INVESTMENT LIMIT ON INFRA BONDS MAY RISE TO RS.50K

The government is considering more than doubling the investment limit in infrastructure bonds eligible for tax rebates as part of a strategy to provide a funding boost to a vital sector while having a beneficial effect across the economy. 

Officials told ET the finance ministrys department of economic affairs, as part of its suggestions for the 2012-13 budget, had proposed raising the investment limit in these bonds to.Rs.50, 000 from. Rs.20,000 now. The revenue department is expected to take a final decision after weighing expected economic gains against short-term revenue losses. The idea is to see if this can be expanded further. 

The tax-free bonds are a good option not just for investors, but also for issuers to raise funds, said a ministry official, who asked not to be identified. After a gap of five years, the 2010-11 budget reintroduced tax breaks on infrastructure bonds, allowing investments of up to. Rs.20,000 in these instruments to be deducted from taxable income and effectively helping individuals save Rs.6, 180 in taxes. Initially announced for one year, this concession was extended for another year last year. Now the economic affairs department wants to continue the tax rebate into the next fiscal with a higher limit and a larger number of eligible issuers. Banks have been lobbying with the finance ministry to allow them to use these bonds to raise long-term funds for lending to the infrastructure sector. Experts said the proposals being considered made sense. There is merit in the proposal as higher tax benefit will allow issuers to raise better amounts, said Vikram Limaye, executive director at IDFC. Added Feedback Ventures Chairman Vinayak Chatterjee: The idea is to channelise household and general savings into infrastructure, which has not happened very effectively so far. If a tax break can help, it makes sense. In 2010-11, IDFC, REC, IIFCL and a few other companies together raised more than. Rs.3,000 crore. In the current year, these infrastructure companies have already sought permission to raise about. Rs.13,500 crore.

 - www.economictimes.indiatimes.com

BIG BLOW TO TAX DEPT, BUT FINMIN MAY AMEND LAW TO TAX SUCH DEALS IN FUTURE

The government may have to take a hit of Rs. 11,000 crore in tax revenue, with the Supreme Court’s ruling in favour of Vodafone in a longpending tax dispute. The revenue loss may go up if the verdict has a bearing on similar deals pending before various courts. But the government could introduce amendments to tax laws, negating impact of this decision on future deals. Prospective investors may not benefit from the Vodafone case, as provisions under the proposed Direct Taxes Code (DTC) make income from such cross-border deals liable to tax in India. As the DTC rollout is likely to be delayed, experts say the finance ministry may make some provisions in the Income-Tax Act itself in the upcoming Budget, to bring such income to taxation in all future transactions. “While the ruling sets back the tax authorities in their quest for getting a bigger share of revenue in India, the victory may be short-lived, as they have other aces up their sleeves. The General AntiAvoidance Rules and amendments to the tax law can be expected to be brought in the Budget 2012 itself,” said Neeru Ahuja, partner, Deloitte Haskins & Sells. PwC India executive director Sandeep Ladda said since DTC contained a proposal to tax similar transactions, this ruling might have limited relevance after its implementation. Some experts said though tax revenue from other similar cases pending before courts might not be huge, a retrospective amendment to the law to tax past transactions could not be ruled out. “There are several grey areas which will come into play. One cannot rule out an amendment with retrospective effect,” said Hitesh Sharma, tax partner, Ernst & Young. Tax on cross-border deals is levied in the range of 10 to 20 per cent. Idea Cellular-AT&T deal of $150 million, GEGenpact ($500 million), Mitsui-Vedanta ($981 million), SABmiller-Fosters and Sanofiaventis-Shantha Biotech ($770 million) are some other disputed cases. The decision was a setback to the finance ministry, grappling with an expected shortfall in revenue collections. Immediately after the verdict, finance minister Pranab Mukherjee met law minister Salman Khurshid and senior officials of the ministry. A core group, comprising senior officials from the tax department, has been formed to examine the judgment. “We obviously need revenue for the government’s important programmes and the other thing is the certainty in law — we have to examine both areas,” Khurshid told reporters after the meeting. While Central Board of Direct Taxes chairman M C Joshi told Business Standard that the government would examine the judgment before deciding a future course of action, another finance ministry official said the only option available was to seek a review of the judgment. Pranay Bhatia, associate partner, Economic Laws Practice, however, said the process of seeking a review could take long and even if the government chose to take that recourse, the possibility was that even a larger bench might not take a different view. After the Bombay High Court passed an order in 2010, asking Vodafone to pay ~11,000 crore to the Income Tax department, the tax authorities got confident that they had acted lawfully in the matter. Besides, Vodafone’s decision in July 2011 to withdraw its petition before a tax authority — contesting its liability to pay withholding tax of about ~3,500 crore on the purchase of stake in Vodafone Essar from its joint venture partner, Essar Group —made the government confident of a victory in the main case, too. While Vodafone had given a bank guarantee of ~8,500 crore, it had already paid ~2,500 crore to the tax department, which will now be returned within two months with four per cent interest.

