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 Source  Business standard

>YOUR MONEY

Are you receiving emails or telephone calls from banks advising you to invest in recurring deposits because there is no tax deducted at source ( TDS) in this case? Remember, such investments aren't tax- free. No TDS merely means the bank will pay you the entire interest amount without forwarding the tax on it to the government. However, the fixed deposit holder will have to include this interest income in her/ his total income and pay tax on this, according to her/ his tax bracket. "There is a common misconception if there is no TDS, it is tax- free. But whether it is recurring deposit, post- office deposits, national savings certificates, or any other savings, if there is no TDS, the interest income is taxed. The only difference between these and fixed deposits is the bank or post office will not deduct tax at source," says Sanjeev Gokhale, a chartered accountant. Banks offer the same rate of interest on fixed deposits and recurring deposits. For fixed deposits, you invest the money in alump sum, while in the case of recurring deposits, you invest once every month. This instrument is encouraged as a way of instilling discipline among investors. The difference is in the case of fixed deposits. If the interest exceeds ₹ 10,000 in a financial year, the bank will deduct 10 per cent tax before crediting the interest to the account. However, this is not the only tax the deposit holder is liable to pay. " This is another common misconception. Many people think they have to pay the remaining 20 per cent tax while filing tax returns. Or, he/ she can also pay through advance tax," Gokhale says. A few months ago, it was reported the income tax department had issued notices to several people who had not filed returns. Among them were those who had received interest income of more than ₹ 50,000. If you receive such a notice, you will have to pay the tax, as well as interest for the delay. The interest is one per cent a month from the last date of filing returns (July 1). The penalty for not filing returns is also charged at the same rate. So, whether you invest in fixed deposits, recurring deposits or tax- saver post office schemes, remember to include the interest income while filing tax returns. The only case in which you don't have to pay income tax on fixed deposits is if you have no other source of income and your income is below the threshold taxable limit. For this, you have to file Form 15G, stating you have no taxable income. Senior citizens have to file Form 15H. In many cases, senior citizens feel if they have done this, they are not liable to pay tax. But if you have two or three fixed deposits in separate banks and you submit a Form 15G or 15H in all the banks, you will have to pay tax if the total interest from all the fixed deposits exceeds the taxable income limit, says chartered accountant Arvind Rao. "Since last year, while submitting Form 15G, deposit holders have to state the deposits they have with other banks. So, banks have to report two types of interests— one on which TDS has been deducted and the other on which it hasn't," he says. PRIYA NAIR Interest income on deposits is taxable according to your tax bracket No TDS on deposits doesn't mean these are tax- free

CCI's fine on Google: Why other firms should not feel ' lucky'

