• Economy gets another rate-cut stimulus
• Govt may allow share swap with foreign cos
• SEZs to get tax refunds on input services
• IRDA tightens noose on errant agents
• Center approves 29 FDI proposals worth Rs 616 cr
• FIPB defers 19 FDI proposals
• New version of BrahMos missile test-fired successfully
• Finmin puts down FBT exemption proposal for exporters’ tours abroad
• SC dismisses plea against Sony Ent
• Debt raising: DoT seeks details from Tata Comm
• United Spirits may place curbs on partner’s holding in company
• Reserve Bank of India (RBI) has clipped two key interest rates by 50 basis points each—a move that is intended to signal more rate cuts. It has lowered the reverse repo rate—the rate at which it borrows from banks—as well as the repo rate—the rate at which it lends to banks—to 3.5% and 5%, respectively.
• According to sources, Govt plans to allow Indian companies to enter into share-swap deals with foreign firms to facilitate merger and acquisition (M&A) activity, which has been hampered by a severe credit crunch. The shares offered in such cashless exchanges could be of another co within the group that is not party to the deal. Pricing norms for such transactions will be framed by SEBI after the proposal is approved by the department of industrial policy and promotion. (ET)
• According to a change in rules notified by govt, developers of SEZs and units inside such zones can from now on claim refunds of taxes paid on all input services, regardless of whether the services are used inside or outside the tax-free zones. The new rules means that developers and units inside SEZs will now have to first pay a tax on the services consumed and then claim a refund from the tax authorities within six months from the date of payment of taxes. Exporters, however, feel that the move could result in unnecessary blockage of funds, paperwork and transaction cost hence, ab-initio exemption would be more appropriate. The notification is likely to come into effect on or after the date of publication of the notification in the Official Gazette. (ET)
• Insurance Regulatory Development Authority (IRDA) has decided to penalise agents if life insurance policies are not renewed. The move, aimed at curtailing mis-selling, will entail commissions being retracted from agents and credited to the policyholder’s account. IRDA has asked insurance companies to claw back commission paid out in policies where premium from the second year onwards is less than the first year. In industry parlance, claw back refers to the recovery of commission already paid to agents. (ET)
• Government has approved 29 FDI proposals worth Rs 616 crore in the last meeting of the FIPB held on 23rd Feb. Proposals cleared includes AAPC Singapore’s Rs 365-crore hotel project whereby AAPC proposed to set up a wholly-owned subsidiary in India for its hospitality venture. Govt has also allowed ABG Bulk Handling’s plan to convert its operating company into an operating-cum-holding company and to make downstream investments of Rs 90 crore. Other proposals cleared by the government include Rs 50 crore investment proposal of Cinema Capital Ventures Fund, US-based Telcordia Technologies’ plan to induct foreign equity up to 74% in the mobile number portability solutions business and Telcordia plan to invest Rs 45 crore in its Indian operation. (ET)
• FIPB has deferred 19 FDI proposals, including those from tractor major John Deere Construction & Forestry, BNP Paribas Securities Services Ltd and Unitech Ltd. The proposal from John Deere related to setting up a JV with Chennai-based Ashok Leyland Ltd to manufacture construction equipment. This attracts Press Note 1of 2005, which deals with approval under automatic route for those companies that have prior JVs in India. Quippo Telecom Infrastructure’s (QTIL) application to sell 16 % of its stake to Oman Investment Fund (OIF) was also deferred. Unitech is learnt to have withdrawn its application for some exemptions to make it eligible to raise overseas funds for its ongoing projects before the FIPB meeting. (BS)
• The new version of the 290 km-range supersonic BrahMos cruise missile was successfully test launched at a firing range in Pokhran in Rajasthan desert by the Defence Research and Development Organisation (DRDO), who have developed the weapon system in collaboration with Russia scientists. The latest land attack version of the missile has been developed for the Army and the weapon was fired in a vertical-launch configuration. The “unique” technology in the Block II BrahMos version makes the missile an “unparalleled” one giving the armed forces the ability to hit targets in building clusters. (BS)
• The finance ministry has rejected a long-pending proposal by the commerce ministry to exempt exporters from fringe benefit tax (FBT) on foreign travel. According to the commerce ministry, the exemption could have boosted exports, that are now reeling under the global financial crisis and a slowdown demand in major markets like the US and Europe. Exporters have been demanding that they should be given exemption from FBT for travel by their employees, who have to frequently go abroad to fetch them orders from foreign buyers. The matter was discussed at a recent meeting of the committee of secretaries (CoSs) and the finance ministry is learnt to have rejected the proposal saying such benefits could not be granted to one section of taxpayers. (FE)
• Supreme Court has dismissed revenue department’s appeal against Sony Entertainment Television (SET) India Pvt Ltd and held that the transfer of telecast rights of films and television programmes abroad will amount to sale of goods or merchandise for claiming tax deduction. The case pertains to the year 1999-2000 when Mumbai-based SET India had claimed a tax deduction of Rs 7.01 crore under section 80 HHC of the Income Tax Act and the income tax department had disallowed it on grounds that TV programmes were not ‘goods’ and the right of ownership and the right of enjoyment were different. In its decision, the Supreme Court said that section 80 HHC of the Income Tax Act, 1961 is an incentive provision. Keeping in mind the object behind Section 80HHC, the words ‘goods’ or ‘merchandise’ have to be read in widest terms. SC also added that words sale would include lease as stated in Income Tax Rules. (FE)
• Govt is learnt to have withheld approval to Tata Communications Ltd’s (TCL) plan to raise debt beyond the permissible limit and has sought to know why it needs those funds. TCL had approached the government for changes in shareholder agreement to raise additional funds. According to sources, TCL has not given enough details of the purpose for which loan is being raised and in view of non-availability of relevant details on the projects proposed to be undertaken, the govt has considered it not possible to give approval for raising the loan even up to the net worth of the company. (Mint)
• United Spirits, liquor major and part of the UB Group, has said that it is willing to offer stake closer to that of the promoter but may place restrictions on its JV partner on increasing its stake higher than that of the promoter. United Spirits is expected to conclude its hunt for a JV partner within 6 months and has been learnt to be in talks with Diageo, and three other liquor majors. United Spirits Chairman, Mr Vijay Mallya, has said that his company will be careful while drafting the JV agreement and will be keen to ensure that the terms of the agreement are adhered to by both the partners. USL is expected to introduce clauses which prevent the partner from increasing stake higher than that of the promoter or even act in unison with a ‘friendly” financial institution to pick up stake from the secondary market. (FE)
