Vodafone tax case review in Supreme Court tomorrow

The Supreme Court tomorrow will hear the government’s appeal in the $2.2 billion Vodafone tax case. The government has, with a review petition, asked the court to reconsider its verdict delivered in January which sided with Vodafone and helped improve foreign investor confidence.

But last week, in the union budget, Finance Minister Pranab Mukherjee proposed changes to tax laws retrospectively to 1963. That move, analysts believe, is the government’s attept at getting around the court’s decision that the government cannot tax a deal between two foreign entities, even if the transaction includes an Indian asset.

India had sought $2.2 billion from London-listed Vodafone in tax after its purchase of Indian assets from Hong Kong-listed Hutchison Whampoa Ltd.

Vodafone is the largest overseas corporate investor in India, but its long-running dispute has come to symbolise the perils foreign firms face doing business in the country. The Finance Minister’s proposal will allow the country to retrospectively tax cross-border transactions in which the underlying assets are located in India.

Business figures have criticized the amendment, which the head of the Confederation of Indian Industries said would "create an impression of India being an investor unfriendly country especially at a time when we need urgent investment."

"This is most retrograde. Our policymakers should realize we do not live in isolation. We need FDI, foreign technology and capital," said Deepak Parekh, chairman of Housing Development Finance Corp, India's biggest mortgage lender.

Mr Mukherjee has sought to allay industry worries by asserting that the new amendment would not duplicate tax paid in other jurisdictions, and only seeks to ensure tax is paid on deals involving the transfer of Indian assets.

Vodafone's deal is not unique. Various other acquisitions involving overseas deals that appeared closed after the Supreme Court ruling could be affected by the proposal.

Kraft Foods Inc's 2010 acquisition of Cadbury's Indian business and deals involving Indian assets sold by AT&T Inc and SABMiller Plc's purchase of Fosters would be at risk under the new amendment.

"The proposal...raises a question as to whether foreign investments are protected in India," wrote Nitish Desai Associates, a legal and tax advisory firm, in a research report.

Legal and tax experts say that while the amendment will see foreign investors act more cautiously in future deals involving Indian assets, the government's decision to throw past deals back into turmoil will only sour overseas investment appetite.

"The government is saying it is clarifying its position," said Amrish Shah, national leader, transaction tax, Ernst & Young India. "But on past deals, it has muddied the water.”

(Reported by A Vaidyanathan with inputs from Reuters)

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Will Mamata vote against the government tomorrow? Unlikely, say sources

Kolkata:  Mamata Banerjee's commitment to her fight against the National Counter Terrorism Centre could be tested tomorrow in Parliament. The head of the Trinamool Congress has field-marshalled a group of ten chief ministers who have opposed the centre's new anti-terror agency on the grounds that it erodes the autonomy of state governments.

Ms Banerjee's party members yesterday moved amendments to "the motion of thanks to the President" for her speech delivered this week to Parliament (the President's address  outlines the government's agenda). In the Lok Sabha, these amendments have been rejected on technical grounds -the wording was incorrect and they were filed too late. But they've been accepted in the Rajya Sabha. The main opposition party, the BJP, has moved similar amendments. So if Ms Banerjee wants to further embarrass the government which she belongs to, her MPs could vote with the BJP and against the ruling UPA. That's not likely to happen, say sources.  

The exit route for Ms Banerjee may come in the form of a protest by her MPs, who could walk out of the House before a vote, demanding financial assistance for Bengal, which is governed by their leader. Ms Banerjee has been asking the centre for 22000 crores; she also wants the centre to suspend the interest the state owes on loans already taken.

Financial assistance is the centre's only hold over Ms Banerjee, whose relationship with the UPA has been in the danger zone for a while now. At a dinner hosted by the Prime Minister last night, Ms Banerjee was missing - she chose to fly to Nagpur instead to attend a wedding. The fact that she deputed a first-time MP, Ratna De Nag, and not one of her senior ministers or leaders was seen as a flat snub to the Congress.

Pointedly, Ms Banerjee deputed two of her union ministers to attend the swearing-in today of the Punjab government, a partnership between the Akalis and the BJP. For the UPA's political rival, Ms Banerjee sent a senior delegation. The Prime Minister's dinner, in comparison, received minimal attention.

