Besides MAT, the revised draft will also address other issues such as tax exemption for the housing sector and taxation of savings
The government today said that the revised draft of the Direct Taxes Code (DTC), aimed at simplifying the tax structure, would be released for public debate in one-two months, reports PTI
"The revised draft will be ready within a month or two," Central Board of Direct Taxes (CBDT) chairman SSN Moorthy said on the sidelines of an Assocham seminar.
In August last year, the government had released the draft DTC, which is being revised on the basis of inputs received from various stakeholders.
The DTC is slated to be introduced in April next year and will ultimately replace the Income Tax Act, 1961, bringing all other direct taxes, including wealth tax, under its purview.
Finance minister Pranab Mukherjee had said that if a reasonable level of discussion happens on the code, a bill could be placed in the winter session of Parliament.
However, the industry is not happy with some aspects of the draft DTC, especially the modified provision of the Minimum Alternate Tax (MAT), the amount that companies are mandatorily required to pay as tax.
The draft suggested 2% MAT on the gross asset value of a company, instead of the current levy of 15% on book profits.
Replying to a query whether the MAT issue will be addressed by the government, Moorthy said, "I won't commit on anything. All I can say is, all the issues raised by the industry and other representatives are under consideration and we are modifying the DTC."
Besides MAT, the revised draft will also address other issues such as tax exemption for the housing sector and taxation of savings.
Expect no significant move from the bourses on either side
The market was volatile today, after it factored in the eurozone aid program. The Sensex ended at 17,195, higher by 54 points (0.3%) while the Nifty settled at 5,156, up 20 points (0.4%). The bourses started with a gain, taking cues from Asian markets. However, they soon pared their gains and touched their intraday lows at the mid-morning session. There was a sharp recovery in afternoon trade, supported by realty and banking stocks.
Asian stocks were volatile after a firm start on concerns about the global economy's outlook despite the massive rescue package for the European debt crisis. Key benchmark indices in Japan, Taiwan and South Korea fell by 0.08% to 0.43%. On the other hand, indices in China, Indonesia, Hong Kong and Singapore rose by 0.31% to 1.13%.
US stocks were down on Tuesday on worries that the $1-trillion bailout for Europe won't solve the region's deep-seated problems. The Dow was down 37 points, (0.34%) to 10,748. The S&P 500 was down 4 points (0.34%) to 1,156 and the Nasdaq gained 0.64 points (0.03%) to 2,375.
There are concerns over the trillion dollar package to pull the eurozone out of the debt crisis. The emergency package announced on Monday offers loans and loan guarantees, if necessary, to help countries to service their debt. The European Central Bank’s (ECB) promise to buy government bonds will help support investor demand. However, the package is not directed to stimulate growth in the weak European economy.
Closer home, gold was trading at near record high levels on Wednesday afternoon tracking overseas gains. Traders were unwilling to buy at this high level. International gold was trading at $1,228.55/1,299.55 an ounce as against the previous close of $1,232.05/1,233.05, after hitting an all-time high of $1,233.65 in the last session.
Industrial output grew slower than expected at 13.5% in March from the year-ago period. The slow growth is because of the partial withdrawal of stimulus measures and increase in interest rates. The Planning Commission, however, believes that the slowdown in March industrial output will not affect the gross domestic product (GDP) of FY 2009-10.
The Reserve Bank of India (RBI) said that the capital account will be opened up gradually and there is no plan of imposing a Tobin Tax to curb currency speculation. The Tobin Tax is a transaction tax on currency conversions intended to curb volatility and speculation. The capital account convertibility is integrally attached with the broader goal of economic growth. However, the RBI also expressed its preference for long-term equity flows over short-term debt flows.
The agriculture minister has said that the government must protect its farmers from cheap imports of wheat and sugar. India abolished a 60% import tax on the sweetener in April 2009. The country, the second-biggest producer of wheat, allowed tax-free imports of the grain in early 2007.
Finance minister Pranab Mukherjee said that although there is concern over high inflation, it seems to be easing now. Wholesale price inflation touched a 17-month high of 9.9% in March.
Foreign Institutional Investors (FIIs) were net buyers yesterday of Rs20 crore. Domestic Institutional Investors (DIIs) also bought stocks worth Rs22 crore. The rupee was up, taking a cue from the strong equity market.
