| Capital gains' reinvestment simplified |
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Many investors, who sell properties, find themselves in a tax tangle because they have not invested the proceeds from sale on time. However, the Mumbai High Court has given relief to investors who had delayed the same. Tax saving on long-term capital gains is possible by investing the capital gain amount in specified bonds, also called as Capital Gains Bonds. This benefit is available under section 54-EC of the Income Tax Act, 1961 ('the Act') up to a limit of ~50 lakh in a single financial year. A tax payer who wishes to claim the exemption from longterm capital gains has to invest the amount in the capital gains bonds within six months from the date of sale or before the filing of returns, whichever is earlier. In the last few years, the Income tax rules have notified bonds offered by National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC) as the specified bonds to claim this exemption. In one of the recent cases that came up for a decision before the Mumbai High Court, the tax payer was denied exemption under this section as the investment into the bonds was done beyond the allowable period of 6 months. In the said case, the tax payer had sold its factory building 22 March 2006 for a long-term capital gain of ~49.36 lakh. The tax payer wanted to claim exemption by investing the gains in REC bonds, however the investment was done on 31 January 2007, that is, almost after 10 months from the date of sale, yet the exemption u/s 54EC was claimed in the return of income. The tax officer rejected the claim and taxed the entire capital gains as the investment should have been completed by 21 September 2006. The first level appellate authority also agreed with the tax officers' view and denied exemption to the tax payer. The second appellate authority however allowed the tax payers claim, as in the said case, the bonds were not available for part of the time during the window of six months available to the tax payer. It also noted the fact that the tax payer had deposited an amount of ~50 lakh with a public sector bank with aspecific direction that the bonds would be purchased out of the said amount as soon they would be available, which helped support the taxpayers stand. At the time of proceedings in the High Court, the tax officers argued that REC Bonds were available for subscription during the period 1 July 2006 to 3 August 2006 and that the tax payer could have invested in these bonds then. The High Court held that the tax payer had time till 21 September 2006 to invest in bonds and avail the benefit under the said section. The said section entitles a person to avail of the right conferred thereby at any time during the period of 6 months from the date of sale of the asset. Availability of bonds only for a limited time during this period cannot prejudice the assessee's right to exercise the same up to the last date. The High court also referred to the well-known legal maxims - law does not compel aman to that which he cannot possibly perform, which would be squarely applicable to this case. As the bonds were not available, it was impossible for the tax payer to invest in them within six months of the sale of the factory. Accordingly, it was important that the section 54EC should be interpreted to ensure that it does not lead to injustice for the tax payer. Therefore, it was essential that the 6 months time frame should be reasonably extended in view of nonavailability of the bonds till 22 January 2007. The High court further discussed about the extent during which the extension of time should be granted to avail the benefit of section 54EC provisions when the bonds referred to therein are not available. In this case, the High court thought it to be both prudent and proper that the extension up to the date on which they are ultimately available, especially considering the fact that the bonds were not available for a major portion of the six months, including the last day. Secondly, it may not always be possible for a tax payer to make the investment on the first possible date on which the bonds were made available during the extended period as during the period the bonds were unavailable, a person is likely to invest the amount elsewhere. Thus, it cannot be expected of him to break the investment at a day's notice and transfer the same to the specified bonds. In view of the same, the High court held that an extension of merely nine days is extremely reasonable in the said case. The tax officers further argued that the tax payer, in any case, could have purchased the bonds of NHAI which was an alternative mode of investment provided for availing the benefit of section 54EC; the same was not accepted by the High Court. It held that the law has given the tax payer the choice to investing in either bonds of REC or NHAI or thus the tax officer cannot insist that the tax payer should have invested only in the bonds of one in preference to another. The choice of which bonds to purchase is entirely with the tax payer and in case the bonds of his choice are not available as is proved in the present case, the time to invest in the bonds get automatically extended till the bonds are available in the market and the assessee can purchase the same. The writer is a financial planner Delayed investment in capital gains bonds won't attract tax, if the instrument isn't available |
| Verdictmay spurwidersmartphone range |