At the dinner last night, senior Congress leader Pranab Mukherjee made it clear that Ms Banerjee's amendments could cost the government heavily - if a vote was held, he warned, the government could lose.

Ms Banerjee's 19 Lok Sabha MPs give her the power to call the shots with the Congress - without her support, the UPA would collapse - and she has held the government and its policies to hostage with increasing daring. She recently forced the UPA to suspend its reforms in retail - the increased Foreign Direct Investment in shops or chains that stock different brands was a move by the Prime Minister and his team to prove wrong allegations of policy paralysis.

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BJP wants discussion on Lokpal Bill in Rajya Sabha tomorrow

New Delhi:  Prime Minister Manmohan Singh has asked the Opposition to allow Parliament to function in the Budget Session that began today, but the BJP is working to its own plan. On Day 2 of the session, tomorrow, it wants Question Hour suspended for a discussion on the Lokpal Bill in the Rajya Sabha. A demand that puts it on collision course with the government, which would like to discuss the Bill only later in the session. Will there be another Lokpal logjam?
The Opposition had stalled much of the Winter Session three months ago on the Lokpal Bill issue. The anti-graft Bill was finally passed by the Lok Sabha in an extended Winter Session last December, but the one day allotted for discussion and voting in the Rajya Sabha was not enough and the government threw up its hands at the midnight hour on December 29, saying there were too many amendments for it to be passed in that session. The Opposition cried foul and has carried over its angst to the Budget Session.     
The BJP's Arun Jaitley, who is the Leader of Opposition in the Rajya Sabha, gave an early indication of what to expect from an aggressive Opposition when he told NDTV on Sunday, "The last session ended on a terrible note. When the government, in order to avoid a vote in the Rajya Sabha on the amendments to the Lokpal Bill, disturbed the session and had it adjourned. Logically, since they wanted time to consider those amendments. I'm sure they've had more than sufficient time. Logically, therefore, the session must take off from where it ended last time. We want the Lokpal Bill to be taken up first."
The government has said it is committed to passing the Bill this time and has promised to list it for discussion in the second half of the Budget Session. Parliamentary Affairs Minister Pawan Bansal said, "All the amendment notices from the last session have lapsed. New notices will have to be given and they have started coming in. The government will then have to review and analyze these. The government is hoping to produce a comprehensive Lokpal bill that will prove a barrier to corruption."
The BJP says it is ready with its fresh notices for amendment and it is not ready to push the discussion to another day. Or, at the very least, it wants an action plan on the Lokpal Bill spelt out by the government before other business can begin in this session.
For the government, the priority right now is the vote on account and Parliament's Business Advisory Committee has also listed an early discussion on Centre-State relations in view of the protests from many regional parties that rule states, which say that the proposed National Counter Terrorism Centre (NCTC) is against the very tenets of federalism.
That discussion would be key to the Congress-led UPA government's political plans as well. For the Lokpal Bill it needs ally Trinamool Congress and parties like the Samajwadi Party and the BSP firmly by its side. It hopes to that by taking up the NCTC issue; one of the main opponents to the NCTC is the Trinamool Congress. Mamata Banerjee has assured the government that she will not rock the boat, but Opposition leaders have hinted that they will reach out to her and other UPA allies on the issue of federalism. As an ally Ms Banerjee does not have the best record for sticking by the UPA on all issues. She has also often accused the Congress of taking allies like her for granted, and of not consulting them before announcing big-ticket policy changes.
Prime Minister Manmohan Singh said today that he was confident of his government's numbers - he has been called upon to make that assertion after the Congress fared poorly in assembly elections held in five states, including UP, recently. The UP results put paid to the Congress's hopes of an easing of coalition equations at the Centre. The whipping the Congress got has also led to much speculation about a Third Front that would include Ms Banerjee. Parties like Chandrababu Naidu's TDP and Naveen Patnaik's BJD have reportedly begun coveting Ms Banerjee's political support as leaders have begun talking about early elections. Dr Singh will host a dinner for his allies tomorrow.
And as the government attempts to keep its UPA flock together through statements of hope and diplomacy dinners, Finance Minister Pranab Mukherjee, who will present the Union Budget on March 16 and Mr Bansal also met senior BJP leaders Sushma Jaitley and LK Advani to get their support for the smooth running of the Budget Session.
In this session, the government has its hands full. It has to deftly push important legislation and attempt a reform-oriented General Budget with an aggressive Opposition and allies with a populist agenda never failing to remind it of the tenuous majority it has in the Lok Sabha and its lack of numbers in the Rajya Sabha.
On the first day of the session, it used President Pratibha Patil's address to detail its strategy on the several big challenges it faces. The Presidential address, lasting over an hour, to a joint sitting of Parliament, saw five disruptions as Opposition parties and allies got up in protest on various issues.

