No where in the world, the taking over of controlling stake in offshore vehicle entails tax liability in the country of operation of final subsidiary. The offshore company is outside the scope of the jurisdiction of India. They are not governed by the Law of India but by law of their registration. If one offshore company takes over another offshore company at overseas center, how does India comes into picture? If this is allowed, then almost all overseas operations of any company would be subject to Indian law.

Any court in India is not entitled to tax the overseas entity for that precise reason. Even if the supreme Court decides in GOI favor, the International Court may overrule the Indian judicial order. There would be no sanctity if domestic law are applied indiscriminately to overseas deals where the participating companies are both overseas firms and the deal is also consummated overseas. It does not matter, the assets of one company may have location in India. The rule of jurisdiction is very clear on this subject.

Is the Judge trying to appease the Government of India to win the promotion to the Supreme Court by deciding big ticket case in their favor?

Kalidas, Hong Kong
3-12-2008...

It is well known that India’s best breed of industrialists Tata (of TISCO and Tata Motors) and Birla (Hindalco) for over 5 decades are in serious trouble while taking up expansion overseas. Yes, they made serious errors and in normal course, they may not have deserved the help for their follies.

Charity begins at home. India as nation must help these two outstanding businessmen. They may not long for Bharat Ratna, Padma Vibhushan, Padma Bhushan or similar khitabs. They need material help at the time of their acute distress.

If Indian Forex Reserve does not come to the help of India’s best industrialists, what is the use? Should we allow our Forex reserve for the use of Americans who have been simply wasting all resources and using them to create toxic waste.

Indian FOREX Reserve belongs to the Indians and must be used for Indians first and others later.

And I do not suggest that you give them free money. Give them the amount required as under after due scrutiny.

1. Assess their requirements and be wetted by top financial institution.
2. Work out how much amount they need
3. Give them @ 5% in foreign currency non subordinated Convertible Bonds secured by the floating pari pasu charge on their respective enterprise.
3.a Such bonds may carry conversion rights at last 6 months average prices of their respective shares, exercisable only after 5 years.
3,b It may have buy back clause at 8% premium per year for the life of 15 years. This will help these guys to buy back the bonds when they are comfortable without diluting their equity stakes when the things improve.
3.c If the Government wishes, it may sell these bonds in the market with huge profit (because current stock prices are very low), after giving respective companies to buy back the bonds.
4. When the things improve, they can raise the capital from the market to buy back these bonds.
5. Give them loans repayable in 15 years due to depression prevailing all over the world.
6. Ask them to pay special tax @ 3% after initial 5 years so as to relieve the interest burden during early phase of management. National exchequer may also be benefited for help rendered.
7. Ask them to give India at least 5 hospitals and 5 Technical Institutes with full management rights vested with the respective group companies on purely voluntary basis. (we can trust them)
8. Ask them to adopt at least 5 villages to make them into model town in next 15 years on voluntary basis. (again, we can trust them)
9. Indian tax payers are not affected with this help. Their advance is fully secured and given to the industrialists they trust most.
for more details, see my blog http: // anilselarka.wordpress. com/

Kalidas, Hong Kong
18-Nov-2008
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Kalidas Replies to Sagar Ref: 0811-MMB-481 of (Saturday, November 8, 2008)
Debt: equity ratio is always relative, although there are some common rules used by bankers. There are two types of ratio - Long Term Debt: Equity and Short Term Debt: Equity and Total Debt: Equity (which is sum of LT and ST debt: equity)

For Capital intensive industry, like Shipping, Airlines, Construction, Engineering, the debt equity ratio is high. However, in every case, the most important is short term debt which exerts liquidity pressure. Generally, 1:1 is considered ideal in center like Hong Kong

During my time in banks in India, one used to have no more than 3:1 debt equity ratio, that is, if the Asset value is Rs 100, the banks will lend Rs 75 and the borrower will contribute Rs 25 (like in Housing Loan). Short Term Debt to equity should not be more than 1:1.

Normally, for short term debt, the important look is to Current Assets to Current Liability which ratio should be 2: 1. In the event of debtor seeking immediate repayment, the borrower has 2 times more assets to liquidate, so he can realize the current assets event at discount to repay the creditors.

Kalidas, Hong Kong


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HK65 But whatever said & done.... Now whether Unitech or any other realty scrips wont go up & up in a straight line..... Sentiments have really turned upside down..... And I have learnt one thing that SENTIMENTS ALWAYS holds an UPPER HAND among FUNDAMENTALS & Technicals etc. But I am also sure that in the long run.... say in 1.5 to 3 years time ..... All these stocks will DEFINATELY CROSS its previous highs & wud ALSO go much much beyond those HIGHER PEAK LEVELS, as I PERSONALLY think & PRESUME that REALTY PRICES in INDIA in the LONGER TERM , say by 2011 will again be at much higher levels.... Any property history wud foretell U that REALTY PRICES have ALWAYS RISEN in the long term & even gone further up than their previous highs.... One more reason I think is that this SECTOR is highly under-owned, in terms of its equities, by any group of people..... ALSO, foreign funds whenever they will come in, will come in FIRST into this sector & also DIRECTLY into REAL ESTATE..... I think the begginning to all this will be SECOND HALF of 2009, when the seeds of INVESTMENTS wud be bowed & fresh start all over again..... cheers as always pranky!! . ...

Great views! I wish most of those are implemented....

