Advantages of a Depository System

The different stake-holders have advantages flowing out of the depository system. They are:-

For the Capital Market:

• It eliminates bad delivery; 
• It helps to eliminate voluminous paper work;
• It helps in the quick settlement of dues and also reduces the settlement time;
• It helps to eliminate the problems concerning odd lots;
• It facilitates stock-lending and thus deepens the market.

For the Investor:

• It reduces the risks associated with the loss or theft of documents and securities and eliminates forgery;
• It ensures liquidity by speedy settlement of transactions;
• It makes investors free from the physical holding of shares;
• It reduces transaction costs; and
• It assists investors in securing loans against the securities.
• It provides upto date information on shareholders’ names and addresses;
• It enhances the image of the company;
• It reduces the costs of the secretarial department;
• It increases the efficiency of registrars and transfer agents; and
• It provides better facilities of communication with members.

For the Corporate Sector or Issuers of Securities:

• It provides upto date information on shareholders’ names and addresses; 
• It enhances the image of the company;
• It reduces the costs of the secretarial department;
• It increases the efficiency of registrars and transfer agents; and 
• It provides better facilities of communication with members.

Function of merchant banker

The basic function of merchant banker or investment banker is marketing of corporate and
other securities. In the process, they perform a number of services concerning various aspects of marketing, viz., origination, underwriting, and distribution, of securities. During the regime of erstwhile Controller of Capital Issues in India, when new issues were priced at a significant discount to their market prices, the merchant banker’s job was limited to ensuring press coverage and dispatching subscription forms to every corner of the country. Now, merchant bankers are designing innovative instruments and perform a number of other services both for the issuing companies as well as the investors. The activities or services performed by merchant bankers, in India, today include:

• Project promotion services. 
• Project finance.
• Management and marketing of new issues.
• Underwriting of new issues.
• Syndication of credit.
• Leasing services.
• Corporate advisory services.
• Providing venture capital.
• Operating mutual funds and off shore funds.
• Investment management or portfolio management services.
• Bought out deals.
• Providing assistance for technical and financial collaborations and joint ventures.
• Management of and dealing in commercial paper. 
• Investment services for non-resident Indians.

Green Shoe Option

It is an option that allows the under writing of an IPO to sell additional shares if the demand is high. It can be understood as an option that allows the underwriter for a new issue to buy and resell additional shares upto a certain pre-determined quantity.
 

Looking to the exceptional interest of investors in terms of over-subscription of the issue,
certain provisions are made to issue additional shares or bonds to underwriters for distribution. The issuer authorises for additional shares or bonds. In common parlance, it is the retention of over-subscription to a certain extent. It is a special feature of euro-issues. In euro-issues the international practices are followed.

In the Indian context, green shoe option has a limited connotation. SEBI guidelines governing public issues contain appropriate provisions for accepting over-subscriptions, subject to a c eiling, say, 15 per cent of the offer made to public. In certain situations, the green-shoe option can even be more than 15 per cent.

Gross National Product

Gross National Product (GNP) is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. Basically, GNP measures the value of goods and services that the country's citizens produced regardless of their location. GNP is one measure of the economic condition of a country, under the assumption that a higher GNP leads to a higher quality of living, all other things being equal.

Service Tax leviable on activity of preparation of place to hold event by erection of pandal and shamiana, CBEC clarifies

Hiring/Erection of Pandal or Shamiana in events/functions does not amount to ‘transfer of right to use’ and is, therefore, liable to service tax

Facts: The process of erection/laying of Pandal or shamiana for organizing event or function is a reasonably specialized job and is carried out by the supplier with the help of his own labour. In addition to the erection of pandal or shamiana the service is generally coupled with other services like supply of crockery, furniture, sound system, lighting arrangements, etc.

Issue Involved: Whether service tax is leviable on the activity of preparation of place for organizing event or function by way of erection/laying of pandal and shamiana ?

Clarification: Yes, it is liable to service tax for the following reasons:

• it is a service of preparation of a place to hold a function or event ; 
• effective possession and control over the pandal or shamiana remains with the service provider, even after the erection is complete and the specially made–up space for temporary use handed over to the customer. 
• the activity of providing pandal and shamiana along with erection thereof and other incidental activities do not amount to transfer of right to use goods ; 
• hence, activity by way of erection of pandal or shamiana is a declared service, under section 66E(f).

