Shell India Tax demands likely to hit sentiment

MNCs, Individual Taxpayers Get Notices Despite Disputes Being Settled
New Delhi: A spate of high profile tax demands on several multinational companies (MNCs) such as Shell, Nokia and Vodafone has the potential to hurt sentiment and experts said investors are hoping that the Budget will have some steps to ensure fair dispute resolution. It is not only companies which are being targeted, even individual taxpayers have come under the taxman’s scrutiny. Several taxpayers have been served notices despite disputes being settled. The tax department, which is facing slowing revenues, has unleashed several demands in the past few weeks, attracting strong criticism and the firms have vowed to challenge the notices.

Experts said the government’s efforts to assure investors have taken a knock with these notices and firms are anxious about fresh developments. “The fact is that revenue collection pressure gets translated down to officers. The high pitch assessment has reached a level of absurdity,” said Gokul Chaudhri, partner with tax consultancy firm BMR Advisers. “The question is how do you bring back investor confidence in this environment? There is uncertainty in the mind of the investor community,” Chaudhri said, adding that all eyes are on the Budget to see whether finance minister P Chidambaram reassures investors and announces an action plan for dispute resolution.

Chidambaram has taken several measures to assure investors about the stability of India’s tax policies after the impact of some tax proposals in 2012-13 scared investors to the sidelines. The government has deferred implementation of the controversial General Anti Avoidance Rules (GAAR) to 2016 and vowed to provide a non-adversarial tax environment.

“At a conceptual level things are looking positive with the government deferring GAAR and accepting recommendations of the Rangachary committee. However, there seems to be a disparity between the policy level and the ground level reality,” said Dinesh Kanabar, deputy CEO of consulting firm KPMG. He said a part of the problem lies in the stiff targets set for revenue officials which translated to such steep tax demands. “The need is to expand the tax base,” Kanabar said.

Telecom giant Vodafone and Shell India have said they will challenge the tax notices, while Finnish telecom giant Nokia has said actions of the tax authorities were “unacceptable and inconsistent with Indian standards of fair play and governance”. “Shell India’s considered view is that the transfer pricing order is based on an incorrect interpretation of the Indian tax regulations and is bad in law as this is a capital receipt on which income tax cannot be levied. Funding of a subsidiary through issue of shares is common in India and globally,” Shell India chairman Yasmine Hilton has said.

“Taxing the money received by Shell India is in effect a tax on FDI, which is contrary not only to law but also to the spirit of the recent global trip by the finance minister to attract further FDI into India,” Hilton has said. Slowing economic growth has put pressure on revenues and authorities are struggling to keep the fiscal deficit within the targeted 5.3% of gross domestic product. Revenue officials are under pressure to meet the tax targets set for the year.

FUELLING CONTROVERSY
The tax department, which is under pressure to meet targets set for the year, has unleashed several demands in the past few weeks, attracting strong criticism

While Vodafone and Shell India plan to challenge the tax notices, Nokia has said actions of the tax authorities were “unacceptable and inconsistent with Indian standards of fair play and governance”

“There seems to be a disparity between the policy level and the ground level reality,” said Dinesh Kanabar, deputy CEO of consulting firm KPMG, adding that a part of the problem lies in the stiff targets set for revenue officials which translated to such steep tax demands
COURTESY:
TIMES NEWS NETWORK
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Spectrum Scam: CBI charges telcos, ex-telecom secy in ’02

CBI Says Favours To Voda, Airtel Led To 846Cr Loss
New Delhi: Nearly two years after the CBI began probing spectrum allocation during the NDA regime, the agency on Friday filed a chargesheet in a case of corruption against telecom firms Airtel and Vodafone and ex-telecom secretary Shyamal Ghosh. The chargesheet claimed the allocation of airwaves during late BJP leader Pramod Mahajan’s term as communications minister had caused a loss of Rs 846 crore.

The CBI estimate is 66% higher than the Rs 508-crore loss mentioned in the FIR and the agency’s report to the JPC on telecom issues, including the 2G scam. The CBI said Ghosh, with Mahajan and the telecom firms, had abused his position to show undue favours to the companies, causing a loss of Rs 846.44 crore.

