Auditors unsure how long listed airlines can go on
PRESS TRUST OF INDIA
New Delhi, 10 November
As airlines continue to find it tough to generate profits and raise
funds, auditors of all three listed carriers —Jet Airways, SpiceJet
and Kingfisher — have raised red flags on their going concern status.
In their latest quarter review reports, auditors of all three airlines
have said the " appropriateness of the going concern basis" is
dependent on the respective company's ability to generate adequate
finance to meet shortterm and long- term obligations and to operate
profitably.
A company is a going concern if it has sufficient resources to
continue to operate indefinitely and to avoid any potential bankruptcy
risks. Troubled air carrier Kingfisher Airlines, part of Vijay
Mallyaled UB Group, has faced the most stringent set of adverse
auditor comments, while auditors for Naresh Goyal- led Jet Airways and
Maran family- run Sun Group's SpiceJet have also commented on their
going concern status. However, the management of all three carriers
have defended their decisions to prepare their respective financial
statements on going concern basis.
Announcing its latest quarter results for the period ended September,
Kingfisher said its flying permit has lapsed and lenders have recalled
their loans, but the " company has detailed plans for renewal of its
operations". Its auditors have said there is " significant doubt on
the ability of the company to continue as a going concern".
Auditors of Jet Airways, SpiceJet say the "appropriateness of the
going concern basis" depends on their ability to meet obligations
Govt invites Bhagwati to discuss agenda for next 5 yrs
year's elections. VRISHTI BENIWAL
New Delhi, 10 November
Eminent economist Jagdish Bhagwati, who hit the headlines after
lauding Gujarat Chief Minister Narendra Modi for economic growth and
entered into apublic spat with Nobel laureate Amartya Sen, will now
decide the " agenda for the next five years" with the UPA government.
Bhagwati, along with Prime Minister's Economic Advisor C Rangarajan
and Reserve Bank of India Governor Raghuram Rajan, will be speaking on
financial sector reforms at the Delhi Economics Conclave, to be
organised by the finance ministry, in the capital next month.
The theme of the conclave, to be held on December 11- 12, is The
Agenda for Next Five Years. Finance Minister PChidambaram will
inaugurate the event which will also be attended by Planning
Commission Deputy Chairman Monetk Singh Ahluwalia, other UPA ministers
Sachin Pilot and Oscar Fernandes, and the corporate sector and the
banking industry, besides some other leading economists.
The presence of Bhagwati, who had reportedly declined to be a part of
the Conclave last year, evokes interests in the light of his statement
few months ago that he would not vote for Congress Vice President
Rahul Gandhi or Modi if they were the Prime Ministerial candidates in
next The Columbia University professor, however, had admitted that
Gujarat, under Modi, had shown rapid growth on major social
indicators. Amartya Sen, on the other hand, had said as an Indian
citizen he did not want Modi as his prime minister because the latter
had not done enough to make minorities feel safe.
"If Sen is bashing Modi purely on the basis of his prejudices, that is
his privilege. But it also betrays lack of integrity and judgement. I
have no doubt the UPA leaders, all of whom I know well, will be
astonished by Sen's declarations," Bhagwati had said in an interview
to this paper in July.
Later, the finance minister had come out saying that as far as growth
is concerned, both the Bhagwati and Sen models were needed as there
was need for combining "passion for growth with compassion for poor".
The Delhi Economics Conclave will also have a session on ' Growth,
Agriculture, Food Security and Inclusiveness: Challenges'.
Economist Jagdish Bhagwati
BRIEFCASEN
A weekly selection of key court orders
UP rebate for cement units illegal: SC
The Supreme Court has held that a " rebate of tax" granted by the
Uttar Pradesh ( UP) government only to cement manufacturing firms
functioning within the state was discriminatory and violated the
Constitution. To encourage manufacturers using environmentally toxic
fly ash, the government had issued a notification granting rebate to
dealers in UP excluding all other dealers manufacturing cement outside
the state using fly ash purchased in the state. A number of cement
manufacturers outside the state, like Jaiprakash Associates, Century
Textiles and Birla Corporation, challenged this rule as discriminatory
and violative of Articles 301 and 304( a) of the Constitution, which
ensure freedom of trade between states. They manufactured cement in
Madhya Pradesh or neighbouring states outside UP after procuring fly
ash from the thermal power stations in UP and then sold cement in UP.
They moved the Allahabad high court which ruled that the rebate was
discriminatory in favour of units within the state. The Supreme Court
dismissed the UP government's appeal.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 'Govt can't act like private employer'
The Supreme Court has indicted the Maharashtra government for
terminating its employees in the Irrigation Development Corporation
after transferring irrigation schemes to a sugar factory. Though the
employees were working for the corporation for 10 years, it maintained
that they were casual workers. They moved the labour court and the
Bombay High Court and won benefits under the Industrial Disputes Act.
