Three steps to avoid a global depression

Policymakers have lost control of the economic crisis and financial markets are forcing the world into a depression, George Soros said on Friday, urging Europe to create a common Treasury, recapitalise its banks and protect vulnerable states.

Soros, chairman of Soros Fund Management who made a fortune during the 1992 sterling crisis, said the most important task was to “erect safeguards against contagion from a possible Greek default.”

“Since a euro zone treaty establishing a common Treasury would take a long time to conclude, in the interim the member states have to appeal to the European Central Bank to fill the vacuum,” he wrote in an article for the Financial Times newspaper.

“Both the banks and bonds of countries such as Italy and Spain need to be protected ... To relieve the pressure on the government bonds of countries such as Italy, the ECB would lower its discount rate.”

Soros said the ECB could then encourage countries to finance themselves with Treasury bills bought by banks. Those banks could then at some stage rediscount the bills with the central bank, allowing countries to refinance for about one per cent a year during the “emergency period.”

“Neither the ECB nor the EFSF (European Financial Stability Facility) would buy any more bonds in the market,” he said.

He said the EFSF should be used to guarantee and recapitalise banks who would then have to maintain credit flows under guidance and monitoring from the ECB.

“These measures would allow Greece to default without causing a global meltdown,” Soros said. “That does mean that Greece would be forced in default ... How Greece fared would be up to the Greeks.”

However, he said only public demand for his plan would make it happen, given likely resistance from banks and national governments.

Auditors Spared of Matching XML A/Cs With Original Papers

Auditors and company secretaries will not be required to certify that filing of accounts under a new electronic format match the original balance sheet, relieving finance professionals from a burdensome compliance in the first year of this new reporting mode. All listed companies and certain unlisted ones are required to file their financial statements for the year ended 31 March 2011 using the Extensible Business Reporting Language (XBRL) format. Moreover, finance professionals, including chartered accountants, have to certify that the audited balance sheet of a company and the XBRL-converted documents match. But for this year only authentication by a practicing CA/CS/CWA will be required and MCA will issue a circular by this week, Avinash K Shrivastava, joint secretary, ministry of corporate affairs, told ET. Thus, these experts just need to authenticate that the data is accounted for and they don't have to validate the converted XBRL document. A government official, however, said there was no significant difference between authentication and certification as both need digital signatures of registered accountants but as the term authentication was more acceptable to companies the ministry decided to go forward with it. XBRL is a global standard for exchanging business information. Under this format, companies report their financial statements using XBRL syntax as an .xml file instead of uploading their balance sheets in .doc or .pdf format. However, Indian companies have some apprehensions about this new mode as they fear that there would be differences in the standard reported balance sheet and the one accepted by the XBRL format. The certification process would have been cumbersome and confusing as several terms would have to be reclassified by the accountants. This would have increased our costs significantly as well as led to a lot of loss in data, an official of a service-based firm told ET. According to experts, this is primarily because in XBRL-enabled filing of financial statements, financial terms may be differently defined than in a standard balance sheet, resulting in a lot of aggregation and desegregation of figures.In the US, XBRL was introduced five years ago, but the process of certification started only this year. India, too, should adopt a gradual process of business reform, a reputed accountant told ET. Ministry officials rubbished the argument. There is no question of any sort of data being lost as at the end of the day it's just reclassification. The net profit after and before tax would still be the same. Such issues are just being highlighted by some with vested interests, the official added. The ministry is doing everything to pacify all stakeholders while ensuring that XBRL as a forward-looking reporting standard gets adopted as smoothly as possible, Shrivastava said. Most accountants ET spoke to said that for this year the ministry didn't allow companies to define their own accounting elements and definitions in their statements under XBRL, something they call 'extensions'. Senior MCA officials dispute this. The issue of extensions is being considered throughout the world as allowing companies to classify their own elements beats the very purpose of a standard reporting format and such a practice can lead to bypassing various important overheads in a balance sheet, one official said on condition of anonymity. Banks, insurers and NBFCs have been exempted from XBRL filing for 2010-11.

