Wednesday, November 18, 2009
CBDT feels tax code needs major rework
CBDT feels tax code needs major rework
The Financial Express, November 18, 2009, Page 1
Surabhi, New Delhi
Corporate India is not the sole critic of the Direct Taxes Code. The code, precursor to a brand new income tax law, has found opposition from within government, too. An internal committee of the Central Board of Direct Taxes, the principal policy-maker in the domain, has called for a thorough review of the code, including a revision of the income tax slabs and the definition of ‘income from salaries’.
The committee has mooted a review of the proposed income tax rates, fearing significant revenue losses. It has also proposed a narrowing of the tax slabs. The concern is that the proposal to tax annual income between Rs 1.6 lakh and Rs 10 lakh at the lowest rate of 10% could affect revenue streams even if all perks are added in the definition of salary income.
As for corporate tax, the panel has suggested retaining the current 30% tax, instead of at the proposed 25%.
The code has proposed a radical shift in the tax rates on the rationale that lower rates lead to better compliance. Accordingly, it has suggested taxing annual income between Rs 1.6 lakh and Rs 10 lakh at a rate of 10%, annual income between Rs 10 lakh and Rs 25 lakh at 20% and income above Rs 25 lakh at 30%.
Coming out in aid of salaried employees, the panel has also called for re-examining the definition of salary income. It has suggested that allowances given to an employee for the discharge of his official duties should be excluded, to avoid the hassles of record keeping for employees and tax officials. Further, reimbursement for medical expenses and employer’s contributions to provident fund should not be clubbed with salary income.
In contrast, the code has mooted that all perquisites should be included in salary income and proposed to do away with exemptions such as house rent allowance, leave travel concession, leave encashment and medical reimbursement.
Significantly, the committee has said retirement savings should not be brought under the exempt-exempt-tax (EET) regime as it will be ‘unnecessarily harsh’ on tax payers.
It has also called for reviewing proposals on international taxation, especially those relating to general anti-avoidance rules (GAAR). At present, the code proposes that under GAAR, the revenue department can make a presumption that an arrangement is entered into by two entities for tax benefit (tax avoidance) alone, unless it is rebutted by the taxpayer. It has suggested that specific provisions should say when such a presumption would be made.
The code, which seeks to replace the Income Tax Act, 1961, was earlier criticised by the National Academy of Direct Taxes–the training and education body for direct taxes—which had even questioned the basis of the draft legislation. It had said instead of a complete overhaul , the IT Act can be simplified by adding new circulars & notifications and recent judgements. It had also said the code was prepared without consulting field formations, trade and industry.
Cos may soon earn ‘credit’ for doing good
Cos may soon earn ‘credit’ for doing good
The Hindu Business Line, November 18, 2009, Page 1
Govt mulls corporate social responsibility credits on lines of carbon trading.
Arun S, New Delhi
Companies may soon be able to trade in Corporate Social Responsibility (CSR) credits, akin to trading in Certified Emission Reductions (CERs or carbon credits, in common parlance).
At a FICCI event, the Corporate Affairs Minister, Mr Salman Khursheed, said the Government could come up with norms on CSR credits on the lines of carbon credits and companies can, in turn, trade in such credits.
Mr Khurshid told Business Line later, “Industry should seriously think about this idea (trading in CSR credits) and send us their suggestions. We are studying the practical implications and will seek the opinion of other ministries.” If the response is positive, the Government may include it in the new Companies Bill.
The Minister said the companies would have to get certification for their CSR activities from a government body and earn credits. The credits could then be traded in a CSR credit exchange.
The company that does not want to do a CSR activity would then have to purchase CSR credits from companies that have earned them.
This is similar to carbon credit where the polluter gets his right to pollute by buying the carbon credits from companies that have earned them through environment-friendly activities.
The Ministry has roped FICCI into the CSR credits project and has asked the Indian Institute of Corporate Affairs to undertake a study on the scope of CSR credit trading.
“Though CSR initiatives are part of normal functioning of companies, they don’t get any tax exemptions. But if a company donates money to a charitable trust, it gets tax exemption. We want companies to do their own CSR activities and get some exemptions for them and not just passively donate to charity,” Mr Khursheed said.
The activities that are likely to earn CSR credits are education, housing, health and sustainable projects, not just for employees but also for the company’s ‘catchment’ areas, the Minister said.
Ms Vijaya Sampath, Group General Counsel and Company Secretary, Bharti Enterprises Ltd, told Business Line that though the idea is innovative and interesting, the Government and the corporate sector needs to look at its viability.
