New Delhi: The Income Tax (I-T) Department has raised a demand of about Rs570 crore on Mahindra Satyam (earlier Satyam Computer Services) for illegally claiming tax credit on fictitious income during the 2003-04 to 2008-09 period, reports PTI.
"We have asked the company to pay about Rs570 crore as tax, as the company claimed the credit on tax which it did not pay overseas," official sources said.
Satyam Computer Services, which was acquired by Tech Mahindra in April last year after the software firm got embroiled in a nearly Rs10,000 crore scam, had claimed credit on tax paid overseas on interest income.
However, the so-called income was found to be fictitious, and so was the tax payment claim, the sources said.
As such, no tax credit was due to the company and the department has raised a demand, which includes interest on the delayed payment as well, they said.
Although the company has asked the department to overlook the income, as it was fictitious, sources said, "This is not possible, as there is no provision in the law to write off the income."
The Rs570 crore tax demand will have implications for Mahindra Satyam, which is struggling to get back on the right track.
The software company is also trying to overcome the damage to its image caused by the multi-crore fraud perpetrated by founder chairman B Ramalinga Raju.
Last week, Mahindra Satyam had come out with financial results for 2008-09 and 2009-10, reporting a net loss of Rs8,176.80 crore and Rs124.60 crore, respectively.
Steel demand in developed economies in 2011 is expected to be well below the pre-crisis peak level
Taking advantage of the slowdown in production of steel and consumption of raw material in China, Indian steel companies have increased the prices of their products between Rs1,000 and Rs1,500 per tonne. The steel companies' move was boosted when NMDC, one of the main raw material suppliers of JSW, Essar Steel and Ispat Industries, announced a 5% cut in iron ore prices. NMDC's move will boost steel companies' margins for this quarter, but will this hike sustain for a long time?
The World Steel Association (Worldsteel), in its October 2010 short-range outlook (SRO) for 2010 and 2011, has predicted an increase of 13.1% to 1,272MT in apparent global steel demand in 2010 and a 5.3% growth in 2011. The association has revised its outlook for apparent steel demand to 13.1% from its previous forecast of 8.4% due to a better-than-expected forecast for developed economies and continued strong rebound in most emerging economies.
"Our first SRO forecast after the economic crisis in 2009 suggested 8.4% growth in steel demand in 2010. We have now revised this figure up to 13.1%. This improved outlook is due to a better-than-expected forecast for developed economies particularly the EU, (the) NAFTA countries, and the CIS as well as the continued strong rebound in most emerging economies. This suggests a steady and stable steel recovery, and our current forecast does not foresee a double-dip recession as feared by some," said Daniel Novegil, chairman of the Worldsteel Economics Committee.
Even though the prediction for this year's demand is high, Worldsteel, whose members produce about 85% of the world's steel, is muted over next year's demand. It says the recent recovery has been driven just because of stimulus packages and inventory building up.
"Despite the better-than-expected forecast for 2010, we are still cautious. Steel demand in developed economies in 2011 will still be well below the pre-crisis peak level. The recovery so far has been mainly driven by the inventory cycle and government stimulus packages whose effects are now fading out. But whether consumer and corporate spending will now pick up and continue the recovery momentum is yet to be seen. Recent economic indicators are giving us mixed signals and developments in the remaining part of this year and early next year must be watched carefully," added Mr Novegil.
More importantly, the report says that China's apparent steel demand is expected to go up 6.7% to 579MT compared to a 24% growth in 2009, and the country saw an increase of 9.2% in apparent steel consumption during the first eight months of this year.
The association, however, noted that China's apparent steel use growth will slow down sharply in the remaining part of this year in the wake of the country's energy rationalisation programme and slowdown in the real-estate sector, one of the main users of steel.
In 2011, the growth rate in China will further slow to 3.5% with a weak real-estate sector and the phasing out of stimulus packages, says Worldsteel.
The organisation is a tad optimistic about India. It says that the country's steel demand is expected to grow by 8.2% this year and 13.6% in 2011.
The US saw decline of 36.2% in apparent steel use last year. However, the country's apparent steel consumption is likely to increase by 32.9% in 2010 and 9.4% to 86.1MT in 2011.
