B U S I N E S S

Reliance, BP shut 7th well at KG-D6 block
New Delhi, December 15
Reliance Industries and its partner BP have shut a seventh well in the D6 block off the country's east coast due to sand and water ingress, bringing down the number of producing wells to 11, a source with direct knowledge of the matter said.

Odds rise for ‘fiscal cliff’ fight entering 2013
Washington, D.C., December 15
The "fiscal cliff" impasse is raising the odds that Congress will fail to meet a year-end deadline to avert steep tax hikes and budget cuts that could push the nation into another recession.

Speaker of the House John Boehner (Republican-Ohio) pauses while speaking during a press briefing at Capitol Hill on Thursday in Washington, D.C. Boehner spoke about House Republicans efforts to address the “fiscal cliff” impasse. — AFP

Advance tax mop-up rises
New Delhi, December 15
The third quarter advance corporate tax collection from the top 100 companies from the city has shown a modest 15 per cent growth year-on-year backed by higher payouts by the banking and financial sector, according to the income tax department sources.

investor guidance
Long-term capital gains tax on infrastructure bonds
According to the Income Tax Act, long-term capital gains (LTCG) tax is exempt under Section 54EC if the amount is invested within 6 months in infrastructure related bonds of NHAI or REC, and the ceiling on this investment is Rs 50 lakh per financial year.

Reliance, BP shut 7th well at KG-D6 block

New Delhi, December 15
Reliance Industries and its partner BP have shut a seventh well in the D6 block off the country's east coast due to sand and water ingress, bringing down the number of producing wells to 11, a source with direct knowledge of the matter said.

The well at D1 and D3 gas fields was shut about a week ago, the source added.

Declining gas output from the D6 block in the Krishna Godavari basin has impacted expansion plans of several power companies, and spurred demand for costly liquefied natural gas imports.

Gas production from D6 has declined to about 23 million standard cubic metres a day (mmscmd), the source said. A Reliance spokesman declined to comment on the matter.

Production at the block may average 22.6 mmscmd in the fiscal year starting April 2013 and is projected to decline to 20 mmscmd in 2014/15, only about a third of the 60 mmscmd it produced in 2010 and well below the planned peak capacity of 80 mmscmd.

Reliance may have to shut under-performing gas fields in 2015-16, oil secretary G.C. Chaturvedi said in October, while Morgan Stanley analysts have said the key gas producing fields in D6 could be exhausted in 5 years.

Reliance brought in the British oil and gas company last year, which paid $7.2 billion to invest in 23 oil and gas blocks with RIL, hoping its offshore expertise would help arrest the decline in output. The D6 block, operated by Reliance, was expected to contribute up to a quarter of the gas supply for Asia's third-largest economy.

Reliance and BP submitted a revised field development plan in September, cutting the gas reserves in the D6 block by about two-thirds to 3.4 trillion cubic feet, the oil ministry said last month. Reliance had government approval to drill 50 wells. — Reuters

Odds rise for ‘fiscal cliff’ fight entering 2013
Congress failure to meet yearend deadline may push US into another recession

Washington, D.C., December 15
The "fiscal cliff" impasse is raising the odds that Congress will fail to meet a year-end deadline to avert steep tax hikes and budget cuts that could push the nation into another recession.

With talks between President Barack Obama and House of Representatives Speaker John Boehner at an apparent standstill, analysts said on Friday that it was increasingly likely that Washington won't be able to reach a deal before January 1.

"It's time to contemplate a plunge off the cliff," Potomac Research Group analyst Greg Valliere wrote in a research note.

Obama has insisted that any deal must raise taxes on the wealthiest 2 percent of US households, an idea Boehner has resisted. The two sides also are far apart on the size and composition of spending cuts that would likely be part of a deal.

Little progress was expected on Friday with Boehner set to return to his congressional district in Ohio for the weekend.

Even if Boehner and Obama were to reach an agreement, they would need time to sell rank-and-file lawmakers on the compromises it would likely include. They also would need several days to draw up legislation and pass it in the House and the Senate.

