Telenor liable to pay taxes: CBDT tells JPC probing 2G scam

The tax authorities are also examining instances of issuance of shares at a huge premium mainly to foreign companies. However, these shares were transferred at par or at a very low premium to group companies, the CBDT said

New Delhi: Telenor of Norway has confirmed that it has permanent establishments in India which makes it liable to pay taxes from revenue sourced from the country, the Central Board of Direct Taxes (CBDT) told the Joint Parliamentary Committee (JPC) looking into the second generation (2G) spectrum allocation scam, reports PTI.

In a presentation before the JPC, the CBDT said Unitech Wireless had made payments to Telenor and its associate companies against purchase of services and equipment.

“Investigations reveal that these foreign companies have substantial physical and economic presence in India creating their permanent establishments in India,” the CBDT said.

These foreign companies are liable to tax in India in respect of revenue sourced from the company, it said.

On issue of statutory notices, the companies have confirmed that they have permanent establishments in the country and four such firms have furnished returns of income for 2010-11 and admitted total income of about Rs25 crore.

“Their (tax) liability for earlier years is under examination,” the CBDT said.

The tax authorities are also examining instances of issuance of shares at a huge premium mainly to foreign companies. However, these shares were transferred at par or at a very low premium to group companies, the CBDT said.

The CBDT is also examining the genuineness of remittances made to foreign investors for purchase of goods/services as well as tax implications in relation to witholding tax and taxability in India.

“The reasonableness of the amounts paid to the foreign companies has to be examined in the case of these payer companies from the point of view of transfer pricing,” the CBDT said.

CBDT chairman NC Joshi, finance secretary RS Gujral and senior officials from the finance ministry made the presentation on the progress of the investigation into the 2G cases before the JPC.

The CBDT told the JPC that it was also examining Swan Telecom which got the UAS license and subsequently sold a major chunk of shares to Etisalat Group of the UAE.

Etisalat invested in Swan through Etisalat Mauritius Limited and Genex Exim Ventures Private Limited (GEVPL).

Etisalat and GEVPL were issued 12.63 crore fresh equity shares of face value Rs10 at a premium of Rs275.72 crore, it said.

The CBDT said that on 25th May, last year, the EtisalatDB Telecom issued one equity share to Etisalat Mauritius at a premium of Rs106.95 crore.

On the same day it issued one equity share at a premium of Rs6.86 lakh to Tiger Trustees, which is now known as Majestic Infracon Pvt Ltd.

The CBDT told the JPC that it was also examining capital gains on account of transfer of share amongst various entities of the Essar Group/Khaitan Group and Rajiv Chandrashekhar Group.

“The issue of disallowance of interest relatable to the advances by Essar Group to Loop Telecom is also under examination, it said,

The CBDT said that tax implication of transfer of shares from Videocon Telecommunications to the Videocon Group companies at a face value of Rs10 was also under examination.

The JPC also drew a time table for having 78 sittings over the next seven months and is hoping to present its final report by the end of the Budget Session of Parliament.

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BSE’s Rs107 crore liquidity boost to derivatives brokers

“We have been working very hard on the structure of the programme and have taken extensive feedback from market participants in designing the programmes,” BSE MD & CEO Madhu Kannan said

Mumbai: Bombay Stock Exchange (BSE), the country’s oldest stock exchange on Wednesday said it has launched a series of liquidity enhancement incentive programmes (LEIPS), with the goal of creating liquidity in the derivatives segment, reports PTI.

As part of these programmes, BSE will incentivise all its derivatives members by paying them as much as Rs107 crore over the duration of these two programmes, a BSE statement said here.

BSE will pay incentives worth Rs5 crore in the first phase of the two-tier series of LEIPS-I (Beta) to participating members.

In the second phase of the programme (or series LEIPS-II), incentives to the tune of Rs102 crore (Rs17 crore on a monthly basis) would be paid out to all participating members.

The LEIPS-I (Beta) will run from 28 September to 25 October 2011 and LEIPS-II will commence on 26th October and run for six months.

Market regulator Securities and Exchange Board of India (SEBI) had allowed the exchanges to introduce liquidity enhancement schemes in the equity derivatives segment this June.

The focus of the first two programmes will be on derivatives on the bellwether index Sensex and its underlying 30 stocks, it said.

“Within the guidelines prescribed and direction provided by SEBI, we are happy to announce our biggest ever initiative in the form of the LEIPS in the derivatives segment.

“We have been working very hard on the structure of the programme and have taken extensive feedback from market participants in designing the programmes,” BSE MD & CEO Madhu Kannan said.