Now, carbon credit through green grass

The Food and Agriculture Organization (FAO) of the United Nations has changed the definition of carbon credit, with its new finding of green grass as the potential area.

Until now, carbon credit was allowed to be claimed from industrial units reducing emission of major polluting gases — SO2, CO2, CO and Nox — into the environment. Now, the reduction of obnoxious gases through green grass will also be entitled to claim carbon credit.

 

Each tonne of reduction in the release of obnoxious gases is entitled for one carbon credit. Green grass, which not only spread greenery all around, also absorbs obnoxious gases from the environment and reduce the quantum of such gases directly into the environment.

The vast potential of grasslands to support sustainable livelihoods while trapping atmospheric carbon and helping slow global warming is one step closer to being realised, thanks to a new methodology developed by FAO in collaboration with the Chinese Academy of Agricultural Science, the Chinese Academy of Sciences and the World Agroforestry Centre.

Large swathes of the world’s grasslands are moderately to severely degraded. Restoring these to a healthy state could remove gigatonnes of carbon from the atmosphere and improve resilience to climate change. So far, however, carbon crediting schemes that pay projects for reducing greenhouse gas (GHG) emissions and sequestering carbon have largely ignored agriculture, including grazing-based livelihood systems.

One key challenge has been finding reliable and affordable ways to measure how much carbon is being trapped in agricultural mitigation projects.

“We think we have cracked the problem and come up with a reliable way for herders who are investing in restoring grasslands to prove they are sequestering measurable amounts of carbon, and fund their activities by accessing mitigation finance,” said Pierre Gerber, an FAO livestock policy specialist who is working on the project.

The breakthrough of FAO’s new methodology is that it provides an affordable way to reliably estimate the amount of GHG emissions removed from the atmosphere through improved management of grasslands.

“Our approach allows not only for direct measurement of carbon sequestration through soil sampling but also computer modelling of sequestration based on soil types and activities undertaken,” said Leslie Lipper, an FAO economist involved in the project. “Being able to demonstrate reliable monitoring is a must for projects wishing to participate in carbon markets, and modelling reduces monitoring costs, making it possible for small-scale herders and livestock raisers to participate.”

The methodology is being applied to a pilot project in Qinghai Province, China, which will eventually be able to deliver significant carbon offsets for a period of 10 years. FAO has sent its methodology for approval to the non-profit Verified Carbon Standard (VSC), a greenhouse gas accounting programme used by projects around the world to verify and issue carbon credits in emissions markets.

MCA may extend demat deadline for shares, bonds

The Union ministry of corporate affairs (MCA) may give more time to unlisted companies to convert their share certificates and bonds into the electronic (dematerialised) format.

The September 30 deadline for this purpose, proposed by MCA in June for companies that had raised money by issue of shares, debentures or any other financial instruments from the public or by accepting deposits from the public, may get extended due to concerns expressed by several small firms, a ministry official said.

According to him, most big companies had opted for the electronic format. It is only the small players that are seeking more time.

The official added the proposal to convert paper certificates to demat form is already part of the Companies Bill, 2011, that is before the Cabinet. Hence, a hasty decision to notify The Companies (Dematerialisation of Certificates) Rules, 2011, may not be needed.

The move was expected to bring in transparency and an easy transaction platform for both companies and investors, in addition to making regulatory scrutiny more effective.

The MCA plan will have no impact on publicly-listed companies, as their promoters will have to move to this new format by September 30, following a Securities and Exchange Board of India (Sebi) directive.

Sebi had earlier said the promoters of all listed companies should dematerialise their holdings fully by by September 30.

Failing this, these companies could be dropped from the derivatives segment. That would mean restrictions on intra-day trading. The regulator had said it could also cut trading bands from five per cent to two per cent.

 

Sebi questions USE on trade concentration

Allegations on Jaypee Capital alone accounting for bulk of turnover, something not permitted under the rules.

