Court questions tax waiver for FIIs
Assocham seeks solace in CII’s embrace
Rupee dips to 44.02, sensex rallies
Import duty to be cut to enhance PC penetration
Kesoram scouting for 50% partner in Birla Tyres
L&T, Sharp forge electronics JV
Johnnie Walker to flow next year
ITC Agro Tech cuts loss to Rs 9.8 crore
Oracle looks for WAP launchpad
UTV in talks with Star to beam Tamil channel

 
 
COURT QUESTIONS TAX WAIVER FOR FIIS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, May 23 
The Delhi High Court today asked the Central Board of Direct Taxes to indicate on what basis it had issued a circular on April 13 clarifying that Mauritius-registered companies were exempt from paying taxes on capital gains and dividends in India, thereby overriding notices issued by the IT department.

Mauritius-registered firms have been exempted from paying taxes on the basis of a double taxation treaty.

A division bench comprising of chief justice Arijit Passayat and justice D.K. Jain said the records must be placed before August 9. The high court gave the direction on a petition filed by an organisation named Azadi Bachao Andolan challenging a notification issued by the CBDT clarifying that the tax liabilities of foreign institutional investors under the Indo-Mauritius double taxation avoidance convention.

The court merged the public interest litigation (PIL) with a similar one filed yesterday by advocate B.L. Wadehra. “The central board of direct taxes will indicate the basis under which it felt necessary to seek clarification from the companies and the material on the basis of which it has issued the notification (on April 13),” the division bench said.

On April 13, the CBDT issued a circular addressed to chief commissioner and director generals of income tax that said: “A certificate of residence issued by Mauritian authorities will constitute sufficient evidence for accepting the status of residence as well as ownership for applying the Indo-Mauritian double taxation avoidance convention. FIIs which are resident in Mauritius will not be taxable in India on income from capital gains arising in India on sale of shares.’’

The petition said an FII would be exempt from paying tax in India by merely producing a certificate issued by Mauritius authorities stating that it was a resident in that country. With this provision nearly 490 FIIs would be free from tax liabilities worth over Rs 3,000 crore even at the modest capital gains of 10 per cent, ABA counsel Prashant Bhushan said.

He said CBDT notification came immediately after the income tax department issued showcause notices to several FIIs registered in Mauritius and engaged in buying and selling shares in India that sought an explanation from them for the non-payment of tax on capital gains and dividends. The IT department had at that time cracked down on FIIs routing investments through “shell investment firms” in Mauritius by stating there were no moves to renege on India’s double taxation treaty with the Indian Ocean tax haven.

IT officials had felt these companies had set up shell companies merely to avoid paying capital gains tax on stock and other investment deals. The Indo-Mauritius treaty allows Mauritius-based companies to be taxed according to their home county’s tax laws; Mauritius laws prescribe zero capital gains tax. Income tax on the island is a mere 15 per cent and the tax treaty allows companies to seek up to 90 per cent rebate in taxes payable to Indian authorities on claims that they have paid taxes in Mauritius.

The notices issued by income tax authorities to these FIIs was on the basis that their place of effective management was not situated in Mauritius but in India or their parent countries. Thus, under the double taxation treaty between India and Mauritius, they would not be treated as residents of Mauritius but would be residents of India or their parent countries.

In case their place of effective management was in India, they would be treated as Indian residents and will be liable to pay taxes on capital gains and dividends received by them in India. But in case their place of effective management is in their parent country, then the Indo-Mauritian treaty will not apply and the applicable treaty will be the one between India and their parent country.

Counsel for Azadi Bachao Andolan Prashant Bhushan said section 5 of the Income Tax Act clearly provides that incomes accruing in the country to people who are not even residents of India will be taxed here. Thus, in either case — whether these FIIs are managed in India or in their parent countries — they are liable to pay tax on capital gains and dividends accruing in india to the national exchequer, irrespective of the fact whether they are formally registered in Mauritius or not.    


 
 
ASSOCHAM SEEKS SOLACE IN CII’S EMBRACE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 23 
Your enemy’s bete noire can be your friend. Or so, it would seem with Assocham, which broke up with Ficci last week after accusing the latter of cold-shouldering it in joint business councils, only to snuggle up to CII.

Industrialists have for some time been talking of a possible Assocham-CII merger. Many saw the appointment of CII director general Tarun Das’s protégé, Jayant Bhuyian, as Assocham secretary general as a sign of things to come.

Bhuyian, who used to head CII’s western region office, had surprised many when he pipped a more high-profile former journalist who was an in-house contender for the job.

Assocham’s current chief Shekhar Bajaj and CII’s past president, Rahul Bajaj, are cousins and sources say the two brokered the deal for closer ties between the two chambers.

