OPINION, P8 COMPANIES, P4 SOHAM D BHADURI There is a need to revisit reservations in medical education INTERNATIONAL, P10 EDITORIAL CHAIRMAN-SPEAK GREEN GOALS Retro tax goes, not soon enough; nevertheless, this is a step towards a less-litigious tax landscape L&T focussed on creating shareholder value by divesting non-core assets Biden targets half of US car sales to be zero-emission by 2030 NEW DELHI, FRIDAY, AUGUST 6, 2021 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL. XLVII NO. 135, 28 PAGES, `8.00 (PATNA `8.00, RAIPUR `8.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 54,369.77 ▲ 546.41 NIFTY: 16,258.80 ▲ 128.05 NIKKEI 225: 27,584.08 ▼ 57.75 HANG SENG: 26,426.55 ▲ 231.73 `/$: 74.19 ▲ 0.10 `/€: 87.98 ▲ 0.30 BRENT: $71.41 ▼ $1.00 GOLD: `47,852 ▲ `2 BILL IN LOK SABHA Govt does sudden U-turn, buries retrospective tax Move comes months after adverse arbitration awards in Voda & Cairn cases; `1.1-lakh-crore tax demands nullified, `8,100 cr to be refunded UNDOING THE DAMAGE ■ New Bill to nullify the 2012 amendment that sought to tax gains from indirect transfer of Indian assetswith retrospective effect Govt now wants to ensure that no tax demand will be raised, based on the 2012 change Tax demand raised for such asset transfer made before May 28, 2012, to be nullified, subject to riders, including withdrawal of litigation against the govt FE BUREAU New Delhi, August 5 Amount to be refunded to the aggrieved party without any interest THE GOVERNMENT ON Thursday put to rest its infamous 2012-born tax lawthatsoughtto retrospectively tax gains from indirect transfer of Indian assets. Though the move notionally involves a scaling down of NewDelhi’staxrevenueambitionsby at least `1.1 lakh crore,any potential loss could be more than offset as the decisioncouldimprovethecountry’s standing as an investment destination, boosting its growth potential and therebytax receipts. The surprise tabling of the ‘The Taxation Laws (Amendment) Bill, 2021’ by finance minister Nirmala Sitharaman in the Lok Sabha was hailed by industry and tax experts. Government managers justified the decision that amounted to a U-turn fromNewDelhi’spublicposturingon theissue,sayingitwasnecessarygiven thatmorethananythingelse,thepolicy focus should now be on ensuring the country’s‘future growth’. Fortherecord,theBillprovidesfor the withdrawal of tax demand made on“indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012 (i.e. the day the retrospective tax legislation came into being)”. It is also proposed to refund the amount paid in these cases without any interest thereon. The government has so farrecovered `8,100 crore,invoking the controversiallaw,including`7,900crore from Cairn Energy. The 2012 law had empowered the 2012 amendment was meant to overturn the Supreme Court verdict in the Vodafone case INDIA'S INFAMOUS RETROSPECTIVE TAX LAW Origin 2012: Govt losesVodafone tax case related to its 2007 $11-billion acquisition of67% stake in Indian mobile-phone business owned by HutchisonWhampoa in SC; subsequently brings in retrospective amendment to overturn SC order Major cases/status ■Vodafone Under the 2012 retrospective law, tax demand on telco, when last computed including interest/penalty,was `22,000 crore;Voda secures favourable arbitral award in Sept 2020; New Delhi asked to pay £4.3 million to company to cover legal costs ■Cairn Energy March 2015: India slaps capital gains tax notice on Scottish firm (the claim amount subsequently inflates to $2.74 bn); group reorganisation under which firm sold its India arm toVedanta in 2011 was cited; New Delhi recovers as much as `7,900 crore by seizure ofshares ofCairn in its former India unit, dividend and withholding oftax refunds; In a Dec 2020 ruling,The HagueTribinal invalidated India’s claim, Cairn out to enforce award by attaching Indian assets overseas Union government to make tax demands concerning cross-border deals all the way back to 1962; the intent was to tax gains arising out of transfer of shares of companies registered outside India provided such sharesderived‘substantialvalue’from assets located in India.The move has sincebeenexposedasamisadventure; theHagueCourtruledagainstagainst Indiainthetworesultanthigh-profile cases involving telecom giant Voda- ● `10,600-CR NOTICE In compliance with laws, will cooperate with ED: Flipkart PRESS TRUST OF INDIA New Delhi, August 5 WALMART-OWNED FLIPKART on Thursday saidthecompanyisincompliancewithIndian laws,includingFDIregulations,andwillcooperate with the Enforcement Directorate (ED) on the notice sent to the e-commerce major. The ED has issued a show-cause notice of `10,600 crore to Flipkart and its promoters for alleged violation of the foreign exchange law,official sources said on Thursday. When contacted,Flipkart said it is in compliance with Indian laws and regulations, including FDI regulations.