The Competition Commission of India ( CCI) recently imposed a penalty of ₹ 1 crore on Google, for non- cooperation with the CCI's ongoing investigation against the internet giant. The CCI in an order imposing the penalty noted that Google, without any reasonable cause, had failed on several occasions to comply with requests for information by the office of the director general ( the CCI's investigative arm). Google is being currently investigated by the CCI for alleged abuse of its dominant position in the internet search and search advertising markets. CCI's probe, which mirrors that of the US and European Union ( EU) competition enforcement agencies, enquires if Google is manipulating its search engine to create a " search bias" that drives users towards ancillary services owned and operated by the company (such as YouTube, Google Maps, Google Finance and so on). The ₹ 1- crore penalty was imposed by the CCI under section 43 of the Competition Act, 2002 — which allows the fair trade body to impose a maximum penalty of ₹ 1 crore for each instance of failure by a company to cooperate with the CCI's investigation. The penalty imposed under section 43 is a procedural one and is in addition to any substantial monetary penalty that may be imposed by the CCI if it concludes that Google has indulged in anti- competitive conduct, at the end of its investigation. A penalty of ₹ 1 crore may not be a lot of money for Google whose annual revenue from India, for the financial year 2013, was a staggering ₹ 2,076.8 crore. However, Google and the senior management of companies that are currently being investigated by the CCI would be erring if they do not read the fine print of the CCI's decision and learn more. It's a wake- up call for Indian companies that tend to be lackadaisical towards regulatory investigations. Noncompliance with CCI's directions is no longer an option. It should be noted that each instance of non- cooperation can be penalised upto a maximum amount of ₹ 1 crore. For example, in Google's case, the CCI noted that the company had not cooperated with the CCI on seven separate occasions, and the regulator could have penalised Google for ₹ 7 crore. However, the CCI reduced the penalty to ₹ 1 crore on account of Google's delayed compliance with the directions of the CCI. Further, the CCI held that instances of non- cooperation by Google could be considered an aggravating factor while tabulating the aggregate penalty against it, if the CCI would conclude that Google had indeed indulged in anti- competitive conduct. Both under the US and EU competition law regime, obstruction of antitrust proceedings can be treated as an aggravating factor for increasing the overall level of fine that may be imposed for a particular competition law infringement. For a company like Google, which may face a penalty of up to about $ 5 billion ( 10 per cent of Google India's previous three- year annual average turnover of $ 49.3 billion) if it is found to have violated the provisions of the competition Act, it may not be wise to go down the path. The decision also held that although companies may delay their compliance with the CCI's directions for " reasonable cause", abstract excuses such as broad and complex scope of the CCI's investigations or lack of a centrallymanaged database would not be acceptable. Therefore, the parties would be required to link each instance of noncompliance with the specific inability that caused it. The CCI also held that delayed compliance with the CCI's directions may be held as non- compliance with such directions altogether. It is important to appreciate why the CCI is empowered to impose such substantial "procedural fines" to discipline companies that refuse to co- operate with ongoing investigations. The CCI's mandate is to regulate anti- competitive market practices, which are often conducted in secret and are, therefore, extremely difficult to prove. For example, cartelising firms will seldom leave a trail of evidence of their concerted action; therefore, the CCI needs access to internal documents of such firms to deduce the existence of concerted behaviour. If the CCI does not have the power to ensure compliance with its directions seeking internal documents/ data of investigated companies, such companies would easily refuse access to the information and sabotage the investigation. Therefore, it is vital for companies that are being investigated by the CCI is to adopt a document- management plan. This will allow a company to efficiently manage their litigation- related documents, delineate documents/ data that fall within the scope of a particular competition law investigation and effectively co- operate with the CCI. Companies should be careful that persistent non- cooperation with the CCI's on- going investigations would not only make it vulnerable to monetary penalties under section 43 of the Competition Act, but may also nudge the CCI into launching the more onerous dawn raid proceedings ( unannounced search and seizure activities), which would involve forcible entry into the offices of investigated companies to confiscate incriminating evidence. The CCI's decision indicates that from now on it may hold companies responsible for delaying its investigations, reinforcing the regulator's commitment to complete all anti- competitive investigations in a time- bound manner. Earlier this year, the CCI had indicated that it intends to complete behavioural competition law proceedings within one year of such proceedings being initiated. Given the track record of bureaucratic hurdles of Indian regulators, this is a credible commitment from a new- age economic regulator. The writer is a competition lawyer with the Competition Commission of India. These views are personal The fair trade body's penalty on the internet giant should be a wake- up call for Indian companies that tend to be lackadaisical towards regulatory investigations REUTERS AVIRUP BOSE AN EYE ON DOMINANCE The Google logo is seen on the top of its China headquarters building in Beijing. The CCI's probe enquires if Google is manipulating its search engine to create a " search bias" that drives users towards its ancillary services such as YouTube, Google Maps and so on

 

