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| Monday, May 22, 2000, Chandigarh, India  
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Many MNCs land in Indian tax net
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Hit by cheaper imports
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Many MNCs
land in Indian tax net NEW DELHI, May 21 — Several foreign companies with a presence in the country have landed in the tax net for the first time as the Income Tax Department sheds its kid gloves approach to multinationals. The department has gone after foreign firms after interpreting double taxation avoidance treaties and reading a new meaning into terms like permanent establishment, business profit, royalty and fees for included services. The Delhi income tax department has raised a demand for Rs 3.93 billion on credit card companies, airlines and organisations offering centralised reservation facilities to travel agents and collected Rs 585 million from them after their liability was confirmed at the first stage of appeal. Visa International has paid Rs. 114 million, which is a little over half the tax demand, and Mastercard International Rs. 37.8 million, or 20 per cent of the tab, as the tax authorities considered credit card data processing equipment installed in India and services rendered by employees of their parent companies here as proof of permanent establishment. Companies providing centralised reservation facilities were booked on the understanding that their equipment, including software, installed at the offices of travel agents, makes them dependent agent permanent establishments of foreign companies. It was held that their income is taxable in India because their activity is completed here. A demand of Rs. 3.4 billion was raised, more than half of it on the Sabre Group alone. A little less than a tenth of the amount was collected, with Amadeus Marketing shelling out Rs. 100 million, followed by Galileo International and American Airlines (Rs. 80 million each) and Abacus Distribution System (Rs. 50 million). British Airways has made the exchequer richer by Rs. 97.4 million. United Airlines and Lufthansa German Airlines also paid nearly Rs. 16.8 million for a like reason. Last year, Japanese companies kicked up a shindig when the salary and allowances paid abroad of their expatriate employees working in India were taxed. Swaran Kanta Nigam, Chairperson of the Central Board of Direct Taxes, says tax was collected even though they protested “we have not a pie to pay.” They had threatened to leave the country and withdraw their investment. “Sorry to say, nothing of the kind happened,” says Nigam. “They paid not only the tax but also the interest.” Nokia has been presented with a tab of Rs. 8.66 billion for income earned during 1996-98; Rs. 1.25 billion has been demanded of Lucent Technologies; Ericsson has been required to pay Rs. 690 million, Motorola Rs. 500 million and Siemens Information and Communication Network Rs. 16.8 million. These companies can, of course, contest the demand. Satellite companies have also been swatted down. PanAmSat, Asiasat, Intelsat, Shin Satellite and Inmarsat would be poorer by Rs. 2.91 billion if their tax liability is confirmed. Sheraton International
has had to pick up a tab for Rs. 102.6 million for
providing consultancy services, managerial assistance and
its logo to Indian Hotels. These were found to be taxable
in India under a tax treaty with the U.S. as “fees
for included service.” — IANS |
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NEW DELHI, May 21 (PTI) — SEBI, known for taking stringent action against securities market violators, has itself been found guilty of defaulting repayment of a loan of Rs 105 crore to the government. The Comptroller and Auditor General (CAG) has pulled up SEBI for non payment of Rs 105 crore loan taken for capital expenditure. The government had granted interest free loans to SEBI amounting to Rs 115 crore between 1992 and 97 to meet their capital expenditure. The default in repayment was despite income from investments being financed from Government interest free loan of Rs 115 crore increasing from Rs 13.41 crore in 1995-96 to Rs 17.53 crore in 1998-99. But it failed to give any concrete proposals for repayment of loan despite being asked by the Ministry of Finance in January, 1997, CAG said in its annual report for 1998-99. SEBI repaid only Rs 10 crore between March, 1995, and March, 1998, and requested the ministry in 1998 to convert the outstanding loan into non-refundable grant. However, the ministry
had not acceded to the request till September, 1999, and
the matter was referred to the Ministry in October, 1999,
and their reply was awaited till February, 2000. |