The United Stock Exchange (USE) has come under the regulatory scanner for alleged concentration of trades by a single member. The regulator has questioned the effectiveness of the exchange’s surveillance and risk mechanism measures that allowed such an occurrence.

According to reports, only a few brokers account for a majority of the volume registered on USE. More important, Gurgaon-based Jaypee Capital, also a shareholder in USE, accounts for nearly 80 per cent of the turnover. USE currently operates in the currency derivatives space and offers currency futures in all the four currency pairs permitted by the Securities and Exchange Board of India (Sebi). It is also one of the only two stock exchanges in the country to offer currency options in the dollar-rupee pair.

“This puts a big question mark on the surveillance mechanism, as there should have been alerts thrown up by the system and the exchange should have taken note of it," said an official familiar with the development. "Questions have been raised as this is something the regulator is not comfortable with. It is against the spirit of the law."

Sebi has clearly said on numerous occasions that concentration of positions with a single member will not be entertained and exchanges should have robust surveillance and risk mechanism measures to monitor such developments.

The regulator has also directed exchanges to put in place systems to monitor "position concentration, open interest across trading members... alerts on large traded quantity." Further, "exchanges were also advised to suitably warn their members against self trades," in a surveillance meet held in December 2008.

Jaypee Capital is a direct shareholder in USE. Gaurav Arora, managing director and founder of the brokerage entity, and his son, Saurav Arora, hold another one per cent each. USE chief executive officer and managing director, T S Nayaranaswami, could not be reached for comments, despite repeated attempts.

"Concentration of positions with one single entity is a clear breach of FUTP (Fraudulent and Unfair Trade Practices)," says Ameet Naik of Naik, Naik & Co. "One cannot have brokers with trading rights, as that was the whole idea behind pushing for demutualisation. Then, there are also codes and ethics followed by brokers, violation of which could have serious impact," says Naik, who specialises in securities regulations.

Data shows that while Jaypee Capital accounted for nearly 80 per cent of the turnover, some of the banks (Andhra Bank, Union Bank of India, Indian Bank, Bank of India and Bank of Baroda) were responsible for a marginal share in the volume. USE’s stakeholders include the Bombay Stock Exchange, which owns 15 per cent, along with 28 banks and three corporate houses.

Last Friday, the volume on USE dropped significantly to Rs 6,514 crore after clocking a little over Rs 12,000 crore the previous day. Interestingly, MCX Stock Exchange (MCX-SX) and the National Stock Exchange registered volumes of Rs 29,992 crore and Rs 35,393 crore, respectively. On Monday, USE registered a turnover of Rs 8,038 crore, while MCX-SX and NSE clocked volumes of Rs 26,616 crore and Rs 19,067 crore. USE’s first-day turnover had surpassed the combined currency segment of NSE and MCX-SX. The exchange had made a big-bang debut last year, cornering a near 52 per cent market share in the currency derivatives segment. Jaypee and Union Bank, incidentally, conducted the first trade on the exchange.

RTI misuse makes I-T dept, CBI see red

Investigating and law enforcement agencies are concerned over the growing number of attempts to misuse Right to Information (RTI) to settle personal scores and animosities, and make personal gains.

A senior official from one of the investigating agencies told

Business Standard that serious concerns were raised in several meetings convened by the government with the Income Tax Department, the Central Bureau of Investigation (CBI) and others in the recent past. “It has been pointed out that steps are needed to balance the RTI provisions, privacy concerns and protection of individuals and institutions from misuse of any information acquired through RTI,” the official said. He added, the discussion on the proposed Right to Privacy Bill had been broadened to cover this aspect.

“It has also been felt that the RTI Act should have provisions so that frivolous complaints and RTI applications are dealt with a firm hand,” he said. The issue was also part of the meeting of the officials from these agencies and also from the concerned ministries, including the ministry of home affairs, called by the Department of Personnel and Training (DoPT) this week.

