008’, but there’s a long road ahead to robust growth, confident consumer
spending and lower unemployment. That was the essence of US Federal Reserve
Chairman Ben Bernanke’s speech at this year’s Jackson Hole conference last week.
It was a rather subdued Mr. Bernanke who sought to reassure his audience, by all
accounts. Confessing candidly that “central bankers alone cannot solve the
world’s problems”, Mr. Bernanke exuded guarded
optimism about the sustainability of the ongoing recovery in the US economy. He
conceded that the recovery “appears somewhat less vigorous than we expected”,
and did not rule out the possibility of deflationary tendencies reasserting
themselves. The thrust of Mr. Bernanke’s statement, which his critics have
attacked as “Nero fiddling while Rome is burning”, was to suggest that the good
news from the US economy was not good enough. Based on the latest national
income growth data for the US, released last week, US authorities have revised
downward the annual estimated rate of growth from the more optimistic initial
number of 2.4% to a significantly lower 1.6% in the quarter ending June 2010.
Export growth is near zero, unemployment levels are high and consumer spending
is still weak. “The prospect of high unemployment for a long period of time,”
said Mr. Bernanke, “remains a central concern of policy.”
Mr. Bernanke’s prognosis suggests that the spectre
of double-dip recession continues to haunt US policy-makers. It is now clear
that the economic slowdown the US faces is more structural than cyclical. This
means there are limits to monetary policy, a fact that Mr. Bernanke openly
confessed even as he assured his audience that the US Federal Open Market
Committee (FOMC) would be open to using all the weapons in its monetary policy
arsenal to stimulate growth, prevent deflation and ensure price stability.
Ending his speech, Mr. Bernanke said, rather chillingly, “Although what I have
just described is, I believe, the most plausible outcome, macroeconomic
projections are inherently uncertain, and the economy remains vulnerable to
unexpected developments.” That is more than a sobering thought. Are Mr. Bernanke
and his Jackson Hole companions being more cautious than necessary or more
optimistic than warranted ? Perhaps the Jackson Hole audience was trying to make
up for past hubris or is afflicted by the paranoia of failed magicians. The
problem for the US is that while monetary policy is unlikely to make much of a
difference, there isn’t much room for fiscal policy either, though the Barack
Obama administration has done more than most developed country governments to
use fiscal policy to stimulate demand. The US needs a boost of confidence in
itself and an investment in its capabilities.
(Source : The Business Standard, dated
30-8-2010)
2 Tax evasion at the top
The Government gave out some interesting numbers.
The Revenue Secretary told a news conference that nearly 96% of the 32.5 million
who pay income-tax reported a taxable income of under `5 lakh; and only 2.2% (i.e.,
715,000 people) reported taxable income of over `8 lakh. Why is this
interesting ? Because when you match these with the income numbers put out by
the National Council of Applied Economic Research (NCAER), on the basis of its
household surveys, some numbers make sense while others don’t. For instance,
NCAER projected for 2009-10 that some 32.3 million households would have annual
incomes of over `2 lakh — which is a reasonably good fit with the total number
of people paying income-tax (the threshold being taxable income of Rs.1.6 lakh).
When you look at the high-income category, however,
the numbers diverge hugely. NCAER says that in 2009-10, there should have been
3.8 million families with annual income of over Rs.10 lakh, a figure that is
more than five times the 715,000 people who report income over `8 lakh (on the
plausible assumption that taxable income of `8 lakh is broadly compatible with
total income of Rs.10 lakh, because of the various tax exemptions available).
Admittedly, some households have more than one income earner, so it could be a
case of clubbing the incomes of husband and wife. Still, it would appear that,
while there is probably not much tax evasion by the middle class, those in the
upper class continue to be predominantly tax evaders.
The good news is that the extent of evasion may be
coming down — sharply. Back in 2004-05, only 122,000 people reported taxable
income of over Rs.10 lakh, whereas nearly six times that number now report
taxable incomes of over Rs.8 lakh. While incomes have been rising rapidly at the
top of the pyramid, few would have expected that India’s highest earners would
multiply so rapidly over five years. In other words, tax compliance has improved
dramatically — but even then, the scope for much greater compliance exists.
That conclusion would be contested by Surjit Bhalla,
who has argued that the rich are the most tax compliant group in the country
(with only 50% practising evasion !). He has used National Sample Survey data to
contend that there were 250,000 people with incomes over Rs.10 lakh in 2004-05
(when there were only 122,000 people reporting that amount of tax income), and
that the population of high-income earners would have gone up to 360,000 in
2006-07. On that kind of track, the number by 2009-10 should have been about
620,000. But since we have 715,000 reporting taxable income of `8 lakh and more,
it looks like 100% tax compliance by the high-rollers —which strains credulity.
Still, if compliance is improving, thank the spread
of tax deduction at source, and the cross-matching of computerised data with
regard to credit card spends, mutual fund investments and the like. But if one
were to assume that three-box cars are bought by only those in this income
bracket, there is another data point worth looking at — because 350,000
three-box cars were sold in the country last year. On the assumption that most
people buy a new car after five years, this figure too suggests many more
high-income people than exist in the tax records.
The point of focussing on this group is that 60% of
all income-tax revenue (or Rs.72,000 crore) comes from these 715,000 people ! If
the number coming into this category were to double, income-tax collections
would go through the roof.
(Source :
The Business Standard, dated 4-9-2010
— Weekend
Ruminations by T. N. Ninan)
Miscellanea
Raman Jokhakar
Tarunkumar Singhal
Chartered Accountants
15 Centre moves SC on levy of service tax on
rental income
The Centre today sought the Supreme Court’s intervention in
deciding the constitutional validity of the Finance Act, 2007 that empowers the
Government to impose service tax on rental income from commercial properties.
A Bench headed by Justice B. N. Agrawal while seeking reply
from Retailers’ Association of India, Confederation of Real Estate Developers’
Associations of India and Multiplex Association of India
on the transfer petition filed by the Centre also stayed proceedings before
various High Courts.
The Centre through the Department of Revenue has sought
transfer of petitions pending before the High Courts of Bombay, Madras, Kolkata,
Punjab and Haryana and Kerala on the ground that there was a likelihood of
conflicting decisions.
According to the petition, retailers, real estate developers
and multiplex owners had filed writ petitions before various High Courts
challenging levy of service tax on leasing, letting, renting or any other
similar arrangement in respect of immovable property for use in furtherance of
business or commerce.
It further said that they had challenged the constitutional
validity of the Finance Act, 2007 on the ground that it was beyond the
legislative competence of the Union and thus Parliament cannot levy
such a tax.
(Source : Internet, 19-8-2008 —
Also widely reported in print media)
1 SC asks tax
authorities to seek technical help
The Supreme Court has asked the Central Board of
Direct Taxes (CBDT) and other tax authorities to get help of technical experts
while deciding income-tax liability of cellular service providers.
The order came after a batch of appeals by
income-tax authorities against the ruling of the Tribunal favouring Bharti
Cellular Ltd. and other service providers. The question was whether manual
intervention was involved in the technical operations by which cellular service
providers were given the facility by BSNL/MTNL for interconnection.
A related question was whether TDS was to be
deducted by service providers when they paid interconnect charges/access/port
charges to BSNL.
“The problem which arises in these cases is that
there is no expert evidence from the side of the Department to show how human
intervention takes place, particularly, during the process when calls take
place,” the order passed by a Bench headed by Chief Justice S. H. Kapadia said.
“We are only highlighting these facts to emphasise that these types of matters
cannot be decided without any technical assistance available on record.”
The Supreme Court underlined “with the emergence of
our country as one of the BRIC countries and with the technological advancement,
matters like the present one will keep on recurring and hence, the time has come
when the Department should examine technical experts so that the matters could
be disposed of expeditiously and further it would enable the Appellate forums,
including this Court, to decide legal issues based on factual foundation.”
(Source : The Business Standard, dated
23-8-2010)
14 Cyber News
Design flaws in bank sites
A
majority of websites suffer from design-related flaws which could make their
customers vulnerable to cyber-theft, according to a recent study by Atul Prakash,
an Indian-American professor at the University of Michigan and his doctoral
students, Laura Falk and Kevin Borders. The team surveyed web-sites of 214
financial institutions and found that three-fourths of them had at least one
design flaw. Significantly, these were not flaws that could be fixed with a
patch, but stemmed from the very flow and layout of the sites, the researchers
revealed “Our focus was on users who try to be careful, but unfortunately some
bank sites make it hard for customers to make the right security decisions when
doing online banking,” Prakash said. Such flaws leave cracks in security that
hackers could exploit to gain access to private information and accounts, the
study noted.
Studying abroad
A
California-based education information provider recently launched
www.studyplaces.com, targeted primarily at Indian students who form a chunk of
overseas universities in many parts of the world. The portal disseminates
information, connects and guides students to over 2,00,000 courses from 10,000
colleges worldwide including universities in India, the US, UK, Europe,
Australia, New Zealand, Singapore, Canada and West Asia. It utilises the
expertise of professionals, many of them alumni of Stanford, IIMS, IITS and
Wharton, to offer guidance to students looking for higher study options. “The
portal is an attempt to help students make the right career choice based on
credible information and professional counseling,” says founder Amitabh Nagpal.
It offers platform for career counselling and college planning and helps
students find, compare, evaluate and select the right course and institution. In
addition, it provides free online counselling and free practice tests for AIFEE,
GMAT, IIT-JEE, TOEFL, etc. The site has a team of 20 counselors, each
specialising in one or more educational domains, which use tools such as
psychometric tests to ascertain students’ aptitude and interests. The students
can also access information on fee structures, expenses involved, life on
campus, and application procedures.
Saving time
The
Wall Street’s www. ExecutiveLibrary.com is an amazing site for those interested
in accessing information for research and other uses. Since early 1990s, the
world has been using the Net to research finance, stocks, economic trends,
demographics, and industry information. And the problem has been not a lack of
information but a surfeit of data, with fewer and fewer sources providing useful
information. To address this, the portal has created a public directory that
lists only the most relevant business sites. Currently, the portal has links to
1,500 useful sites where users can read news, research companies, get answers to
legal questions, hunt for jobs, look up medical information, download software,
and find other information. In addition to a content-heavy homepage, which lists
hundreds of news and reference sources, users can avail the research link which
provides access to the government, financial market research, statistics,
economy, business and law, marketing and advertising information. In that sense,
it’s a great time-saver for those who use the Net for professional and credible
information on a regular basis.
(Source
: Business India, 21-9-2008)
13 Delhi High Court convicted
Senior
Advocates
The Delhi High Court convicted senior advocates R.
K. Anand and I. U. Khan in the BMW expose case for obstructing administration of
justice. “They are senior advocates and they did not tender either conditional
or unconditional apology for their conduct in the BMW case,” a Division Bench of
Justices Manmohan Sarin and Madan B. Lokur said, in their 112-page verdict in
the contempt case relating to the expose.
Recommending that they be stripped of their
designation of senior advocate, the Court asked them not to appear in the Delhi
High Court and its subordinate Courts for the next four months as punishment.
The Bench also imposed a fine of Rs.2,000 on each
of them and rapped them for their ‘irresponsible’ behaviour, saying “we are not
dealing with young lawyers. Both are seasoned lawyers and such conduct was not
expected of them.
(Source : Internet, 21-8-2008
— Also widely reported in print media)
12 Foreign cos must report exempted income to I-T.
Taxmen will now be able to keep a closer tab on
income exempt under foreign tax treaties. The Central Board of Direct Taxes (CBDT)
has said that any income arising in India, but exempt from the country’s tax
laws, because of a double tax avoidance treaty, must be first reported to the
Tax Department before availing the exemption.
Even if the income is taxable outside India, the
assessee must include it in the total income chargeable to tax in India, the
board has said in a recent notification. “Relief will be granted in accordance
with the method for elimination or avoidance of double taxation provided in such
agreement,” the Notification added.
With a large number of foreign companies operating
in India, the Department has found that there are many cases where either they
are not reporting their exempt income or underreporting it.
While the assessee can avail the same foreign tax
credit even now, the Tax Department will get a much better understanding of his
earnings, a Finance Ministry official explained.
The Department’s missive, however, only relates to
earnings of resident companies and individuals. Tax experts are of the view that
with increased movement of workers and the cross-border nexus between companies,
the Notification will help the Department get a better understanding of the
income of such assessees.
“It looks like the Department’s intention is to get
a complete picture of a person’s global earnings regardless of the benefits
under the tax treaties,” Amitabh Singh, partner Ernst and Young said. The
clarification is the latest in the CBDT’s efforts to plug loopholes in the
country’s international tax laws given that a large number of MNCs have set up
shops in India through back offices and subsidiaries and are availing benefits
under tax treaties.
(Source : Internet, 8-9-2008)
11 Plastic containers may be
deadly for your brain.
Plastic containers may be deadly for your brain.
Canadian researchers have found that Bisphenol A (BPA), the chemical used in
making plastic containers, might be responsible for impairing many brain
functions such as learning and remembering.
They also fear that it could be a factor behind
Alzheimer’s, schizophrenia and depression.
BPA is globally used in making plastic water
bottles, baby food bottles, food containers and dental prostheses.
In their study, the researchers at the University
of Guelph found that BPA might be leaking into the solid or liquid foods kept in
the plastic containers.
When these foods and liquids are consumed, they
said, the chemical might be getting into the human system, disrupting
communication between brain neurons which is vital in understanding and
remembering.
(Source : The Times of India, 5-9-2008)
10 MNCs seek detectives’ help to
check IPR violations
In order to provide brand protection and curb
duplication of products, IT, pharma, electronics, telecom and electrical goods
manufacturing giants are approaching private detectives to safeguard them
against Intellectual Property Rights (IPR) violation.
Detective agencies have also been approached by
national and international industry associations to extend help for safeguarding
their products.
According to an ongoing study commissioned by the
Ministry of Human Resource Development, the estimated losses due to piracy in
motion pictures is 7.3%, sound recordings and musical compositions 24.5%, books
21%, and the highest is in the software domain, reaching 292.8%.
While recent trend of piracy has badly affected
Indian film and musical industry, we are doing our best to bring this fake
business to end.
To recommend improvements in the working of the
Intellectual Property (IP) regime in India in terms of IT enabling and
networking of operations and enhancing human resource capabilities, the
Federation of Indian Chambers of Commerce and Industries (Ficci) and Department
of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry,
have also joined hands to set up a working group.
DIPP has taken note of Ficci’s recommendations and
it has been decided to digitise all the patents granted till date and open it up
for online public access.
Showing concern over the trend, the patent office
has started e-filing of patent and trademark applications through its website
http://www.patentoffice.nic.in.
