Wednesday, October 15, 2014

Exit Polls Give BJP The Thumbs-Up

Set To Form Govt In M'rashtra & Haryana, But Not All Projections Give It Clear Majority Sena May Finish 2nd, Cong 3rd, MNS To Fare Worse Than In 2009
BJP will form the next government in both Maharashtra and Haryana, exit polls predicted on Wednesday . The only thing they did not agree on was whether the party would win a clear majority on its own. If the polls are proved right, it will validate BJP's bold gamble in going it alone in both states, as well as its focus on a Narendra Modi-centred campaign that dwelt more on governance issues than on the communal rhetoric often associated with the saffron party .

Of the four exit polls that made projections for Maharashtra, one--by Today's Chanakya--gave BJP 151 seats or a clear majority in the 288member assembly . Another, done by AC Nielsen for ABP News, predicted that the par ty would just hit the half-way mark of 144. The CVoter poll conducted for Times Now gave BJP 138 seats and the Cicero poll for the India Today group gave it 124. According to the latter two, while BJP would need some support from others, it should hardly find that a problem.

Interestingly , Shiv Sena too is not seen as a major loser, at least in terms of seats, from the break-up of the 25-yearold alliance with BJP . All the polls agreed that it would finish second and improve significantly on its 2009 tally of 44 seats, though the numbers varied from 59 to 77. Three of the four polls put Congress in third spot, just a little ahead of NCP , while one had it the other way round. MNS would get fewer than the 13 seats it won in 2009, all polls said.

In Haryana, which recorded an all-time high turnout of 73%, only three polls made predictions. Two of them gave BJP a clear majority, while the third had it hitting the half-way mark. The ABP News poll suggested BJP will win 54 seats in the 90-member House, Chanakya 52 and CVoter 45. If any of these comes true, BJP will comfortably form the government in the state.

Modi's popularity still a vote-catcher?

PM Narendra Modi's dominance looks set to be entrenched with exit polls indicating that BJP chief Amit Shah's gamble of going it alone in Maharashtra and Haryana may have paid off.The gains indicated suggest continuing popularity of Modi and his message of development and probity. P 14



Friday, October 10, 2014

Vodafone wins Rs 3,200cr tax case

No Levy On Transfer Of Shares To Mauritius-Based Parent, Rules HC
Vodafone got a shot in the arm on Friday after the Bombay high court ruled in its favour in the transfer pricing case relating to undervaluation of share capital issued by Vodafone India Services Private Limited (Vodafone India) to its Mauritius parent.

The tax department sought to bring the transaction of issue of share capital within the transfer pricing ambit. It held that the differential between the price at which shares were issued by Vodafone India and the valuation done by the tax department to be in the nature of a loan to the Mauritius-based parent company . In other words, equity was recharacterized as a loan. The tax department raised a demand of around Rs 3,200 crore.

However, the high court held that issue of shares does not give rise to any income and there can be no question of any transfer pricing adjustment. A bench of Chief Justice Mohit Shah and Justice M S Sanklecha ruled, "Issue of shares at a premium by the petitioner to its non-resident holding company does not give rise to any income from an admitted international transaction." For the purpose of application of transfer pricing provisions, one of the prerequisites is that there must be an international transaction between associated enterprises (Vodafone India and the Mauritius company in this case). However, in the absence of income, no international transaction can arise.

"There is no charge express or implied, in letter or in spirit to tax issue of shares at a premium as income. In this case, the revenue seems to be confusing the measure to a charge and calling the measure a notional income. We find that there is absence of any charge in the Act to subject issue of shares at a premium to tax," ob served the high court.

Vodafone said in a statement on Friday that the company "has maintained consistently throughout the legal proceedings that this transaction was not taxable. We welcome the decision today in the Bombay high court".

On August 21, 2008, Vodafone India had issued 2,89,224 equity shares of Rs 10 each at a premium of Rs 8,500 per share.

However, the transfer pricing officer revalued the shares at Rs 53,775 per share. Based on arm's length pricing adjustment, the tax department held a total shortfall of Rs 1,308.91 crore to be a deemed loan given by Vodafone India to its holding company. Periodical interest income was also held chargeable to tax in the hands of Vodafone India.

Sanjay Tolia, leader, transfer pricing at PwC India, said, "It is a welcome judgment as the transaction of issue of shares by Vodafone was nothing but a capital account transaction, and consequently the share premium, if any, ought to be capital receipt. The transfer pricing provisions permit the transaction to be re-quantified but not to be re-characterized. Hence, there was no question of the transaction resulting in 'income' taxable in India. The judgment will not only serve as a precedent in the legal arena but will also lend the much needed boost to foreign investors." Pranav Sayta, tax partner, EY India, said, "The verdict not only spells victory for Vodafone but also holds hope for other companies which are facing a similar dispute. One has to wait and see whether the tax department accepts this order or decides to appeal before the Supreme Court." Shell and two Essar Group companies are among several other MNCs contesting similar transfer pricing cases.


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