Highway projects to hit the fast lane
Highway projects to hit the fast lane
Hindustan Times, HT Business, November 18,, 2009, Page 23
The government is formulating a new set of guidelines and rules to put the country’s highway development on the speedway.
The cabinet committee on infrastructure, headed by Prime Minister Manmohan Singh, has given ‘in-principle’ approval to a host of measures, including empowering the National Highways Authority of India (NHAI) to raise funds directly from the public and institutions by floating tax-free bonds.
The government has also assured the body that the cess on diesel and petrol will continue for 20 years.
The government currently imposes a cess of Rs 2 on petrol and Re 1 on diesel to provide finance for development of roads and highways. As much as Rs 3,000-4,000 crore becomes available annually through this means — depending on the average price of petrol and diesel prevailing in the year.
NHAI, which is responsible for developing and maintaining national highways, meets its financial needs through this cess on fuel, borrowings from international lending agencies and the financial market.
“The government has given in-principle approval to NHAI for providing letter of comfort, confirming availability of cess at least till 2030-31,” said a senior official, who did not wish to be identified, as he was not authorised to speak to the media.
NHAI chairman Brajeshwar Singh did not respond an emailed questionnaire sent by HT.
The National Highway Development Programme (NHDP), first conceived in 2000, is being carried out in five simultaneous “phases” covering a distance of 33,097 kms. About half of these projects (15,731 kms) are, however, yet to be awarded.
These are among a number of recommendations of the BK Chaturvedi committee set up to suggest ways to implement road projects faster and more efficient.
Under the proposed norms, the length of the project for a single contractor has been doubled to 500 km, making them more attractive through higher economies of scale.
This would also increase the quantum of viability gap funding that a bidder can raise from designated government agencies to bridge the shortfall in financing the project.
Nitesh Estates plans to raise Rs 1kcr via SPV share sale
Nitesh Estates plans to raise Rs 1kcr via SPV share sale
The Economic Times, November 18, 2009, Page 7
Proceeds To Finance Setting Up Of Ritz Carlton Hotel In Chennai
Boby Kurian & Sachin Dave BANGALORE MUMBAI
BANGALORE-BASED real estate developer Nitesh Estates is learnt to have planned to raise nearly Rs 1,000 crore through sale of shares of a special purpose vehicle (SPV) to finance setting up Ritz Carlton hotel in Chennai.
A person close to the matter said the hotel SPV would sell shares to private equity investors prior to its listing with a foreign stock exchange, preferably Singapore or London. Nitesh would dilute over 70% stake through stake sale and foreign listing, he added. Executive director LS Vaidyanathan refused to comment on the issue.
Last week, Nitesh entered into an agreement with US-based Ritz Carlton, a whollyowned subsidiary of Marriott International, to set up a 200-room hotel and 80 serviced residences in Chennai. The project, which will be located on 9 acres of land in Chennai’s posh Boat Club area, will also have one lakh sq ft of luxury retail space. The cost of the project is estimated to be around 1500 crore. Nitesh is also working with the foreign company to develop a hotel in Bangalore in next two years.
Daiwa Securities and Nomura are learnt to be in discussions with Nitesh Estates for the overseas listing of the SPV in next six months. Nitesh Estates is expected to hit the market with a Rs 550 crore initial public offer (IPO) in January. It has learnt to have appointed Morgan Stanley, Enam, Kotak and JM Financial as advisors to the IPO. It might divest anywhere around 35% stake through the IPO.
Centre asks states to frame norms for land acquisition
Centre asks states to frame norms for land acquisition
The Economic Times, November 18, 2009, Page 9
Don’t Plant Your Factories On Agricultural Plots: Anand Sharma
Our Bureau NEW DELHI
THE CENTRE has suggested to the state governments that they should create industrial land banks from available waste and fallow lands, to avoid confrontation with farmers over acquisition of agricultural plots for industrial purposes.
At the first conference of state industry ministers in New Delhi, commerce and industry minister Anand Sharma proposed that the Centre and the state should work together on guidelines for creation of the industrial land bank.
“Farmers should not be victims of industrialisation. They should be partners in the process,” Mr Sharma said in his address to state ministers.
Interestingly, industry ministers from Bihar, West Bengal and Orissa—the states that have witnessed a many local agitations over land acquisition for industrial purposes—were not present at the meeting, though they were represented by senior officials.