Wherever Vodafone investors go, hefty returns follow SURAJEET DAS GUPTA New Delhi, 14 April Putting money in Vodafone India has proved a bonanza for many Indian business tycoons, as well as some lucky telecom executives. Ajay Piramal, who last week sold his 11 per cent stake in the company, is not the only Vodafone investor to have made a killing. Others include some of India Inc's who's who — Max India Chairman Analjit Singh, who has had a long association with the company; Kotak Mahindra Group, one of the first to invest in the country's telecom sector; the Hindujas, who sold their telecom venture to Vodafone; BPL Mobile founder Rajeev Chandrasekhar; Rajan Nanda's Escorts group; and Vodafone India's top executive Asim Ghosh, who steered the company and helped make it a force to reckon with. When Piramal last week offloaded his stake in the Indian company, earlier called Hutchison- Essar, for ₹ 8,900 crore to Vodafone Plc, the UK- based parent company, he got a 52 per cent return on his investment. He had bought the stake in two tranches two years earlier for a total of ₹ 5,864 crore and replaced Essar to ensure Vodafone Plc's stake in its Indian subsidiary did not breach the 74 per cent foreign direct investment (FDI) cap under the then prevalent regulation for telecom firms. The government last year relaxed the rules to allow foreign telecom companies to hold 100 per cent stake in Indian ventures. Among key reasons for the telecom company to have multiple Indian partners were regulatory compulsions. New partners had to be brought in to replace the exiting ones, as the company was required to meet the country's FDI norms. Until 2005, India allowed only up to 49 per cent foreign equity in telecom companies, so the parent company needed partners — sometimes more than one to ensure it met the cap but did not lose its say as the biggest stakeholder. In 2005, the rules were revised and the FDI cap was raised to 74 per cent. The parent company also saw a major restructuring and consolidation of its business in Hutchison- Essar, the Indian arm; there was more leeway to increase stake. And later, as the government last year allowed 100 per cent FDI, the UK's Vodafone Plc got the opportunity to buy out all its Indian investors and make Vodafone India a 100 per cent subsidiary. Stake sale by Piramal and Singh was part of this exercise. Earlier, the erstwhile HutchisonEssar had also grown the Indian business through a string of aggressive acquisitions and setting up joint ventures. The Essar group's Ruias had exited the company in April 2011, after 11 years of association, by selling their 33 per cent stake to Vodafone Plc for $ 5 billion. Hutchison had in 2000 bought a 49 per cent stake in Essar's Delhi operations, in which the Ruias held a 51 per cent stake. When Hutch sold its 67 per cent stake in 2007 to Vodafone for $ 11.1 billion, the Ruias decided to stay put and were able to get a settlement of $ 415 million from Hutchison for not opposing the deal. They gave an assurance of not fighting a legal battle or asserting their right of first refusal in relation to the Vodafone deal. Max India's Singh, another old partner from the Hutchison days who, like the Ruias, continued his association when Vodafone came into play. He was made the India subsidiary's chairman at a time the company was into a serious tax dispute with the government. When Singh sold his effective 4.5 per cent stake in Vodafone India last week, he made ₹ 1,241 crore. The association of Singh and Hutchison goes back to 1992, when they formed a joint venture to bid for metro mobile licences, opened by the country for the first time. In 1994, they won the licence for Mumbai. Singh sold his 41 per cent stake in the JV in 1998 for ₹ 561 crore to a Hutchison venture. Again, he made money in 2005, when he sold 3.16 per cent of his residual stake in HutchisonEssar, a consolidated company set up after various acquisitions, to Essar for ₹ 657 crore. But, Singh had a second coming. He returned in 2006, buying the 8.3 per cent stake of Kotak Mahindra Bank's subsidiaries, associates and promoter group companies in Huchison- Essar for ₹ 1,019 crore. Kotak was one of the first to invest in Hutchison- Essar through various transactions. In 2009, Analjit Singh proposed reducing his effective holding in Vodafone India, through three of his companies — from 7.58 per cent to 3.87 per cent — by selling to Vodafone Plc. The Foreign Investment Promotion Board ( FIPB) data showed this would entail an FDI flow of ₹ 533 crore. During the Hutchison- Essar days, the Ruias and Hutch had planned a smart strategy of acquisitions to grow their business. This also benefitted many Indian entrepreneurs who ventured in the telecom space. BPL Mobile founder Rajeev Chandrasekhar was one such entrepreneur. He sold his telecom business to Essar Group, which paid him $ 1 billion for controlling stake. It bought a 67 per cent stake directly, while the remaining was to be bought over from other shareholders, both foreign and domestic investors. The acquisition was made to merge BPL with Hutchison- Essar. Subsequently, the company's operations in the circles of Maharashtra and Goa, Tamil Nadu and Pondicherry and Kerala were merged with Hutchison- Essar. These were the circles where Hutchison- Essar was not present. The Mumbai operations were also part of the deal but remained independent following a bitter battle between the two partners over terms of the merger. A similar strategy led the company to strike a deal with the Hindujas, who were among key promoters of Fascel, a company with mobile operations in Gujarat (Hutch did not have its operations in Gujarat). With the government raising the FDI cap in 2005, Hutchison was the next year able to increase its stake in Hutchison- Essar by buying out Hindujas' 5.11 equity stake in Hutchison- Essar for $450 million. The company also bought the licence of Escotel, a JV in which the Escorts group was a partner, for Punjab. It is not known how much was paid for this, but analysts the sum could have been more than ₹ 150 crore, the initial price of the licence. It was not only businessmen making all the money through investments in Vodafone. Asim Ghosh, who straddled two managements — of Hutch and Vodafone — sold his stake in the company in two tranches. In 2007, when Ghosh and Analjit Singh indirectly bought equity in the company, their shareholding came under scrutiny in the light of the announcement of Hutchison- Essar's deal with Vodafone. There were allegations the two were acting as a front and that their holdings were controlled by Hutchison Telecommunications International. This implied the JV had breached the 74 per cent FDI limit. But, after a lot of to and fro, the deal went through and was eventually cleared. However, in 2009, Ghosh sold part of his equity to Vodafone, bringing down his stake in the company from 4.68 per cent to 2.39 per cent. FIPB documents showed this would lead to an FDI inflow of ₹ 330 crore. Two years later, he sold his remaining stake to Singh for an undisclosed sum. Piramal sold his stake after the government relaxed the rules to allow foreign telecom companies to hold 100 per cent stake in their Indian subsidiaries INVESTORS' DELIGHT |ESSAR GROUP made over $5.4 billion by selling its stake in Vodafone India and from a settlement with Hutchison |AJAY PIRAMAL made ₹ 8,900 cr, a return of 52% in two years, from his investment in Vodafone India |RAJEEV CHANDRASEKHAR made $1 billionby selling BPL's telecom business to Essar ( all of its business, except in Mumbai, was merged with Hutchison- Essar) |ANALJIT SINGH made over ₹ 2,900 crover the years in various deals, including sale of stake in Hutchison Max |KOTAK MAHINDRA GROUP made over ₹ 1,019 crby selling its stake in Hutchison- Essar |HINDUJAS sold their stake in Hutchison Essar for $ 450 million |ASIM GHOSH is estimated to have made ₹ 300 crin one tranche of stake sale ( his earnings from second stake sale are not known)