L&T (up 1.2%) has received a project from the Qatari government for waste water treatment. Cadila Healthcare (up 2.5%) has entered into a licensing and supply agreement with Abbott Laboratories that will help Abbott quicken the pace of its growth in emerging markets. As per the agreement, Abbott will gain the rights to at least 24 Zydus products in 15 emerging markets where Abbott has a strong and growing presence. The agreement also has an option for additional 40 products to be included over the term of the collaboration.
Despite being under regulatory watch for apparent financial subterfuge, Prithvi Information Solutions appears to be unfazed. Its recent overseas acquisition should raise some eyebrows
IT solutions and engineering services company Prithvi Information Solutions (Prithvi) is shrouded in multiple cases of financial manoeuvrings. Over the past one year alone, the Hyderabad-based company has attracted one controversy after another, without drawing flak from the regulator. Now, it has announced a $3-million acquisition of US-based business intelligence firm, Percentix.
How is it that a company conspicuously involved in questionable practices continues to operate unfazed and unbridled, to the extent of making overseas acquisitions? Consider the facts: In the year 2009, three international audit firms walked away without signing the balance sheet. Ernst & Young resigned after signing a heavily qualified balance sheet in March 2009. It was followed by PriceWaterhouseCoopers (PwC), which resigned in panic in the wake of the Satyam scandal.
The firm that replaced PwC as an auditor made as fast an exit as PwC and resigned in less than four months without signing the accounts. In the subsequent Annual General Meeting (AGM) of Prithvi, the company appointed another firm, VK Asthana & Co, which did not show any hesitation and signed the accounts without raising any questions. The firm completed its audit within just 23 days and issued the report on the financial statements. Very convenient indeed!
Less than a month after the AGM on 30th January, there was a report in Tehelka magazine dated 27 February 2010 about another scandal where Prithvi was issued a summons by a city criminal court. The Rs200 crore alleged fraud involves unpaid dues to a leading Japanese corporation. Tehelka says that the company diverted money to be used for buying telecom equipment for State-owned Bharat Sanchar Nigam Ltd (BSNL) to itself, by shadily diverting payment terms and having the money credited to its own accounts, without informing Sojitz Corp of Japan.
A couple of days earlier, the company had planted a report in a couple of obscure journals that it was set to bag an order worth Rs200 crore—the exact amount diverted in the Sojitz case. It is also facing action from the Directorate of Revenue Intelligence (DRI), although the accuracy of these charges is not known.
Add to this, Deutsche Bank had filed a first information report (FIR) in June 2009 accusing Prithvi's promoters of a fraud of Rs40 crore, according to a CNBC report. Although Deutsche Bank has remained tight-lipped in public, it is reported that Prithvi had diverted bank funds to real estate and made false claims about significant global contracts.
For a while, the Securities and Exchange Board of India (SEBI) had surprisingly chosen to remain a mute spectator to the company’s brazen actions. After Moneylife exposed the company’s practices a couple of months ago, SEBI stood up and took notice, and claims to have been investigating the company since.
Amitava Lahiri, senior VP and head of IT services at Prithvi had told the Financial Chronicle a few days ago that this acquisition is part of an overall strategy to make Prithvi a $1 billion firm by revenues. This seems ambitious considering the state of the company’s financials, which are worsening every year. For the March 2010 quarter, the company has recorded a net loss of Rs49.58 crore as against a net loss of Rs6.87 crore for the previous corresponding quarter. Its year-on-year performance has also witnessed a substantial drop. For the year ended 31 March 2010, the company registered a net profit of Rs4.92 crore compared to Rs44.46 crore for the year ended 31 March 2009.
Yet, the company appears quite optimistic about its future. Prithvi expects to bag several new deals this year and has even firmed up plans to increase its headcount in view of the same. Reports state that the company is looking to recruit about 1,000 more people to cater to its ‘expanding’ business.
Considering the extent of Prithvi’s financial machinations, one would think either the regulator or the stock exchanges would have taken the company to task long ago. Their deafening silence till recently was really surprising. Now that SEBI has supposedly decided to take a closer look at the company, some concrete action should be expected soon.
It should be a worrying fact for SEBI that the company remains unabashed despite the regulator’s presence.