ArcelorMittal’s proposed steel projects in Orissa and Jharkhand and Korean steel major Posco’s plans of entering Orissa are held up due to land acquisition problems. Tata Motors had to shift its base for manufacture of its budget car Nano from West Bengal to Gujarat due to agitation by farmers in Singur.
Some states such as Tamil Nadu have established good practices in respect of planned industrialisation, which merits consideration by others. The minister added that attractive relief and rehabilitation package have to given to people whose land is acquired.
“Use of farm land for industrial projects should be the last resort,” he said. Speaking to ET, minister of industry from Madhya Pradesh Kailash Vijayvargiya pointed out that creating a land bank was a good idea and his state was already working on it. “We have already created a land bank and want to work on it further,” he said.
The idea behind the state industry ministers’ conference, which will now be held annually, is for the Centre and states to come together and jointly sort out problems to make India an attractive destination for investors, both domestic and foreign. According to DIPP estimates, India is likely to attract FDI worth $50 billion by 2012, which could go up to $100 billion by 2017. “If the Centre and states can work in tandem to remove hurdles, it will not be difficult to achieve the target,” Mr Sharma said.
The Economic Times, November 18, 2009, Page 9
Don’t Plant Your Factories On Agricultural Plots: Anand Sharma
Our Bureau NEW DELHI
THE CENTRE has suggested to the state governments that they should create industrial land banks from available waste and fallow lands, to avoid confrontation with farmers over acquisition of agricultural plots for industrial purposes.
At the first conference of state industry ministers in New Delhi, commerce and industry minister Anand Sharma proposed that the Centre and the state should work together on guidelines for creation of the industrial land bank.
“Farmers should not be victims of industrialisation. They should be partners in the process,” Mr Sharma said in his address to state ministers.
Interestingly, industry ministers from Bihar, West Bengal and Orissa—the states that have witnessed a many local agitations over land acquisition for industrial purposes—were not present at the meeting, though they were represented by senior officials.
ArcelorMittal’s proposed steel projects in Orissa and Jharkhand and Korean steel major Posco’s plans of entering Orissa are held up due to land acquisition problems. Tata Motors had to shift its base for manufacture of its budget car Nano from West Bengal to Gujarat due to agitation by farmers in Singur.
Some states such as Tamil Nadu have established good practices in respect of planned industrialisation, which merits consideration by others. The minister added that attractive relief and rehabilitation package have to given to people whose land is acquired.
“Use of farm land for industrial projects should be the last resort,” he said. Speaking to ET, minister of industry from Madhya Pradesh Kailash Vijayvargiya pointed out that creating a land bank was a good idea and his state was already working on it. “We have already created a land bank and want to work on it further,” he said.
The idea behind the state industry ministers’ conference, which will now be held annually, is for the Centre and states to come together and jointly sort out problems to make India an attractive destination for investors, both domestic and foreign. According to DIPP estimates, India is likely to attract FDI worth $50 billion by 2012, which could go up to $100 billion by 2017. “If the Centre and states can work in tandem to remove hurdles, it will not be difficult to achieve the target,” Mr Sharma said.
Structured debt under RBI scanner
Structured debt under RBI scanner
The Economic Times, November 18, 2009, Page 9
Sugata Ghosh MUMBAI
A NEW conservatism is sweeping the financial sector. After taking the fizz out of markets such as loan securitisation and currency derivatives, the Reserve Bank of India has turned its glare on equity linked debts—one of the hottest products among well-heeled investors and corporates.
The regulator has asked leading finance companies, bond houses and securities firms to disclose details on all structured debentures floated by them to raise money.
The move, the market feels, may be harbinger to a new set of dos and donts on these instruments whose returns may be linked to stock indices, individual shares, money market rates (like overnight index swaps) and even commodities.
Over Rs 15,000 crore of such structured debts are outstanding in the market. “Most of these instruments are unsecured...it’s possible that RBI is uncomfortable with such instruments, which investors may not fully understand and end up losing money,” said the chief dealer of a large Mumbai-based non-banking finance company that has received the RBI communique.
The most common among these structured debts was equity-linked debentures (ELDs), which were aggressively sold by securities arms of foreign and private banks and foreign NBFCs. A comparatively new debt instrument in the Indian financial market, ELDs came in two types: (a) principal protected, where the principal amount is fixed while the interest component is variable and linked to stock market movements; (b) the more risky variant is the non-principal protected instruments where the even the principal is linked to the market. The issuance of nonprotected ELDs stopped since rating agency Crisil announced two years ago that it was “reconsidering assigning ratings” to such debentures.