CBI’S CLAIMS
Then telecom secy Shyamal Ghosh, in conspiracy with Pramod Mahajan and telecom firms, gave undue favours to Airtel & Vodafone, causing a loss of 846cr

Ghosh ‘deliberately’ did not obtain comments of then member (finance) of DoT despite huge financial implications

SPECTRUMPED 
CBI chargesheet gives clean chit to telco promoters
New Delhi: The CBI, in its chargesheet on spectrum allocation, has said former NDA minister Pramod Mahajan, former telecom secretary Shyamal Ghosh and telecom firms had colluded to cause a loss of Rs 846 crore to the exchequer. It said that there was an undue gain to telecom companies, including incidental benefit to other telecom firms, by charging an additional 1% of AGR (adjusted gross revenues) instead of charging the required additional 2% AGR for allocation of additional spectrum from 6.2 Mhz to 10 Mhz.

The chargesheet, accessed by TOI, added that former telecom secretary “Shyamal Ghosh ‘deliberately’ and with ‘mala fide intention’ did not obtain the comments of then member (finance) of DoT despite the issue involving huge financial implications. The wireless advisor, who was the custodian of the entire spectrum, was also intentionally bypassed on flimsy grounds that he was retiring on that very day i.e. on January 31, 2002”.

In defence, Ghosh reportedly told the JPC that the issue of allocating spectrum was pending since 2000 and he could not, contrary to what CBI the has said, be accused of delaying the decision.

On the charge that the decision was rushed through in a single day, Ghosh reportedly said it was based on information developed over more than a year. Telecom regulator Trai had said that it would consider additional licences only if problems of existing operators were addressed.

Ghosh also argued that the extension of revenue sharing set at 2% for additional 5Mhz would be 4% for additional 10Mhz. The CBI named three telecom firms—Bharti Cellular Ltd, Hutchison Max Pvt Ltd (now Vodafone India Ltd) and Sterling Cellular Ltd (now Vodafone Mobile Service Ltd) —as accused.

Ghosh and the firms have been accused of criminal conspiracy and violating provisions of the Prevention of Corruption Act. Although the agency named the firms in the chargesheet, it said it could not find anything against their promoters. The agency accused Mahajan of conspiring with Ghosh to benefit the private players, but said no action was proposed as he is dead. Jagdish Rai Gupta, who was then deputy director general in-charge of value added services, has been made an approver in the case.
Courtesy:
Neeraj Chauhan & Abhinav Garg TNN
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I-T dept alleges tax evasion by Vodafone

New Delhi: The Income Tax Department has told the Supreme Court that telecom major Vodafone suppressed real transactions in transfer of its assets to evade taxes over Rs 4,000 crore.

The allegation was reiterated in additional documents filed in an appeal against the Gujarat High Court’s verdict that ratified the plan of Vodafone Essar and its six other associate companies to transfer their passive infrastructure assets, including mobile towers and equipment worth Rs 20,000 crore, to group firm Vodafone Essar Infrastructure. It claimed that the scheme was intended to avoid capital gains tax worth Rs 3,500 crore and stamp duty worth Rs 600 crore and the transfer of these assets would have attracted Central Sales Tax or VAT and other provisions of the I-Tax Act, 1961.

According to the fresh affidavit, Vodafone, Bharti and Idea formed a JV (Indus Towers) for pooling in their existing passive assets. Instead of directly transferring these assets to Indus, a conduit in form of a colourable device was developed to evade taxes whereby the assets were first transferred into transferee companies and then these companies were amalgamated into Indus Towers.

“The respondent company suppressed that the transferor company had in December 19, 2008 entered into an Indefeasible Right to Use Agreement with Indus whereby the exclusive right to use the passive asset had already been granted to Indus with effect from January1, 2009 (date prior to the effective date of scheme),” the affidavit said.

The I-T department further said that the HC failed to appreciate that at the time when the board of directors of the transferor company approved the scheme, the firm lacked the corporate power to make gifts. FE

‘Need Mumbai, Delhi, Kolkata licence extension’
MUMBAI: Vodafone India on Thursday said it has sought extension of its licence period for Delhi, Mumbai and Kolkata circles, which are coming up for renewal in November 2014.

The telecom operator has sought the extension under clause 4.1 of the licence agreement under which the government can extend the period of licence by 10 years at one time if the request is made the operator during the 19th year of the licence period.

The government is working on conducting auction of spectrum in 900 MHz band for Delhi, Mumbai and Kolkata circles during this financial year. PTI
Courtesy:
Indu Bhan: New Delhi, Dec 21 2012, 02:25 IST
http://www.financialexpress.com/news/it-dept-alleges-tax-evasion-by-vodafone/1048319/0