The term ‘Intellectual Property’ reflects the idea
that its subject matter is the product of the mind or the intellect. These could
be in the form of patents, trademarks, geographical indications, industrial
designs, layout-designs (topographies) of integrated circuits, plant variety
protection and copyright.
According to the data released by the industries
body, the filing of patent applications has increased from 4,824 in the year
1999-2000 to 28,882 applications in the year 2006-07. The grant of patents has
shot up from 1,881 in 1999-2000 to 7,359 in 2006-07.
“Although companies and administration are doing
their best to stop it, we feel that a separate wing from the government to
tackle this crime would help us and the firms,” an expert said.
(Source : Business Standard, 25-8-2008)
9 Bridging the GAAP
The Asian Crisis in the 1990s made the world sit up
and recognise the need for corporate governance as a mechanism to safeguard
investments in public enterprises and heightened the importance of having a
global Generally Accepted Accounting Principles (GAAP) for comparability and
transparency of financial information across continents. The US accounting
scandals of Enron, Worldcom, Adelphia or the European scandals of Ahold or
Parmalat enforced the view that a framework of governance and global GAAP needs
to emerge to safeguard capital in companies, which in the digital age is without
the protection of political or physical borders.
David Tweedie, the Chairman of International
Accounting Standards Board said in the Europe Club of Canada on 25 April 2008
that : “In the midst of the Asian financial crisis, several companies whose
financial statements seemed to indicate that they were secure, suddenly went
bankrupt casting great doubt on the veracity of the statements and in particular
the national accounting standards in use. While it is important not to overstate
the role of accounting standards and practices in precipitating the Asian
financial crisis, it is clear that confidence in financial reporting practices
in that region disappeared.” “As a consequence, financing, much of it short term
in nature and not subject to any capital controls, was withdrawn. Interest rates
rose, investment ground to a halt, and an economic slowdown followed. In the
aftermath of the crisis, it was unlikely that confidence in the existing or any
revised national standards could be restored rapidly, indeed, if ever. The
obvious choice was to move to an internationally accepted set of standards.”
Since 2001, the mission given to IASB was to create a single set of
principles-based global financial reporting standards that are used throughout
the world’s capital markets. The overriding principle is that irrespective of
the country of origin of a transaction, whether in New York, New Delhi, or
London, the accounting should provide a consistent answer to the same economic
transaction.” The Institute of Chartered Accountants of India, National
Committee of Accounting Standards and the government of India have affirmed that
India will transition into International Financial Reporting Standards (IFRS) as
the accounting principles for the country from April 1, 2011. Entities which are
either listed companies or companies filing for a listing or companies having
over a threshold of sales of 100 crore or public debt of over 25 crore are
covered by the first wave. These are called public interest entities. The small
and medium enterprises (SMEs) will be covered at a later date which is yet to be
decided.
The dilemma — incremental or big bang approach ?
Nations around the world are faced with the dilemma of whether their national
accounting standards should be aligned to IFRS or take the big bang approach of
adopting IFRS as written by IASB and follow standards that are globally applied,
irrespective of the economic environment.
In India, a debate is raging amongst various
stakeholders, including the government whether we should converge or adopt IFRS.
While the former would mean that we amend and modify IFRS standards to be
relevant to India, the latter would mean that we adopt IFRS standards as they
are written by IASB to be the accounting language of India. ICAI in their
decision paper on convergence has stated, “Convergence with IFRS — all at one
approach — that IFRS will be adopted for public interest entities for accounting
periods starting on or after 2011”. But doubts are now arising due to differing
views of various stakeholders on how the roadmap to 2011 will be drawn.
IFRS with modifications by various countries would
result in multiple and possibly conflicting versions of IFRSs globally. A
misplaced sense of national pride or intense pressure from industries make
countries amend or alter IFRS principles to suit the national requirements. This
becomes IFRS as applied by a specific country as opposed to IFRS as issued by
IASB. This would defeat the purpose of global convergence, which is to move
toward a single set of high-quality accounting standards for use throughout the
world. This rationale is reflected in the US Securities and Exchange
Commission’s (SEC) announcement of the elimination of the requirement for
foreign private issuers to reconcile their IFRS financial statements to US GAAP.
The SEC has stated that the reconciliation requirement is being dispensed with
only for financial statements prepared using IFRSs as issued by the IASB so as
“to encourage the development of IFRS as a uniform global standard, not a
divergent set of standards applied differently in every nation”.
We have this wonderful opportunity to move into a
globally acceptable financial principles, which is considered comprehensive and
followed by over 120 countries in the world. By 2011, IFRS is expected to be
followed by 150 countries. How can we call ourselves a global power and not
adopt global standards as our own ? In due time, by virtue of India’s economic,
intellectual and geo-political weight, we will be a principal player in
formulating these standards.
Way forward the roadmap to 2011 needs to be
comprehensive as it has been detailed in the ICAI’s concept paper on convergence
with IFRS in India. Out of the 38 effective IFRS standards, there are only 2
standards in India that have no difference with IFRS and six have minor
differences. Eighteen standards of IFRS will need a level of technical
preparedness by the industry and the professionals for implementation or would
have conceptual differences with the Indian standards. Ten standards need
changes in laws and regulations for them to comply with the principles of IFRS.
The effort to harmonise is still huge as there has to be a consensus amongst the
various stakeholders including the government as some of the provisions of the
Companies Act or other Acts like the RBI Act etc., need to be amended for
compliance with IFRS principles.
The tax laws, companies law and other laws for specialised industries including banking, insurance etc., need to be reviewed to determine the differences with IFRS as we currently apply them and mechanism to deal with them on convergence.
Though IFRS has been written with the intention of global application, we would also need to evaluate whether under the Indian economic environment, application of any specific IFRS principle would make our industries vulnerable to the results and if there is a compelling reason that such applications will be inappropriate in India. Such deviations should be few and rare.
There is still a long road ahead. We need all the stakeholders – the industry, ICAI, government, RBI, SEBI, tax authorities and other regulators to engage in the transition process to IFRS. The debate we need to engage in is to holistic ally review, if any, application is inappropriate for India and address such issues in the transition provisions including those relating to first time adoption. The thought behind actions needs to be clearly articulated and debated. We have some time ahead and can meet the deadline of 2011, but clarity of thought and speed of action would be of essence.
We need all stakeholders – industry, ICAI, government, RBI, SEBI, tax authorities – to engage in the transition to IFRS, says Kaushik Dutta.
(Source: BusinessStandard,25-8-2008)
8 Large US banks may fail amid
recession
Credit market turmoil has driven the US into a
recession and may topple some of the nation’s biggest banks, said Kenneth Rogoff,
former chief economist at the International Monetary Fund.
“The worst is yet to come in the US,” Rogoff said
in an interview in Singapore. “The financial sector needs to shrink; I don’t
think simply having a couple of medium-sized banks and a couple of small banks
going under is going to do the job.”
The US housing slump has triggered more than $ 500
billion of credit market losses for banks globally and led to the collapse and
sale of Bear Stearns Cos, the fifth-largest US securities firm. Rogoff said the
government should nationalise Fannie Mae and Freddie Mac, the nation’s biggest
mortgage-finance companies, which have lost more than 80% of market value this
year.
US Treasury Secretary Henry Paulson asked Congress
on July 13 for emergency powers to inject “unspecified” amounts of government
funds into the companies if necessary.
Banks repossessed almost three times as many US
homes in July as a year earlier and the number of properties at risk of
foreclosure jumped 55%, according to RealtyTrac Inc, an Irvine, California-based
seller of foreclosure data. US builders probably broke ground on the fewest
houses in 17 years last month, according to a Bloomberg News survey.
Rogoff told a conference in Singapore that the
credit crisis is likely to worsen and a large bank may fail, Reuters reported
earlier. Rogoff, 55, is a professor of economics at Harvard University. He was
the IMF’s chief economist from August 2001 to September 2003.
The world’s largest economy is already in a
recession, and the housing market will continue to deteriorate, Rogoff said. The
US slowdown will last into the second half of next year, he said, predicting a
faster recovery in Europe and Asia.
The Federal Reserve, which has left its key
interest rate at 2% after the most aggressive series of rate reductions in two
decades, risks raising inflationary pressures, he said.
(Source : Bloomberg, Singapore — Business
Standard, 20-8-2008)
7 Two-thirds US firms paid no
income tax in 1998-2005
Two out of every three United States corporations
paid no federal income taxes from 1998 through 2005, according to a report
released by the Government Accountability Office, the investigative arm of
Congress.
The study, which is likely to add to a growing
debate among politicians and policy experts over the contribution of businesses
to Treasury coffers, did not identify the corporations or analyse why they had
paid no taxes. It also did not say whether they had been operating properly
within the tax code or illegally evading it.
The study covers 1.3 million corporations of all
sizes, most of them small, with a collective $ 2.5 trillion in sales. It
includes foreign corporations that do business in the United States.
Among foreign corporations, a slightly higher
percentage, 68%, did not pay taxes during the period covered — compared with 66%
for United States corporations. Even with these numbers, corporate tax receipts
have risen sharply as a percentage of federal revenue in recent years.
The GAO study was done at the request of two
Democratic Senators, Carl Levin of Michigan and Byron L. Dorgan of North Dakota.
In recent years, Senator Levin has held investigations on tax evasion and urged
officials and regulators to examine whether corporations were abusing tax laws
by shifting income earned in higher-tax jurisdictions, like the United States,
to overseas subsidiaries in low-tax jurisdictions.
Senator Levin said in written remarks that “this
report makes clear that too many corporations are using tax trickery to send
their profits overseas and avoid paying their fair share in the United States.”
But the GAO said that it did not have enough data to address the role of what
some policy experts say is a crucial factor in profits sent overseas.
That factor, known as transfer pricing, involves
corporations charging their overseas subsidiaries lower prices for goods and
services, a common move that lowers a corporation’s tax bill. A number of
corporations are in transfer-pricing disputes with the Internal Revenue Service.
Either way, the nearly 1,000 largest United States
corporations were more likely than smaller ones to pay taxes.
In 2005, one in four large United States
corporations paid no taxes on revenue of $1.1 trillion, compared with 66% in the
overall pool. Large corporations are those with at least $ 250 million in assets
or annual sales of at least $ 50 million.
At a basic corporate tax rate of 35%, all the
corporations covered in the study in theory owed $ 875 billion in federal income
taxes. But because the tax code allows corporations to claim legally an array of
deductions, write-offs, operating losses and tax credits, the actual taxes paid
were much lower.
Joshua Barro, a staff economist at the Tax
Foundation, a conservative research group, said that the largest corporations
represented only 1% of the total number of corporations, but more than 90% of
all corporate assets.
The vast majority of the large corporations that
did not pay taxes had net losses, he said, and thus no income on which to pay
taxes. “The notion that there is a large pool of untaxed corporate profits is
incorrect.” In 2004, a GAO study said that 7 in 10 of all foreign corporations
doing business in the United States, or foreign-controlled corporations, paid no
taxes from 1996 through 2000, compared with 6 in 10 United States corporations.
(Source : Business Standard, 14-8-2008)
6 Compliance Report of Transfer
Orders, 2008 — Scant respect for Government — CBDT directions
CBDT has noticed that nearly 50% of the officers
transferred are not relieved so far and so have not joined their new places of
posting. This is non-compliance of Government’s order and has been viewed
seriously by the Competent Authority.
Board notices that many officers are not being
relieved by CCIT (CCAs)/DGsIT on the pretext that their representations are
pending before the Board. Board wants the field to note that as per Para 11 of
Transfer Policy, further representations from the officer would be considered
only after the officer joins his place of posting and applies through proper
channel and such petition shall not confer any right whatsoever on the officer
to continue on their previous post in defiance of Government’s orders. Failure
to comply with the Governments orders would lead to actions both against the
non-complying officer as well as their Controlling officer.
Now the CBDT directs that, all officers under order
of postings may be relieved immediately and a consolidated report of their
relieving as well as joining dates may be sent to the Board by 18th August 2008
without fail. [CBDT F.No.A-35015/44/2008-Ad.VI, dated 13th August, 2008]. This
is today — we are almost sure that disobedience will continue. How can these
disobedient officers instill any discipline in their subordinates ?
Disobedience of the Board is not confined to CBDT;
CBEC is no better. On 16th August 2008, Saturday — a holiday for the CBEC, the
Board issued a transfer order of 11 Joint Commissioners/Additional
Commissioners. What was the urgent need for issuing this order on a Saturday,
especially when the whole of Government of India was on a vacation with three
holidays ? (CBEC office order No. 195/2008 dated 16-8-2008)
(Source : Taxindiaonline.com)
5 India’s Best Kept Secret — The
Official Secrets Act — An ‘Invalid’ Act ?
The State’s regressive omerta code, was never
notified. It isn’t actually a law !
Here’s the untold story of the Official Secrets Act
(OSA) 1923: It was passed in April 1923 by the Legislative Council. The Act was
never notified in the Gazette of India.
To become law, every Act must be notified in the
Gazette of India. The National Archives of India, Ministries of Home and Law say
they are
not in possession of any such Notification. None exists in the 1923 Gazette of
India either.
The OSA was amended twice, in 1951 and 1967, and
made more stringent. But only the amendments were notified in the ‘Extraordinary
Gazette of India’. Legal luminaries say that if an Act is not notified, it is an
‘invalid’ law.
Why The British wanted OSA :
In 1923, Bolsheviks could fester unrest in India
directly or indirectly. They have “increased our troubles on the North West
Frontier and Waziristan”. This could “lead to a rupture with Afghanistan”.
Prominent ‘Mussalman’ leaders have shown sympathy with the Afghans. Unwise to
disregard possibility of ‘fanatical Muslims in India’ acting in sympathy with
them. Increased Japanese activity in Burma calls for better means for ‘obtaining
information’, Post- (First World) War enemy powers are out to ferret secrets. In
the event of a war between Japan and America, the former may try to arouse
Indian feelings against the British Empire. There are no existing laws to deal
effectively with such activities.
(From the note prepared by General C. W. Jacob,
Chief of General Staff, in 1921. Document sourced from the National Archives of
India, Delhi.)
“I checked all the dates from 1923 and no such
Notification for the OSA exists.” Maj. Gen. V. K. Singh Ex-Raw.
“It’ll jeopardise any more future prosecutions
under the OSA. Technically, it’ll all be invalid.” Hosbet Suresh, Ex-Judge,
Bombay HC.
“If it has not been notified, the very validity of
the Act can be challenged in Court.” Rajindar Sachar, Ex-CJ, Delhi HC.