CBI, the Enforcement Directorate (ED), the investigation wing of the Income Tax department, the Narcotics Control Bureau, the Directorate of Revenue Intelligence (DRI) and Delhi Police are all concerned. “It has been seen that the RTI Act is often misused for settling personal scores and grudges,” the official said.

The applications aimed at misusing RTI have emerged as a major problem in the dowry and income tax related cases. Outlining the problem, a senior Income Tax official said: “Earlier people would send complaint against an individual first and then file RTI to get the details about tax payments and income. The situation has changed.

The complaint and the RTI are coming together and they demand information within a month.” The investigating agencies have stressed that the endeavour to derail critical investigations by seeking information through RTI is emerging as a big issue, the official said. “If the official handling the RTI application is amenable to manipulation, the results could be dangerous,” he added.
Explaining the extent of the problem, he said in one of the RTI applications it had been demanded that information should be provided on the postings of a particular army official in different armed forces bases.

RBI has managed exchange rate well

The Indian rupee has depreciated by more than eight per cent so far this month, after remaining stable for a fairly long period. Naturally, there has been a growing pressure on the Reserve Bank of India (RBI) to aggressively intervene in the forex market to stem the rupee's decline, since imported inflation rises and risks associated with exchange rate volatility are growing.

Despite the rupee falling to its lowest level against the dollar in more than two years on Thursday, RBI has stayed on the sidelines, stating it would intervene aggressively only when it saw excessive volatility. Many experts feel this stance of RBI's would aggravate the uncertainty in equity markets and scare foreign investors away.

However, as a central monetary authority, RBI has to focus on the effectiveness of forex interventions. We cannot forget such interventions do involve important costs. Among others, these costs are the risks of financial losses on the operations, the cost in terms of resources devoted to the conduct of these operations, and the cost in terms of credibility, if the intervention fails to deliver the desired effect.

The considerations of the costs versus gains of intervention might have prevented RBI from intervening aggressively, though there has been some intervention in the market, as reported by some of the newswires.

While the current attack on the rupee is primarily sentiment-driven, on account of the growing turbulence in Europe, the rupee has developed a strong depreciation bias, due to India's widening current account deficit and growing dependence on short-term flows. These factors may not allow our currency to recover substantially (and sustainably), even after RBI intervenes aggressively. Also, according to RBI's report on forex reserves in August, India's external liabilities are more than its external assets. So, RBI would like to use forex reserves more prudently. Besides, a depreciation bias would help exports and employment generation, which is the need of the hour.

We also need to understand central banks the world over prefer selective, rather than complete, public disclosure of their interventions to make such moves more effective.

Rupa Rege Nitsure
Chief Economist, Bank of Baroda

Top 100 companies post unflattering tax numbers

Growth in advance tax collections from the top 100 companies almost halved from 19 per cent in April-June to 9.9 per cent in July-September. Advance tax payments by these corporate assesses stood at Rs 31,707 crore in the second quarter of 2011-12, against Rs 28,863 crore in the corresponding period last year.

The country’s largest lender, State Bank of India, besides public sector units Indian Oil and Steel Authority of India Ltd, and private sector companies Piramal Healthcare, Bharti Airtel and Maruti Suzuki contributed to the decline in growth. On the other hand, ONGC, Reliance Industries, Tata Steel, NTPC, HDFC Bank and Bank of Baroda posted a good rise in payments.

A slowdown is visible in the auto sector, with Maruti Suzuki paying Rs 120 crore during the second quarter, down 56 per cent from last year. Advance tax payment by Hyundai declined 13.5 per cent to Rs 81 crore. Tata Motors also showed no increase in the second quarter.

Similarly, oil marketing companies, facing under-recoveries, reported dismal tax payments. In fact, Indian Oil did not pay any tax in the second quarter compared to Rs 351 crore in last year’s second quarter. Bharat Petroleum Corporation Ltd paid 83 per cent less tax at Rs 35 crore against Rs 206 crore over the period. Piramal Healthcare also did not pay any advance tax in the quarter.

“The second quarter has slowed, compared to the first quarter. Top companies have paid less tax, which means they have factored in a slowdown. Things are not rosy at all,” said a finance ministry official.