Advance booking of a hotel suite is capital asset; its transfer is chargeable to tax

ACIT V. SHABNAM SACHDEV (Delhi - Trib.)

Long-term advance booking of hotel suite, which gave assessee perpetual right of possession and right to transfer same, was capital asset

In the instant case, the assessee had entered into an agreement with 'G' for long-term advance booking of a suite in a hotel complex, permanently reserved for her use, till the agreement subsisted. She had treated profit on sale of such right in the suite as long term capital gain (‘LTCG’) after reducing indexed cost of acquisition, which consisted of security deposit paid to 'G' and maintenance charges paid to hotel. The AO noticed that the assessee had claimed both the benefit of deduction under sec. 24(a) in previous year as well as indexed cost of acquisition on maintenance expenses while computing capital gains. He held that the long term advance booking was not tenancy right and, hence, not a capital asset. Therefore, he treated the profit on surrender of reservation of suite as income from other sources, after deducting the amount of installments, but not the maintenance charges. On appeal, the CIT (A) held that the sale consideration received was taxable as long-term capital gain and assessee was entitled to benefit of indexation. He, however, held that assessee was not entitled to benefit of indexation on amount paid as maintenance charges to hotel. Aggrieved by the order of CIT(A), assessee filed the present appeal.

The Tribunal held in favour of assessee as under:

1) The assessee was entitled to constant use of suite only in consideration of the agreement and the security deposit. Further, the agreement contained covenants as under:

1. All government, Municipal and other taxes or levies in relation to the suite were to be paid by the assessee separately.
2. Although the booking was in favour of the assessee, yet it could occupy it itself or use the same for its family members or senior staff and bona fide personal and business guests.
3. The agreement/advance booking was transferable as and when desired by the assessee in writing.

All these covenants made it abundantly clear that assessee had got right of residence or possession in the suite by virtue of the agreement. This right was transferable at the option of assessee. Thus, this right was akin to the tenancy rights which are a valuable right in the property.

2) Section 2(14) defines 'capital asset' as property of any kind held by an assessee. The term 'property' encompasses in its ambit bundle of rights. The right to dispose of a thing in every legal way, to possess it and to use it to exclude everyone from interfering with it, comes within the ambit of property. The exclusive right of possessing, enjoying and disposing of a thing comes within the term of 'property'. The assessee had perpetual right of possession of suite and was entitled to transfer the same. Therefore, long-term advance booking, by virtue of which assessee got right to possession, was 'capital asset' within the definition of section 2(14) and, therefore, on transfer of the same, LTCG had accrued to the assessee and assessee was, accordingly, entitled to indexation of cost of acquisition. Thus, the department's appeal was dismissed.

Difference between tax evasion and tax avoidance

The Direct Taxes Enquiry Committee (Wanchoo Committee) has tried to draw a distinction between the two items in the following words.

“The distinction between ‘evasion’ and ‘avoidance’, therefore, is largely dependent on the difference in methods of escape resorted to. Some are instances of merely availing, strictly in accordance with law, the tax exemptions or tax privileges offered by the government. Others are maneuvers involving an element of deceit, misrepresentation of facts, falsification of accounting calculations or downright fraud. The first represents what is truly tax planning, the latter tax evasion. However, between these two extremes, there lies a vast domain for selecting a variety of methods which, though technically satisfying the requirements of law, in fact circumvent it with a view to eliminate or reduce tax burden. It is these methods which constitute “tax avoidance”.

Substance versus form

Where form prevailed: A firm transferred its business assets to a company formed for its purposes. The same business was carried by the company consisting of the erstwhile partners as its shareholders. The Income-tax Officer sought to withdraw the depreciation allowed (the difference between sale price and written-down value) of machinery. Tribunal and High Court held that there was change only in the form of ownership as persons behind both firm and company were the same. Supreme Court held that legal form should prevail and restored the order of Income-tax Officer. This is a case where the form came to the assistance of revenue CIT v. B.M. Kharwar (1969) 72 ITR 603 (Supreme Court).