However, CII president Arun Bharat Ram says a merger was not in the realm of possibilities right now.

“We have not even thought about a merger, hence there is no question of welcoming the idea.”

Many are not inclined to buy that. They say the idea has definitely taken roots, it is only that the two chambers and their chiefs are not talking about it because it is too early. Ficci secretary general Amit Mitra and president GP Goenka are away in Paris and, therefore, were not available for comments.

While CII stays taciturn, the Assocham president fuelled speculation about a union by dubbing CII as the country’s top chamber. “CII is, no doubt, the number one among the three apex chambers in the country. It is a mammoth organisation and they have worked hard to attain this height,” Bajaj told reporters here today.

The tensions between Assocham and Ficci came to a head during Clinton’s visit when chambers were vying with each other to get a share of attention from the world’s most powerful man.

Assocham joined CII in Hyderabad after realising it would not be in a position to host Clinton on its own strength.    


 
 
RUPEE DIPS TO 44.02, SENSEX RALLIES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 23 
Even as the bourses staged a last-minute rally, the rupee today breached the crucial psychological level of Rs 44 to a dollar.

Late buying in pivotals like Zee Telefilms, Infosys apart from Hindustan Lever and Satyam Computers saw the BSE sensex recording a rally of over 23 points to finish at 3943.54. Dealers said that though some of the buying was more of short-covering, it was prominent in some of the key ICE companies like Zee, which had seen a significant erosion in its value in the recent past. “Most of the buying was seen towards last thirty minutes. This completely reversed the scene,” a broker pointed out.

The sensex had earlier touched an intra-day low of 3831.86, triggered by a sustained weak trend for the fourth consecutive day on the Nasdaq.

The initial downslide was mainly attributed to heavy selling by a leading US-based FII, but the situation was reversed towards the fag end of the trading session when local and foreign funds bought a wide-range of stocks which included Global Telesystems, HFCL, Silverline, Wipro and NIIT, which boosted market sentiments. Moreover, short coverings by operators towards the closing hour of trade on the last day of the current settlement on the National Stock Exchange also fuelled the minor rally.

However, heavy dollar short-covering led to the rupee finishing at Rs 44.0250/0350 per dollar, lower from the previous finish of Rs 43.9700/9750.

The rupee had dipped to an intra-day low of Rs 44.04/05, slightly away from the all-time low of Rs 44.05/08 per dollar attained on May 10.

The short-covering was largely said to have been done by corporates and importers. While the rupee opened at Rs 43.9700/9750, activity rose in the noon following a fresh wave of dollar short-covering by banks.    


 
 
IMPORT DUTY TO BE CUT TO ENHANCE PC PENETRATION 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 23 
The ministry of information technology (MIT) has set a target of increasing the penetration of personal computers (PCs) to 20 per thousand by the year 2008, from the current 3.4 per thousand.

The MIT plans to further lower the import duty on PCs and will also promote the development of information technology tools in various Indian languages.

Further, in order to upgrade the quality of the Indian software industry to bring it at par with international standards, the information technology ministry has initiated Softcap — a programme for software capability enhancement, in association with Carnegie Mellon University (CMU) USA.

According to a report prepared by the ministry of information technology titled ‘Advantage India: Investment opportunities in electronics and information technology,’ the Indian software industry is likely to touch Rs 243 crore in 1999-2000. The Advantage India report provides all the necessary information for prospective investors in the information technology sector.

According to the report, the country’s software exports continued to grow and are likely to touch Rs 73 billion in 1999-2000 from Rs 49 billion in 1998-99.

The report estimates the production of PCs in India to stand at a mere 0.4 million units, as against an estimated demand of 1.4 million units. The domestic demand of PCs is expected to increase to 2 million units by the year 2000-01.

Pramod Mahajan, minister for information technology, is currently in the USA along with a delegation of infotech professionals and entrepreneurs. The delegation will highlight the progress made by India in the software industry. The delegation will also highlight special incentives announced by the government for promotion of information technology in India.    


 
 
KESORAM SCOUTING FOR 50% PARTNER IN BIRLA TYRES 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, May 23 
Kesoram Industries Ltd, the B.K. Birla group flagship, has commissioned Citibank to arrange a joint venture partner for Birla Tyres.

Birla Tyres, which returned to the Kesoram fold on April 1, 2000 after dissolving a lease arrangement under a consortium of four group companies, is being hived off into a separate company.

A senior official said a 50 per cent stake in the new company would be offered to the joint venture partner.

Talks are now going on with three leading companies including Pirelli of Italy.

Pirelli, with which Birla Tyre had a technology tieup, is said to be close to the deal; the two other companies are Goodyear and Continental.

The asking price for selling the 50 per cent stake is believed to be in the region of Rs 300 crore.

