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Current Affairs Reading Material - Part B

Current Affairs Reading Material - Part B

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Published by: muttu&moon on Oct 30, 2009
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10/21/2011

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CURRENT AFFAIRS READING MATERIAL8
TH
August’09 – 14
th
August’091.Decoding the new Direct Taxes Code
New Finance Minister Pranab Mukherjee, in his Budget speech last month, promised that themuch-awaited new Direct Taxes Code would be released within 45 days. And the promise wasduly met on Wednesday when the draft of the Code was released for public comments. Whilethe FM clearly delivered as far as the timeline is concerned, let us now see certain reactionsat first sight on the content of the Code.The Code is proposed to come into effect from April 1, 2011. The Foreward to the Codeclarifies that the Code is to eliminate distortions in the tax structure, introducing moderatelevels of taxation, expanding the tax base and simplify the language.Some of the key changes bought about by the Code are as under: First and foremost, the Codeproposes that the tax rate for companies (both domestic and foreign) can be substantiallyreduced to a uniform rate of 25 per cent. However, foreign companies would be required tosupplement their corporate tax liability by a branch profits tax of 15 per cent on branchprofits (that is, total income, as reduced by the corporate tax).Further, for the individual taxpayers, the taxation continues to be on slab basis. However, thelimits under the tax slab are proposed to be considerably increased as under: Up to Rs 1.6lakh: Nil; Rs 1.6 lakh to Rs 10 lakh: 10 per cent; Rs 10 lakh to Rs 25 lakh: per cent; above Rs 25lakh: 30 per cent.The Code now provides for the Minimum Alternate Tax calculated with reference to the “valueof the gross assets”. This is on the premise that the shift in the MAT base from book profits togross assets will encourage optimal utilization of the assets and thereby increase efficiency.The rate of MAT will be 0.25 per cent of the value of gross assets in the case of bankingcompanies and 2 per cent of the value of gross assets in the case of all other companies.The present distinction between short-term investment asset and long-term investment asseton the basis of the length of holding of the asset is proposed to be eliminated. The SecuritiesTransaction Tax, or STT, is proposed to be withdrawn.One of the things on the simplification front is that the separate concepts of ‘previous year’and ‘assessment year’ will be replaced by a unified concept of ‘financial year’.Consistent with the international trend, the Code contains a specific section on general anti-avoidance rule saying that any ‘arrangement’ entered into by a person may be declared as animpermissible avoidance arrangement. It may be noted that such general anti-avoidance ruleis non existent in the present statute.Tax incentives for savings is proposed to be rationalised to an ‘Exempt-Exempt Taxation’method. Under this method, the contributions are exempt from tax, the
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accumulation/accretions are also exempt, however all withdrawals at any time are subject totax at the applicable personal marginal rate of tax. It is proposed that the withdrawal of anyamount of accumulated balance as on the March 31, 2011 from PPF and EPF will not besubject to tax. In other words, only new contributions after the Code commences will besubject to EET method of taxation.The Code also substitutes profit-linked incentives by a new scheme. Under the new scheme, aperson would be allowed to recover all capital and revenue expenditure (except expenditureon land, goodwill and financial instrument) and he would be liable to income-tax on profitsmade thereafter. The period consumed in recovering capital and revenue expenditure will bethe period of tax holiday. The new scheme applies to developing, operating, maintaining ofinfrastructure facilities, power generation and distribution, exploration and production ofmineral oil or natural gas, developing of SEZs, etc.It will now take some time before the entire fine print is slowly decoded and then the otherside which is the tax experts, companies and associations take off with their comments. Thesemay be provided at direct taxes code-
2.Subir Gokarn tops list for RBI Deputy Governor’s post
Subir Gokarn, Executive Director and Chief Economist at Standard & Poor’s Asia Pacific, isheading the shortlist of candidates for the Reserve Bank of India (RBI) Deputy Governor’s post.Gokarn is also a Business Standard columnist.The selection committee, headed by RBI Governor D Subbarao, has forwarded the shortlist tothe Appointments Committee of the Cabinet, which will take a final decision. Gokarn’s nametopped the list for the fourth Deputy Governor, sources close to the appointment process said.They added that a formal announcement was expected over the next few days.If selected, Gokarn will replace Rakesh Mohan who quit the central bank in June and will be incharge of monetary policy matters, which are being looked after by the Governor himself.The others in the running included Arvind Virmani, the government’s chief economic advisor,Ashoka Mody, assistant director at the International Monetary Fund’s European department,and Jahangir Aziz, J P Morgan India’s Chief Economist.
3.Danone got Rs 380-cr capital gain in Britannia divestment
 
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Groupe Danone, the global dairy products major based in France, netted a capital gain of Rs380 crore (¤56 million) when it recently divested its indirect 25.5 per cent holding in theBangalore-based biscuit major Britannia Industries.Danone and the Mumbaibased Wadia Group in April 2009 agreed to end their 13year-old jointventure for running Britannia Industries for around Rs 900 crore. The relationship had turnedsour during the preceding 18 months owing to a range of issues — intellectual property rightsover Britannia’s ‘Tiger’ brand of biscuits, a minority stake purchase by Danone in Bangalore-based nutraceuticals firm Avesthagen, to Danone’s application to the Indian government to dobusiness in India on its own.Wadia Group and Danone owned 25.48 per cent each in Britannia through Associated BiscuitsInternational Holdings (ABIH), a London-based company. This company, in turn, owned 50.96per cent in Britannia. Leila Lands, a Mauritius-based investment firm and wholly-ownedsubsidiary of Bombay Burmah Trading Corporation, a Wadia Wadia Group company, bought outthe Danone stake, giving the Wadias complete control.Group company, bought out the Danone stake, giving the Wadias complete control.
4.Mid-rung Bollywood houses enter regional movie sector
 With the release of its first Kannada movie, Houseful ,a comedy starring south Indian actorDiganth, Maverick Productions ventured into regional cinema in July. The mid-rung Bollywoodfirm is making three more regional movies, one each in Kannada, Gujarati and Malayalam,slated to be released this year.At least 10 other midrung production houses are following, mainly driven away by the highproduction costs of Bollywood movies. Further reasons like entry of corporates into productionof Hindi films, a growing regional film sector and a rising number of multiplexes across statesare other reasons.Ultra Distribution, Shri Ashtavinayak Cine Vision, Seven Star Creations, Down Town Films andSpectra Multimedia, among others, which were into production of Hindi films, have alreadylined 10-12 regional films this year.“We ventured into production of regional movies as costs of producing Hindi movies haveescalated. Producing a Bollywood movie involves a high-degree of risk compared with that of aregional film, which is still a niche market,” Ultra Distribution’s Chairman and ManagingDirector Sushilkumar Agarwal told Business Standard.The cost of an average Hindi movie is around Rs 30-35 crore, more than 10 times that of theaverage regional film. It would cost around Rs 1-3 crore for making a Gujarati or Marathi film,while a Bhojpuri one would cost around Rs 50 lakh to 2 crore. So, too, with Malayalam (Rs 80lakh–Rs 3 crore), Kannada (Rs 1.5-3 crore) and Bangla (Rs 80 lakh- Rs 3 crore).
5.Bharti Airtel may sweeten MTN offer
 
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