“After the RTI Act came into force, the OSA has no
place . . . even its relics cannot remain.” Veerappa Moily, Congress pointsman.
“The law was perpetuated by the bureaucracy, to
insulate itself from public scrutiny.” Aruna Roy, Ex-NAC Member.
In 2007, the Administrative Reforms Commission
(ARC) headed by senior Congress leader Veerappa Moily finally decided to bite
the bullet on the draconian Official Secrets Act (OSA). It put it on record that
an Act “enacted in the colonial era” (1923) had no place in democratic India.
The controversial piece of legislation had to either be amended or scrapped. But
as is wont to happen, a committee of secretaries set up later by the upa
Government examined and rejected the Moily panel recommendation. The status
now : a Cabinet subcommittee is taking a
second look at the suggestions put up by the ARC.
Meanwhile, research into the origins of the OSA has
thrown up a shocker, putting a question mark on the very validity of the Act.
Documents accessed under the RTI Act from the Ministries of Home Affairs (MHA)
and Law and Justice, as well as the National Archives of India (NAI), show the
OSA was never notified in the Gazette of India—a mandatory requirement to make
any Act a law.
(Source : An article by Saikat Datta, Outlook
India
— From Internet)
4 Revenue Department tells FIPB to
reject telecom FDI from tax havens
In another instance of Indian tax authorities
adopting a hard-nosed stance to prevent abuse of tax avoidance treaties, the
Revenue Department recently opposed a proposal of a Cyprus-based company to
increase its stake in an Indian telecom services company from 40% to nearly 74%.
The Foreign Investment Promotion Board (FIPB)
rejected the proposal on security concerns and the Revenue Department is saying
the source of funds is not clear.
Advising FIPB, the nodal agency for approving
foreign investment proposals, to reject the proposal, the Department pointed out
that gains from the future sale of the shares in question would not be taxable
in India due to the double taxation avoidance agreement (DTAA) with Cyprus.
The Revenue Department’s stance assumes importance
given that India is trying to renegotiate the Cyprus treaty with an eye on
taxing capital gains taxable in the jurisdiction in which the income is earned.
This is not the first instance of such an effort by India. In fact, it has
already reworked the DTAA with the United Arab Emirates and removed the capital
gains tax exemption clause. India is also trying to renegotiate a similar treaty
with Mauritius.
It may be recalled that the Tax Department is
currently in litigation with Vodafone on paying withholding tax for acquiring
Hong Kong-based Hutchison’s stake in a Mauritius-based outfit that held a
majority stake in Indian mobile service provider Hutch-Essar.
FDI is rising sharply from Cyprus and Mauritius,
compared with inflows from developed countries like the United States and the
United Kingdom. From an inflow of $ 58 million in 2006-07, FDI from Cyprus rose
sharply to $ 834 million in 2007-08. In the first two months of the current
fiscal, FDI from Cyprus stood at $ 177 million.
Similarly, FDI from Mauritius rose from $ 6.3
billion in 2006-07 to $ 11 billion the next year. In the first two months of the
current fiscal, FDI from Mauritius stood at $ 2.85 billion.
With overseas companies structuring their
investments to maximise benefits and minimise tax cost by routing investments
through tax havens, preventing abuse of tax treaties is high on the agenda of
the Indian Revenue authorities.
(Source : Business Standard, 19-8-2008)
Two Indian companies — Reliance Industries (RIL) and Tata Consultancy Services (TCS) — figure in the financial disclosure report submitted by Lawrence Summers, Director of President Barack Obama’s National Economic Council. The disclosure document, submitted on March 23, showed how Summers and other senior advisors to Obama earned large salaries from the companies they were involved with and served in lucrative positions on corporate boards.
The documents show that RIL paid Summers $187,500 in 2008 as ‘advisory board fees’. Asked about the disclosure, an RIL spokesperson said, Summers, besides other international luminaries, was part of the Reliance Industries International Advisory Board and the Reliance Innovation Leadership Council that guided the company on global issues. Summers had resigned from both these commitments before he joined the US Government on January 20, the spokesperson added. Summers’ disclosure form, which covers his income in 2008 and the first three months of this year, also shows that TCS paid him $67,500 for a ‘speaking engagement’ on September 21, 2008.
Summers also received ‘speaking fees’ of $67,500 from JP Morgan, $45,000 from Citigroup, $135,000 from Goldman Sachs and $67,500 from Lehman Brothers, which went bankrupt in the mortgage crisis last year. In fact, Lehman, which declared bankruptcy in September, paid Summers $67,500 for an engagement on July 30, the filing showed. Summers, a former US Treasury Secretary and Harvard University President, received $2.7 million in speaking fees from a range of organisations and companies.
77 Stress management
A stressor is a
situation, thought or stimulus that triggers your stress response. We all need a
little stress in our lives. Good stress makes us feel alert and stimulated. But
chronic, acute stress can cause anxiety, depression and disease. Different
people may respond differently to the same stressor. It’s important to identify
what stressors cause you distress. The more you learn about your stressors, the
more likely you are to diminish, control or eliminate them.
When you’re
stressed, you lose sleep. When you lose sleep, you feel more stressed. Sleep
deprivation doesn’t just make you tired. It interferes with the natural pattern
of stress hormone production . . . . Exercise protects the body against the
effects of physical and psychological stress. But there are some caveats. First,
to reap anti-stress benefits, exercise should be aerobic. Weight training has
important health benefits, but it’s not a great stressbuster. Second, you will
get more benefits if you exercise in bouts of at least 30 minutes. This is how
long it takes for the brain to produce endorphins — those natural opiates that
give you the ‘jogger’s high’.
Third, you might
not benefit if you don’t want to exercise. When animals are forced to exercise,
they become more — not less — stressed. Take a deep breath. This is one of the
oldest stress management tips around. Take a deep breath and exhale — slowly.
When you inhale, you speed up your sympathetic nervous system. When you exhale,
you slow it down — a minitress reducer.
(Source : The Economic Times, dated 31-7-2010)
76 Gururaj Deshpande
to co-chair Obama’s Advisory Council
India-born Gururaj
Deshpande, chairman of Tejas Networks, A123 and Akshaya Patra, has been
appointed co-chairman of US President Barack Obama’s National Advisory Council
on Innovation and Entrepreneurship. He will support Obama’s
innovation strategy by helping develop policies that foster entrepreneurship,
create jobs and drive economic growth.
Popularly known as
‘Desh’, Deshpande is one of the 26 members of the council which includes serial
entrepreneurs, university presidents, investors and non-profit leaders. Steve
Case and Mary Sue Coleman will serve as the other co-chairs.
(Source : Business Standard, dated 23-7-2010)
75 ‘35kcr for
Commonwealth Games a waste, should’ve gone to poor kids.
A verbal spat was
initiated by Congress leader Mani Shankar Aiyar when he was asked to comment on
the rainy morning by some media persons outside Parliament House. “I am
delighted in a way because rains are causing difficulties for the Commonwealth
Games. Basically, I will be very unhappy if the games are successful, because
then they will start bringing Asian Games, Olympic Games and all those,” the
former sports minister replied.
Explaining his
opposition to the Games, Mr. Aiyar said a whopping Rs.35,000 crore were being
spent on the sporting event, when it should have been spent on children who did
not have the basic facilities to play. “Those who are patronising the Games can
only be evil. They cannot be God. Thousands of crores are being spent on
circuses like these while the common children are being deprived of basic
facilities to play,” Mr. Aiyar said, adding that all ‘expectations’ from the
Games had been belied.
Mr. Aiyar also
alleged that India had bribed other Commonwealth nations for the Games. “To take
the Games, the Olympic association of every Commonwealth country was given $ 1
lakh . . . . it was given to Australia, New Zealand, Canada, and Britain. Those
countries did not need this money,” he said adding that “I would call it a
bribe.”
(Source : The Economic Times, dated 28-7-2010)
74 Desi lawyers teach
English to US attorneys
Many top US law
firms are hiring Indian lawyers to edit and make grammatical and syntax
corrections in legal drafts/contracts prepared by their lawyers. A Fortune 100
client of a US law firm, Smith Dehn LLP, has specifically requested that legal
research, analysis, writing, editing exercises that cost millions of dollars in
the US be done by Indian attorneys.
A recent American
bar council journal article compared the scenario to a man bites dog story. It
says highly-trained LPO (legal process outsourcing) attorneys in India have been
assigned the task of correcting grammatical and other mistakes of partners and
associates at some of the top 100 law firms in the US. It further said,
high-quality and effective English writing has been out of fashion in the US for
several decades.
Till some time
ago, Indian lawyers were seen to use lofty English British-style pomposity, a
vestige of colonial rule. Their sentences were long and
winding. There were too many usages of passive and indirect speech. Today, they
are good with plain, crispy, clear and clean English writing. In fact, LPO has
made them think global and grow global. American lawyers are liking it, a
high-quality second look at the draft, said Russell.
(Source : The Times of India, dated 26-7-2010)
72 Double standards
Case :
US :
Asbestos-related suits
India : Bhopal Gas
tragedy
Damage :
US : 700,000 people affected
India : 20,000
dead, 570,000 injured with possible generational impacts
Caused by :
US : Asbestos fibres
India : Methyl
Isocyante gas released from the factory
Liability :
US : Carbide and Amchem cases being fought by Dow
India : Dow
refuses to take liability of Carbide
Payments :
US : $ 487mn litigation costs, $ 1.5bn resolution costs & $ 839mn estimated
future liability
India : $ 470mn
paid by Carbide in 1989. Refuses any further payment.
(Source : The Times of India, 3-7-2010)
73 Online evaluation
sparks revolution
Engineering
students pursuing their PhDs needn’t fret over errors in their results anymore.
The Visvesvaraya Technological University (VTU) has introduced online evaluation
of answerscripts for its PhD students from 2010-11.
On a pilot basis,
VTU has already scanned the 750 PhD answerscripts. If all goes well, it’ll be
extended to MTech and MBA courses, too.
Manual evaluation
leaves multiple scope for errors. In case of multiple solutions, the evaluator
will have the freedom to decide. The process take only a few minutes and the
scripts get stored in the system. A software developed exclusively for digital
evaluation helps the evaluator open the answer booklet with just a mouse-click.
Next, the screen displays a series of register numbers. The evaluator can have
his pick. The question for the particular answer is displayed on the screen,
along with the scheme of evaluation. This also allows two evaluators to check
the same answerscript simultaneously. The final evaluator draws an average. In
case of a difference of 15 marks or more, the third evaluator reassesses the
script.
(Source : The Times of India, dated 15-8-2010)
71 IFAC president
warns against auditor rotation
Mandatory auditor
rotation makes no sense, according to International Federation of Accountants
president Robert Bunting.
“While firm
rotation might seem to remove any bias that may be attached to past decisions,
it makes no sense at all,” Bunting said.
“In most parts of
the world there are not enough choices to allow for this without forcing
companies to choose audit firms that have no expertise in their industry.”
Bunting said a
number of countries have experimented with mandatory rotation before abandoning
it as almost impossible to implement. Yet, it is still being considered as a
remedy to the Satyam scandal in India.
It would not be a
pragmatic solution and would set the country apart from nearly all of its
trading partners, Bunting said.
(Source : www.ifac.org)
70 10% and 30% of the
amount recovered to Whistle blowers – USA – SEC
In what could give new meaning to the phrase — “If you see something, say
something” — a clause within the financial reform legislation is offering big
cash rewards to whistleblowers who report fraud and other wrongdoing at
U.S.-listed companies and Wall Street banks.
Under the program,
which is already live, anyone who provides a tip that leads to a successful
Securities and Exchange Commission action will be able to collect between 10%
and 30% of the amount recovered — as long as the total amount exceeds $1
million. This means the minimum payout is $ 100,000. The whistle blower could be
a company insider or a private investor, if they’re able to offer information or
analysis that leads to an action. And with potential payoffs netting millions —
or even tens of millions — of dollars, experts are bracing for a surge in
tipoffs.
The program also
protects squealers against company retaliation. Any whistleblower who is fired,
demoted, suspended, threatened, harassed or discriminated against by a company
for providing info or testifying in an SEC investigation, can file an action in
the U.S. District Court. If they succeed in proving their case, the legislation
guarantees the person’s reinstatement, two times the amount of backpay owed, and
coverage of all court and attorney fees — so long as the action is filed within
a certain time period.
Even a mid-cap
company could wind up with a consent order or suit in the millions of dollars,
says Daniel Karson, executive managing director and counsel at Kroll, a risk
consulting company. “So 10% for making a phone call is a pretty good payday,” he
says.
(Source : TIME.COM, 19-8-2010)
Vodafone deal : Tax burden draws flak
The
Government’s attempt to change its tax laws in order to slap a $ 2 billion tax
bill on Vodafone for its roughly $ 11.1 billion purchase of Hutch Essar in
2007, is meeting with stiff resistance from powerful US investors. Claiming
that the move has killed investment appetite in India, US investors have
written to the Finance Minister Pranab Mukherjee, asking for a review of the
Revenue authorities decision to tax cross-border investments with
retrospective tax legislation enacted in 2008.The strongly
worded letter, expressing concerns about India’s investment climate has also
been sent to principal secretary to PM, T. K. A. Nair, Cabinet Secretary K. M.
Chandrasekhar, Deputy Chairman, Planning Commission, Montek Singh Ahluwalia
and the Commerce Ministry. The letter has been written by the National Foreign
Trade Council (NFTC), an association of 300 US business enterprises engaged in
all aspects of international trade and investment.According to
the NFTC, any necessary changes made to the laws should be with prospective
effect only, rather than through retrospective changes in interpretation of
current law or application of withholding tax provisions.The NFTC
warns that the move “creates an impression among foreign investors that
investing in India brings with it a significant risk of tax liabilities
arising from unforeseen new interpretations of tax laws and retrospective tax
changes’’. ‘‘Our members will have limited funds to invest overseas and this
new interpretation may cause several of them to reconsider investing in India,
looking instead to other countries which have not taken this position and
which act in a perceived less arbitrary manner in taxing foreign investors,’’
it added.Pointing out
that US-based MNCs have a history of robust investment in India, NFTC said ‘‘
Indian Revenue authorities have begun to argue that India is entitled to tax
certain capital gains on global M&As taking place outside of India.’’(Source :
Internet & Media Reports, 8-8-2009)
Right to education becomes law, puts India in
select league
India on Tuesday joined a select global club with the passage of the Right to
Free and Compulsory Education Bill, setting in motion an ambitious, if
much-delayed, scheme of providing education to every child between 6 and 14
years.
