Mar 27, 2012

Will examine and modify GAAR if required, says FM:

Amid fears that FIIs may be taxed for short-term capital gains in stock markets, the government today said it will examine and modify the General Anti Avoidance Rules (GAAR) if required.

"I will examine and modify GAAR as and when required. This is essential for anti-avoidance," Finance Minister Pranab Mukherjee said in Parliament today.

In his Budget for 2012-13, Mukherjee had said that the government wanted to introduce GAAR in order to "counter aggressive tax avoidance schemes, while ensuring that it is used only in appropriate cases, by enabling a review by a GAAR panel".

Securities and Exchange Board of India Chairman UK Sinha had said yesterday the government "is going to have a new look at tax avoidance, so they they are going to work in that way".

The fear of GAAR had spooked stock markets which tanked 2% yesterday on concerns that all short-term capital gains made by FII and P-Note investments would be taxed. The Sensex, however, recovered today rising over 200 points.

Meanwhile, Finance Ministry sources seeking to allay fears that Participatory Notes -- an instrument through which FIIs unregistered with Sebi invest in stock markets -- said that the I-T department will have to first prove the intention of avoidance before making GAAR applicable.

"GAAR is not created to target any class of financial instruments. The onus of proving tax avoidance lies mainly with the government and partially on the assessee," sources said.

"All benefits which a person is entitled in a DTAA [Double Taxation Avoidance Agreement] treaty can be overruled or denied if GAAR is invoked," sources said.

Provisions of GAAR will be applicable from April 1 and not with retrospective effect.

Source: www.business-standard.com

Sensex breathes 205 pts sigh on GAAR clarity; rupee spikes:

The BSE Sensex showed smart recovery on Tuesday after CNBC-TV18, citing unnamed finance ministry officials, reported the government would not target the participatory notes under its newly proposed General Anti-Avoidance Rule (GAAR).

Overall the day was quite choppy ahead of F&O expiry on Thursday. The 30-share BSE Sensex rose 204.58 points or 1.20%, to close at 17,257.36 after hitting an intraday high of 17,366.84 and low of 17,061.16.

Finance ministry sources say, only participatory notes which fail certain regulatory tests may be subject to taxation. There will not be a double taxation, the report said.

Aliff Fazelbhoy, partner - tax, M&A and employment, ALMT Legal, said that it was not the government's intention to tax P-notes but advised caution until it was spelt out.

Meanwhile, the NSE's 50-share Nifty rallied 58.90 points or 1.14% to 5,243.15, helped by the rising rupee, short covering post yesterday's sharp fall and the global cues.

Jason Hughes of IG Markets tells CNBC-TV18 that Indian equities look attractive around the 5200 level on the Nifty.

The Indian rupee appreciated by 58 paise to 50.69 a dollar today after falling in previous sessions, which suggests that foreign institutional investors may have stepped in to buy their favourite stocks. The 8.79% 2017 bond yield spiked further by 0.5% to 8.52 ahead of announcement of government's borrowing programme this week.

Cigarette major ITC rose 1.8% and FMCG company Hindustan Unilever shot up 3.5%.

Country's largest lenders State Bank of India and ICICI Bank were up 0.7-1% while rival HDFC Bank was up 1.5%. Housing finance company HDFC moved up 2.2%.

Shares of Sterlite Industries, Cipla and DLF topped the buying list, rising 3.5-4.5%.

Engineering and construction major Larsen & Toubro, telecom company Bharti Airtel and top commercial vehicle maker Tata Motors rallied 2-3%.

Index heavyweights Infosys and ONGC were up 1-1.8%. Tata Consultancy Services, India's No. 1 software services exporter rose 0.9%.

However, shares of Maruti Suzuki, country's largest car maker fell 2% after Maharashtra government imposed 4% tax on diesel cars and 2% on petrol cars. State-run BHEL was down 1%.

Declining shares outnumbered advancing by 841 to 593 on the National Stock Exchange. Total traded volume was more than Rs 2.42 lakh crore.
Global markets gained after comments over US economy by Fed chairman Ben Bernanke yesterday. Asian markets closed 0.8-2.4% higher barring Shanghai while European markets were moderately higher.