“Wewill cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice,”Flipkart added. Comments could not be immediately elicited from the founders. According to sources, the notice under various sections of theForeignExchangeManagementAct(Fema) was issued to a total of 10 notices last month that includes Flipkart, its founders Sachin Bansal and Binny Bansal, among others. The notice was issued after completion of investigationandthechargesincludeviolationofforeign direct investment (FDI) rules and those that regulate multi-brand retail,theyadded. Continued on Page 12 COVID IMPACT Banks see slippages rise in cash collection-driven segments SHRITAMA BOSE Mumbai, August 5 ■ SBI's gold loan NPA ratio rose to LENDERS REPORTED A deterioration in asset quality during the April-June quarter in loan categories where cash collections play an important role. Gold loans, commercial vehicle (CV) loans and microfinance — all saw fresh bad loans inch up in Q1FY22 as the secondwave of Covid-19 hampered collection activities.The absence of a moratorium on repayments, unlike last year, made the stress more evident on lenders’books. State Bank of India (SBI), CSB Bank and Federal Bank 2.24% in Q1FY22 from 0.82% in Q4FY21 ■ CSB Bank, Federal Bank and ICICI Bank also saw gold loan stress rising were among the lenders who reported an increase in nonperforming assets (NPAs) in the gold loan segment. SBI’s NPAratioin gold loansstoodat 2.24% in the June quarter. SBIchairmanDineshKhara Bajaj Finance's gross NPA ratio in auto finance rose to 19.15% in Q1FY22 from 9.31% in Q4FY21 Mahindra Finance saw collection efficiency dip to 67% in May 2021 before rising to 90% in June attributed the high NPA ratio in gold loans to the inability of collection staff to reach borrowers amid mobility restrictions. Continued on Page 12 Bond yields end flat ahead of RBI monetary policy FE BUREAU Mumbai, August 5 THE YIELD ON the benchmark government security ended at 6.206% onThursday, marginally higher than their previous close, a day ahead of the August monetary policy announcement. Inflation prints of over 6% weighed on the minds of investors. However, economists and market watchers expect the six-member monetary policy committee (MPC) to continue OTHER CASES (ON PAGE 12) fone and UK-based Cairn Energy in September2020andDecember2020, respectively.In fact,the 2012 amendment was meant to overturn a Supreme Court verdict that invalidatedaretrospective-taxnoticeclaims slapped on Vodafone in relation to its 2007 $11-billion acquisition of 67% stakeintheIndianmobile-phonebusiness owned byHutchisonWhampoa. Continued on Page 12 QuickPicks TN power utility told to compensate solar developers STATE-OWNED discoms, which refuse to lift and pay for 'high-cost' power from solar developers in violation of the relevant laws, policies and purchase agreements, will now come up against a quasi judicial order, reports Vikas Srivastava in Mumbai. Setting aside a March 2019 order of the Tamil Nadu electricity regulator, the Appellate Tribunal for Electricity (Aptel) ruled that curtailment and back-down on renewable power purchases by discoms for reasons other than grid security is untenable. PAGE 2 Satellite services: DoTissues licence to Bharti’s OneWeb THE DEPARTMENT ofTelecommunications (DoT) has issued a letter of intent (LoI) to Bharti group-backed OneWeb for satellite services in India, according to an official source, reports PTI. OneWeb is eyeing a full global coverage, including India market, by the middle of 2022 with a constellation of 648 low-earth orbit satellites. "DoT has issued LoI for global mobile personal communication by satellite (GMPCS) licence to OneWeb. "The company needs to submit all compliances, fees, etc., after which licence will be issued to the company. It should take about a month in the whole process," the source added. PAGE 18 New Delhi to prioritise the growth objective over inflation. In its last few policy meetings, the ReserveBank ofIndia(RBI)has chosen to look through inflation, seeing it as a supply-side phenomenon. ■ Detailed report on Page 6
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