The law is unique as, while providing compulsory education, it would not fail
any student till Class VIII. It also enjoins all Government and private
schools to provide 25% quota to ‘disadvantaged’ kids. The law provides for
building neighbourhood schools in three years whose definition and location
will be decided by states.
The legislation, which has already been passed by the Rajya Sabha, will soon
be enacted after getting the assent from President Pratibha Patil. The RTE
would empower the seven-year-old 86th Constitutional amendment that made free
and compulsory education a fundamental right. The Bill sets down guidelines
for States and the Centre to execute and enforce this right. Earlier,
education was part of the directive principles.(Source :
The Times of India, 5-8-2009)
India to amend tax treaty with Mauritius
India is planning amendments to the Double
Taxation Avoidance treaty with Mauritius to prevent its misuse for avoiding
taxes. “Amendments to the Indo-Mauritius DTAC (Double Taxation Avoidance
Convention) to prevent its misuse and enhance exchange of information,
including banking information, are being pursued . . .,” Minister of State for
Finance S. S. Palanimanickam said in a written reply in the Rajya Sabha.The changes in the treaty are being worked upon
through a joint working group constituted for this purpose, he added. Many
companies route their investments into India through tax havens to avoid
paying taxes.The Organisation for Economic Cooperation and
Development (OECD) has said that all countries should permit access to bank
information for all tax purposes, so that tax authorities could fully
discharge their revenue raising responsibilities, the Minister said.(Source : Business Standard, 5-8-2009)
UK amends citizenship rules
The automatic right for non-EU citizens,
including Indians, to apply for a British passport after working in the UK for
five years has been ended with the introduction of ‘probationary citizenship’,
under which they must demonstrate commitment to the country through voluntary
work and integration.There is a double benefit in the requirements to
demonstrate a commitment to Britain and a willingness to play a part in
community life. These allow the authorities to judge a person’s economic
potential and contribution to society. Crucially, migrants will be helped to
settle in, a particular challenge for people learning a new culture. Points
could also be removed for ‘bad’ behaviour.Under the new system, applicants for citizenship
require a total of 20 points to gain probationary citizenship either through
the work route — meeting the immigration rules (10 points) and passing
knowledge of life in the UK or the English language test (10 points).To gain full citizenship applicants must pass
knowledge of life in the UK or an English language test. Those who have failed
either test will have to retake it.(Source : Business Standard, 5-8-2009)
Companies routing funds to evade taxes face taxing times
The Government is mulling new laws to bring into the tax
net domestic companies which deliberately route their overseas investments
through tax havens to avoid paying taxes at home.The inclusion of new provisions in the existing tax laws,
called Controlled Foreign Corporation (CFC) laws, was also suggested by the
Kelkar Task Force on tax reforms.India, however, is still debating on the modality of the
CFC, though the Kelkar report, submitted to the Government six years ago, had
recommended “introduction of anti-abuse provisions in the domestic law,
enacting of CFC regulations and the law relating to thin capitalisation”.The advantage of having CFC laws is that it will not be
affected by the Double Taxation Avoidance Agreement (DTAA). Currently, the
profits of subsidiaries of Indian companies are not taxable in India, as there
are no laws to bring them under the tax net. In fact, foreign subsidiaries do
not declare their dividends to avoid being taxed in India.(Source : Business Standard, 3-8-2009)
Oh, for some
rectitude
You can’t spend more without
higher revenues. ‘Calculated risks’ is a euphemism for fiscal brinkmanship
“There has been an unsustainable increase in
Government expenditure. Budgetary subsidies, with questionable social and
economic impact, have been allowed to grow to an alarming extent. The tax
system still has many loopholes. The crisis of the fiscal system is a cause
for serious concern. The fiscal deficit of the Central Government, which
measures the difference between revenue receipts and total expenditure, is
estimated at more than 8% of GDP in 1990-91, as compared with 6% at the
beginning of the 1980s and 4% in the mid-1970s. This fiscal deficit had to be
met by borrowing. The burden of servicing this debt has now become onerous.
Interest payments alone are about 4% of GDP and constitute almost 20% of the
total expenditure of the Central Government.Without decisive action now, the situation will
move beyond the possibility of corrective action. There is no time to lose.
Neither the Government nor the economy can live beyond its means, year after
year. The room for manoeuvre, to live on borrowed money or time, does not
exist anymore.”
— From the first budget speech of Manmohan Singh, 24 July 1991.Today interest payments account for Rs.2,25,511
crore; defence Rs.1,41,703 crore; and subsidies Rs.1,11,276 crore. These three
alone siphon off 78% of Centre’s net revenue. None build infrastructure.
(Note : The above analysis remains valid even today. Our fiscal
situation is much worse than in 1991. Have we learnt any lessons in last 18
years ? Where are the remedial measures ?)(Source : Businessworld Magazine, 3-8-2009)
More than 600 years of British history and tradition ended
when Parliament’s upper chamber, the unelected House of Lords, ceased to also
be the nation’s highest court.The 12 ‘Law Lords’ convened in their debating chamber and
delivered the institution’s final seven judgments. The Lords of Appeal in
Ordinary, as they’re formally known, are moving to the Supreme Court of the UK
on October 1.The House of Lords has been operating as a court since
1399. Prior to that the full Parliament could weigh cases. While the House of
Lords has kept separate judicial and legislative functions since 1876, the two
weren’t physically divided. After hundreds of years it looks ‘unusual’ for
lawmakers to be involved in judicial affairs, and the Supreme Court is a ‘nice
symbol’ of modernity.The new court will be located in a refurbished building
overlooking Parliament Square. It will be made up of 11 of the 12 Judges that
worked in the House of Lords. Anthony Clarke will be the 12th Justice, and the
first to be appointed directly to the Supreme Court. Nicholas Phillips, now
senior law lord, will be the first President of the UK Supreme Court.While ‘constitutionally nothing will change,’ the symbolic
importance of physically separating the Legislature and the judiciary is
significant, head of Justice, a UK human rights and law reform organisation.(Source : The Times of India, 31-7-2009)
Subbarao spells out RBI’s five big challenges
The first challenge is managing the balance between the
short-term compulsions of providing ample liquidity to the market and the
potential for an inflationary pressure.The second challenge is to manage “the Government’s large
borrowing programme without crowding out present or potential private credit
demand’’. Despite active liquidity management by the central bank, Government
borrowing has led to hardening of yields. The third challenge is to maintain
policy rates and liquidity conditions that could spur private investment
demand. Having a fiscal consolidation process with a concrete roadmap was also
a challenge before the RBI.“Large fiscal deficits, if continued strictly beyond the
recovery period, can crowd out private investment and trigger inflationary
pressures”. “It is also necessary to focus on the quality of fiscal adjustment
while pursuing quantitative targets’’.For the medium-term, the challenge was to improve the
country’s investment climate to move forward with financial sector reforms “to
promote financial inclusion, further widen and deepen financial markets and
strengthen financial institutions’’.(Source : The Times of India, 22-7-2009)
Foreign
investment law in the works
The Government is working on a proposal to
introduce a new legislation relating to foreign investment aimed at removing
the distinction between various categories of overseas capital, a move
intended to ensure stability in policy and help Indian firms attract long-term
capital.The new Foreign Direct Investment Act would seek
to remove the distinction between various categories of overseas fund flows
such as portfolio investment, venture capital, private equity and direct
investment. Rules on external investment in Indian companies make a
distinction between portfolio investment, in which an investor buys shares of
a company from the secondary market, and foreign direct investment (FDI), in
which the investor normally acquires a relatively larger holding directly.
The new legislation would involve major changes to the existing Foreign
Exchange Management Act, or FEMA, which deals with both inbound and outbound
foreign investment.The new legislation would remove all confusion
and provide stability in terms of policy. The Finance Ministry has already
started work on the new legislation and would seek inputs from the Reserve
Bank (RBI) on it, the official said. The new Act will also give clearer
guidelines on convertibility.The RBI has consistently been of the view that in
the hierarchy of preferred capital flows, FDI ought to be at the top. The
current policy is largely ad hoc. It is governed by several rules that
are changed through so-called ‘Press Notes’ issued from time to time by the
Department of Industrial Policy and Promotion (DIPP) and FIPB. Interestingly,
the official said the Press Notes issued by the DIPP have no legal sanctity
since changes to guidelines on foreign investment require changes to FEMA
rules, which rarely gets done.(Source : The Times of India, 8-8-2009)
86 British Airways gets Rs1.44 billion tax
notice.
UK-based British Airways has been slapped a service tax
notice by the Revenue Department asking it to pay the balance of Rs.143.5 crore
(Rs.1.44 billion) liability on sale of tickets in India between May 2006 and
November 2007.
“We have issued a notice to the British Airways on July 25
intimating the company of its service tax liability,” a senior Excise and
Customs Department official said. He, however, clarified that the company has
already paid Rs.117 crore (Rs.1.17 billion) tax, although after a delay.
(Source : Internet News, 29-7-2008)
85 Are you addicted to your
BlackBerry ?
Its nickname, CrackBerry, says it all. There is no
recreational use of Research in Motion’s BlackBerry. It is a compulsive
addiction, or you’re not a user.
Academic studies back up the notion. It found that
a third of BlackBerry users show signs of addiction ‘similar to alcoholics’. The
BlackBerry found its first big pool of users in corporate America. Helping with
productivity and collaboration at work, it lets employees keep up with
colleagues, customers and suppliers even while away from the office.
But, like addicts, users of these devices are not
using the time savings and productivity gains to shorten their work hours.
Instead, they work longer. Glenn Wilson, a psychologist at King’s College
London, found that two-thirds of users check work e-mails out of office hours
and on holidays.
Getting more done, thanks to the speed of
communication, doesn’t necessarily enhance the quality of life.
Wilson found that a compulsion to reply to each new
message led to constant changes of direction, which inevitably tired and slowed
down the brain. The distractions of constant e-mails, text and phone messages
are a greater threat to IQ and concentration, he says, than taking cannabis.
Even those most reliant on this technology worry
about never-ending workweeks and the toll imposed by the constant interruptions
to family life and personal relationships—a result of having this umbilical cord
to work. People are always partly somewhere else, whether at dinner or in bed,
surreptitiously glancing down at the glowing screen and stroking the scroll
wheel.
And the suspicion must be that it is double the
trouble when both partners are constantly connected to Exchange servers more
than to each other—especially among couples dubbed DILS and DINS (for double
income, little sex, and double income, no sex).
One solution : Don’t slavishly respond to every
e-mail. In Europe, it is increasingly considered ill-mannered to read an e-mail
that arrives during a meal, let alone answer it, just as it would be considered
rude to read a book at the table during dinner.
King College’s Wilson found in a clinical trial
commissioned by Hewlett-Packard that one in five of those studied broke off from
meals or social engagements to receive and deal with messages. Although nine out
of 10 agreed that answering messages during face-to-face meetings or office
conferences was rude, one-third nonetheless felt that this had become
“acceptable and seen as a sign of diligence and efficiency.”
Stress and a compulsive addiction to overworking
aren’t solely caused by wireless push e-mail, though it makes it easier to get
hooked. And there is a generation that has grown up expecting to connect 24/7 to
friends and family by e-mail, IM and SMS that can separate work and social
never-severed connectivity.
If you are not one of them, you don’t have to go
cold turkey. Remember, even the CrackBerry has an off button.
(Source : Internet Newswires)
84 FlashGet (size 4.4 MB)
This is a download manager. It uses MHT
(Multi-server Hyper-threading Transportation) technique, supports various
protocols such as HTTP, FTP, BT, MMS, RTSP and has document management features.
FlashGet can call anti-virus automatically to clean
viruses, spyware and adware after finishing download. Check it out at
http://www.flashget.com/index_en.htm
83 Recover Files (Size 1.17 MB)
This is file recovery software that allows the user
to recover accidentally deleted files, even files removed from the Recycle Bin,
network drive, compact flash card, portable drives, in a DOS window, or from
Windows Explorer. Download from
http://www.download.com/Recover-Files/3000-2094_4-10715455.html
20. The progress challenge — Dean Linsey
In 2010, most of us take on too many
responsibilities, try to do too much, and even own too much. Being too busy is a
big source of stress in today’s get, get, get and go, go, go world. Often, we
are so chronically over-scheduled that we never give ourselves a chance to offer
our best or to enjoy the moment. Are your days fulfilling, or are they merely
full ? It is possible that we could get more out of life by doing less. When we
internalise the difference between full and fulfilling, we realise it’s not how
many events we attend, activities we get involved in, or how much stuff we have
that’s important. We do not have to say ‘yes’ to every demand on our time. And
we shouldn’t feel bad, since we are saying ‘no’ to the event or project, not the
person.
If we are committed to working and winning in this
world of change, we must know our limits and not limit our nos. Consider your
well crafted goals and your schedule before agreeing to additional work.
Simplify — get rid of the clutter and baggage in your life and in your house.
Start your own just say no campaign to regain quality time. Review priorities
and see if a request fits. When you see things that waste time or hinder your
progress, speak up. A polite way to say no to a request for your time : “I’m
quite committed. I can be your backup, but please keep searching.” Structure is
vital for becoming a Business Attraction Magnet. Solid self-management leads to
higher productivity and reduced stress. Our desks need to be workstations, not
storage space.
(Source : The Economic Times, dated 9-10-2010)
82 Stickies 6.5a (Size 975 KB)
Stickies is a PC utility to try to cut down on the
number of Post-It notes you leave stuck to your monitor. It is a computerised
version of those notes.
http://www.majorgeeks.com/download5501.html
10. India tops list for increase in tax misery score
France, China and Belgium have been named as having the top three harshest tax climates. Qatar, the UAE and Hong Kong have trumped other economies to retain the friendliest tax climate, according to the 2009 Tax Misery and Reform Index. About two dozen countries recorded a decline in their tax misery score and these jurisdictions include Switzerland, Italy, the UK, Canada, South Korea, Malaysia, New Zealand, Singapore, Russia and Taiwan. Besides India, other countries that added to harshness in their tax climate include China, France, Finland, Turkey, Mexico, Luxembourg, Ireland and Thailand.
Jurisdictions with unchanged tax misery score include Germany, the US, Israel, Vietnam, Pakistan, Hong Kong, the UAE and Qatar. There are eight European nations among the 10 least tax-friendly countries on the list, published in the April 13 edition of Forbes Asia. “This year, most Asian jurisdictions continue to have more tax-friendly environment compared with other parts of the world. The survey shows that outside of China and Japan, the rest of Asia continues to enjoy stable, low tax advantage,” Forbes noted.