S.P. Godrej hated chalta hai attitude MUMBAI, May 21 (UNI) — Noted philanthropist and Chairman of the Godrej group Sohrab Pirojsha Godrej, who died in London last night, was a man with varied interests and believed in enhancing the image of the business community by personal service. Asked about his philosophy of life, Godrej once said: “The best philosophy is to do the best one can. There are to my mind several components of this philosophy. The first is: those who are better off in life owe an obligation to those less fortunate than themselves”. The “other component is to live and let live , acquire tolerance and understanding of other people. Still another is to bid goodbye, firmly and finally, to our deplorable chalta hai, chalne do (let it pass) attitude. The last component is perhaps what we lack most — developing rational ethos, cultivating scientific temper”. Godrej was deeply worried about corruption which he said was completely obstructing India’s progress. He even donned a black batch on his arm to register his quiet protest against it. A humanist and an animal lover, Godrej’s wide range of interests included scientific management, environment, population control, education, social welfare, international affairs, mass media, arts, archaeology and heritage conservation. Before he left for Paris to attend a conference, he had coined two slogans — Save Mumbai to Help India and Help Bring Our India Up Quickly. After his return, Godrej had planned to host an ambitious conference of the country’s opinion makers to fulfil his slogans. But with his death in London en route to Paris, his ambition would remain a dream. Godrej travelled extensively to over 170 countries and spoke six languages. He was closely connected with the Worldwide Fund for Nature (India) of which he was the President emeritus. He was also concerned over the rapid decline in the population of India’s national animal tiger. He was also associated with the Bombay Natural History Society (BNHS), the Society for Friends of Trees, the Family Planning Association and the Population Foundation of India. International recognition of Godrej’s contribution to conservation of nature and natural resources was the conferment of the WWF 25th anniversary benefactor “White Pelican” award on him at the hands of Prince Philip, the Duke of Edinburgh. Godrej had been the head of many chambers of commerce and binational bodies, some of which had conferred prestigious awards on him. A year ago he was honoured with the Padma Bhushan. The Godrej township at Pirojsha Nagar in Mumbai bears testimony to the various causes he promoted in the field of housing, education, health and family welfare and environment. He was particularly proud that a large expanse of the Mangrove forest , perhaps the best on the west coast, adjoins the township which is maintained and protected from poachers by the Soonabai Godrej Trust. Born on June 3, 1912, Mr Godrej was the eldest son of Pirojsha B. Godrej, who was the brother of the founder of over a century old Godrej group — Ardeshir B. Godrej. After getting his
Bachelor of Science degree from St Xaviers College,
Mumbai, Godrej, also known as Soli, joined the group and
over the years made several contributions to nurturing
the company which is today worth Rs 4,500 crore. |
Papa’s
tunes: music for whom? ON May 15 these columns carried Anjan Roy’s article “Cavorting rupee to Papa’s tunes’ on the US dollar-rupees exchange rate. The salient points made in the piece were:
Anyone who follows the daily movements of international currencies is aware that it is usual to see hard currencies like U.S. dollar, euro, Japanese yen or Swiss franc to gyrate one to two per cent in the course of a single day. Such an observer is thus flummoxed to witness a mere 0.9 per cent fall in the rupee on May 10 as a “sudden collapse” while 1 to 2 per cent daily movement in hard currencies is “readjustment”. Such an alarmist view only deters one from proper perspective formation. The foreign exchange market in India is very shallow. The purchase or sale of US $ 100-120 million in a day leads to large currency movements. Such movements are normally checked by RBI through appropriate purchases/sales by SBI. That this did not happen on May 10 confirms Roy’s view that RBI wanted the rupee to depreciate slightly. It is generally agreed by experts, including those at RBI, that the rupee is already over-valued by over 2 per cent as per REER (Real Effective Exchange Rate). It is a matter of time before this adjustment in rupee-dollar value takes place. Such a move would take care of the interests of US $ denominated exports which form about 65 per cent of India’s total exports. But the present exchange rate policy leaves 35 per cent of remaining exports conducted in euro, sterling, Swiss franc, yen etc. high and dry because any fluctuation in US dollar and the other currency (e.g. euro) parity reflects on this currency’s parity with the rupee. It is no surprise, thus, that rupee has appreciated by about 14 per cent against euro and 13 per cent against Swiss franc in the past five months. The accompanying chart shows that in two months period to May 19, the rupee appreciated by 6.31 per cent against sterling and 5.21 per cent against euro. No one can explain such appreciation of the rupee on the basis of principles that determine exchange rates between two currencies: relative inflation, economic growth, interest rates, balance of payments, currency flows etc. It can only be explained by the fact, that despite protestations by the