The official said all three companies were now in the process of valuing the assets of Birla Tyre on the basis of which they will make their bids.

“We expect the tyre division to be transformed into a joint venture in the next few months,” the official said.

He also pointed out that the joint venture had been proposed because of future investment plans.

“The technology is also a crucial factor and we are looking for a right partner who can provide both marketing and technological support,” the official said.

Birla Tyres was promoted in 1989 as a division of Kesoram Industries with an investment of Rs 300 crore.

Since Birla Tyre made huge losses, its management was handed over to four group companies — Century Textiles, Kesoram Industries, Jay Shree Tea & Industries and Bharat General & Textile Industries — in 1995 initially for a three year period.

The leasehold however was extended twice by one year each.

The arrangement had worked rather well: in 1994-95, the company had incurred a net loss of Rs 28 crore on a turnover of Rs 356 crore.

But in the very next year, it bounced back into the black with a net profit of Rs 11.5 crore. It posted a net profit of Rs 33.40 crore on a turnover of Rs 588.29 crore in March 1999.

The tyre unit is operating at a 97 per cent capacity utilisation level.

The radial tyre unit will substantially improve the company’s bottomline and turnover, an official said.

The division’s strength lies in truck tyres with sales registering a growth of 15 per cent over the previous year’s sales of over seven lakh truck tyres and a little over four lakh non-truck tyres.    


 
 
L&T, SHARP FORGE ELECTRONICS JV 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 23 
Larsen & Toubro (L&T) has spun off its electronics office equipment distribution business into a joint venture with Sharp Corporation of Japan.

To be called Sharp Business Systems (India), the new venture will introduce in India, Sharp’s state-of-the-art products like digital and analog copiers, besides a range of fax machines.

L&T will hold a a 26 per cent stake while the Japanese major will control the rest.

The formation of the joint venture company, an L&T press release said here today, is based on the recommendations made by the Boston Consulting Group earlier this year.

The new company will embrace the distribution division of L&T, which now sells Sharp’s electronic office equipment.

The engineering, procurement and construction major will provide the new joint venture the benefits of a sharp insight into the Indian market and a nation-wide network of offices which can be used to sell a wider range of electronic products made by Sharp.

Apart from copiers and fax machines, Sharp will introduce products like notebook computers and a variety of ink-jet printers.

Sharp is a developer of core technologies that play an integral role in the digital era. As one of the leaders in semiconductors, it manufactures consumer electronics and components.    


 
 
JOHNNIE WALKER TO FLOW NEXT YEAR 
 
 
BY OUR SPECIAL CORRESPONDENT
 
Calcutta, May 23 
The world’s best loved whisky brands — Johnnie Walker and J&B — will be soon be available at your neighbourhood liquor vend early next year.

United Distillers & Vinters, the world’s largest spirits company with operating profits of $ 1.6 billion, will start retailing its bestselling liquor brands soon after the government dismantles its regime of quantitative restrictions on imports in April next year in line with its commitment to the World Trade Organisation.

Mohita Arora, marketing controller at UDV responsible for developing strategies to propel the international brands in the Indian marketplace, told The Telegraph that the company has already started reworking the brand positioning as well as the marketing strategy for the two brands which are currently available only at the duty-free shops.

As UDV switches into an aggressive mode to expand its business in India, the company has chalked out an aggressive marketing plan to ratchet up the market share of Gilbey’s — its whisky brand in the 25 million cases a year regular whisky market - from 12 to 15 per cent. Gilbey’s main rivals are Bagpiper and Director’s Special.

Smirnoff, its biggest brand worldwide (premium white spirit or vodka), is being repositioned in India to fight off not only major brands in the premium white spirit segment (one lakh case a year) but in the premium spirits market (including whisky) which is about 1 million cases a year as well.

UDV’s ad spend in India has been increased ten-fold with 3-4 ad spots of 40 seconds on major TV channels. It has also formed strategic alliance with websites and is including many more Indian towns in the Smirnoff Fashion Awards 2000 and Smirnoff World DJ championships. It is also launching a new Smirnoff competition in Photography.

International Distillers & Vinters has internationally merged with United Distillers. The merged entity, UDV is now the world’s largest spirits and wines company trading in more than 200 countries and with annual sales of 100 million cases of some of the biggest spirits brands including Smirnoff, Johnnie Walker, J&B, Gordon’s and Bailey’s .

UDV contributes 60 per cent of the profits of Diageo — one of the world’s leading consumer goods companies formed in 1997 by the merger of GrandMet and Guinness.    


 
 
ITC AGRO TECH CUTS LOSS TO RS 9.8 CRORE 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
Hyderabad, May 23 
ITC Agro Tech Ltd has shown a 40 per cent decline in its turnover at Rs 51.40 crore for the financial year 2000 as against Rs 86.65 crore for the corresponding period of the previous year.