Advance tax payments, an indicator of financial performance of India Inc and the economy, stood at Rs 48,054 crore in the first six months of 2011-12 (April-September), against Rs 42,898 crore in the year-ago period, a growth of 12 per cent.

Traditionally, collections in the second quarter are better than the first.

A dip in growth sequentially strengthens fears of an economic slowdown, reflected by growth in industrial production having slumped to a 21-month low of 3.3 per cent in july.

Markets open weak on global cues

The markets witnessed a negative opening following weak trades across the global markets. The BSE Sensex opened at 16,812, down 253 points and the Nifty at 5,053, down 81 points.

The Federal Reserve made it official, yesterday, that there were significant downside risks to the economy even as it launched a new plan, 'Operation Twist',  to reduce long-term borrowing costs.

The Fed has revealed plans to shift $400 billion from short-term Treasuries into long-term Treasuries in an effort to boost lending and spur the economy. The Fed's new plan includes lowering long-term borrowing costs in order to bolster the battered housing market.

Overnight, the US markets plunged post the Federal Reserve's announcement. The Dow Jones industrial average dropped 2.5% at 11,125, with all but one of the blue-chip index's 30 components closing in the red. The S&P 500 fell nearly 3% at 1,167 and the Nasdaq shed 2% at 2,538.

In the morning trades, Asian markets have been projecting the evident weakness in the global markets with the Hang Seng, Nikkei and Shanghai Composite indices having shed nearly 1-4% each.

Back home, the Nifty had taken a breather in trade yesterday after Tuesday's strong up move. Analysts suggest that it is likely to get support at around 5,010 - its short-term moving average.

Among the sectoral indices, BSE Metal, Realty and Bankex indices are leading the losses, down nearly 2% each. Sterlite Industries, SAIL, JSW Steel and Hindalco Industries, down 3% each, are the major losers from the Metal' space.

IndusInd Bank, Yes Bank, ICICI Bank and Federal Bank, down 2-3% each, are the top losers among the financials.

On the Sensex, Tata Motors, Sterlite Industries, Hindalco Industries, Tata Steel and DLF, down 3-4% each, are the prominent losers. ONGC, marginally up at Rs 262, is the only gainers from the pack.

The overall market breadth is negative as 1,136 stocks have declined against 383 advancing ones, on the BSE.

SI  Reporter / Mumbai September 22, 2011, 9:40 IST

SECTION 65(105)(zzzzm) OF THE FINANCE ACT, 1994

SECTION 65(105)(zzzzm) OF THE FINANCE ACT, 1994 - LEGAL CONSULTANCY SERVICES - EXEMPTION TO SERVICE PROVIDED BY AN ARBITRAL TRIBUNAL IN RESPECT OF ARBITRATION TO ANY BUSINESS ENTITY

NOTIFICATION NO. 45/2011 - SERVICE TAX　, DATED 12-9-2011

2.　This notification shall come into force on the date of its publication in the Official Gazette.
In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services referred to under item (iii) of sub-clause (zzzzm) of clause (105) of section 65 of Finance Act, 1994.To clarify　sub-clause (zzzzm) of clause (105) of section 65 of Finance Act, 1994 reads as follows:-
　(zzzzm) to a business entity, by any other business entity, in relation to advice, consultancy or　assistance　in any branch of law, in any manner:　
Provided that any service provided by way of appearance before any court, tribunal or authority shall not amount to taxable service.

New Competition Policy in winter session: Moily

The announcement of the National Competition Policy will be the second biggest reform initiative after the 1991 economic reforms, according to Union Corporate Affairs Minister Veerappa Moily.

Chairing the first consultation meeting, organised by the Indian Merchants' Chamber and the Indian Institute of Corporate Affairs, he said the Cabinet nod would be expected by December and the New Competition Policy would be in place by 2012.