 – www.business-standard.com

IS THE EMAIL DEAD LETS PLEASE TALK

Email is dead, Facebook founder Mark Zuckerberg declared famously last November. Now, Thierry Breton, chief executive officer of Atos, one of Europes largest IT companies, wants to show the world how a 6-billion company can be run without internal emails. Breton recently vowed that after 2014 none of Atos 80, 000 employees will ever send an email to another. Breton, 56, is a former French finance minister and took over as the A to s CEO in 2008. He stopped using emails a few years ago. We use email for instant communication, which is a bad way to use emails, he told ET during a recent visit to India. We use email for archiving data, which is a bad way to do it. We use email to send global information to everyone this is also a bad way to communicate;we use email to manage processes, which is a bad way to do it. We have many bad usages of email. Breton plans to replace email with social networking tools, which he believes will be more efficient. Atos is now a year into what it calls the Zero-email programme. Breton says a few hundred Atos engineers are developing new social networking tools and adapting existing ones. There is so much enthusiasm for new communication tools that once people start using them they dont want to go back to email. An average business user responds to over a 100 emails daily, recent studies have found. Atos estimates that many employees spend 15-20 hours every week just checking email, of which only 15% are really useful to them or customers. But employees still trawl through the rest for fear of missing out on something. 

- www.economictimes.indiatimes.com

DOING BUSINESS EASIEST IN AP: FICCI STUDY

Andhra Pradesh, with its time-bound single-window mechanism, supported by legislation, has considerably eased the burden of businesses, while Tamil Nadu tops in the promotion of industrial clusters. The large automotive cluster in the State is among the top 10 in the world, says a FICCI report. The report, brought out in partnership with management consultancy Bains & Company, identifies best practices and high-impact reforms implemented across seven major states along 12 key factors and arrives at actionable recommendations for implementing similar reforms in other States. The States reviewed are Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Rajasthan, Tamil Nadu and West Bengal. The report, released on Wednesday, is part of the Federation of Indian Chambers of Commerce's ‘Empowering India' project. “In the next phase we hope to expand our coverage to the remaining major states as well, and thereafter bring the entire country under the project fold,” said Mr Harsh Mariwala, President, FICCI, in a release. The report found Gujarat emerging as one of the leaders in land acquisition because of a transparent policy, as well as a more effective process enabled by its computerised land bank system. Karnataka, too, was commended for introducing reforms in property registration with a computerised process and ‘anywhere' registration across major urban areas. The State has also simplified the process of obtaining construction permits by introducing a provision for online submission of building plans in Bengaluru. Recent initiatives by Maharashtra to improve the administration of labour laws include introducing an online labour management system. The report also showed that Rajasthan handled its power situation effectively to reduce deficit, with significant thrust on alternate sources of energy. West Bengal, too, launched a single-window system, including a common application form, which cuts down the application form from 99 pages to seven. The report and its recommendations were developed after seeking perspectives from the government and industry through 180 interviews and a survey of 75 FICCI members.

 - www.thehindubusinessline.com