The company has, however, managed to prune its loss to Rs 9.8 crore from the level of Rs 13.6 crore in the previous year.

A company spokesman said ITC Agro Tech has purchased the vanaspati brand Rath from SIEL Ltd to strengthen the company’s position in the cooking medium market in the country. The market share of Sundrop, its sunflower oil brand, has improved by 1.3 percent to 16.4 per cent in the year.    


 
 
ORACLE LOOKS FOR WAP LAUNCHPAD 
 
 
FROM M RAJENDRAN
 
New Delhi., May 23 
Oracle India is scouting for partners to introduce its range of wireless access protocol (WAP) applications in the country. The company is believed to be in negotiations with telecom giants Ericsson and Nokia, and support service providers for WAP-based products.

“We are looking for partners who can use our WAP-based products. Discussions with a few manufacturers have started. The final agreement is expected to be clinched this year. This is a new technology and Oracle has developed a product that offers high-quality internet services on mobile phones and other hand-held devices, in addition to desktop computers,” Oracle India country manager Shekhar Das Gupta told The Telegraph.

The company has developed Project Panama, the code name for a new technology which delivers seamless and dynamic Web content to users of mobile devices, including 3Com Palm Pilots, GSM smart-phones, and Microsoft Windows CE devices.

Oracle says its product made in Europe will allow internet and cellular service providers to deliver personalised services directly to mobile-users without having to modify the contents.

The current system requires content developers, service providers and mobile operators to create customised Web contents which meet the special requirements of mobile devices, including limitations imposed by a smaller screen size and memory

“The software from Oracle is expected to provide the first dynamic interchange between mobile users and the Web. Customers will be able to check flight information, weather reports and buy goods and services on their mobile devices,” Gupta said.

Oracle plans to use the WAP technology to overcome the limitations of retrieving Web-based material by translating automatically the HTML-or XML-based formats of internet content into languages which can picked up by wireless devices. This will help content providers to expand their reach beyond desktop PCs, to a whole new group of subscribers who would like to do business on their mobile-devices.

To make sure its applications work in all mediums, Oracle India plans to increase the investment in its Research and Development centres to tap software professionals.

The company has a development centre in Bangalore, which is part of the Oracle Corporation development facility. Oracle school of advanced technology is a part of the Hyderabad-based Indian Institute of Information Technology (IIIT) centre.

At the same time, Oracle India plans to focus on e-business solutions to capture a larger chunk of this fast-growing market.

“India has definitely been gripped by the e-business revolution. Organisations are re-engineering to be continuously competitive, efficient and customer-centric in their approach. We are prepared to lead this transformation,” Gupta said.

Oracle Software India is a 100 per cent subsidiary of the US-based Oracle Corporation. The company’s products and services are marketed through its partners and offices in Calcutta, Chennai, Mumbai, Delhi, Hyderabad and Bangalore.    


 
 
UTV IN TALKS WITH STAR TO BEAM TAMIL CHANNEL 
 
 
FROM SATISH JOHN
 
Mumbai, May 23 
United Television (UTV) is in talks to explore the possibilities of distributing Vijay TV, its Tamil channel, on the Star TV network.

UTV boss Ronnie Screwwala controls Vijay TV, which claims to have the second largest Tamil TV audience in the region. The tie-up follows the acquisition of a 12 per cent stake in UTV by the Murdoch-owned Newscorp.

While the alliance will give Vijay TV a wider audience it will help Star Network penetrate new markets. Confirming this, senior officials at Star TV said the negotiations between the two companies have reached a conclusive stage.

With Subhash Chandra’s Zee TV securing a foothold in the south by taking a controlling stake in Asianet, it was imperative for Star to expand its presence in South India. “This is probably the first of a series of steps to secure a base in the south,” said an analyst tracking the industry.

While it is known that the Rupert Murdoch-owned Star and News Corporation has acquired a 12 per cent stake in United Television (UTV), what is not clear is the amount involved in the deal. Analysts say the use of Star TV’s platform to launch Vijay TV might have been part of it.

Earlier, the two entertainment majors had struck a strategic alliance in areas, which included content for some of its channels and internet portals. The strategic alliance also included content Star’s existing and new channels, animation co-productions between Fox Kids and Saban and UTV.

By virtue of the alliance, UTV is expected to produce and supply content and programmes to News Corp’s Webcasting and internet sites globally while Star will offer TV content for UTV’s broadband portal called sharkstream.com.

Even though News Corporation had invested in UTV in 1996, Screwwala entered into an agreement six months ago to buy back in full News Corp’s holding in UTV.

The recent deal, sealed some time in March, enabled Newscorp and associates to acquire a 12 per cent stake in UTV.    

 

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