Stan Collender, a budget expert with Qorvis Communications, sees a one-in-four chance of that happening at this point. "It's far more likely we'll go over the cliff and then fix it retroactively in January," he wrote.

If Washington does not act, tax rates are due to rise for all Americans at the beginning of next year and the federal government will have to cut spending on military and domestic programs across the board.

The resulting $600 billion hit could push the economy back into recession, but the full effect likely would not be felt for months — giving lawmakers some time after the New Year to resolve the situation.

DEAL IN PRINCIPAL? Representative Steny Hoyer, the no. 2 Democrat in the House, said Congress could agree to keep current tax and spending rates in place for several weeks if negotiators reach a deal in principle by the end of the year but don't have enough time to pass it into law.

That probably will be impossible if Obama and Boehner have no deal in place, the Maryland lawmaker said. "If we don't get an agreement of any type, then, yes, I think you're going to run into a hard-and-fast deadline of December 31," Hoyer said on Fox News on Thursday night.

Though the economy would likely not take an immediate hit if lawmakers miss the deadline, failure to reach a deal could spook financial markets, which have been relatively calm in recent weeks. Still, the uncertainty over the cliff has weighed on markets and overshadowed other relatively good economic news.

"The uncertainty that (the cliff) is creating is basically holding the markets hostage in the short term," said Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds, in New York.

Opinion polls show most Americans support Obama's demand to raise tax rates on the wealthiest 2 percent of households and many observers expect Republicans will ultimately go along. — Reuters

Advance tax mop-up rises

New Delhi, December 15
The third quarter advance corporate tax collection from the top 100 companies from the city has shown a modest 15 per cent growth year-on-year backed by higher payouts by the banking and financial sector, according to the income tax department sources.

The growth chart is led by the largest financial institution, LIC, which has paid 10% more at Rs 1,297 crore in advance tax payout for Q3 compared to Rs 1,166 crore in the same period a year ago.

However, the largest lender State Bank of India has paid marginally lower advance tax in Q3 at Rs 1,701 crore as against Rs 1,730 crore in the same period last year. SBI said its total advance tax outgo in the third quarter of this fiscal rose 4.5% to Rs 4,694 crore.

Similarly, housing lender HDFC said it has paid Rs 560 crore in advance tax against Rs 475 crore in the year ago period, a growth of 18 per cent. — PTI

investor guidance
Long-term capital gains tax on infrastructure bonds
A.N. Shanbhag

According to the Income Tax Act, long-term capital gains (LTCG) tax is exempt under Section 54EC if the amount is invested within 6 months in infrastructure related bonds of NHAI or REC, and the ceiling on this investment is Rs 50 lakh per financial year. My query is related to this last aspect. Suppose LTCG of, say, Rs 70 lakh is made in January 2013. Can Rs 50 lakh be invested u/s 54EC in the current financial year before March 31, 2013 and the remaining Rs 20 lakh in the next fiscal, i.e., after April 1, 2013, but before May 31, 2013 (total investment of Rs 70 lakh within 6 months of making the LTCG, but spread over two financial years). In this manner can one save LTCG tax on the entire sum of Rs 70 lakh?

— Ratnakar

The ceiling on the investment applies to the fiscal. Therefore, you can save the entire Rs 70 lakh of capital gains by investing over two successive financial years. However, the ITO may not agree. There are conflicting judgments in this regard, where both investment over Rs. 50 lakh overlapping over two financial years has been allowed — but the same has also been disallowed by another tribunal. So the issue is contentious and, if you do go ahead with this plan, you should be willing to defend your stand should the ITO take any objection.

Recently I won a washing machine worth Rs 5456 in a National Savings Organization lucky draw. Is any tax deduction at source applicable?

— Sindhiya

Yes, TDS is applicable @30% on this income. Winnings from race, lottery, card game, crossword puzzle, etc, is taxed u/s 115BB at the maximum marginal rate of 30% (plus cess). The scope engulfs any game show, an entertainment programme on TV or electronic mode, in which people compete to win prizes. No expenditure is allowed except that on owning and maintaining racehorses. Even the benefit of the basic threshold of Rs. 2,00,000 is not available but the various income deductions can be claimed.