02 June 2009

INCOME TAX
CII`s Budget wishlist: Up IT exemption limit,no FBT, surcharge
Delhi : Industry chamber CII on Monday asked for raising income tax exemption limit by Rs 50,000, but did not call for another stimulus package in the full Budget for 2009-10 expected in July by the new UPA Government.A chamber delegation, led by CII Vice President Hari Bhartia, has had pre-Budget interactions with Revenue Secretary P V Bhide today. The delegation demanded that the Budget should have measures to promote investment, remove Fringe Benefit Tax and surcharge on corporate income tax , required to upturn the slackening economy.
Tax breaks for gas production to cost govt Rs 40,000 cr
Delhi : The government will lose Rs 40,000 crore in revenues if natural gas production is given tax breaks, the revenue department in the finance ministry has opined, an assessment disputed by experts.Revenue secretary PV Bidhe met petroleum minister Murli Deora on May 29 and is believed to have expressed reservations on the grant of seven-year exemption from payment of income tax to natural gas production, a senior government official said.Though the Cabinet had guaranteed exemption from payment of income tax on oil and gas production from areas awarded under the New Exploration Licensing Policy (Nelp), the finance ministry last year said the fiscal incentives were only for oil.

Misc. - Direct Tax
Effective tax compliance rate of India Inc declines in ? 08-09
Delhi : IN A little over a month from now, Pranab Mukherjee will present his Budget for 2009-10. He must be very busy putting final touches to the proposals right now. In many ways, his job will be more difficult this time than his predecessor. The growth rate of gross domestic product has fallen sharply last year, industrial production has grown at a substantially lower rate and the spectre of job loss and salary cut is still haunting the nation. The Budget has to address all these problems and take measures to boost the economy. He has another big task ahead ? broadening up of welfare measures for the poor. That is, higher social sector spending. But the question is where will the money come from?

CUSTOMS
Dumping duty on fluorescent lamps from Vietnam, China
Delhi : Prices of compact fluorescent lamps (CFLs) imported from China and Vietnam may move northwards, with the Finance Ministry imposing a definitive anti-dumping duty on such imports from these two countries. A definitive anti-dumping duty usually lasts for five years, unless revoked earlier. The definitive anti-dumping duty would be applicable from November 21, 2008, the date of imposition other provisional duty. The recommendation to levy definitive anti-dumping duty on CFL imports from China and Vietnam was made by the Designated Authority in the Commerce Ministry in end February 2009

SERVICE TAX
Can contract be bifurcated to decide tax jurisdiction? Article
Delhi : he issue of taxability of offshore services was settled by the Supreme Court in case of Ishikawa (288 ITR 408) wherein it was observed that there are two conditions which are required to be met in order to bring the income from services in the tax net in India. The two conditions both of which are to be met are that services should be rendered in India and that the services should be utilised in India. Thus where services are rendered/provided outside India, then the consideration therefore will not be taxed in India even if the services are utilized in India. The Apex court also held that whatever was paid by a resident to a non-resident cannot be taxed in India unless there is sufficient territorial nexus with India.

SEBI
Sebi proposes to fund class action suits
Maharashtra : In the first move of its kind in the country, the Securities and Exchange Board of India has decided to finance investor associations that propose to fight collective suits - which resemble US or European-style class action suits - in Indian courts.The stock market regulator will announce detailed guidelines on this shortly and has introduced a new clause in the regulation for the Investor Protection and Education Fund that was notified recently. Sebi has already made a one-time contribution of Rs 14 crore (Rs 140 million) towards this fund.

Misc. Corporate Laws & Other Commercial Policies
Airline safety: India likely to seek more time from US
Delhi : The civil aviation ministry is expected to ask the US Federal Aviation Administration (FAA) for more time to strengthen safety and oversight standards in Indian airports, after the US regulator raised concerns about the level of compliance with global standards in the country. A team from the FAA is expected to visit India in June for another inspection of the country’s airport facilities, but Indian officials said they would request the Americans to delay the visit by a month.The Indian civil aviation secretary, M Madhavan Nambiar, and the Directorate General of Civil Aviation (DGCA) head Nasim Zaidi, are in any case expected to brief the US regulator about the measures taken by India to upgrade security and safety standards.
Fairplay panel plans drive to ‘educate’ cos
Delhi : The Competition Commission of India (CCI), which got enforcement powers recently, plans a campaign to educate companies about the practices that may put them on the wrong side of the law, before it starts action against errant firms on its own.The commission will reach out to corporate houses across the country in June to tell them what practices have to be stopped immediately, said a commission official who asked not to be named.For example, predatory pricing, or selling cheaper than the rival’s product to capture the market, will be considered legal so long as the consumer benefits from it.