 

Source   Business  Line

Round-tripping: SEBI issues notices to five major corporate houses

SHISHIR SINHA

 

Seeks information about alleged stock price manipulation, violation of FII norms

NEW DELHI, APRIL 14:  

Market regulator Securities and Exchange Board of India has issued notices to at least five major Indian corporate houses including United Spirits, Unitech, Essar, GMR, and Sterlite on suspicions of stock price manipulation and possible insider trading through funds parked abroad.

The notice, dated mid-March, has given a month's time to the companies to respond. The notice is based on the report sent by erstwhile market regulator of the United Kingdom, Financial Services Authority (FSA) in 2010.

"It was an unsolicited report enquiring about a foreign bank called UBS," a person associated with the development told Business Line.

 GMR and Essar have categorically denied having any dealings with UBS in the period referred to by the notices, thereby implying that any suspicion of round-tripping was totally unfounded. While Sterlite categorically denied receiving any notice, United Spirits declined to comment on the issue and Unitech did not respond to an e-mail sent by Business Line.

UK regulator

 It was the UK FSA's report that led SEBI to investigate allegations that companies of the Anil Dhirubhai Ambani Group (ADAG) had used a Mauritius-based fund to make clandestine investments in another group company.

Following investigations, SEBI initiated proceedings, but ended up settling through a consent procedure in early 2011, which saw two ADAG companies (Reliance Infrastructure Ltd and Reliance Natural Resources Ltd) cough up ₹50 crore as the consent fee. A consent does not imply either an admission or a denial of wrongdoing. 

The FSA was regulating stock market till April 2013 before being disbanded into two authorities — Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).

SEBI is trying to determine whether the five corporate entities have raised funds abroad through External Commercial Borrowings (ECBs) or some other instruments and then 'round-tripped' the money through a fund that invested in their shares in India.

The Indian regulator will be looking at whether this violated the RBI rules related to ECBs as well as whether this led to price manipulation through possible insider trading. The period under scrutiny is between 2005 and 2008.

Companies' denial

 While not denying that the company had received a notice from SEBI, the Essar spokesperson in an e-mail response said: "We categorically deny information given in your queries. Essar entities have never dealt in their own shares through any FII/UBS banking channels." Similarly, the GMR spokesperson said: "We have not dealt with any transactions in GMR shares during the period 2005 to 2007 through FII route using Mauritius, UK or any other channel facilitated by UBS."

 While the Sterlite spokesperson said the "information is completely incorrect", his counterpart in the United Breweries Group said: "We do not wish to offer any comment."  United Spirits is a part of the UB group.     

(This article was published on April 14, 2014)

 

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CS A Rengarajan

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