"China's energy rationalisation policy, which will reduce the country's steel production in this quarter, and slow demand in the international market have given an opportunity to Indian steel companies to hike prices. Along with this they are also getting a good response from the auto and construction sectors (in the domestic market)," a senior analyst from ICICI Securities told Moneylife.
"Since (the) last two months, imports of Chinese steel have gone down resulting in a fall in the inventory level and raw material prices have also been cut down. Right now, most of the factors are in Indian steelmakers' favour, but further increase will depend on China's action," said the analyst.
"For this quarter, margins for steel companies would be better due to lower input cost compared with the second quarter's input cost," he added.
A sharp fall in construction sector activity in the EU had reduced apparent steel use by 35.7% in 2009, but the recovery in the region is looking stronger than expected due to the global recovery, adds Worldsteel. The region will see an 18.9% increase in 2010 and 5.7% next year.
Recent developments in China, which accounts for close to 50% of total production, have surely been a positive for Indian steel companies. Elara Securities (India) Private Limited, in its report, says that the slowdown in China and cuts in raw material prices would deliver better margins for Indian companies, and JSW will be the largest beneficiary as levels of integration remain low - hence savings on the cost front will be the highest.
But the report also added that any drastic improvement in Chinese production might affect the entire steel equation in India.
JP Morgan, in a report published on 1st October, has raised a question over the sustainability of the recent price hike. It says that even major steel companies hike steel prices due to low demand for steel and raw material in China; it is difficult for steelmakers to sustain it for a long period. After the sharp increase in imports during April-July, steel imports have declined over the past two months, for inventory levels to come down, says the report.
However, the report says that the recent rupee appreciation and decline in import prices will create uncertainties over the price hike. Last week, Chinese HRC (Hot Rolled Coil) export prices declined by $30-$40 a tonne. The current Chinese export price of $600 a tonne, combined with spot rupee rates, results in landed steel prices of Rs31,000 per tonne, implying that domestic steel prices currently - even before the increase - are now 3% higher than landed Chinese import prices and on parity with CIS import prices, says the report.
"After November, if China increases production of steel then Indian steelmakers would not be able to hike prices further. But there is (a) danger of rising imports, which will also have to be watched," the ICICI Securities analyst added.
New Delhi: The Delhi High Court has turned down the plea of drug firm Cadila Healthcare seeking to restrain Diat Foods from using the 'sugar free' tag for low calorie food products, reports PTI.
A bench headed by Justices Sanjay Kishan Kaul and Valmiki J Mehta said the expression, 'sugar free', cannot be restricted if used in descriptive sense and without the intent of causing confusion among customers.
"There is no restraint on the respondent (Diat Foods) using the expression 'sugar free'. The use of the word, 'sugar free' in descriptive sense or otherwise cannot be restricted, though it should be used in a manner so as to avoid confusion by not indicating a connection with the product of Cadila Healthcare," the court said.
However, the court said the 'sugar free' tag cannot be used with greater prominence or with a larger font size than the other distinctive character of the product and granted 30 days time to Diat Foods to exhaust existing packaging stocks.
"The expression 'sugar free' should not be used with greater prominence and a larger font size than 'Sugarless Bliss' and 'Sweetened with Splenda' (which are used on the packets of Cadila's products). Diat Foods is granted 30 days' time to exhaust existing stocks of packaging," the court said.
Cadila Healthcare contended that Diat Food has been using the trademark, 'sugar free', which is identical, or deceptively similar to its trademark.
It further contended that Diat Food has used its trademark, 'sugar free', with a bigger font size and bright colour for its product, 'Sugar Free Cookies', so as to make it almost indistinguishable from Cadila's products.
However, the court rejected the contention of the firm and said the trademark, 'sugar free', cannot be said to be a coined word and at best a combination of two popular English words. Such adoption entitles other in the field to use the expression unless attempts were made to cause confusion among customers.
"Cadila Healthcare's trademark, 'sugar free', cannot be said to be a coined word and was at best a combination of two popular English words. Such adoption naturally entails the reason that others in the field would also be entitled to use such phrases, provided no attempt is made to ride on the bandwagon of the appellant (Cadila Healthcare)," the court said.