“Ideally, the policy should precede the law, but it is a good idea to have a policy, even if the Competition Act is already in force,'” said Mr. Moily. He said, while the Competition Law was for enforcement, the policy was for infusion of principles and promoting competition culture in the country.

The Ministry of Corporate Affairs (MCA) wants to strengthen and refine India's competition laws and the strategy involves the drafting of the competition policy, making changes to laws and norms that government departments need to follow.

Once in place, the policy will be a guide for various ministries and State governments to follow on competition.

The Minister said the Centre alone could not implement the Competition policy but the States as well as local bodies should be encouraged to promote competition. “It is their actions which affect the common man most” he added.

He said the Competition Policy was one of the most important instruments to ensure transparency in transactions.

Speaking on the forthcoming Procurement Policy, he said that once in place, it would remove lot of arbitrariness and discretionary powers in government purchases. “Over Rs.11 lakh crore of purchases are effected by government departments in India, and sadly we don't have a procurement policy yet, while smaller economies like Nepal and Afghanistan have well laid out norms.”

The Ministry wants to evolve a policy based on a vast consultative process. It had posted a draft competition policy on its website, seeking comments from the public during August 2011. It also held meetings with economists and consumer associations as well as business and industry.

Besides, a dozen experts are being approached to suggest sector-specific policy changes that are required to adopt principles of competition.

Another national consultation on the Competition Policy will be held in New Delhi on September 22, 2011 following which the final draft will be prepared.

Companies Act

Mr. Moily said India would a new Companies Act in 2012, replacing the existing Act of 1956. The Minister expected to obtain the approval of the Union Cabinet by next week or within a fortnight, following which it could be introduced during the Winter Session of Parliament.

The new Companies Bill seeks to promote shareholder democracy and improve corporate governance. The Ministry reworked and ‘fine-tuned' the Companies Bill, 2009, as the Standing Committee suggested as many as 300 amendments. 

MODIFICATION IN PPF SCHEME

MODIFICATION IN PPF SCHEME : DEPOSIT LIMIT RAISED FROM RS. 70,000 TO RS. ONE LAC WHILE RATE OF INTEREST ON ADVANCES AGAINST DEPOSITS IN PPF SCHEME RAISED FROM 1 PER CENT TO 2 PERCENTAGE POINTS

PRESS RELEASE, DATED 6-9-2011

The Committee on Comprehensive Review of National Small Savings Fund (NSSF) headed by Deputy Governor, RBI has recommended revision of certain provisions of PPF Scheme, 1968 and benchmarking of interest rates on various small savings schemes with the secondary market yields on Central Government securities of comparable maturities with suitable spread.

The Committee has recommended increasing the deposit limit under PPF Scheme from existing Rs. 70,000 to Rs. 1 lakh per annum and fixing of rate of interest on advances against deposits in PPF scheme at 2 percentage points as against the prevailing interest rate on such advances at 1 per cent.

The Committee has further recommended benchmarking interest rate on small saving schemes to interest rate on Government securities of similar maturities with a positive spread of 25 basis points on all schemes except for 50 basis points for 10 year NSC and 100 basis point for Senior citizens Savings Scheme. Recommendations of the Committee have been referred to State Governments and concerned Ministries/Departments of Central Government for their comments.

This information was given by the Minister of State for Finance Shri Namo Narain Meena in a written reply to a question raised in Rajya Sabha today.

Centre to Move Ahead with Companies Bill

As part of its effort to showcase its commitment to transparency and accountability, the government has decided to move forward with the Companies Bill, 2011. The Prime Minister’s Office has stepped in asking the corporate affairs ministryto move ahead with the proposed legislation.
The government would like to introduce the bill in the winter session of Parliament.
More significantly, the PMO has suggested that there needs to be an emphasis on ensuring that there are independent directors on the board of companies. This was decided at a review of ministries dealing with industry and commerce by the Principal Secretary to the Prime Minister TKA Nair. The Companies Bill, 2009 requires public listed companies above a prescribed size to reserve a third of all seats on the board for independent directors. It requires that independent directors (or their relatives) not do business with the company which amounts to more than 10% of the turnover of the company in the past two years. Permitting financial transactions with the company up to this point creates a potential conflict of interest.
The listing agreement under the SEBI Act prohibits independent directors from a material financial relationship with company but does not define the term ‘material’.
In its review of the Bill, parliamentary standing committee on finance had recommended that the liabilities of independent directors should be limited to enable them to act freely and objectively. It suggested that the appointment process of independent directors be made independent of its management.