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25 August Apple Inc scored a clear victory in its patent dispute with Samsung Electronics Co yesterday, increasing pressure on smartphone makers around the world to create handsets that stand apart from the iPhone and deliver more choices for consumers in a $219.1 billion market. A jury awarded $1.05 billion in damages yesterday after finding that Samsung infringed six patents for mobile devices, a defeat for Apple's biggest opponent in smartphones. The verdict strengthens Apple's hand as it seeks to discourage Samsung and competitors such as HTC Corp and LG Electronics Co from making devices that mimic the iPhone. While it's a blow to efforts by Samsung and its software partner Google Inc. to challenge Apple in smartphones, the outcome will probably mean a broader range of devices and more options for consumers as rivals seek to avoid costly legal tussles, said Carl Howe, an analyst at Yankee Group. "This is a big win for Apple," said Howe, whose firm is based in Boston. "It's good for innovation. It says that if you create something new, others can't just piggyback on it. From a competition point of view, it says create your own stuff. It says copying is not OK." Cupertino, California-based Apple would add to its victory over Samsung should US District Judge Lucy Koh, who presided over the trail, decide to ban Samsung mobile devices from the US based on the jury's findings of infringement. Koh, who could also triple the damages awarded, will consider the injunction request at a later date. Design imperative "The more significant issue is whether or not Apple is entitled to an injunction," said Colleen Chien, an assistant law professor at Santa Clara University. "If it is, expect to see some new phone designs emerge, quickly -- not only by Samsung but all other handset makers selling designs similar to Apple's." Apple shares rose to as high as $675.94 in late trading yesterday as the verdicts were announced, surpassing the intraday record of $674.88 reached on August 21. The stock had gained less than 1 percent to $663.22 at yesterday's close. Apple sought $2.5 billion to $2.75 billion for its claims that Suwon, South Korea-based Samsung infringed four design patents and three software patents in copying the iPhone and iPad. Jurors found infringement by all 21 Samsung devices that Apple claimed had copied its socalled rubberbanding technology, the way an iPad or iPhone screen seems to bounce when a user scrolls to the end of a file. Innovation threat The nine-member jury in San Jose, California, rejected Samsung's patent counterclaims against Apple and its request for damages. The jury also determined that all of Apple's patents at stake in the trial were valid. In light of the verdict, Samsung and other manufacturers will probably need to work harder to ensure that their devices aren't seen as copying Apple's, said Kevin Rivette, founder of 3LP Advisors LLC and former vice president of intellectual property strategy for International Business Machines Corp. "It's a good day for competition," Rivette said. "You're going to force competitors to come into the marketplace with new designs." Still, tweaks aimed at avoiding copying the iPhone won't necessarily result in better products as companies put concerns over intellectual property ahead of innovation, Chien said. "Rather than innovate first, sort out the IP later, which has been the custom in tech, companies will need to be much more mindful of the patent landmines that are out there, and try to avoid or secure rights to them," she said. "That could literally choke innovation." Google loses Samsung will ask the judge to overturn the verdict and, if she doesn't, will appeal the case, Mira Jang, a spokeswoman for Samsung, wrote in an e-mail. "Today's verdict should not be viewed as a win for Apple, but as a loss for the American consumer," Samsung said. "It will lead to fewer choices, less innovation, and potentially higher prices." The four-week trial underscores rising stakes in the smartphone market, where sales surged 62 per cent last year, according to data compiled by Bloomberg Industries. While Samsung is the leading smartphone manufacturer, Apple's iPhone is the best-selling single device. Google's Android operating system is the most used mobile software, with 61 per cent share. The verdict also hands a defeat to Google, which may need to scale back or change features of Android, said Rivette. "Google is in a position that it didn't want to be in," he said. Jurors found infringement by all 21 Samsung devices that Apple claimed had copied its so-called rubberbanding technology Apple can grow more yet Apple Inc, already the most valuable US company in history, has room to grow further, as its stock trades at a discount to the Nasdaq Composite Index and the company prepares an upgrade to its best-selling iPhone. Investors value Apple at 15.4 times trailing 12-month earnings, while the average company in the 2,495-member Nasdaq trades at 16.5 times, according to data compiled by Bloomberg. The company rose to arecord $665.15 on August 20, giving it a market value of $623.5 billion, the highest-ever for a USbased company. Apple's profit growth has outpaced its share increase, contributing to the lower price-to-earnings ratio. While the stock has jumped more than 80-fold in the past decade, earnings have gained more than 300-fold to $28.05 a share last financial year from 9 cents in 2002. Projections for further gains reflect optimism that Chief Executive Officer Tim Cook will use $117.2 billion in cash to keep growing in markets such as mobile devices, while pushing into new ones, including televisions. BLOOMBERG RULING IN APPLE-SAMSUNG CASE discourage competitors like Samsung and also HTC Corp and LG Electronics Co from making devices that mimic the iPhone partner Google to challenge Apple in smartphones, the outcome will probably mean a broader range of devices and more options for consumers benefit if manufacturers seek alternatives to Android to avoid being sued by Apple over. The two companies have sued each other in the UK, Australia and South Korea |
| Suspicion can't take place of legal proof' |