Government and RBI to the contrary, the US dollar-rupee rate is an effectively managed exchange rate. With the rupee-dollar rate decided, any fluctuation in dollar — other currency rate internationally gets reflected in the rupee parity with this particular currency. This introduces an element of uncertainty in exports. It is no wonder that in the past two years exporters in euro, sterling, swiss franc etc. had to incur cash losses only because of appreciation of rupee against these currencies or refuse orders. Experts would always say the exporters of these currencies can avoid losses by hedging. Practically, because of various inflexible rules, hedging is never possible in more than 30-35 per cent of cases. Therefore in case of major currencies other than US dollar, RBI should announce a band of parity value between rupee and major currencies as some East European countries do. That would prevent both windfalls and pitfalls for exporters in these currencies. With WTO guidelines looming large and the government gradually withdrawing all export related benefits, the dream and necessity of 20 per cent annual export growth in dollar terms, would be possible only if the total export infrastructure is upgraded, export transaction costs are reduced, labour laws are amended and a pro-active exchange rate policy is introduced. With the first three
needing time to be implemented given the governmental
abilities and inclinations, let RBI begin with
formulating a three-year exchange rate policy that guides
Indian exports into the WTO-led environment particularly
the ones conducted in hard currencies other than US
dollar. |
Hit by
cheaper imports CHEAPER import route through Nepal hit indigenous industry. Reduction of Custom duty under the W.T.O. treaty is already taking heavy toll of our industry & trade. The SSI sector, in particular is under pressure to survive. The Government’s rhetorics notwithstanding nothing tangible is being done to face the onslaught of this competition between unequals. Indo-Nepal treaty of trade was signed on December 6, 1991. Under this, India provides access to its market free of basic and auxiliary Custom duty and quantitative restrictions for almost all manufactured goods which contain not less than 80 per cent of Napalese materials or Nepalese and Indian materials. Later on February 16, 1993, this clause was diluted. On December 3, 1996, this clause was altogether removed. It is not understood as to why this clause was deleted. This clause was good enough to check free flow of goods manufactured in other countries through Nepal. Politically there cannot be any objection to this clause. Economically it was a sound provision. The yarn-based industry has crippled. Custom duty on imports is very high. The Government’s claim of 35 per cent average duty in fact comes out to be around 60 per cent in certain cases. The vanaspati ghee industry is mauled. Many of our big entrepreneurs have shown business wisdom by just putting symbolic presence in Nepal to take advantage only to beat less enterprising people. Is this the way our Government is opening competition? The Government has imposed special additional custom duty (SAD) on an average of 4.5 per cent on Nepalese goods. There is a lot of hue and cry from Nepalese entrepreneurs which in fact voice the highly enterprising Indian entrepreneurs having interest served through Nepal. High-powered Nepalese team headed by the Prime Minister is coming to India later this month to sort out the matter. The matter is very serious for the survival of our own industry. The Government should not yield to pressure. The clause in the original treaty of 1991 should be re-introduced. The SSI sector is vital to the economy as it takes care of the unemployment. Job creation is possible through this sector as large units are going highly capital intensive. Flow of bank credit to
the SSI sector is chocked as it was. It is general
perception that bank’s money is at high risk with
this sector. This is wrong. Large units owe to banks and
FIs a whopping sum of Rs 48,000 crore which is 43 per
cent of the total loans taken by this sector. |
CAG: 11 telecom firms owe dues NEW DELHI, May 21 (PTI) — The Comptroller and Auditor General of India has named 11 private telecom companies for non-payment of various dues to the government and asked the Department of Telecom to investigate the matter. While Madhya Pradesh basic operators Bharti has been named for not paying Rs 1.80 crore compensation for damaging the cables of the Department of Telecom while laying cables for its own network, 10 other companies have been named for non-payment of inter-connection and other charges. Only BPL US West has paid the short billed amount of Rs 51.31 lakh, while Hutchison Max, Modi Korea, Usha Martin, ABC Communications, Aircell Digilink, Hexacom India, Escotel Mobile, Reliance Telecom and BPL Wirelesss have still to pay the short billed amounts pointed out by the CAG. A CAG report said Bharti Telnet while laying cables for its network in different cities in Madhya Pradesh has caused large scale damage to the DoT network at several places during January, 1998, to March, 1999. Heads of the affected circles had estimated a damage of Rs 2.25 crore and demanded the amount from the company. But the company so far has paid only Rs 45.77 lakh. The balance amount of Rs 1.80 crore was still pending as of September, 1999. CAG found that despite