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2G: Cabinet meets tomorrow to finalise queries for Supreme Court

New Delhi:  The Cabinet is expected to meet tomorrow to finalise details of seven questions that the government plans to ask the Supreme Court through a presidential reference on the issue of telecom licences in view of the court's verdict in the 2G scam case.
In January, the Supreme Court cancelled 122 licenses granted in 2008 by then Telecom Minister A Raja for mobile network licenses and accompanying second generation or 2G spectrum; the two judges who delivered the verdict said all national resources must be distributed only through an auction. The licenses revoked by the court had been allocated on a first-come-first-serve basis by A Raja and the judges said this policy was "fundamentally flawed" partly because it presented an advantage to anyone with access to the "corridors of power."
The government has said that while it in no way challenges the verdict of the court, it needs answers on how natural resources should be distributed hereon. The Prime Minister had in February sanctioned a Presidential reference on the matter - which means that the government will formally request President Pratibha Patil to ask the Supreme Court if its order applies to all natural resources.
NDTV has learnt that these are the seven questions that the government is likely to pose to the Supreme Court through the presidential reference:
1) Whether licenses, other than the ones auctioned, were granted illegally?
2) Were all licenses granted on a first-come-first-served basis, upto 2007 granted illegally?
3) If yes, then what steps should be taken by the government to deal with those licenses?
4) If no, is the Government of India obligated to ensure a level-playing field in granting licenses and whether it is required to withdraw spectrum allocated to all existing licenses? Also, should it be with retrospective effect and be charged and at what price and what date?
5) Is dual technology licences illegal and is the government of India required to make a level-playing field and withdraw all spectrum allocated to licensees in 2008? Should they be charged, and at what price and from what date?
6) Does the 3G spectrum auction allotted in 2010 to entities whose licenses have been quashed in the judgement referred to in the above stand withdrawn?
7) Is allocation of spectrum through auction the only legitimate mode even when it is inadequate or there is no competition?
The President can, under Article 143 of the Constitution, refer matters of public interest to the Supreme Court.  The Supreme Court will then set up a bench of either three or five judges to provide clarifications requested by the President. These judges could talk to parties involved with the case or to experts; regular hearings will be held before they share their conclusions.
The last time such a presidential referral was made was in 2004 for a dispute between Punjab and Haryana over water-sharing.
The 122 licenses that were cancelled in January are at the heart of what's believed to be India's biggest scam. As Telecom Minister, Mr Raja, now in jail for over a year, allegedly granted sweetheart deals to companies who conspired with him - not only did he give them licenses at throwaway prices, but the spectrum they needed was free. Many of the executives of these companies were arrested last year and spent several months in jail before being granted bail.
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Stargazers wait to see Mars tomorrow

London:  People in the Northern Hemisphere might be able to see the Mars with their naked eyes this weekend when it is at its closest to Earth in over two years.

Stargazers are excitedly waiting to see the Red Planet in the night sky, the Daily Mail reported on Saturday.

The event, known as an opposition, happens once every 26 months when the orbits of Earth and Mars align so that the two planets form a relatively straight line with the sun.

The opposition was expected to occur in the Northern Hemisphere at 11 p.m. EST this Saturday (4 a.m. GMT Sunday).

However, because of Mars's elliptical path around the sun, the red planet will be closest on Monday, when they will be about 100.7 million km apart.

With a telescope, gazers will be able to see the Red Planet's ice caps and surface details, the Mail said on Saturday.

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