Where substance prevailed: 

• The assessee received compensation ostensibly paid for premature termination of managing agency and claimed that the receipt was not liable to tax as a capital receipt. The Supreme Court upheld the action of authorities in ignoring the legal façade which merely disguised the real intention between the parties to cloak payment of income nature as a capital one – Juggilal Kamlapat v. CIT (1969) 73 ITR 702 (Supreme Court). 

• Certain shares were held in the name of others, but the deceased was the real owner of the shares as was found with reference to evidence. The High Court had held that the shares were not includible in the estate of the deceased as they were not in his name. The Supreme Court pointed out that, in substance, the deceased was the owner though only beneficially and upheld the inclusion for estate duty purposes – CED v. Aloke Mitra (1980) 126 ITR 599 (Supreme Court).

Management and repair of private railway sidings by Central Railways are exempt from Service Tax

CENTRAL RAILWAY V. COMMISSIONER OF CENTRAL EXCISE & CUSTOMS (Bombay High Court)

Prima facie, Central Railway’s services of management and repair of railway sidings owned by private parties were exempt under Notification No.24/2009-ST, because in view of assessee it was an incident of maintenance and repair of railway tracks

In the instant case, the assessee, Central Railways Department, carried out maintenance and repairs of railway sidings owned by private parties. For said activity the revenue demanded service tax under category of management, maintenance or repairs services. On an application for stay, the Tribunal directed the assessee to make a predeposit of 50 per cent of the service tax demanded. Aggrieved by the order of Tribunal, assessee filed the instant appeal.

The High Court directed a waiver of pre-deposit with the following observations:

1. In view of Notification No. 24/2009-ST, as amended on 21-12-2010, management, maintenance or repair of railways was exempted;
2. Prima facie, from 21-12-2010, assessee's work of management and repair of railway sidings owned by private parties was exempt, because in view of assessee it was an incident of maintenance and repair of railway tracks;
3. For period prior thereto, since demand was levied against the Union Ministry of Railways, ends of justice would require that extent of deposit had to be scaled down. Hence, predeposit was waived off in part.

Stagflation

High inflation and high unemployment (stagnation) occurring simultaneously.

Different levels of strategy

Strategies at different levels are the outcomes of different planning needs. There are basically three types of strategies: 

• Corporate Strategy: At the corporate level planners decide about the objective or objectives of the firm along with their priorities and based on objectives, decisions are taken on participation of the firm in different product fields. Basically a corporate strategy provides with a framework for attaining the corporate objectives under values and resource constraints, and internal and external realities. It is the corporate strategy that describes the interest in and competitive emphasis to be given to different businesses of the firm. It indicates the overall planning mode and propensity to take risk in the face of environmental uncertainties.
• Business Strategy: It is the managerial plan for achieving the goal of the business unit. However, it should be consistent with the corporate strategy of the firm and should be drawn within the framework provided by the corporate planners. Given the overall competitive emphasis, business strategy specifies the product market power i.e. the way of competing in that particular business activity. It also addresses coordination and alignment issues covering internal functional activities. The two most important internal aspects of a business strategy are the identification of critical resources and the development of distinctive competence for translation into competitive advantage.  
• Functional Strategy: It is the low level plan to carry out principal activities of a business.In this sense, functional strategy must be consistent with the business strategy, which in turn must be consistent with the corporate strategy. Thus strategic plans come down in a cascade fashion from the top to the bottom level of planning pyramid and performances of functional strategies trickle up the line to give shape to the business performance and then to the corporate performance.

Importance of Strategic Management

Strategic management intends to run an organization in a systematized fashion by developing a series of plans and policies known as strategic plans, functional policies, structural plans and operational plans. It is a systems approach, which is concerned with where the organization wants to reach and how the organization proposes to reach that position. Thus, strategic management is basically concerned with the futurity of the current decisions without ignoring the fact that uncertainty in the system is to be reduced, to the extent possible, through continuous review of the whole planning and implementation process. It is therefore necessary for an organization interested in long run survival and command over the market, to go for strategic planning and the planning process must be holistic, periodic, futuristic, intellectual and creative with emphasis given on critical resources of the firm otherwise, the organization wil fal in the traps of tunneled and myopic vision.