delay of more than 21 months, DoT did not take action to
recover the outstanding amount from the bank guarantees
of the company. Ebony eyes Ludhiana CHANDIGARH, May 21 — Ebony celebrated its first anniversary here today with Ms Shanta Hit Abhilashi, Mayor of Chandigarh, as the chief guest. Mr H.S. Narula, Chairman, DS group, said that the group today launched its Ebony clothing brand. He said Ebony plans to
open another centre in Ludhiana this year. The local
store received four lakh customers this year and recorded
a turnover of Rs 7 crore. |
ty
by R. N. Lakhotia Q: Kindly clarify the following points and oblige: — I an a retired State Government employee and my 28 years old son is permanently void disabled and handicapped. Can I avail deduction of Rs 40,000 under Section 80DD from my income. — I am a chronic patient of Diabetes, Heart and Cancer Lymph Knots. Can I get relief u/s 80DD as per rule 11DD. If so upto what extent. —Whether an individual becomes entitled to avail the income-tax exemption limit of rupees one lakh on entering into 65th year of age or on completion of 65 years. — How to get back the DTS, if one, and income is not taxable. — I purchased 500 shares of MEP-1992 and have received Rs 7545 last year in May on account of repurchase by UTI. Should I include this amount in income during Financial Year 2000-2001. — Whether the Medical allowance of Rs 250 P.M. granted by the Punjab Government is accounted for in income or not. — Whether leave travel concession given to the pensioners equal to their one month basic pension once after 2 years is taken as income or not. — B.K. Chopra, Amritsar Ans: You can avail tax deduction u/s 80DD in respect of your disabled son. You will not be eligible for deduction u/s 80DDB in respect of chronic diseases. Kindly refer to the exact diseases which are mentioned in rule 11DD. The tax rebate u/s 88B which is permissible to a senior citizen is only when he has completed the age of 65 years and not when he has entered the age of 65 years. If tax has already been deducted at source then to enable you to get the refund you should file your Income-tax return. The income arising from MEP should be included in your income. The medical allowances would become fully taxable under the Income-tax law. leave travel concession subject to your actually spending the same is exempt from Income-tax twice in a block of 4 years. Q: I am pensioner of Punjab Government and I want to gift money from my own resources to my son and daughter-in-law for purchasing a plot in their name. I am income tax payer. Please clarify:- (i) The financial limit of Gift Amount. (ii) The detailed procedure to be adopted by the donor, and the recipients. (iii) If the amount so gifted is to be shown in Income Tax Returns by both parties. Ans: You can make gift to your son without any financial limit. However, please avoid making a gift to your daughter-in-law because of Section 64 of the Income-tax Act. You can just write a gift cheque and give it to your son along with a letter expressing your intention about the gift. Please obtain acknowledgement of acceptance of the gift by your son on the second copy of the letter. It is better that the gifted amount is duly reflected in the tax return filed by both the persons. Q: I am a Government servant and earning Rs 10000 per month. My parents expired in August 1996 in road accident. Now I want to ask the following questions. (a) Whether the income transferred to my name i.e. Fixed Deposits, Bank accounts etc is taxable? (b) The amount received by me from Insurance Co is whether taxable or not? (c) The interest on payment received by me from Insurance Co is taxable or not. The interest is given by Insurance. Co from date of filing of case in MACT to receipt of payment date. — Puneet Soni, Ambala Cantt. Ans: No Income-tax is
chargeable in respect of the assets inherited by you from
your late parents. However, you will now be required to
make payment of Income-tax on the income earned by you on
the assets so inherited. No Income-tax is payable on
amount received from Life Insurance Corporation. |
sti