Govt committee suggests Increase in PPF limit, Saving Interest rate, Withdrawal of KVP

A government committee has suggested raising interest rates on Post Office savings bank deposits to four per cent, a suggestion that could benefit lakhs of small depositors.  The Committee on Small Savings also recommended linking returns on other small savings schemes with interest rates on government securities.  It has also suggested that Kisan Vikas Patra (KVP) be withdrawn and annual investment limit for the popular Public Fund (PPF) be raised to Rs 1 lakh from Rs 70,000 at present. Provident

The committee recommended that interest rates for Post Office savings deposits be raised to four per cent from 3.5 per cent at present, in line with the Reserve Bank’s decision to hike rates on savings bank deposits.

Under the new formula, suggested by the committee headed by RBI Deputy Governor Shyamala Gopinath, small savings schemes would provide better returns to investors.

Interest rate for one-year deposit scheme would go up to 6.8 per cent from 6.25 per cent, while returns for the PPF would improve to 8.2 per cent from 8 per cent.

With regard to taxing returns on the small savings schemes, the committee said the issue should be considered by the government while firming up the Direct Taxes Code ( DTC )), which seeks to replace the Income Tax Act, 1961.

Noting that the small savings schemes are agent-driven, the committee suggested that the commission on them should be gradually reduced from four per cent to one per cent.

Can liaison office generate taxable income?

It is quite common that foreign companies planning to do business in India set up a liaison office for undertaking promotional work as a prelude to actual commercial activities. A liaison office needs prior approval from Reserve Bank of India. Since the liaison office is not permitted to do any commercial activities, it is generally believed that the existence of a liaison office will not generate any taxable income in India.

It may be clarified that where the liaison office creates a permanent establishment or establishes a business connection, the foreign company would become liable to pay tax on the profits, which can be attributed to the liaison office. But if liaison office doesn’t create any of the aforesaid relationship, liaison office will not attract any income tax in India.

Richest & Poorest In Parliament

Prime Minister Manmohan Singh and his ministerial team declared their assets that places his own wealth at 5.1 crore ($1.3 million), while Urban Development Minister Kamal Nath is richest with over 250 crore ($55 million). Defence Minister A.K. Antony seems the poorest with 35 lakh ($77,000).

Among the so-called big-four in the council, Finance Minister Pranab Mukherjee is worth around 3 crore, Home Minister P. Chidambaram around 25 crore, Antony around 35 lakh, while External Affairs Minister S.M. Krishna commands a little over 3 crore.

Among the other heavyweights, Agriculture Minister Sharad Pawar is worth 12 crore.

ICAI’s moderation criteria

In a dispute under the Right to Information Act, the Supreme Court last week ruled that the Institute of Chartered Accountants of India must disclose, if asked by acandidate in its examination, the standard criteria relating to moderation employed by it for the purpose of making revision. The court also rejected the argument of the institute that it had copyright over question papers and therefore they could not be disclosed even after the tests. It also rejected the argument of the institute on the burden cast on it by supplying information to failed candidates. Out of nearly 4 lakh candidates, only 16 per cent pass. If all of the failed candidates seek information on their answer sheets, the work of the institute will be stalled, it had argued. The court said that “Additional workload is not a defence. If there are practical insurmountable difficulties, it is open to the examining bodies to bring them to the notice of the government for consideration so that any changes to the Act can be deliberated upon. Examining bodies like ICAI should change their old mindsets and tune them to the new regime of disclosure of maximum information. Public authorities should realize that in an era of transparency, previous practices of unwarranted secrecy have no longer a place.