“Sensex is the true barometer of our economy and we are hopeful of extensive market participation in the most well- known and globally tracked index,” he added.

The key features for the LEIPS structure include payments to all participating members for derivatives traded volumes and also for open interest (OI) maintained in the segment.

Additionally, the exchange has decided to abolish payments in some cases of the derivatives segment and cap it at Rs50 in some other cases, which works out to 1/100th the fees for options trading on other exchanges.

Liquidity in the segment will also be ensured with the presence of market makers. However, incentive payouts will be made to all participating members and not just the market- makers, the BSE said.

The first programme in the two-tier series is LEIPS-I intended to assist BSE’s derivative trade members assess and test their end-to-end systems for quoting, trading and clearing capabilities for BSE derivatives segment.

The second programme in the series-LEIPS-II- is intended to help in building a healthy derivatives order book on the BSE derivatives platform. All derivatives members would be incentivised for their participation—some as market makers and others as general market participants, the exchange said.

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SAT asks Sahara to explain fund mobilisation mode

The matter came up before the SAT after Sahara India Real Estate Corporation and Sahara Housing Investment Corporation had appealed against a SEBI order to refund the money raised through an issue of optionally fully convertible debentures


Mumbai: The Securities Appellate Tribunal (SAT) on Wednesday directed the Sahara Group to file a fresh affidavit explaining how it had raised funds from as many as 66 lakh investors without even issuing an advertisement, reports PTI.

“Our sympathies are not with the appellant (Sahara Group) since you have not told us how you had reached out to 66 lakh investors and raised funds from them without even issuing an advertisement. We want to know how it happened.

“Of course, this will have no binding on the case.

Could you have an affidavit about how much money was raised and the mode adopted to raise the money? This is only for our information. This is looking very odd,” SAT presiding officer NK Sodhi told Sahara counsel Fali S Nariman.

The matter came up before the quasi-judicial body SAT after two Sahara group companies—Sahara India Real Estate Corporation and Sahara Housing Investment Corporation—had appealed against an order by the Securities and Exchange Board of India (SEBI) to refund the money raised through an issue of optionally fully convertible debentures.

Mr Nariman argued that SEBI had no jurisdiction and its provisions do not apply on his client’s bonds, unless securities are listed.

He argued that every issue regarding Sahara’s red herring prospectus must be dealt with the corporate affairs ministry and the Registrar of Companies (RoC).

“The only competent authority is the RoC. It is not SEBI at all and therefore its guidelines don’t apply on us.

The SEBI board says my client is guilty of violating Section 117. But I say SEBI has no jurisdiction and that it has misunderstood its authority.

“Besides, the Company Law Board and SEBI could not have worked without consulting each other. They should have known.

It is impossible to run a government without inter-departmental correspondence. After all, they are supposed to work ‘in tandem’ to protect investors' interests,” Mr Nariman said.

SAT too agreed that SEBI itself had chosen not to regulate unlisted companies.

Mr Nariman also questioned why they are not entitled to a copy of the investigative report as charges are based on it.

He also pointed out that out of 66 lakh of investors, the investigative report has picked up the case of only two investors to try and demolish Sahara’s private placement of optionally fully convertible debentures (OFCDs).

However, SEBI counsel Arvind P Datar argued that OFCDs are a ‘hybrid’ instrument in the sense that it is a debenture or debt instrument for 119 months, and on the 120th month when it is converted to shares, it becomes equity.

“My submission is that the Sahara has not disclosed everything. They tried to term it as a ‘private’ placement, when it was actually a public issue. The RoC giving the group a certificate is not approval of their act,” Mr Datar said.

He also cited an instance where Sahara India Real Estate Corporation’s directors who are sons of the Group chairman, resigned merely two days prior to the extraordinary general meeting.

“The company had no whole-time directors. Three months prior to the resolution to raise money through OFCDs, the company’s fixed assets were nil and its net current assets were merely Rs6,54,000. Its debit balance is nothing but losses carried forwarded.
“A loss-making company with a paid up capital of merely Rs10 lakh, wanted to raise Rs20,000 crore! We don’t know when it began raising deposits. When the ministry of corporate affairs asked them about deposits raised, they said that they will furnish details after the issue,” the SEBI counsel said.

Citing documents, he argued that there are so many ‘introducers’ who have affixed signature, but whose address proof were not furnished. Besides, computer code numbers were also assigned to these introducers. He also pointed out aspects which were not mentioned by the company’s red herring prospectus. All this shows that these debentures were issued to the public and that it was not a private placement.

The tribunal will continue to hear the arguments on Thursday.

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