Keep watch on Bombay Dyeing Q: Please comment on the prospects of Daewoo Motors. Do you recommend an investment therein? Ans: The company has achieved 70 per cent indigenisation at its manufacturing facilities at Surajpur in Uttar Pradesh (UP), and the same is proposed to be raised to 80-90 per cent within a year. The company now proposes to lay stress on the development of its exports. The parent company Daewoo Corporation, is a strong player, and has pumped in over Rs 3000 crore into the company. The future growth will come mainly from the introduction of new models. Moreover, the company is known to be an aggressive marketeer. Finally, although the equity base of Rs 551.04 crore appears high it must be noted that the floating stock is on the lower side at less than 7 per cent. To conclude, though an investment in this company is not recommended, one could hold on for now. Q: Do you advise an investment in HEG Ltd? Ans: HEG Ltd a constituent of the north-based L.N. Jhunjunwala group. The company’s main line of business is the manufacture of graphite electrodes. It owns one of the largest graphite electrode manufacturing plants in South East Asia. HEG also has interests in power generation, sponge iron and textiles. Though this expansion had been completed during the preceding financial year, the delay in commissioning and initial teething troubles did not permit it to provide better volumes in that year. The company also managed to supply uninterrupted power to its electrode graphite manufacturing plant from its co-generation facilities. The company also commissioned yet another hydro-electric power plant with a capacity of 13.5 mw in Tawa during this period. The company had tried its hand, at onshore drilling too. However, owing to a general shift in focus towards offshore drilling, activities in this direction have practically come to a standstill at HEG. The future plans of the company now comprise mainly laying greater stress on its areas of core competence, which could augur well for its future profitability. Considering these factors, HEG could emerge as a dark horse winner in the future, in view of which, while an investment in this scrip is not recommended for the time being a close watch over its prospects could be kept. Q: What would be the best position to take up in Bombay Dyeing & Mfg Company? Ans: Bombay Dyeing & Manufacturing Company (BDL) posted its worst performance of the last decade during 1997-98 and the same was attributed to a substantial fall in the international price of dimethyl terepthalate (DMT), a raw material used in polyester fibres, since the third quarter of last year. The resultant sharp drop in international DMT/PTA prices have consequently forced BDL to offer discounts of Rs 4,000-5,000 per tonne in order to push its stocks. BDL was recently saddled with an anti-dumping duty of 9.4 per cent on bed linen exports by the European Union, which could curb volumes in the near term. The company does not enjoy any integration and imports its entire paraxylene requirements. Of late, the prices of paraxylene have moved up, while those of DMT have not moved in tandem. No capacity expansion in DMT’s is on the anvil and with no levels of integration, BDL’s fortunes are closely linked to international prices. However, its textiles division is ahead with a major restructuring in the offing, where the focus will be on selected items for providing higher value. It could witness more testing times in future as some of the downstream producers shift from DMT to PTA. In view of the said scenario, it would be best to wait and watch the progress of the company. — Ashok Kumar
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co
Sorry brother IT appears that the bull operator who was controlling the share price of Sri Adhikari Bros has exited from that counter. Little wonder then that the share price of this media stock has begun plumetting. Smoke signals There is a strong rumour that ITC, the tobacco major will offset the dip in its sales volumes by hiking its prices. Any smokers, er.... takers? Holiday blues The grapevine has it that the leading bull operator is back from a holiday and has started making large purchases at select counters. Does this mean we will witness a rebound now? Vintage Cards Notwithstanding the sharp dip in its share price, Vintage Cards is being tipped as a company to watch by analysts Why? Its innovative product branding is beginning to bear fruit.
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Inflation rises to 73-week high NEW DELHI, May 21 (PTI) — The annual rate of inflation shot up to a 73 week high of 6.31 per cent for the week ended May 6, on a sharp increase in the prices of some food articles and petroleum products. FIIs in debt MUMBAI, May 21 (PTI) — FIIs continued to shy away from the equity market as represented by unwinding of their positions by Rs 106.1 crore during the week ended May 18, but their investments into debt were up at Rs 76 crore Max India NEW DELHI, May 21 (PTI) — Max New York Life, the insurance joint venture between Max India and New York Life International Inc., will invest Rs 300 crore in the first year of operations in India. The companies also have plans to form an asset management company next year. Max India MD Vivek Jetley told PTI. Woodland CHANDIGARH, May 21 (TNS) — Woodland organised a “Display-cum-target linked incentive scheme for dealers under which Mohan Shoe co of Ambala and Janta Footware of Rohtak have been declared the winners. Johnson AMRITSAR, May 21 (FOC) — Johnson and Johnson has launched its baby nappy wash detergents. A demonstration was organised for the women at a nursing home here yesterday. DSQ Soft CHENNAI, May 21 (PTI)
— DSQ Software today announced it had privately
placed three million shares with a company called New
Vision Investment at a price of Rs 980 per share. |
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