So now we know that while every fourth member of the Lok Sabha has a criminal record, virtually every member is a crorepati. Quite a few would even qualify for membership of the Business Standard Billionaire Club (those with assets of over Rs.1 billion, or Rs.100 crore). We also know that these standard-bearers of socialism (every political party has to swear to this creed if it wants to be registered with the Election Commission) have increased their wealth manifold in the last five years. All this suggests a range of possible hypotheses : that politics is India’s most lucrative profession, that those with criminal records make more money than honest tribunes of the people, that those who speak in the name of the poor and rail against capitalist excesses are actually plutocrats in mufti, that you can get fat on the ‘mammaries of the welfare state’ (every member can ask for Rs.2 crore to be spent on his favourite project, every year; that’s Rs.10 crore in a five-year term), that members can and do make money by asking questions in the House, that members can and do get offered money to vote in a particular way . . . . All this is true even when you do not occupy ministerial office (which brings with it access to more mammaries), and though you have to spend campaign funds vastly in excess of what the law allows . . . .
We should now take the next logical step. Every government employee should be asked to make similar disclosures, bearing in mind the latest story of the sub-inspector of police in Delhi who has accumulated assets worth Rs.30 crore, on a salary of Rs.30,000. And just so that government employees know what it is like to have the Central Bureau of Investigation on your tail, this hound dog should be asked to do a random check on all annual filings (more mammaries !). For, the truth is that our governments run vast armies of criminal gangs, which seem to be concentrated in places like the police and the tax-gathering machinery, but exist elsewhere too.
With one honourable exception (Jaswant Singh), hardly any finance minister has done anything to clean up these Augean stables; some of them have even increased the incentive for harassment by placing impossible revenue targets before officials and then cracking the whip, and by writing up the law in such a way that taxmen get extraordinary powers — which become more mammaries to milk. At the last meeting of the CII National Council, companies complained behind closed doors about how they were being asked, on the strength of oral orders, to pay up more tax — with the tax officials refusing to issue written tax demand notices !
The tragedy is that Jaswant Singh’s attempt to have taxpayers treated fairly and with respect, and his appointment of Vijay Kelkar to recommend ways in which the business could be made less extortionate, have been nullified. After demanding that certain tax filings can only be done digitally, the tax department has made sure that the digital system does not work (so you are in the Kafkaesque situation of being required to do something under the law that the creators of the law will not allow you to do). After mandating that tax evasion will be checked through the scrutiny of digital records, assessments done from a distance so as to minimise the human interface, and refund cheques automatically credited to bank accounts, tax officials do all the things that they have done for years, including waving refund cheques in your face and asking for a cut, not just for themselves but for their brother officers as well. It wouldn’t hurt to have some sunlight thrown on all these murky areas.
(How True ! There are more than 110 crore ‘Cows’ to be milked by the Establishment ! ! ! )
22 Missing in action
MPs’ absenteeism subverts Indian democracy
Inflation is a burning issue because it eats into the already
meager incomes of the poor, and our politicians are concerned. Right ? Wrong.
MPs revealed how much they really care about rising prices of essential
commodities as opposed to how much they would like us to believe that they care
— by largely playing truant when the matter came up for discussion in both
Houses of Parliament. In the Lok Sabha, even among the few MPs who bothered to
turn up, many staged a quiet exit soon after. The lack of quorum in the House
was dealt with simply by not drawing attention to the inconvenient fact.
Even though India is a democracy, this apathy makes it
resemble a dictatorship. A dictator rules by decree and has the power to silence
the opposition. In a democracy whose politicians are apathetic, the opposition
silences itself. Dissent in a dictatorship can be expressed only through street
protests or militant agitations. That’s also the idiom in which opposition
politicians like to express themselves in India.
In both cases there’s little scope for dialogue or rational
debate. Politics is reduced to posturing or making token gestures. If
politicians want us to believe that they are serious about the causes they
espouse, let them at least show up when the issue is tabled in Parliament. Scant
attendance of parliamentarians reduces democracy itself to a formal affair.
(Source : The Times of India, 16-4-2008)
23 Samsung chief charged with $ 114m tax
evasion. Also helped son gain control
Samsung Group chairman Lee Kun Hee will stand trial for tax
evasion and breach of duty, prosecutors said, after a three-month probe into
allegations of corruption at South Korea’s largest industrial group.
Lee, 66, was charged with evading 112.8 billion won ($ 114
million) of taxes, the special prosecutors said at a press conference in Seoul
on Thursday. Lee is also charged with breach of duty for incurring losses at
Samsung when helping his son gain control of units of the group. Nine other
Samsung executives were also charged. Lee, one of South Korea’s richest men, has
denied the allegations. Samsung Group, which accounted for about 20% of South
Korea’s exports in 2006, said it will reorganise its business and management.
President Lee Myung Bak, who took office in February, pledged during election
campaigning to increase corporate transparency and governance after scandals
involving South Korea’s biggest industrial groups.
(Source : Bloomberg)
21 Corrupt Govt. official’s wife is also
guilty : HC
The spouse of a Government officer in a corruption case who
has benefitted from his/her ill-gotten wealth is equally guilty, the Bombay High
Court has ruled. Justice V. R. Kingaonkar of the HC’s Aurangabad Bench recently
held Dhule resident Mangalabai Wagh guilty of abetment in a disproportionate
assets case for allowing her husband Bhaskar Wagh to acquire several properties
in her name.
The Judge upheld a Trial Court verdict sentencing Mangalabai
to three years’ rigorous imprisonment and imposing a fine of Rs.2 lakh. The HC
also dismissed an appeal by Wagh challenging his punishment of seven years’
rigorous imprisonment and a fine of Rs.3 lakh awarded by the Trial Court.
‘Mangala held shares and immovable property as well as a
vehicle in her name despite not having any source of income,’ said the Judge.
‘It will have to be said that she abetted the commission of offence of criminal
misconduct by (her husband) Wagh,’ he added.
(Source : The Times of India, 9-4-2008)
20 Quotation of the month
‘All governmental orders must comply with the requirements of
a statute as also the constitutional provisions. Our Constitution envisages a
rule of law, and not rule of men. It recognises that howsoever high one may be,
he is under law and the Constitution. All the constitutional functionaries must,
therefore, function within the constitutional limits’.
(Source : Supreme Court of India,
The Economic Times, 7-3-2008)
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
59 FDI’s free fall
Falling FDI in both absolute and relative terms indicates a
lack of investor confidence. It should jolt politicians back to governance and
building on the 1991 reforms. A UN report on FDI in 2010 makes this point
sharply. Though global FDI flows increased by a percentage point over the last
year, developing economies’ share jumped 10%. For the first time ever, more than
half of global FDI travelled to emerging markets. However, FDI inflows into
India declined by a whopping 31.5%. And that’s not in relative but in absolute
terms. In other words, it’s not just that India is getting a smaller share of a
bigger pie — indicating its relative uncompetitiveness among emerging markets.
It’s that the size of the pie itself has shrunk for India – by almost a third.
That ought to be enough to set alarm bells clanging for our economic managers.
(Source : The Times of India, dated 25-1-2011)
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
58 Infosys plans to stem MBA-MTECH attrition
Infosys, the country’s second largest information technology
services firm, is aggressively planning to increase the number of its business
consultants by re-skilling many of its engineers.
“Every quarter, a lot of people leave us for higher courses
like MBA and MTech. We have seen a rise in the interest level of our employees
for consulting work. To tame this and provide growth opportunity for engineers,
we are planning to introduce a new initiative as part of our iRace (Infosys Role
and Career Enhancement) programme,” said Mohandas Pai.
In-house CAT : In-house engineers with over two years of
experience can opt for this programme. The company is expected to do a pilot
test soon and to implement the programme next year. “We will conduct a test for
the employees and if they pass the test, they can join our consulting team,” Pai
added.
(Source : Business Standard, dated 21-1-2011)
(Comment : Our profession needs a similar programme)
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
57 RBI promises parity if foreign banks form arms
The Reserve Bank of India (RBI) is dangling the carrot of
near level-playing field to foreign banks such as Citigroup and HSBC, if they
convert into wholly-owned subsidiaries which is essential for systemic safety,
instead of functioning as parents’ branches, leaving room for instability.
MNC banks would be allowed to set up branches at their will
in smaller cities, barring some security-sensitive regions, and list their
shares on stock exchanges with at least 25% Indian holding, said a central bank
discussion paper on Presence of Foreign Banks in India.
Global banks would have a minimum capital adequacy ratio of
10% and lower priority sector lending target than domestic private peers.
There are 34 foreign banks operating in India as branches,
accounting for 7.65% of total banking assets as on March 31, 2010, up from 9.03%
a year ago. If credit equivalent of off-balance sheet assets are included, their
share was 10.52%. The share of top five foreign banks alone was 7.12%.
(Source : The Economic Times, dated 22-1-2011)
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
56 SC blames own verdicts for declining standards
The Supreme Court reprimanded governments for abuse of
discretionary land allotment powers before turning reflective and admitting that
some of its judgments have contributed to the all-round falling standards.
The Bench’s remarks came during the hearing of a petition,
which accused the Madhya Pradesh Government of allotting 20 acres of prime land
at a throwaway price to the Kushabhau Thakre Trust, which has BJP leaders L. K.
Advani and Venkaiah Naidu as trustees. Before reserving verdict, the Court said
: “Discretionary power was to be used in public good. In the last 50 years, this
is exercised just for the opposite. The man who abides by law feels he is a
fool. Every state, not only Madhya Pradesh, who has got discretionary power has
abused it.
(Source : The Times of India, dated 19-1-2011)
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
55 Political governance — End the drift
Decision-making isn’t a synonym for governance. Even so, it’s
a good pointer to a ruling dispensation’s ability to be on its toes. On that
score, data shows UPA-II fared badly in 2010. The cabinet’s record on number of
decisions taken in 2010 compared to earlier was below par. Between 2005-08
during the Congress-led coalition’s first tenure, the cabinet took an average of
242.5 decisions yearly. The annual average since 2005 is 183. In 2010, however,
the Cabinet managed consensus on just 112 decisions, the lowest single-year
figure since the UPA came to power. Amazingly, decision-making actually
decelerated post-2009, when the Left was no longer around to ambush it !
(Source : The Times of India, dated 18-1-2011)
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
54 Fuel Pricing — Death by policy
The new Union minister for petroleum and natural gas Jaipal
Reddy can implement the brightest ideas from the smartest bureaucrats and yet
the root of the problem that resulted in the murder of Mr. Yashwant Sonawane, a
district official in Maharashtra who sought to curb the adulteration of petrol
by the kerosene mixing mafia, will not be touched unless India’s fuel pricing
policy is shaped by the logic of simple economics. Various estimates have been
provided in the past few days of the size of the domestic black market in
kerosene. Some put it upwards of Rs.16,000 crore annually. This is a huge amount
of money that can finance large and even globally powerful mafias, not to
mention two-bit gangsters like the ones who killed Mr. Sonawane. There was a
time when Mumbai was in the grip of smugglers. With some simple policy steps
like lower tariffs, liberalisation of gold imports and such like these
all-powerful mafias were marginalised and largely confined to Bollywood movies.
In the case of kerosene and diesel an export smugglers mafia has been created
with India’s lower priced fuels smuggled to Nepal and Bangladesh.
The only way in which mafias get eliminated is by the
elimination of the economic basis for their existence. It is not prohibition
that finally ended the power and wealth of bootleggers and illicit liquor mafia,
but a liberal policy that allowed the sale of properly priced alcohol.
As a first step, the Government must reduce the price
differential between diesel, kerosene and petrol. This will not only have the
positive effect of reducing the fiscal burden of the humungous oil subsidy, but
also encourage a more rational use of both diesel and kerosene. The
under-pricing of these two fuels has encouraged the growth of highly
energy-inefficient and environmentally dangerous means of power generation and
fuel utilisation. Moreover, for an import-dependent country like India
subsidised fuel increases the trade deficit and contributes to external payments
problems.
(Source : Business Standard, dated 31-1-2011)
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
(Source : Business Standard, dated 15-2-2011)
53 SC : No govt. wants a strong judiciary
The Supreme Court said no government wants a strong judiciary
and added that meagre budgetary allocations by the Centre and states came in the
way of setting up of courts and infrastructure to speed up the justice delivery
system.
It said : “No government wants a strong judiciary . . .
Budgetary allocation to judiciary is less than 1% by the governments. This shows
their commitment towards judiciary.” The remark from a Bench of Justices G. S.
Singhvi and A. K. Ganguly came when it was told that only one witness has been
examined in the last four years in the Amar Singh phone-tapping case, which has
been marred by adjournments.
(Source : The Times of India, dated 12-2-2011)
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
52 Taxing wealth — Has the time come for the super-rich to
pay more taxes ?
One of the high points of economic and fiscal reform in India
in the past two decades has been the progressive moderation of direct tax rates.
Thanks to this, the ratio of direct to indirect taxes has risen, a sign of
greater progressiveness and equity in India’s taxation system. Direct taxes are
not easily passed on, as indirect taxes tend to be, and so their incidence is
more directly on the individual or firm paying the tax. While this has been a
positive trend, the ratio of total tax revenues to national income has, in fact,
come down in recent years and remains below 12%. India has a very low tax/GDP
ratio by world standards. Apart from widespread tax evasion and avoidance, the
complete exemption of certain types of income from taxation, like agricultural
income, has made it that much more difficult for the tax authorities to capture
all taxable incomes.
The wealth of just 657 BS billionaires has been estimated to
be Rs.16 lakh crore. Taxing away just 0.1% of that would yield a revenue of
Rs.16,000 crore. A 10% long-term capital gains tax, with the securities
transactions tax dumped, and a death duty or inheritance tax can easily generate
another Rs.10,000 crore, netting a cool Rs.26,000 crore of additional direct tax
revenue, without hurting the middle class. Not only would this help Mr.
Mukherjee in his fiscal house-keeping but it would give his party a talking
point at a time when it is being accused of corruption and currying favour with
corporates. Some, including the stock market, would cry foul and the Government
must factor that negative response in. But many would cheer a Government dipping
into the deep pockets of the super-rich.
(Source : Business Standard, dated 15-2-2011)
Subject : Survey — Legal, Tax and Accounting Aspects
Speaker : Dilip Lakhani, Chartered Accountant
Past President, BCAS
Venue : I.M.C. Hall, Churchgate, Mumbai.
Date : 26th November 2008
1. Introduction :
At the outset while identifying the reasons prompting the Tax
Department to conduct a survey is that though theoretically every assessee has
to pay tax on income he actually earns, in actual practice the assessee pays tax
only on the income he discloses. Very often, the gap between the two is found to
be mordantly large, resulting in generation of undisclosed income and
undisclosed wealth. To counteract this practice, the Legislature has given wide
powers to tax authorities to conduct surveys and search proceedings. Though
these provisions are legally valid, controversies arise in their implementation.