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Shri P Chidambaram met Shri A Raja on 30.1.2008 for discussions on spectrum charges and one has to appreciate the discussions held in the light of the facts discussed above. Meeting was held at a time, it may be noted, when Shri A Raja and DoT officials had already brushed aside the views expressed by Dr D Subbarao in his letter dated 22.11.2007, the views expressed by the Department of Economic Affairs in the note dated 3.1.2008 and in the absence of any response from PMO on the note dated 15.1.2008 sent by Shri P Chidambaram. Meeting dated 30.1.2008 and subsequent meetings Shri P Chidambaram had with Shri A Raja on 29.5.2008, 12.6.2008 and with the Prime Minister on 4.7.2008 have to be appreciated in the light of the facts already discussed. Shri P Chidambaram, it is seen under the abovementioned circumstances, had taken up the stand in the meeting held on 30.1.2008 that the Finance Minister was not seeking to revisit the current regimes for entry fee or for revenue share and for the regime for allocation of spectrum, however, it was urged that the following aspects had to be studied: "(i) The rules governing the allocation of additional spectrum and the charges thereof, including the charges to be levied for existing operators who have more than their entitled spectrum. (ii) Rules governing trade in spectrum. In particular, how can government get a share of the premium in the trade? (iii) The estimate of the additional spectrum that may be available for allocation after taking into account: (a) the entitlement of entry spectrum of fresh licenses; (b) the spectrum that needs to be withdrawn from existing operators who do not have the subscriber base corresponding to the spectrum allotted to them; and (c) the spectrum that may be released by Defence. (iv) We also need to check the current rules and regulations governing withdrawal of spectrum in the event of: (a) not rolling over; (b) merger and acquisition; (c) trading away spectrum." guidelines/prescribed from time to time. However 6.2 + 6.2 Mhz in respect of TDMA (GSM) based system shall be allocated to any new Unified Access Services Licensee". 3.1.2 It implies that an operator is eligible for consideration of additional 1.8 Mhz spectrum (making total of 6.2 Mhz) after ensuring optimal and efficient utilization of the already allocated spectrum taking into account all types of traffic and guidelines / criteria prescribed from time to time. 3.1.3 The matter was internally discussed with Solicitor General, who opined that he is defending the Government cases in various courts, where one of the main contentions is that auction would lead to reduction of competition and will not help in reducing the tariff and hence it would be against increase of teledensity and affordability. These being public interest concerns, it would be difficult to change the track at this juncture. 3.1.4 It is, however, proposed to price the spectrum of 1.8 MHz beyond 4.4 Mhz upto 6.2 Mhz. The Trai in its report of August 2007 has recommended that any licensee who seeks to get additional spectrum beyond 10 Mhz in the existing 2G bands, i.e. 800, 900 and 1800 Mhz after reaching the specified subscriber numbers shall have to pay a onetime spectrum charge at the below mentioned rates on pro-rata basis for allotment of each Mhz or part thereof of spectrum beyond 10 Mhz" Shri P Chidambaram and Shri A Raja met on 29.5.2008 and 12.6.2008 for resolving the then outstanding issues relating to the allocation and pricing 2G and 3G spectrums. Meeting of two Ministers would not by itself be sufficient to infer the existence of aconspiracy. Even before those meetings, as instructed by the Finance Minister, the Finance Secretary and Telecom Secretary had already met on 24.4.2008, had agreed that it might not be possible to charge operators already having allocation upto 6.2 Mhz and the principle of equity and level playing field would require that the operators who get fresh allotment of spectrum up to 6.2Mhz for GSM too should not be charged for Spectrum upto 6.2 Mhz for GSM. Therefore, the allegation that Shri P Chidambaram had over-ruled his officers' views and had conspired with Shri A Raja is without any basis. Criminal conspiracy cannot be inferred on the mere fact that there were official discussions between the officers of the MoF and that of DoT and between two Ministers, which are all recorded. Suspicion, however strong, cannot take the place of legal proof and the meeting between Shri P Chidambaram and Shri A Raja would not by itself be sufficient to infer the existence of a criminal conspiracy so as to indict Shri P Chidambaram. Petitioners submit that had the Minister of Finance and the Prime Minister intervened, this situation could have been avoided, might be or might not be. We are of the considered view that materials on record do not show that Shri P Chidambaram had abused his position as a Minister of Finance or conspired or colluded with A Raja so as to fix low entry fee by non-visiting spectrum charges fixed in the year 2001. No materials are also made available even for a prima facie conclusion that Shri P Chidambaram had deliberately allowed dilution of equity of the two companies, i.e. Swan and Unitech. No materials is also available even prima facie to conclude that Shri PChidambaram had abused his official position. We are, therefore, of the considered opinion that no case is made out to interfere with the order dated 4.2.2012 in C.C. No. 01 (A) / 11 passed by Special Judge CBI (04) (2G Spectrum Cases), New Delhi or to grant reliefs prayed for in I.A. No. 34 of 2012. Special Leave Petition (Crl.) No. 1688 of 2012 is, therefore, not entertained, so also I.A. No. 34 of 2012 in Civil Appeal No.10660 of 2010 and they are accordingly stand rejected. Excerpts from the order of Justices G S Singhvi and K S Radhakrishnan, Supreme Court, on August 24, in Special Leave Petition (Crl) No. 1688 of 2012 and IA No. 34 of 2012 in Civil Appeal No. 10660 of 2010; Subramanian Swamy Petitioner/Appellant(s) versus A Raja respondent OPINION SC ORDER ON 2G CASE AGAINST CHIDAMBARAM |
Company Secretary, Chennai
email csarengarajan@gmail.com
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