Source: www.moneycontrol.com

L&T Finance buys Fidelity's India fund business:

Reuters) - L&T Finance Holdings (LTFH.NS) has acquired Fidelity Worldwide Investment's India mutual fund business to boost growth in the country's growing but highly competitive asset management business.

The acquisition will provide L&T Finance, a unit of Indian engineering conglomerate Larsen & Toubro Ltd (LART.NS), more products and access to retail customers, the company said in a statement on Tuesday.

Shares in L&T Finance, which the market values at $1.6 billion, ended 4.2 percent higher at 50 rupees before the deal announcement, while the BSE Sensex rose 1.2 percent.

Fidelity Worldwide was looking to sell its India mutual fund business, a source with direct knowledge said on January 30, as growing competition, weaker markets and regulatory changes take a toll on the sector's profitability.

The sharp fall in the Indian equity markets last year and the recent regulatory changes such as the removal of the entry load, or a commission charged by a mutual fund distributor for selling a product, have added to the competitive pressure.

Fidelity Worldwide's India asset management arm, which was launched in 2004, managed assets worth about 88 billion rupees as of end-December, data from the Association of Mutual Funds in India showed.

As per the assets under management, it was the 15th largest company in India's 44-player asset management industry.

Assets managed by fund managers in India rose to 5.9 trillion rupees as of March 2011 from 2.3 trillion in March 2006, a study by research and consultancy company PricewaterhouseCoopers showed.

Lured by the long-term prospects of Asia's third-largest economy, overseas fund managers, such as U.S.-based T. Rowe Price Group Inc (TROW.O) and Fidelity, have been buying into Indian money managers or setting up operations on their own.

Nippon Life Insurance earlier last year paid $290 million for a 26 percent stake in the asset management unit of Indian financial services provider Reliance Capital Ltd (RLCP.NS).

Lazard was the financial advisor to L&T Finance for the acquisition.

Source: www.in.reuters.com

India in world's most eco confident list:

 Indians have emerged as the second most confident people about their economy across the world on easing inflationary pressure and increased foreign investments, says a report.
According to global research firm Ipsos, India's economic confidence jumped by 9 points to 74 per cent in the month of February compared to the previous month, becoming the second most economically confident country after Saudi Arabia which tops the chart with 90 per cent.

Sweden is the third most economically confident country, where 73 per cent are optimistic about their economy, followed by China (72 per cent), Germany (71 per cent), Australia (66 per cent) and Canada (65 per cent).

"The Indian economy has continuously recorded high growth rates and has become the second most preferred destination for foreign investments and business. India's economic growth is expected to remain robust in 2012 and 2013, despite likely headwind of double-dip recessions in Europe and the US," Ipsos India CEO Mick Gordon said.

More than half of Indian citizens (51 per cent) believe their local economy which impacts their personal finance is good and 56 per cent people expect that the economy in their local area will be stronger in next six months, Ipsos said.

Mick further noted that inflationary pressure eased as the wholesale price index fell, making daily consumption items relatively affordable and giving hopes that Reserve Bank of India will ease its monetary policy stance by reducing the policy rates in the coming months which will further fuel economic growth of the country.

The report, which examined citizens' assessment of the current state of their country's economy said the overall global average economic confidence remained unchanged at 38 per cent last month.

On the other hand only a handful of those in Hungary (3 per cent) rate their national economies as 'good', followed by Spain (4 per cent), Italy (6 per cent), France (7 per cent), Japan (9 per cent) and Great Britain (10 per cent).

Countries with the greatest improvements include India, China, Mexico, Saudi Arabia and Turkey, while, countries with the greatest declines are Argentina, Poland, Belgium, Indonesia and Australia.

The survey was conducted in February this year among 19,216 people in 24 countries like Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Great Britain, Hungary, India, Indonesia, Italy, Japan, Mexico, Poland, Russia, Saudi Arabia, South Africa, South Korea, Spain, Sweden, Turkey and the USA.

Source: www.financialexpress.com