It also gives rise to many issues in accounting the differential incomes
disclosed at the conclusion of the survey or search.
2. Search (S. 132) and survey [S. 133(A)]
— comparative study :
Though repercussions of Search are more drastic, the Survey
provisions, according to the speaker are more risky for the following reasons :
The first reason is that a warrant for search needs approval
of the highest administrative authority,
namely, Director General of Investigation (a rank equal to Chief Commissioner)
who issues the warrant only after careful and in-depth study of all relevant
facts, circumstances and background of the case.
Another safeguard is that before coming to the decision of
taking search of any assessee, care is taken to ensure that the assessee’s case
satisfies at least one of the three basic conditions. The authority must record
the reason to believe that the assessee is understating his income. He has to
spell out why the search is to be conducted and what is the information
available for conducting the Search.
This process of collection of data to arrive at this
satisfaction takes two to three months. It is only after such satisfaction that
the Director General of Investigation issues a warrant.
As compared to this, S. 133A does not contain similar
preconditions of satisfaction. It provides that the Income-tax authorities may
visit the place of business of the assessee to carry out the Survey. It can take
place if there is fall in turnover, fall in G.P. ratio or non-compliance by the
assessee during assessment proceeding. The only condition is to get approval of
the Additional Commissioner of Income-tax.
3. Analysis of legal, accounting and tax aspect of survey proceedings :
Survey connotes comprehensive inspection of place of business
or profession. A survey cannot be conducted at place of residence. The survey
party can inspect the books of accounts, documents, take inventory of stock,
cash, valuables, investments, all of which thereafter will be inventorised.
After 1-6-2002, survey party is given power to impound books
of accounts and documents and take custody of the same after inventorisation. No
other asset can be impounded.
Normally survey cannot be conducted at residence, since it is
not a place of business. If in the return of income it is shown as any other
place of business, then the survey can be conducted at residence as well as in
any other place of business, say, godown or branch or additional place.
4. Timing for commencement of proceedings :
As regards timing to commence Survey, the same should be
within normal business hours. Once proceedings start, the same can continue till
it is concluded i.e., even beyond hours of business. The Search
proceedings should commence only between sunrise and sunset.
5. Places that can be covered under survey proceedings :
Where the assessee states that his books of accounts are with
his C.A. or Advocate, then the survey can be conducted even in office of the
C.A. or Advocate. However, In 1994, the CBDT issued a Circular stating that
normally Survey should not be conducted in office of C.A., but he should be
asked to produce those books at the place of business of his client who is being
surveyed. If the C.A. refuses to co-operate, then the office of the C.A. can be
surveyed. But the scope of survey will have to be restricted to the books and
other documents of that particular client only and not to books, etc. of C.A.
himself or his other clients.
6. Authorities who can conduct the survey proceedings :
The Income-tax authorities defined in explanation to S. 133
are Commissioner, Asst. Commissioner, Income-tax officer and Inspector, so also
officers of investigation wing i.e., Asst. Director, Director of
Investigation, Deputy Director of Investigation, Additional Director of
Investigation and Inspector. But Chief Commissioner and Director of
Investigation cannot conduct survey. The reason is they are senior officers.
7. Rights conferred on the Officers :
The rights of officers in survey party include right to enter
premises and verify whatever is available in the premises. But the officers
cannot take personal search. The officers in such cases ask the assessee and
others present to empty their pockets and place the papers, documents before the
officers’ table which can then be inspected. It is important to note that though
inspector is an authority in search party, his powers are very limited viz.
to verify books and documents and put identification marks on books and
documents. Except these two powers, he has no other authority. However, in
practice, stock inventory, cash count is done by the inspector. So also very
often statement is recorded in handwriting of the Inspector and signed by the
assessee and countersigned by an officer. The statement is recorded u/s.133A(3),
in search proceedings u/s.132(4), the oath is to be administered before the
statement is recorded. However, u/s.133A, the authorities have no power to
administer oath. Therefore, even if the assessee makes a false statement,
provisions of prosecution under the Indian Penal Code cannot be invoked. Three
important Sections of I.P.C. are excluded in survey proceedings. These are S.
179, S. 180 and S. 181 of the Indian Penal Code, which apply to refusal to make
statement, refusal to give evidence and refusal to give reply. But in search
proceedings, if any of these events occurs, the assessee can be prosecuted. S.
166 of I.P.C. provides that if a Government servant exercises any power for
which he is not authorised, he can be imprisoned for one year.
8. Rights of assessee during survey :
As far as search proceedings are concerned, the rights are given as guideline. These are applicable even during the survey proceedings. The assessee can do his normal functions required for carrying on his business activity, he and his assistants can go out for the assessee’s work. The only restriction is that he should remain present when his statement is to be recorded.
There is no power to arrest or confine the assessee to his business premises.
After inventory is taken, the assessee is asked to put values against each item of stock inventorised. But per law, after inventorisation, the function of survey comes to end. It is only at the time of assessment that the assessee can be called upon to evaluate and prove the valuation and to reconcile the same with stocks shown in books.
During the survey the search party insists on valuation and to quantify the difference solely with a view to persuade or compel the assessee to make high amount of declaration. But such action is not as per law. The survey party or even search party cannot restrict the movement of the assessee. This is held by Delhi High Court in its discussion on rights of assessee during survey proceedings, refer 194 ITR. U / s.132, governing search proceedings, there is power to break open doors, cupboards, cash boxes, false ceiling while making search of unaccounted valuables. No such power exists in S. 133A. If the cupboard or safe is locked, the officer can record his satisfaction about existence of valuable stored in it and get search warrant, whereby he can get the power to break open such containers.
As regards sealing of business premises or god owns, there is no such power to seal premises or god own with search authorities, nor survey authorities. [Shyam Jewellers 196 ITR 239.]
Generally survey proceedings end with recording statement and taking declaration from the assessee.
9. Retraction of declaration of disclosed amounts by assessee:
Whether the statement can be retracted? The statement is not recorded on oath. If it is so recorded, then it casts higher burden on the assessee to prove what he said was not correct.
Before retracting the statement the assessee should first consider the material gathered during survey and its value. Mere blanket retraction will not help the situation. But where materials gathered indicating concealed income form a small part of the disclosed amount, which is either through pressurisation or otherwise, then the assessee can retract his statement saying that it is taken under coercion. Retraction shall be made at the earliest point of time. Retraction statement should clearly set out the circumstances and factual events compelling him to disclose higher amount in his original statement recorded.
10. Three basic principles to be borne in mind are:
i) The amount disclosed in statement is not a conclusive evidence. One has to give due weightage to the circumstances leading to disclosure.
ii) Confessional statement given under ignorance of legal rights is not having evidential value. To illustrate, an assessee not aware of exemption to capital gain, discloses and includes such amount in his declaration statement, still no tax can be levied on such capital gain.
iii) The law is always open to convict a person if evidence is found to be false. Hence, even if declaration is produced before the Court, which is retracted, the Court will verify whether the evidence or material gathered, is sufficient to justify declared sum. If the answer is affirmative, then retraction will not stand the test of law. In converse situation, the Court will uphold retraction.
11. Issue of summons during survey proceedings:
The power to issue summons is given when the assessee is creating hindrance in proceedings or not giving statement when called upon, then the officer can issue summons u/s.131 calling the assessee to attend his office on appointed day and time. S. 131 gives all powers of a Civil Judge to Af), Actually, if the assessee has cooperated and if stocks, cash valuables are inventorised, then summons is not necessary. This was held in 58 ITD 492 and 27 BCAJ 475, which supports the law that summons cannot be issued indiscreetly.
As decided in 246 ITR 353, a bar is put on recording the statement of the assessee over long periods. The recording of statements has to be completed within reasonable time.
In survey proceedings, the authorities persuade the assessee to declare large amount assuring him that penal proceedings will not be invoked if he discloses such amount as indicated by officers. However, such assurance has no legal base.
Penalty u/s.271(1)(c) can be levied only when there is concealment of income or filing of inaccurate particulars. Hence, filing of returns is a prerequisite. If the due date for filing the returns of current year is not yet expired and if the disclosed amount is not related or attributable to earlier year’s income, then there is no ground to initiate S. 271(1)(c)proceedings.
12. Accounting treatment to stock and cash difference :
The undisclosed stock included in the stock inventorised can be brought into books by debiting stock and crediting income. Thereafter the assessee can pay tax as Advance Tax. In 190 ITR 43 (Born.) it was held that where due date for filing has not yet expired, no penalty can be levied if such difference is submitted to tax as income. So, if the undisclosed stock or cash or any valuables not disclosed relate to current financial year and not earlier year, then the assessee need not file declaration regarding such stock, but can incorporate the same in current year income and pay tax. This position will not be applicable if such undisclosed income relates to earlier year. The speaker said that a survey is something like voluntary disclosure scheme always available to the assessee by disclosing it as current year income.
13. Power to impound stocks, cash and other assets, books of accounts & documents:
Prior to 1st June, 2002, there was no power to impound anything from business premises. After 1st June, 2002, officers can impound books of accounts and documents and no other assets. The definition of books of accounts is contained in S. 2 (12A) and documents are defined in S. 2(22A). So any loose papers noting unaccounted sale may not fall in the definition of books of accounts, still survey party can inventorise them and will require the assessee to produce them at the time of assessment proceedings. Those documents which are unsigned, which are undated, unsigned Memorandum of Understanding, may not be documents.
14. Presumptions:
In S. 132(4A) there are certain presumptions, viz. (i) contents of documents are presumed to be true; (ii) The handwriting will be presumed to be of the assessee unless proved otherwise, (iii) signatures will be presumed to be of assessee unless proved otherwise.
However, all these presumptions available during search proceedings are not available during survey proceedings.
15. Presence of CA. during the course of surveyor search:
The speaker felt that such presence will facilitate the proceedings in its smooth functioning. Unfortunately, S.C in 62 Taxrnan 73, has held that whatever is noted in proceedings is the statement of facts. The concerned person is not yet accused and no charge sheet is filed against him, so the work of investigation is in nature of finding of facts, hence CA. or an Advocate has no role in these proceedings. Based on this their presence is not permitted.
16. Time limit for return of impounded documents:
After impounding the documents, ten days’ time is given to retain them, after which those documents are returned unless the officer takes permission of CIT or Director of investigation to retain them for further time by recording the reasons. Such recording is necessary even at the time of impounding.
In 156 ITR, S.c. has held that documents collected even during illegal search can be a piece of evidence which the Dept. can use against the assessee. The Commissioner while giving permission for retaining documents beyond ten days has to record the reason for giving such permission and according to the Speaker, he should intimate the same to the assessee. In search & survey, no appeal is provided. The only remedy is writ which is expensive.
When disclosure of excess cash and excess stock is made, the difference is treated as income. But where there is a shortage, then the Dept. will presume that the difference is unaccounted sale. But entire estimated sale price will not constitute income, a due deduction of cost of material can be claimed from such sale. The same is the position of cash on hand. If cash of, say, Rs.5 lakhs is found but cash per books is, say, Rs.1 lakh, the entire difference though treated as unaccounted sale, the assessee can claim cost of unaccounted purchase as deduction and the difference alone will be concealed income. Again, since the source for unexplained investment is proved, provision of S. 69C or other sub-sections of S. 69 will not apply. Therefore entire shortage of stock or cash will never constitute income. Accounting entries to regularise excess stock or excess cash in the same financial year by debiting stock or cash and crediting income. The entry can be made at any time, at the time of surveyor thereafter. Excess stock can be entered in stock book with corresponding entries in financial books. However, in case of a manufacturer, the incorporating entries of sales (unaccounted) will expose him to liability under indirect taxes like excise, sales tax, vat. In case of traders, if the amount is credited as commission, then service tax gets attracted. As against this, it is possible to argue that income was from derivative trading speculation or commodity trading. Though the source gets explained, the confrontation in Indirect Taxes, VAT, etc. can be avoided. In case of less cash and more stock being found, a set-off can be claimed. Hence due care should be taken when the assessee is made to disclose. He can reserve his explanation till the date of assessment proceedings.
17. Copies of statements recorded:
Can the assessee ask the authority to furnish him copies of statements – The answer is in the negative. The judicial view is that the assessee gets the right to demand it only when any such statement is used against him.
The meeting then terminated with a vote of thanks to the learned speaker.
Subject : Completion of ‘Four years of Right to
Information Act’ — A meeting organised by BCAS jointly with IMC and P.C.
Governance Trust
Venue : I.M.C. Hall, Churchgate, Mumbai.
Date : 12th October, 2009
Part-A :
A brief report on proceedings of the meeting.
On 12th October, 2009 the BCA Society, Indian Merchants’
Chamber and P. C. Governance Trust jointly organised the above meeting in
which many august institutions and NGOs in the city participated in
celebrating the Fourth Anniversary of Right to Information Act introduced on
12th October, 2005.(1) The meeting started with opening speech of Julio
Rebeiro representing, Indian Merchants’ Chamber. The speaker outlined the
objective and purpose of the Act and gave valuable suggestions on strategy to
be adopted for effective implementation. He expressed his satisfaction that
not only masses in cities but also in villages are becoming aware of the
utility of the Act, which will help in checking corruption and will make Govt.
authorities accountable and answerable.(2) Narayan Varma representing BCAS Foundation said that
his Foundation has started RTI Clinic and is attending through telephone
service the complaints and grievances of the members of public. The Foundation
publishes articles in newspapers, writes books, articles and publications
which are widely appreciated. He stressed the need to make public movement
more effective.(3) Anand Castolino of Bombay Catholic Sabha, informed that
his institution organises many meetings in various parts of city of schools
and college students, senior citizens and many others. The persons attending
the meetings participate actively. Every week, clinic is held in the Mahim
office to help persons suffering in hands of corrupt and irresponsible Govt.
authorities.(4) Paramjeet Singh explained work done by his Dharma RTI
Mission. His concern has established Help Centres aided with computer and
other equipments. The RTI Help Centre is focussing on collecting information
from schools, colleges about non-receipt of Govt. grants and provides
assistance in filing applications. The slum areas in Govandi are also visited
where meetings are held of residents to register their grievances. These are
then forwarded to concerned offices and are followed up thereafter.(5) Ashok Ravat represented Forum of Free Enterprise, M. R.
