CAG pulls up I-T Dept for shrinking tax base

The auditor has said that the decline was at variance from the accepted notion that simple tax laws and lower tax rates promote better tax compliance

Official auditor the Comptroller and Auditor General (CAG) today pulled up the Income-Tax Department for not being able to retain the existing tax base in 2008-09, particularly among corporate taxpayers.

“The number of assessees declined by 3% compared to an increase by 7.6% in 2007-08. The decline was sharper among corporate assessees, indicating, inter alia, stop-filing which would need to be reviewed by the Central Board of Direct Taxes,” CAG said in a report tabled in Parliament today.

The decline was at variance from the accepted notion that simple tax laws and lower tax rates promote better tax compliance, CAG said.

“It is a matter of concern that the (I-T) Department which is otherwise aiming towards widening the tax base had not managed to retain the existing tax base. Evidently, the Department is not utilising the mechanisms available to widen the tax base,” it said.

Though the taxpayer base grew from 271.8 lakh in 2004-05 to 326.5 lakh tax-payers over the last five years, the number of tax assessees fell by 3% in 2008-09.

The report also pointed out that of the 7.5 lakh companies registered with the Registrar of Companies as on 31 March 2009, only 3.3 lakh are recorded with the Income-Tax Department as corporate assessees, leaving a filing gap of 4.2 lakh companies.

“The Board would be advised to reconcile the discrepancy for accurate assessment of filing gap,” CAG said.


Jaypee tries to cement its position again

The Jaypee group—which had planned massive expansions in the 1990s, but landed up in a financial mess—is looking at growth over the next 10 years

The Jaypee group plans to ramp up its cement capacity up to 55 million tonnes (MT) by 2015, with an investment of around Rs8,000 crore-Rs10,000 crore. In addition, it also plans to expand its power capacity by 13,000MW over the next six years.

The group plans to increase its cement capacity from the current 22MT to 35MT by 2011. Going forward, it plans to further increase capacity to 55MT by 2015. The Jaypee group has interests in cement, power, engineering, hospitality and townships.

On being questioned on the total investment likely for this planned expansion in cement, Rahul Kumar, chief financial officer, Jaiprakash Associates Ltd, said, “To add 20MT of cement capacity, we would require an investment of close to Rs8,000 crore to Rs10,000 crore.”

The additional cement capacity which is being planned to take the total capacity to 35MT is already under construction. The remaining plants for the further planned expansion of 20MT are in the planning stage.

In the power segment, the company plans a total capacity of 13,000MW in the next six years. Out of this 13,000MW, 7,000MW has been planned in the thermal power segment, which is likely to be commissioned in the next four years. Work on the total 7,000MW capacity has already started.

Jaiprakash Gaur, founder-chairman of the group, expects the entity to grow at around 40% to 50% in the next 10 years. “To match a 9% gross domestic product growth, a few companies will have to grow at 40% to 50%. In the next 10 years, this group is poised to grow at 40% to 50%,” he said.

The group has announced the public listing for its infrastructure arm Jaypee Infratech Limited. Jaypee Infratech has set a price band of Rs102 to Rs117 per share for its initial public offer, aiming to raise up to Rs2,350 crore. The offer comprises fresh issue of shares to raise Rs16.5 million, as well as sale of 60 million shares by cement and construction firm Jaiprakash Associates.

Out of the total Rs2,350 crore, Rs1,650 crore will be utilised by Jaypee Infratech for project development and other corporate services. The remaining Rs700 crore would be utilised by the parent company, Jaiprakash Associates Ltd for expansion in various sectors.

Jaiprakash Infratech—which is developing the Yamuna Expressway—plans to open the route to traffic by 2011, before the commissioning date of 2013.


IPOs continue to post gloomy results

Most of the public issues in the past few weeks have failed to make a mark and are trading at substantial discount to the opening price

The performance of IPOs continues to be plagued with problems. Once again, new public issues of several companies have taken a nosedive after listing. In the past few weeks, about 14 new stocks have listed on the bourses, out of which eight are now trading below opening price; while others are barely trading at par.

Real-estate developer DB Realty opened at Rs452 on 24 February 2010. It is still trading flat at around Rs450 as on 22st April. Emmbi Polyarns, manufacturer of polymer-based products, got listed on the same day as DB Realty. It is now down a whopping 56% at Rs20 per share.

Cable television services provider Hathway Cable & Datacom too shares the same fate. After listing at a premium of Rs10 to its issue price, it is currently trading at Rs215, down 14% from its listing price.

ARSS Infrastructure Projects is the only stock to have posted healthy returns since listing. This stock listed at a whopping 42% premium to its issue price. It is now trading at Rs1,296, up 103% from listing price. However, market sources said that the gains are mainly due to interested buying which has had an enormous impact on the price because of the small floating stock.

Among the other significant underperformers are Texmo Pipes & Products, DQ Entertainment (International), Pradip Overseas and Shree Ganesh Jewellery House. Texmo is trading at a 27% discount to its listing price, while DQ is floundering at 19% below its listing price.

Pradip Overseas, which listed on 5th April, is down 25% while Shree Ganesh Jewellery House has taken a severe beating, down 44% from its listing price.
Stocks like Man Infraconstruction (up 6%), United Bank of India (up 1%), IL&FS Transportation Networks (up 1%) and Persistent Systems (0%) have barely inched above their respective listing prices.

However, some of these stocks have posted decent gains on their issue prices such as Persistent Systems (up 29%), Man Infraconstruction (up 40%) and DQ Entertainment (up 37%).

Two of the latest public issues have exhibited the same trend. Intrasoft Technologies, which listed on 12th April at Rs150 is now trading down 15% at Rs127. Goenka Diamond & Jewels opened on 16th April and has since gone downhill (-18%).

Such erratic performance is the main reason why retail investors are still shying away from the primary markets. Several of these public issues took place at a time when the stock markets were on a strong bull run. Even at such times, if public issues fail to deliver results, then one can’t blame the investors for not showing interest. Indeed, IPO performance is now completely determined by the interplay between the short-term market condition, greed of the promoters and aftermarket speculation. Given the fact that these factors put together can never ensure a rational offer price and traded price, retail investors are likely to stay away even more in the future.



V Kumar

7 years ago

This article is very confusing about issue price, listing price and subsequent trading prices. Needs cleaning up.

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