The government appealed to the Supreme Court, which asked the
government to give them 25 per cent back wages and continuity of
service, though they would not be reinstated. The court remarked that
a government corporation should not imitate the attitude of private
sector employers.
"Termination should be the last resort; in this case the government
did not appear to make any effort to absorb them in other activities
of the department or insist on the sugar factory to absorb them," the
court said in the judgment on, State vs Sarva Shramik.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Liquor licencee must fulfil terms
A liquor contractor cannot seek to revoke her obligations under a
licence though she could not conduct business because of public
protest, the Supreme Court stated while dismissing an appeal case,
Mary vs State of Kerala. Mary was a successful bidder for country
liquor shops and she deposited 30 per cent as security. However, the
residents of the area, Kalady, renowned as the birthplace of
Shankaracharya, would not allow her to set up liquor shops. She
informed the board of revenue that she was not able to run shops and,
therefore, the licence should be revoked and her money should be
returned.
The excise authorities rejected her plea and demanded the balance of
the dues under the contract. She moved the high court, without
success. Her appeal was dismissed with the Supreme Court observing
that " in a contract under the Abkari Act the licencee undertakes to
abide by the terms and conditions of the Act which are statutory and
the licencee cannot invoke the doctrine of fairness."
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 'Surrender is not voluntary disclosure'
Surrender of income after its detection in a search by tax authorities
could not be called ' voluntary disclosure', the Supreme Court stated
while dismissing the appeal case, MAK Data Ltd vs Commissioner of IT.
After a show cause notice was issued by the authorities, the assessee
company made an offer to surrender a sum " by way of voluntary
disclosure without admitting any concealment" and to avoid litigation
and buy peace and to make an amicable settlement of the dispute. The
court stated that such sentiments should not carry away the
authorities.
The question is whether the firm had offered any explanation for the
concealment. Section 271 raised a presumption of concealment and it
was for the assessee to rebut it by cogent evidence, the court said.
DGFT's twin Diwali gifts
On the eve of Diwali, the directorgeneral of foreign trade (DGFT) gave
two gifts by way of clarifications. The first was a public notice
related to the application of the notification regarding the nexus
between the items of import under advance authorisation and inputs
actually utilised in the manufacture of export product. The second, by
way of a circular, related to declaration regarding availing Cenvat
Credit by deemed exporters claiming duty drawback.
On August 1 this year, the commerce ministry introduced anew
paragraph, 4.1.15, in the Foreign Trade Policy, effectively making it
mandatory that the inputs actually used in manufacturing the export
product should only be imported under advance authorisation or
dutyfree import authorisation (DFIA). Similarly, inputs actually
imported must be used in the export product and this must be
established for every advance authorisation or DFIA, said the
notification. The difficulties this notification caused were detailed
in this column on October 14 this year.
The public notice dated October 30, 2013, says that cases where both
export and import have been completed before August 1 or where DFIA
has been endorsed as ' transferable' before August 1, the said
notification will not apply. If only export has been completed, partly
or fully, before August 1, then the corresponding import would be
allowed against an undertaking from the authorisation holder that the
inputs of same specification as actually used in the product already
exported shall only be imported. For every export made on or after
August 1, provisions of paragraph 4.1.15 of the FTP shall apply and it
is immaterial whether for such export, corresponding import has
already been made ( fully or partly) or not. The issue regarding
Cenvat declaration for claim of drawback arose out of a wrong
declaration prescribed in the form ANF 8 in the Handbook of
Procedures, Vol 1 in 2009.
On March 1, 2011, the DGFT amended the format of declarations calling
for declaration that the manufacturers have not availed of and will
not avail of the Cenvat facility in respect of the input/ components
used in the deemed export supplies. As pointed out in this column on
April 4, 2011, this was a faulty declaration because there could
always be situations where a manufacturer uses imported goods and has
taken Cenvat Credit of the additional duties of customs, but not the
basic duties of Customs. Now the DGFT has clarified that such basic
Custom duty paid can be claimed as brand rate of duty drawback, based
on actual duty paid documents.
This clarification helps but not fully. Prescribing the brand rate
route creates unnecessary paperwork. There is no reason to deny
Customs allocation of notified All Industry Rates of Duty Drawback,
even when Cenvat Credit has been availed. Also, the declaration
calling for certificate from the claimants of drawback that they have
not been issued any advance authorisation/ DFIA in respect of the
goods supplied as deemed exports ignores the fact that the duty
exemption scheme does allow duty- free import of some inputs under the
advance authorisation and drawback of duty paid on other inputs.
The DGFT can easily rectify these defects and give another gift by
clarifying that the amendment that served from India benefits will be
available on net foreign exchange earnings basis will operate
prospectively for exports made during the current year onwards and not
for exports made during the previous years.
Email: tncr@ sify. com
EXIM MATTERS
TN C RAJAGOPALAN
--
CS A Rengarajan
9381011200
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