Pai Foundation and N. A. Palkhiwala Memorial Trust. He complained about the
road blocks created by administrative persons in replying the applications
filed. The authorities invariably try to take shelter u/s.8 of the RTI Act to
avoid giving answers to questions raised and to furnish details. He informed
that Books, Guides and Information materials are published explaining various
provisions of the Act and Rules. The forum of free Enterprise is also keeping
in touch with Bank Depositors Association. Instances of frauds on depositors
by private banks and co-op. banks have become rampant. Unfortunately a
favourite plea is put forth by those Banks that they are outside the scope of
the Act. He stressed the need to remedy this unfortunate position. Another
road block put in by Govt. authorities is the common plea that the question
does not fit in definition of information. To overcome this, his organisations
are advising those applicants to approach State Information Commission since
S. 81 empowers the Commission to investigate into complaints.(6) Mr. Rasikbhai representing Tarun Mitra Mandal, reported
that his organisation is conducting various seminars, programmes in Mumbai,
Thane and Navi Mumbai to train public on use of RTI Act effectively. His RTI
centre assists public in drafting applications, appeals and other procedural
matters for better implementation.(7) The above representations were followed by short
lectures of a few students of law college.In concluding remarks, the Chairman expressed satisfaction
that the movement is gathering momentum. He hoped that there will be proper
reciprocation from authorities in Govt. and public sector undertakings to make
the legislation meaningful and will bring transparency and will reduce
corruption. Hon. Justice Dhananjay Chandrachud was then requested to enlighten
the audience on this occasion.
Part-B :
Speech of Hon. Justice Dhananjay Chandrachud, Mumbai High
Court
The Hon. speaker said that the society should look to the
legislation not as a tool to raise issues but should consider it as a
movements and as an effective tool to achieve goal of transparency, efficiency
and should inculcate a spirit of social commitment amongst Public servants. It
should become a new way of life, an awakening in the society. It should
replace the apathy, the indifference in the heart of a citizen and should
encourage him to raise his voice against malpractices, which will improve
radically the functioning of Public bodies. The act will replace scepticism
with optimism, will replace apathy with active interest, will replace feeling
of absence of power with sense of actual power. It will encourage involvement,
by shedding indifference and alienation. It will replace the governance from
the hands of administrators into the hands of subjects who are the
beneficiaries. The reports that are published about the issue of non-receipt
of pensions, non- receipt of ration cards, distribution of lands to landless,
issues concerning Aanganwadi, Balwadi and variety of issue concerning
millions.The Hon. speaker shared his experience on many of those
issues coming before the judiciary, where the judiciary could realise the hard
reality about the injustice done to the subject, by administrators.Hon. Justice Chandrachud stressed, that there can be no
development without empowerment. Both are interwoven providing information
about governance is a sure way to empower the citizen in quest for
development.‘At basic level, the right to information provides access to information. It is a means to an end and not an end in itself. There is a much deeper meaning in right to information. It means governance, which makes administrators realise their accountability to society. Though today we are at the threshold, the efforts should be in the direction of attaining the goal at availing access freely without barriers. Dealing with issues concerning judiary, Hon. Chandrachud said that de-regulation is becoming a Mantra of the day, in process of greater involvement of private sector. Impact of liberalisation or deregulation. Right to know is a constitutional right and the same cannot be abrogated confining the scope of the Act only to Govt. administration or public bodies.
Definition of Information given in the Act, covers information relating to any private body which can be accessed by a Public authority under any other law for the time being in force. Therefore, according to Hon. speaker, what can be accessed by Public authority can be accessed by any individual citizen also. Therefore, though the implementation is presently focussed on Public governance or Public officials, it has to be extended to private governance in course of time.
The implementation will have to be carried out at two different levels. Firstly, creating awareness of right in all stratas of society in Urban and Rural areas. It should be institutionalised by going beyond individuals. Their experiences should be shared. For easy and quick access the speaker said that the judicial Dept. has developed a software to have quick reference to pendancies of cases before the Court. Taking it as sample, softwares can be developed to have an access to statistics about issues regarding disposal of pending applications, subjectwise areawise, the information as to whether Appeals are disposed of expeditiously or not and other administrative issues. Mechanisation of operations in every part of functioning will greatly help attaining process of transparency and administrative efficiency. S. 8 of the Act is misused by authorities to deny access to information. But unless the information is of commercial confidence or related to national security, the access can not be denied. We need an era, where disclosure must be the norm and suppression of information should be an exception. It is only then the goal of having a free society with informed citizens can be attained.
The meeting terminated with a vote of thanks to Hon. Justice Chandrachud and to all dignitaries representing activist organisations for actively participating in the meeting.
Subject : Foreign Investments in Real Estate
Speaker : Rajesh Kapadia, Chartered Accountant,
Past President, BCAS
Venue : I.M.C. Hall, Churchgate, Mumbai.
Date :
16th July 2008
(1) While reviewing the trend of prices of real estate over
the past three decades and while identifying the reasons for spurt in real
estate prices year after year, the speaker Mr. Kapadia candidly observed that
apart from other economic factors the main cause is the utter failure of the
Urban Land Ceiling Act, 1973 in attaining the declared objective for which it
was enacted. The objective of controlling the rising prices and bringing rates
of residential flats within reach of common man failed miserably. During the
period of emergency in the country and a few years thereafter, the prices of
residential flats were in the range of Rs.70 to Rs.80 per sq.ft. in South
Mumbai. Between 1986 to 1993 the prices remained fairly stable.
(2) After 1995 there is unprecedented rise in real estate
prices year after year. Now a new trend has emerged amongst the class of
developers of specialising in different categories, such as construction
projects for residential complexes, commercial spaces, hospitality i.e.,
hotels, industrial parks, malls and similar projects.
(3) To regulate the development projects, the regulating
authorities issued two Press Notes. But even these Press Notes excluded certain
categories from its purview e.g., Press Note 2 does not deal with
industrial park developments, which comes under automatic route. Similar
position exists in cases of development of warehousing, hotels, etc.
(4) As regards regulating the provisions applicable to
foreign investment in real estate developments, the speaker said that there are
four or five segments available to foreign investors who are either NRIs or
foreign venture capital investors or foreign institutional investors. For each
of these categories there are different norms.
(5) Regulations prohibit participation of foreigners in real
estate business as traders per se. However, real estate business does not
include development of townships, construction of residential and commercial
premises, roads, etc.
(6) On following two dates viz. 6th July 1991 and 3rd
March 2005, drastic changes were introduced in regulations which have made the
real estate business an attractive proportion to foreign investors. From 12th
January 2005 the permission of Govt. hitherto required for foreign investors was
done away with. As per Press Note No. 2, hundred percent investment in
development projects of townships, hotels and roads was allowed to non-resident
investors subject to the following conditions :
(a) For development of housing project, investment in land
acquisition of minimum 10 hectares which is equal to 25 acres, will be the
precondition. The question that needs consideration is whether a 100% subsidiary
Co. of a foreign company can acquire agricultural land for development. The
answer is that if the law of the State in which such agricultural land is
situated, permits such acquisition, then such company can purchase agricultural
land provided it takes steps to convert agricultural land into non-agricultural
land and uses it for development of building and not for purposes of
agriculture.
(b) Capitalisation norms and restrictions :
A foreigner making investment through a subsidiary in India
will be obliged to invest at least 10 million dollars. If investment is made
with Indian joint venture partner, then capital contribution will be 5 million
dollars. The investment should be within 6 months from commencement with lock-in
period of 3 years from date of investment.
(c) What constitutes joint venture :
The ratio of investment in such joint venture need not be
equal. The foreign investors can have dominating percentage. As regards period
of six months from commencement, Press Note No. 2 provides that the date should
be counted from the date when agreement to subscribe shares is entered into
between co-venturers. The minimum prescribed amount of 5 million is to be
brought in within six months. The condition of lock-in period of 3 years applies
to minimum investment and not to additional investment over and above minimum
investment.
(d) Time period for completion of project :
At least 50% of the project has to be completed within five
years from the date from which all the clearances are obtained. The investor
will not be permitted to sell undeveloped plot. It means that before effecting
any sale, he must have completed development of plot by carrying out
construction of roads, water supply lines, drainage, water storage and related
facilities. It means, the investor must develop 10 hectares of project plot
before effecting sale.
(7) The speaker then observed that the boom in real estate
trade is attributable to excess liquidity in the economy. Many foreign investors
find that they are suffering cash crunch though the lock-in period is yet not
over. For making the development project viable, they have already invested
funds over, say, 25 crores plus Stamp Duty @ 1% and if at that stage any
disputes or difficult situation arises, then to meet the liquidity challenges
the only way is to dispose of their surplus investment over minimum by
transferring their shares or to liquidate holdings through buy back of shares or
to liquidate the company. In another situation if construction has already
started but if constructed area cannot be disposed of profitably, the investor
will face serious difficulty. Where development of land, say, of 10,000 sq.
meters is undertaken, then built-up area of 50,000 sq.mtrs. will be available
assuming FSI of 5. In the event response to constructed area is very poor, then
the loss may be much higher. The foreign investor has to keep in mind all such
situations.
8) The speaker then clarified that in the event the project fetches good profit, then dividend can be declared, subject to transfer of required percentage to reserves.
9) As regards companies in real estate, with huge capital investment of, say, 100 crores, the foreign borrowing for purchase of land is not permitted. Such borrowing’s are permitted only for financing construction work. As issue of shares at premium is possible, in such a case the capital base can propor-tionately be kept smaller. However, it is necessary to look into Reserve Bank guidelines. The amount of premium can be considered, for satisfying the condition of minimum capitalisation. External Commercial Borrowings (ECB) is not permitted. On
1-6-2008 the Government has put a bar on issue of non-convertible preference shares or non-convertible debentures. Debentures must be convertible and time frame for conversion has to be observed. But, if the company has committed to issue non-convertible debentures prior to 1st June 2008, then such company can continue with its commitment. In another situation if company wants to change over to convertible debentures, then Reserve Bank should be approached before taking such step.
10) Another aspect is satisfying valuation norms prescribed by the Controller of Capital Issues, pre-vailing up to 1992. Though this order was abolished, valuation rules prescribed by CCI regulations still continue.
11) As regards conversion of preference shares in equity shares, such conversion is treated as transfer for ascertaining capital gains liability of shareholder.
12) As regards conversion of debentures into shares, S. 47(10) of the Income-tax Act provides that the same will not be regarded as transfer. Transfer of shares by one foreign Co. to another foreign Co. requires no permission, nor is it governed by transfer pricing rules, nor by pricing guidelines. The same principle applies to transfer by one NRI to another NRI. Where transfer of shares is from person resident in India to non-resident, no approval is required. This however is subject to compliance of guidelines, set out in circular of RBI of October 2004 and pricing guidelines.
13) Any gift by a resident to a resident outside India needs RBI approval. Where there is a transfer by a person outside India to a resident in India, the repatriation of price realised above fair value will not be permitted to such non-resident.
14) Mr. Kapadia then stressed the need on the part of non-resident investor to give serious thought to structuring aspects of joint venture investment, by planning of route to be adopted, by studying the provisions of DTAA, and FEMA, whereby the tax effect can be minimised and his investment will be ideally tax effective and cost effective.
15) The speaker thereafter touched upon the various segments of real estate trade. It cannot just be restricted to conventional form of construction of buildings, but also takes into consideration other forms. The capital investment requirement and form of organisational set-up vary from each other. The few illustrations are:
a) Real estate management company needs to have minimum net worth of 5 crores.
b) There was one more category of O.CB., where 60% of holdings were owned by non-residents. Now, 50% of Directors of such real estate management company should be financing directors. The unit should invest in real estate projects of which 80% should be in completed projects and maximum up to 20% in incomplete project. Investment in vacant land is not permitted. These provisions at present are in a draft form till guidelines are notified.
c) The other avenues in real estate are development of service plots, residential or commercial premises, development of townships, investment in manufacture of building materials, investment in joint ventures, and similar other forms of organisation. In respect of many of the avenues there are no limiting or restrictive conditions like minimum capitalisation or lock-in period. The only requirement is the investor should be an NRI, a person of Indian origin. All these investments will be on repatriable basis.
d) As regards foreign venture capital investors fund, clause 5(5) of Foreign Venture Capital Fund Regulations of 1998 plays an important role. The constitution of a venture capital undertaking has to be a company whose shares are not listed on a recognised stock exchange in India and which should not be engaged in an indus-try specified in negative list. The advantage is lock-in restriction and pricing restriction are done away with.
16. Regulations Re : Real Estate Mutual Fund:
The only requirement is that management of such mutual fund shall have at least 5 years expertise in real estate trade. The investment should be in a specified real estate asset and not in incomplete projects or projects under construction. It must be located in India and in such city as may be specified. The property should not be subject matter of any litigation. At least 35% of net assets of the fund will have to be invested directly into real estate asset and therefore such mutual fund will not be equity-oriented mutual fund. Distribution made by mutual fund will be subject to dividend distribution tax. The investment can also be made in shares, debentures, mortgage-backed securities. The investment in these can be 75% and balance 25% in any securities. No real estate mutual fund can invest more than 25% of its capital in unlisted shares. The NAV of the real estate mutual fund shall be published every 90 days.
17. While concluding his talk, the speaker narrated a quotable quote of Pandit Jawaharlal Nehru on the eve of Independence in 1947. Hon. Panditji said, “The achievement which we celebrate today is a step of opening as an opportunity to the greatest triumph. We should be wise enough to grab this opportunity and accept the challenge of future”. This statement applies even today in current economic scenario.
The meeting terminated with a vote of thanks to the speaker.
68 FDI inflow through tax havens
increases manifold — Mauritius, Singapore & Cyprus contribute 61% of FDI inflow
in 2007-08.
FDI from Mauritius, jumped from Rs.28,759 crore in
2006-07 to Rs.44,483 crore in F.Y. 2008, registering a 55% growth, whereas FDI
inflows from Singapore rose by whopping 362% during the same period, an analysis
based on FDI data reveals. FDI from Cyprus rose over 12 times from Rs.266 crore
in F.Y. 2007 to Rs.3,385 crore.
(Source : The Economic Times, 20-7-2008)
67 Pakistani investors stone Karachi Exchange.
Pakistan investors stormed out of the Karachi Stock
Exchange, smashed windows and cursed regulators after the benchmark index fell
for 15th day, the worst losing streak in at least 18 years. The index has
plunged 35% from the record of 15,676.34 on April 18.
(Source : The Economic Times, 18-7-2008)
66 SEC sanctions E&Y.
Ernst & Young LLP, one of the so-called Big Four
accounting firms, agreed to forfeit more than US $ 2.9-million to settle U.S.
regulatory claims that it compromised its independence while auditing three
companies.
