• ADRs of banks not part of FDI: RBI
• Poorly drafted Cenvat rules leading to litigation: SC
• 10 FDI proposals of Rs 1,123 crore approved
• Regulators ask SBI’s insurance partner to avoid Mauritius route
• Code threatens taxing time for M&A deals
• Reserve Bank of India (RBI) has suggested to the finance ministry that foreign investment in local banks in the form of ADRs, GDRs, FCCBs and any type of convertible warrants be excluded while calculating the FDI limit for Indian banks. RBI is learnt to be of the opinion that these forms of foreign investment is quasi-equity and, therefore, should be treated as such. (ET)
• Supreme Court has observed in two separate rulings - an appeal involving Maruti Suzuki and another judgment involving M/s Gujarat Narmada Fertilizers, that the CENVAT Credit Rules were not properly drafted causing huge rise in litigations and conflicting decisions by various benches of Custom Excise & Service Tax Appellate Tribunal (CESTAT). The apex court said that repeated amendments in the CENVAT Credit Rules has given a further fillip in rising number of litigations in the country. (ET)
• According to sources, Govt has cleared 10 FDI proposals worth Rs 1,123 crore, the largest FDI of Rs 750 crore being Essel Group-promoted DTH service provider, Dish TV India’s proposal, followed by United Breweries (Holdings) Ltd proposal to issue fully convertible equity warrants (worth Rs 219 crore). Following that is K S Oils Ltd which is likely to bring in Rs 98 crore of FDI through issuance of warrants to its foreign investors. Govt has deferred nine proposals, including that of Unitech Wireless (Tamil Nadu) Pvt Ltd and ByCell Telecommunication. Three proposals of Chennai-based Asha Micro Credit, Cholamandalam DBS Finance and Cargil & Financial Services India have been rejected. (FE)
• According to sources, govt and financial sector regulators have prevailed on Insurance Australia Group (IAG) to route its investment in a general insurance JV with State Bank of India through Singapore, instead of the original proposal to bring the money through a Mauritian subsidiary. The investment through Singapore would still make IAG eligible for tax benefits, under India’s Comprehensive Economic Cooperation Agreement (CECA) with the city-state. IAG’s investment in the JV, in which it would hold 26 per cent, is estimated at Rs 540 crore, including an entry premium. The regulators wanted transparency in the transaction, especially because it involved the country’s largest bank, which is also a public sector player. (BS)
• Tax Experts feel that the draft Direct Taxes Code would make life much more complicated for companies planning restructuring or mergers and acquisitions. Reasons: Certain provisions of the code would delay the negotiation process, increase the tax liabilities and introduce uncertainties due to the General Anti-Avoidance rules (GAAR). Also, according to sources, the Code, if implemented the way it has been drafted, can override each of the 75 double tax avoidance agreements (DTAAs) that India has signed as it proposes that neither a DTAA nor the code shall have a preferential status by reason of it being a treaty or law. (BS)