“The RBI wants to bring down the leverage by non-banking finance companies, which are allowed to raise unsecured debt, and bring down systemic risk. This is the customary conservatism on RBI’s part,” said a senior dealer of a local bond house.
Significantly, the RBI letter comes at a point when the Sensex has crossed 17,000 and an unbridled inflow of FII money has revived the old debate on the need to curb dollar inflow. “The low interest rate on bank deposits and poor return from short-term mutual funds may have increased the appetite for such instruments among many investors,” said treasurer of a foreign bank. “It’s also possible,” according to him, “that RBI wants to curb the back-to-back transactions that goes on in offshore markets against these issuances.” Foreign firms issuing ELDs in India often enter into reverse deals in markets like Singapore or Hong Kong to hedge their positions, and such transactions can make the local stock or currency market more volatile.
CLOSE WATCH
What is structured debt?
Debt that the lender has tailored specifically for the borrower. Structured debt often includes incentives and options for the borrower to do business with the lender. The most common among these structured debts was equity-linked debentures (ELDs)
How big is this market?
Over Rs 15,000 crore of such structured debts are outstanding in the market.
Why is RBI interested?
RBI may be uncomfortable with instruments that investors may not fully understand and end up losing money. RBI may also want to curb the back-to-back transactions that happen in offshore markets against these issuances.
The Economic Times, November 18, 2009, Page 9
Sugata Ghosh MUMBAI
A NEW conservatism is sweeping the financial sector. After taking the fizz out of markets such as loan securitisation and currency derivatives, the Reserve Bank of India has turned its glare on equity linked debts—one of the hottest products among well-heeled investors and corporates.
The regulator has asked leading finance companies, bond houses and securities firms to disclose details on all structured debentures floated by them to raise money.
The move, the market feels, may be harbinger to a new set of dos and donts on these instruments whose returns may be linked to stock indices, individual shares, money market rates (like overnight index swaps) and even commodities.
Over Rs 15,000 crore of such structured debts are outstanding in the market. “Most of these instruments are unsecured...it’s possible that RBI is uncomfortable with such instruments, which investors may not fully understand and end up losing money,” said the chief dealer of a large Mumbai-based non-banking finance company that has received the RBI communique.
The most common among these structured debts was equity-linked debentures (ELDs), which were aggressively sold by securities arms of foreign and private banks and foreign NBFCs. A comparatively new debt instrument in the Indian financial market, ELDs came in two types: (a) principal protected, where the principal amount is fixed while the interest component is variable and linked to stock market movements; (b) the more risky variant is the non-principal protected instruments where the even the principal is linked to the market. The issuance of nonprotected ELDs stopped since rating agency Crisil announced two years ago that it was “reconsidering assigning ratings” to such debentures.
“The RBI wants to bring down the leverage by non-banking finance companies, which are allowed to raise unsecured debt, and bring down systemic risk. This is the customary conservatism on RBI’s part,” said a senior dealer of a local bond house.
Significantly, the RBI letter comes at a point when the Sensex has crossed 17,000 and an unbridled inflow of FII money has revived the old debate on the need to curb dollar inflow. “The low interest rate on bank deposits and poor return from short-term mutual funds may have increased the appetite for such instruments among many investors,” said treasurer of a foreign bank. “It’s also possible,” according to him, “that RBI wants to curb the back-to-back transactions that goes on in offshore markets against these issuances.” Foreign firms issuing ELDs in India often enter into reverse deals in markets like Singapore or Hong Kong to hedge their positions, and such transactions can make the local stock or currency market more volatile.
CLOSE WATCH
What is structured debt?
Debt that the lender has tailored specifically for the borrower. Structured debt often includes incentives and options for the borrower to do business with the lender. The most common among these structured debts was equity-linked debentures (ELDs)
How big is this market?
Over Rs 15,000 crore of such structured debts are outstanding in the market.
Why is RBI interested?
RBI may be uncomfortable with instruments that investors may not fully understand and end up losing money. RBI may also want to curb the back-to-back transactions that happen in offshore markets against these issuances.
Delhi Urban Property Registration and Titling Act 2009
Delhi Urban Property Registration and Titling Act 2009
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http://www.delhi.gov.in/wps/wcm/connect/DoIT_Revenue/revenue/our+services1/general+public+comments+on+the++registration+and+recordalof+title+of+immovable+properties+in+urban+areas+act%2C+2009
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