Finance ministry hits back, says Vodafone was aware of tax liability

Vodafone described the comments of finance secretary RS Gujral in this connection as ‘untrue’

New Delhi: The Indian finance ministry hit back at Vodafone’s claim that it was not told of the tax liability on the Hutchison deal, saying that the British telecom giant was provided a copy of the notice, reports PTI.

“We have provided copies of the letter (about tax liability) to the concerned parties,” Hutchison Essar, which was later taken over by Vodafone, had said in its communication to the tax department on 5 April 2007, a finance ministry official pointed out.
Vodafone in a statement had claimed that it had never received any communication from authorities to withhold tax while making payment to the Hutchison and described the comments of finance secretary RS Gujral in this connection as ‘untrue’.

The Income Tax (I-T) Department had in March 2007 advised the Vodafone to withhold tax while making payments to Hutchison to acquire its stake in Hutchison Essar in the $11.2 billion deal. The deal happened in May 2007, well after the tax demand was raised in March 2007, the official said.

“The payer (Vodafone group) as well as payee (Hutchison Telegroup) can make application to the Assessing Officer under section 195(2) and 197 of Income Tax Act 1961 for dealing the exact tax liability resulting from above mentioned (acquisition) transaction,” said the letter sent by I-T Department on 23 March 2007.

 It’s a matter of record, the official said, adding that “since Vodafone was a UK-based company, we sent letter/notice to Hutchison Essar for dealing with the exact tax liability and Hutchison Essar provided the letter to concern parties.Hutchison Essar had acknowledged this.”

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ICICI Bank lowers Kingfisher stake to 2.9%

As per the latest shareholding pattern filed by Kingfisher with the stock exchanges today, ICICI Bank held about 1.67 crore shares, accounting for a 2.9% stake in the airline as on 31 March 2012

New Delhi: Leading private sector lender ICICI Bank’s stake in the troubled air carrier Kingfisher Airlines has come down sharply to 2.9%, from more than 5% at the end of 2011, reports PTI.

As per the latest shareholding pattern filed by Kingfisher with the stock exchanges today, ICICI Bank held about 1.67 crore shares, accounting for a 2.9% stake, in the airline as on 31 March 2012.

In contrast, ICICI Bank held 2.63 crore shares, or 5.3% stake, in Kingfisher as on 31 December 2011.

While the details of sale of shares by ICICI Bank could not be ascertained, the latest list of Kingfisher shareholders includes two new entities—LKB Finance (1.38%) and SHCIL Services (1.04%).

At the current market price, the shares estimated to be sold by ICICI Bank during the quarter would be worth about Rs15 crore.

 Kingfisher shares have been seeing huge selling pressure for many months now. The stock slipped 2.2% in today’s trade at the BSE and closed at Rs15.70. Earlier in the day, the shares hit their all-time low level of Rs13, before recovering some ground.

The company has lost about two-third of its market value in the past one year. The shares were trading above Rs47 level a year ago on 26 April 2011.

The promoters currently hold little over half of the company (50.2% stake), but more than 90% of their holding is pledged with various lenders.

As per a mid-quarter shareholding pattern disclosed by the company on 8 February 2012, ICICI Bank's stake in Kingfisher stood at 3.02% at that time.

Besides ICICI Bank, state-run banking major Punjab National Bank (PNB) is also believed to have lowered its stake in Kingfisher. While PNB held 1.14% stake in Kingfisher at the end of 2011, its name does not figure among the shareholders owning more than 1% equity in the company at the end of January-March 2012 quarter.

The listed companies are required to disclose the names of all their shareholders owning more than 1% stake at the end of every quarter.

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Govt biggest factor weighing on outlook: Moody's

India's outlook is still underachieving and poor management has dragged economic growth to below potential, Moody's Analytics’ senior economist Glenn Levine said

New Delhi: Moody's Analytics said India is growing but below its potential as politics is weighing on the economy and termed the national government as the “single biggest drag” on business activity, reports PTI.

India’s outlook is still underachieving and poor management has dragged economic growth to below potential, Moody’s Analytics’ senior economist Glenn Levine said.

“The single biggest factor weighing on the outlook is the Indian government. In all economies it is impossible to separate the economic from the political outlook, and that is particularly the case in India,” Mr Levine said.

 The report further noted that there is broad-based weakness in the economy as all sectors are vulnerable.

“Softer global conditions, weak investor and business confidence, government paralysis, and tight monetary conditions are all weighing on demand. Almost all sectors have slowed, with particular weakness in manufacturing and mining, alongside a worrying contraction in private investment,” the report said.

GDP (gross domestic product) growth slowed to 6.1% year-on-year in the fourth quarter of 2011, the slowest pace since 2008, and is growing at around 6% through the first half of 2012.

However, a steady upturn in activity is likely to lift the second-half GDP growth to 6.5%.

This puts 2012 growth substantially below India's potential of around 7.5%.

“Risks are still tilted to the downside because of the dire political situation, though there are some reasons for optimism. We see growth accelerating through 2012, but it won’t hit potential until the second half of 2013,” Moody's Analytics said.

The report further said that the national government weighed down by corruption and funding scandals has passed no notable bills.

“The government has lost all momentum, and progress is unlikely on existing bills like land reform, fuel subsidies, labour rights, and the much-discussed supermarket reforms between now and the next national election in 2014,” it said.

The report termed prime minister Manmohan Singh as an “ageing technocrat who now appears tired of the rough and tumble of Indian politics” and added that the UPA didn’t have the numbers or the leaders to push through tough-minded reforms needed to drive the next wave of growth.

Some of the other political risks include possible tensions with China, as highlighted by India’s recent missile launch, and Maoist insurgency spread across nine states.

However, the Reserve Bank of India’s (RBI) bigger-than-expected 50 basis points interest rates cut in April is a positive move and it will lift demand from the second half of 2012. Besides, preliminary numbers indicating average monsoon rains in 2012 is another piece of good news, the report said.

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