Vodafone will appeal against tax ruling The Mumbai High Court yesterday dismissed a challenge by Vodafone against a $2bn tax case in a blow to the UK group and a potential setback for other companies looking to make investments in India. Vodafone had challenged whether Indian tax authorities had the right to assess the tax on the UK group`s $11bn acquisition of a local mobile company, Hutchison Essar. Vodafone said it would appeal against the ruling to the Supreme Court in New Delhi, the country`s highest court, using an eight-week extension of an order temporarily preventing the tax department from taking any action. "Vodafone, based on advice received, continues to believe that the transaction is not subject to tax in India and is confident of a positive outcome ultimately," the company said. Although the court rejected the petition, the full text of its decision has not been released, leaving it unclear on what grounds the judges rejected the company`s case. In February last year, Vodafone bought a 67 per cent stake in Hutchison Essar, now known as Vodafone Essar, from Hutchison of Hong Kong. India`s tax department argued that even though Vodafone was the buyer and Hutchison was the seller, the UK group should have withheld an estimated $2bn of capital gains tax on the deal on the government`s behalf. Vodafone has countered by saying the sale of shares took place between foreign companies, which under past practice would normally have exempted the transaction from taxation in India. Under the Hutchison Essar sale, a Dutch company controlled by Vodafone paid the $11bn to a Cayman Island entity run by Hutchison, for another Cayman Island company that indirectly held a controlling stake in the India-based mobile operator. "The decision is very significant," said Mukesh Butani, partner and head of taxes at consultancy BMR & Associates. "The bottom line is that if they`ve lost the case, there will be an impact on several other offshore transactions that the central government wants to tax." However, there were indications that the court`s ruling might have been based on procedural issues rather than those related to the substance of the case. The court might have decided Vodafone should have gone through the normal taxation department channels for dispute resolution, including arbitration, before resorting to legal action. Investors were adopting a wait-and-see attitude to the case, which they expected to run for a long time. "Vodafone has told us that whilst this is a disappointment this makes a capital gains tax liability no more or less likely," said Jonathan Groocock of Investec Securities. The deal has given Vodafone an important foothold in the world`s fastest growing large emerging market for telecoms. The group has risen from the fourth-largest operator in the country at the time of the deal to the third-biggest today with 56.7m subscribers at the end of October. The Vodafone case is just the largest of several mergers and acquisitions that the Indian tax department is thought to be focusing on. Another potential case involves Genpact, a backoffice outsourcing centre set up by General Electric. It became independent in 2004 when GE sold a 60 per cent stake to the private equity firms Oak Hill Capital Partners and General Atlantic. GE said it had not received any direct correspondence from the tax department. Instead, the tax office has written to Genpact India seeking information about the transaction. The tax department has also demanded Rs4.5bn ($90m) from Tata Industries, part of the Tata group, for its Rs6.6bn purchase of a stake in mobile operator, Idea Cellular, from AT&T of the US in 2005, the Economic Times has reported By Joe Leahy in Mumbai ...

If the assets of the subsidiary company are located in India or for that matter in a domestic country anywhere in the world that domestic company is well within its right to amend its laws in such a way so as to make any transaction in respect of the assets situate in it subject to domestic law. For example citibank branches in india should be subject to takeover tax laws or incometax laws as the case may be if it involves its assets situate in India. Till then ofcourse it would be outside the purview of such taxations etc. Cases in India as u r well aware are by and large decided on the basis of promotional avenues or illegal monetary gains and only a miniscule percentage strictly on merits and that too only small matters especially in lower courts. The dragging on of cases is another plus for the aggressive but illegal aggressor to the detriment of the victims who are generally law abiding and sincere ....

Sorry Boss, then MY HEARTFELT TRIBUTE to this REAL HERO too..... Thats what I mentioned yesterday that ALL THE STAFF incl the RECEPTIONISTS, The Stewards, The WAITORS, The Managers, The GM and the rest of the STAFF TEAM are my TRUE HEROES..... We must SALUTE to those REAL ONES also, in that list......!!!! But merely by writing here does not offer THE REAL TRIBUTE.... ITS HIGH TIME, ......REALLY really..... REAL HIGH TIME that WE ALL SHUD WAKE UP to their cause & bring in the REVOLUTION NEEDED.... Much Needed now....!!!!!!!!!!!!!! pranky!! ....

as a corollary ... though i personally dis approve , financially there was nothing wrong with everything that went in to subprime . its the greed and speed that made it dirty [ so it more of economical or pshycho-social issue ] . imagine all the swaps in last 7 years happening over 25 years of period ....then lehman would have made profit [even with the third rate assets that were with offshore entities ]! they overspeed it ...! they overdid it !...

Hi sambala , its not that human being were not interconnected for trade in any of the old time . It wasn`t also the case that people from one place wont own and invest in business in the other .And if that`s globalization then we don`t really have anything new happening in this century ! . This inter connect and inter dependence was always there between trade systems .its just that improvements mechanical and communication have widened the size of trade systems and the connect . Whats new and what i precisely oppose is the interference ! There is this huge manipulation of money flows , peoples habit , trading practices and common wisdom that got sold under the name of globalization . Once cute sub accomplice was the word liberalization . Again the flow on new knowledge and ideas inst new to social systems and it too got advanced with communication media . What went in addition to this connect and opening up is the surrender and slavery to the basic ideas of good-bad , progress-poverty , profit-loss etc etc . We did see the benefits ,just like any thing steady that starts moving enjoys the move . Its when you pause and gauge the direction one learn to differentiate between movement and journey ! And that diff is clear of.....well direction ! we need to check for the directions of our movements minus the manipulation and standardizations that got marketed on the name of globalization . sd3 . ps : i love the way u reply to posts with articles !...