Audit & Acc - Misc.
Accounting norm changes help major cos boost earnings
Delhi : Relaxations in AS 11, the Accounting Standard that deals with the ‘effects of changes in foreign exchange rates’, may have helped quite a few large companies report a better profit picture for March 2009.Even as top financial companies in the US are said to have benefited from a less stringent Accounting Standard that allows flexibility in mark-to-market accounting, some of the leading Indian companies such as Tata Motors, JSW Steel, Sterlite Industries, Ashok Leyland and Bharat Forge have come up with an improved earnings picture in March 2009 as a result of the amendment to AS 11 and some could even have slipped in to losses in FY-09 had they not chosen to adopt the changes.
Accounting for rate regulated entities Article
Delhi : Many governments regulate the pricing of essential services such as natural gas, water and electricity. The objective is to provide price protection to consumers while providing a fair return to the supplier. These regulatory mechanisms have created significant accounting issues under IFRS, which does not have any elaborate guidance on the subject.The accounting for rate regulated entities is now on the agenda of the International Accounting Standards Board (IASB) and a separate project has been set up to deal with it. The IASB intends to publish an Exposure

Draft (ED) in July 2009.
Finance & Money Markets
Misleading regulations can kill unsecured debt market Article
Delhi : The corporate bond market is a stated strategic focus area for financial sector regulation in India. When the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (“Debt Regulations”) were notified about a year ago, the intention was to kickstart the corporate bond market. However, avoidable ambiguity prevails, with bad interpretation by merchant bankers and the media being left undisturbed by the Securities and Exchange Board of India SEBI.The Debt Regulations purport to provide a regulatory framework for corporates to raise debt and list such debt on stock exchanges. The debt instruments could either be issued in the form of a “public issue” i.e. inviting the public to subscribe to debt instruments or by way of “private placements”, where only select invitees numbering less than 50 could initially subscribe.
Rise in NPAs to spoil revival: Crisil
Maharashtra : While the euphoria that India Inc is making a comeback is gathering momemtum due the bull run on the stock markets and the better-than-expected GDP numbers, there are concerns that indicate that all might not be well. Rating agency Crisil, a subsidiary of Standard & Poor’s, has cautioned that the Indian economy is still going through a period of stress and downturn risk is not completely bottomed out as yet. The likely growth in non-performing assets (NPAs), a trigger for the global growth to dither, is raising its ugly head in India as NPAs of corporates is set to grow three times.
RBI to let SBI guarantee Tata Motors debt issue
Maharashtra : The Reserve Bank of India (RBI) will allow the State Bank of India (SBI) to guarantee the recently-concluded Rs 4,200-crore non-convertible debenture (NCD) issue by Tata Motors. A source close to the central bank said that RBI had decided to exercise what the person described as “regulatory forbearance” in case of the Tata NCD issue, which means it would be exempt from the ban on banks guaranteeing corporate bondsIn reaching this decision, RBI was mindful of the fact that the interest of investors would be jeopardised, if the guarantee were to be withdrawn after the event, the source, who requested anonymity, said.An RBI circular issued last Friday clarifying that existing regulations do not permit banks to guarantee corporate bond issues had spooked investors who had invested in the issue.
Govt eyes Rs 10,000 crore from PSU stake sales in 12 months
Delhi : THE new UPA government at the Centre plans to raise Rs 10,000-crore through stake sales in stateowned units over the next one year, more than what the previous UPA government achieved during its entire five-year tenure.With the Left off its back, the Manmohan Singh-led government is planning to unveil its disinvestment agenda in the coming budget, complete with annual targets, a finance ministry official said.“The government has fixed a target of Rs 10,000 crore from disinvestment proceeds over a 12-month period starting July 2009,” said the official, who requested not to be named.“The government is preparing a blueprint that will identify the public sector units where the state’s holding can be diluted at the earliest.
Funds pitch for higher cap on single-stock investments
Maharashtra : SOME large domestic mutual funds are asking market regulator Sebi to revise a rule that prevents them from investing more than a tenth of an equity scheme’s assets in a single stock or equity-related instrument. The main trigger for the request is that the rule is constraining or will constrain these schemes from increasing their investments in shares of Reliance Industries, usually at the vanguard of a bull stock market rally. Reliance Industries’ weightage in the benchmark S&P Nifty index of the National Stock Exchange has been on the rise, increasing by over 2% since the beginning of the year.

Pre-Budget 2009
Budget for fiscal fitness and economic growth
Delhi : Having completed the complex exercise of Cabinet formation, the Government’s focus is on the legislative business ahead. As Finance Minister, Mr Pranab Mukherjee, told a TV channel recently, he hopes to present the Budget early in July 2009 and get it passed by the end of the month. He recognises that any delay will call for a further vote on account. The Minister obviously banks on the strength of the ruling party and its allies to avert the vote on account. What is of interest to all are the contents of the Budget. Obviously, it will have to take measures to spur growth.