The firm “engaged in improper professional conduct”
after agreeing in 2002 to create an audio series of recorded interviews with
industry leaders in collaboration with Mark Thompson, a board member for three
of its clients, the Securities and Exchange Commission said in a statement on
Wednesday. It didn’t identify the companies.
Best Buy Co., the largest U.S. electronics dealer,
announced plans in 2004 to drop Ernst & Young as its auditor after learning
Thompson, a member of its audit committee, had a separate relationship with the
accounting firm. Thompson earned about half his income by coaching Ernst & Young
partners to conduct talk show-style interviews for its ‘Thought Leaders Series’
of compact discs, the SEC said.
The regulator also cited Ernst & Young’s Chief
Operating Officer, John Ferraro, for allowing the violations. He settled by
pledging to refrain from similar misconduct in the future. Thompson settled by
agreeing to forfeit US $ 123,900.
The firms, like the other defendants in the case,
didn’t admit or deny wrongdoing. Ernst & Young is giving up almost US
$ 2.4-million in audit fees, plus interest.
(Source : Internet Newswire, 6-8-2008)
65 I-T nod likely to be made mandatory for
remittances.
Sources said a certificate from Assessing Officer (AO)
prescribing the rate at which withholding tax is to be deducted would be
required. This regulation existed some years ago, but was done away with to make
the process less cumbersome. However, with increase in remittances, both
corporate and individual, there is a growing feeling in the Department that tax
could be escaping the Department’s eye.
Tax experts feel this condition would create an unnecessary
roadblock. They feel the Department should specify a threshold or exempt
requirement of NOC in cases where no tax is payable.
(Source : The Economic Times, 8-8-2008)
[Compilers’ Note : Bureaucrats always want to gain and
regain controls. Does the Department have the time and requisite resources to
scrutinise even the Remittance Certificates issued by CAs u/s.195 ?]
63 Top companies ignore ICAI rule
on forex loss treatment.
First-quarter results of several big companies such
as Reliance Industries, Reliance Communications, Bharti Airtel and Jet Airways
would have been a lot worse had they followed the Accounting Standards (AS) 11
rules prescribed by the Institute of Chartered Accountants of India (ICAI).
Most of these companies, however, chose to comply
with Schedule 6 of the Companies Act, which is at variance with the treatment
prescribed in AS-11 for the exchange loss incurred on foreign
currency-denominated liabilities for acquiring fixed assets.
For example, if the forex loss on this account were
taken to the profit and loss (P&L) account as required under AS-11, the net
profits of Reliance Industries for the quarter-ended June would have been 23%
lower than reported. Similarly, Reliance Communications’ net profits would have
shrunk 70% if it had taken the forex loss on the P&L account.
“The effect of changes in foreign exchange rates
has to be charged to the profit and loss account. The standard has been notified
by the Government and is part of the rules. Any violation has to be dealt with
by the Government,” said ICAI President Ved Jain.
The problem is that the Companies Act has not gone
through a consequential amendment.
“The three agencies (Sebi, ICAI and the Ministry of
Company Affairs) need to work in tandem so that there’s no ambiguity,” said
Sanjay Aggarwal, Head, Financial Services, KPMG.
(With inputs from Business Standard Research
Bureau)
(Source : Business Standard, 6-8-2008)
64 ICAEW Joint Disciplinary Scheme
fines KPMG £ 1.6 million.
In its latest batch of disciplinary orders and
regulatory decisions, the ICAEW has found KPMG at fault for its work on the 2000
audit of Independent Insurance Group.
The firm “accepted that loss could be turned to
profit by using stop loss insurance which was too good to be true”. KPMG’s audit
partner, named as a Mr. Sayers, was advised by the firm’s concurring partner to
confirm the stop loss terms directly with the reinsurers. No reason was provided
for why the audit partner failed to do this. Independent’s actuaries, Watson
Wyatt, told Sayers that they “did not understand why the reinsurers were writing
these contracts when they appear to be obviously loss making.”
It subsequently turned out that Independent had
agreed to pledge £ 141 million as a condition of obtaining the stop loss, and
there were further agreements which limited the liability of the reinsurers and
sought to pass risk on to an Independent subsidiary. In addition, a different
stop loss contract required the payment of a premium of £ 1.6 billion over four
years. Shortly afterwards Independent’s Chief Executive resigned and the company
went into liquidation.
Eight years after the event, KPMG were finally
reprimanded by the Institute, fined £495,000 and ordered to pay costs of £ 1.15
million.
(Source : Internet Newswires, 8-8-2008)
62 Da Vinci copied Chinese art, says British
historian.
Leonardo da Vinci’s drawings of machines are
uncannily similar to Chinese originals and were undoubtedly derived from them, a
British amateur historian says in a newly-published book.
Gavin Menzies sparked headlines across the globe in
2002 with the claim that Chinese sailors reached America 70 years before
Christopher Columbus.
Now he says a Chinese fleet brought encyclopedias
of technology undiscovered by the West to Italy in 1434, laying the foundation
for the engineering marvels such as flying machines later drawn by Italian
polymath Leonardo.
The 70-year-old sold more than a million copies of
his first book, “1421”, which argued Chinese sailors mapped the world in the
early 1400s before abandoning global seafaring.
To support his argument, Menzies publishes drawings
of weapons, mills and pumps from a 1313 Chinese agricultural treatise, the Nung
Shu, and from other pre-1430 Chinese books, next to apparently similar
illustrations by Leonardo, Di Giorgio and Taccola. “By comparing Leonardo’s
drawings with the Nung Shu we have verified that each element of a machine
superbly illustrated by Leonardo had previously been illustrated by the Chinese
in a much simpler manual,” he says.
(Source : The Times of India, 30-7-2008)
When telecommunications provider IDT decided to switch
auditors from Ernst & Young to Grant Thornton in early 2008, the “driving force
was to save money,” says CFO Bill Pereira. It worked. Part of a companywide
effort to reduce corporate overhead, the move cut IDT’s $ 4.3 million audit bill
almost in half. Although initially “we were fearful of leaving the Big Four,”
says Pereira, “in retrospect, we are really happy with the decision.”
In fact, the switch went so smoothly that IDT declined to
announce the renewal of Grant Thornton’s contract in its most recent proxy —
because IDT was open to switching again. “We knew there had been changes in the
market and we wanted to evaluate where fees stood,” says Pereira. “We didn’t
just make the automatic assumption that we’d stick with Grant Thornton. We felt
it was our responsibility to do our homework.” (IDT eventually did renew with
Grant Thornton — and cut its bill by nearly another million dollars, to $ 1.42
million last year.)
Welcome to the new auditor-client relationship. In the wake
of the Sarbanes-Oxley Act of 2002, audit fees soared, auditors dumped risky
clients by the hundreds, and ‘value-added’ services all but vanished under the
weight of new independence rules. Today, the reverse is true. Audit fees have
been dropping across the board since 2007. In 2004, more than a third of auditor
changes were the result of audit firms walking away from clients. Last year, 82%
of auditor changes were because companies fired their auditors (among the Big
Four, the number was 90%). And companies aren’t just negotiating lower fees;
they are also demanding more value — read ‘services’ — covering everything from
corporate-board education to competitive intelligence.
Publicly traded companies alone spent $16 billion on audit
and audit-related fees in 2008, with nearly 7,000 companies paying more than $
100,000 each year, and 2,585 paying more than $ 1 million, according to CFO’s
analysis of data from Audit Analytics. Little surprise, then, that half of all
CFOs now say they regularly (at least every two years) benchmark what their
company pays its external auditor against what their peers pay, according to the
latest Duke University/CFO Magazine Global Business Outlook Survey.
Unusually low or high fees both can signal trouble: weak
audits for the former and potential conflicts of interest for the latter.
“Companies paying the highest fees (may do so to gain) more flexibility and
aggression in accounting,” says Whisenant. He has done studies that suggest that
fees that are unexpectedly high or low “can both lead to conditions where the
shareholders do not benefit.”
Take, as an extreme case, Fannie Mae, which in 2003 paid a
surprisingly low $ 2.7 million for its audit by KPMG. An accounting scandal the
following year subsequently caused the company’s audit bill to soar to $ 203
million (paid to Deloitte & Touche after KPMG was dismissed).
More recently, in building its case against David Friehling,
auditor of Bernie Madoff’s Ponzi scheme, the SEC charged him with raking in
“substantial fees.” But, in fact, the opposite is true : that Madoff’s
multi-billion-dollar fund paid the tiny audit firm of Friehling & Horowitz a
mere $ 186,000 per year should have been a glaring red flag.
(Source : CFO.com, 1-4-2010)
In the wake of a chartered accountancy student’s arrest last
week for allegedly forging documents using a CA’s stamps and seals, the Pune
branch of the Institute of Chartered Accountants of India (ICAI), now suspects
the accused may have misused stamps and seals of more chartered accountants in
the city.
Shahajahan Khurshid Khan allegedly made duplicates of stamps
and seals of CA Sunil Shankar Yelol with Yelol’s ICAI membership number for tax
audit of M/s. Jagtap Automobiles and duped Yelol of Rs.9.80 lakh.
The incident came to light when Jagtap Automobiles decided to
hand over their audit work to another CA, Vijay Anpat. Following the CA
protocol, Anpat called up Yelol to obtain his no-objection certificate about the
handover. Yelol realised that Jagtap was not his client, but the stamps and
seals carried his membership number.
According to the ICAI legal advisor, advocate V. B. Khatri,
Khan may have used the stamps and seals for people who had applied for bank
loans to get TDS refunds and so on.
(Source : forum4finance.com, 21-3-2010)
The Congress leadership expressed concern over mounting
judicial pendency with Prime Minister Manmohan Singh and UPA chief Sonia Gandhi
saying they were robbing the sheen from the democratic system which aims to
provide speedy justice to aam admi.
The duo, while seeking a way out from the halting wheels of
justice, said the Gram Nyayalayas Act would prove a big step in removing the
pendency. The PM urged the states to take immediate steps to operationalise the
law. Sonia said 2.5 crore cases were pending at various levels across the
country. In a telling comment, the PM mentioned the concern over judicial
backlog while adding that democracy will have little meaning for the common man
if he could not “secure basic rights and easy access to speedy justice”.
While Sonia was mild in her observations, she added that
“speedy, effective and affordable justice” was a party objective. She said the
Gram Nyayalaya Act would bring justice at the doorsteps of rural masses. It will
add 5000 courts for which the Centre will give Rs.1400 crore, she said, adding
they will cut the arrears that stood at 2.5 crore.
(Source : The Times of India, dated 28-3-2010)
Judiciary faces a crisis of merit at a crucial layer as
majority of the states are finding it difficult to fill 25% of district judge
posts through a limited departmental examination that was devised to give talent
a speedy promotion route.
This became clear before the Supreme Court as senior advocate
Vijay Hansaria as amicus curiae pointed to the large number of vacancies in
district judge posts, which is the highest level in the lower judiciary
responsible for fighting the huge pendency of nearly 2.6 crore cases. The large
number of posts falling under the cadre of Higher Judicial Service was mainly
vacant due to failure of existing judicial officers to clear the tough
departmental competitive test. The situation is so bad that in Tripura, eight
posts were advertised under the speedy promotional route but only two candidates
applied, Hansaria said. This was the situation in almost all states.
Rao gave a chart of the vacancies under 25% quota for speedy
promotion through competitive examination. It said West Bengal had 50 vacancies,
Uttar Pradesh 24, Maharashtra 42 and Orissa 12. The Apex Court had noticed on
January 13 that in Bihar, though 16 posts were available, the HC could fill only
two.
(Source : The Times of India, dated 26-3-2010)
(Note : The origin of the problem lies in very poor
remuneration and pathetic quality of education and training in Law. The Law
Colleges are proliferating as it requires only a few class-rooms and a few book
shelves for a library. There is no supervision or control over quality of
education and training provided. Many persons enrol in these colleges ‘to be
student’ and enjoy the privileges, benefits and protection bestowed on
students.)
The government might drop the draft Direct Taxes Code (DTC)
proposal that virtually gives Indian tax laws supremacy over the Double Taxation
Avoidance Agreements (DTAAs) with other countries.
The move’s implication is that the India-Mauritius DTAA,
which underpinned the emergence of the small island nation as the largest source
of foreign investment in India, along with more than 70 other bilateral tax
treaties, would not automatically become subservient to the Code when it kicks
in from April 1, 2011.
The revised draft would be ready in about two months. While
the proposed EET (exempt-exempt-tax) method for taxation of savings is a concern
for individual taxpayers, the proposal to impose MAT on gross assets (opposed to
book profits now) is worrisome to corporate India. When asked about these
proposals, Moorthy said, the revised DTC draft would reflect conceptual changes
in these proposals as well.
(Source : The Financial Express, dated 25-3-2010)
Keeping in tune with the weather, the heat on practice of law
by foreign advocates in India has just been turned up. Petitioner A. K. Balaji,
a practising advocate of Tamil Nadu (‘Petitioner’), has filed a writ petition in
High Court of Madras (‘High Court’) alleging non-action on part of various
government bodies. The petitioner has claimed that numerous foreign law firms
are allegedly violating provisions of Indian Advocates Act, 1961 (‘Advocates
Act’) by providing legal services in India.
The petitioner has filed a writ petition against Bar Council
of India, Government of India, a business-process outsourcing firm and several
well-known foreign law firms (‘Respondents’) alleging violation of the Advocates
Act, Immigration laws and the Income-tax Act, 1961.
The petitioner has claimed that the interpretation of the
Advocates Act is to allow only an ‘Advocate’ registered under the Advocates Act
to practise law anywhere in India. As such the Advocates Act allows a foreign
citizen to practise law in India only if the person possesses necessary
educational qualification and the country of citizenship allows Indian citizens
to practise law in their country on a reciprocal basis. In absence of a
reciprocal arrangement, Indians are not allowed to practise law in most
jurisdictions without taking further set of educational courses and other tests,
such as QLTT in case of UK or the state bar examination in case of the US. No
such requirement of taking a qualifying examination or programme, apart from a
qualifying legal education, is necessary for enrolling as an ‘Advocate’ under
the Advocates Act.
The petitioner has made various government bodies such as
Income-tax Department, Ministries of Finance and Law, and other immigration
offices responsible for not taking cognizance of the alleged violation of
various laws by the respondents. The petitioner claims to have made a
representation in the past to these agencies, and due to lack of responsiveness,
has filed a writ petition with the High Court under Article 226 of the
Constitution of India against the government and its agencies to take
further action in this respect.
(Source : nda@ndalaw.com, dated 23-3-2010)
