In case of a company, notice under section 148 is to be served on its Principal Officer for making a valid assessment under section 147.
Where the notice under section 148 was not served upon the Principal Officer of the assessee-company but on a person who was not empowered to receive the notice, the service of notice under section 148 was not a valid service, and the assessment completed under section 147 in the absence of a valid service was bad in law. - [2010] 8 TAXMANN.COM 266 (LUCKNOW - ITAT)
5 January 2011
Facebook Deal Offers Freedom From Scrutiny
Facebook’s new financial security could buttress the company’s independence and help Mark Zuckerberg retain near absolute control.SAN FRANCISCO — In Silicon Valley, going public used to be the ultimate rite of passage for a start-up — a sign it had arrived.
No more.
With its $500 million infusion from Goldman Sachs and other investors, Facebook is now flush with cash, and a market value of about $50 billion, giving it the financial muscle it needs to compete with better-heeled rivals like Google.
And Facebook hopes for an even bigger advantage from the deal, the ability to delay an initial public offering. That would allow it to remain free of government regulation and from the volatility of Wall Street. It would also allow Mark Zuckerberg, the company’s chief executive, to retain near absolute control over the company he co-founded in a Harvard dorm room in 2004.
This strategy was unthinkable in Silicon Valley just a few years ago, when hundreds of start-ups with scant revenue and no profits, like Pets.com and Webvan, raced to go public, and investors eagerly lined up to buy their shares.
Lots of people would stand in line to buy shares in Facebook, but for now, only an exclusive few — wealthy clients of Goldman Sachs — will be able to. On Monday, Goldman sent e-mail to certain clients, offering them the chance to invest in the company.
That offer is the latest sign of the emergence of active markets in the shares of closely held companies. Those markets are helping successful start-ups like Facebook develop the financial wherewithal to compete in the big leagues of business. They have also become an avenue for venture capitalists and start-up employees to cash in their stock, turning many overworked engineers into instant millionaires.
And so a young mogul like Mr. Zuckerberg, the world’s youngest billionaire at age 26, can enjoy many of the benefits of going public without having to tie the knot with Wall Street. Other hot technology companies like Twitter, Zynga and Groupon are also tapping secondary markets to keep stock market investors at bay. They are in no rush to go public and no longer need the bragging rights that a stock offering used to bestow.
“This is a topsy-turvy world,” said Scott Dettmer, a founding partner of Gunderson Dettmer, a law firm that has advised venture capitalists, start-ups and entrepreneurs since the 1980s. He added that even a few years ago, “there were all sorts of business reasons to go public, but for entrepreneurs it was also a badge of honor.”
Perhaps more than any company founder, Mr. Zuckerberg, who declined to comment for this article, has frequently expressed his lack of interest in Wall Street, though Facebook is clearly not above taking its cash. He passed on opportunities to make a killing, for example, when, at age 22, he rejected billion-dollar offers for Facebook.
“Mark would absolutely prefer not have an I.P.O. until he absolutely has to,” said David Kirkpatrick, the author of “The Facebook Effect.” “He absolutely doesn’t want to sacrifice control because he believes that his vision is necessary to keep powering the company forward.”
Mr. Zuckerberg’s quest to keep Facebook private, though, will not last forever. Federal regulations require companies with 500 or more investors to disclose their financial results, eliminating one of the principal advantages of staying private.
The Goldman Sachs investment, for a stake of less than 1 percent in the company, is formulated in part to skirt those rules. But it may help for only a limited time. The Securities and Exchange Commission is investigating private company trades in secondary markets, and regulators may decide that what is good for Facebook is not necessarily good for the investing public.
Still, the huge cash infusion is a coup both for Mr. Zuckerberg, who is said to own about a quarter of the company, and Facebook. The deal gives the company cash to hire employees or build data centers.
It also puts Facebook, which makes most of its money through advertising, on a path to surpass Google, by some measures, as the most successful Internet company to come out of Silicon Valley. Facebook is on track to bring in as much as $2 billion in revenue this year.
The deal with Goldman values Facebook at nearly twice the $27 billion that Google was worth after its first day as a public company in August 2004. Google did not cross the $50 billion mark until about six months later.
The two companies have become enemies, but their founders share a deep suspicion of Wall Street, born in part from witnessing the devastation that followed the dot-com bubble. Like Mr. Zuckerberg, the founders of Google, Larry Page and Sergey Brin, set up two classes of shares, which kept them in control after the public offering. They also vowed not to be beholden to short-term investors.
Mr. Zuckerberg is exhibiting many of the same misgivings about the stock market. Mr. Zuckerberg has frequently demurred when asked about an eventual public offering. One of Facebook’s earliest investors said recently that the company would not go public before 2012.
But Mr. Zuckerberg is benefiting from the fast-growing market for trading in the shares of privately held tech companies, which the Google founders did not have. Through private exchanges like Secondmarket and Sharespost, and through direct transactions between investors, closely held companies, their investors and their employees have been able to sell their shares to others. For start-ups today, that has opened new options to going public.
“Companies have financing alternatives that they didn’t have,” said Marc Bodnick, a managing partner at Elevation Partners, which invested in Facebook in the last year.
Those alternatives have become more attractive for companies, in part because of the increased regulations imposed on public companies but also because of the rise in short-term trading, which leaves some executives feeling they have lost control of their companies.
Ben Horowitz, a partner with Andreessen Horowitz, a venture capital firm, said the cost of being a public company had risen to about $5 million a year, from about $1 million a year. Mr. Horowitz, an early employee of Netscape, said that such costs would have eaten into the meager profits of the pioneering Internet company when it went public in 1995. Additionally, accounting and legal requirements have become distractions for many start-ups, said Mr. Horowitz, whose firm is an investor in Facebook.
Those distractions are bothersome for strong-willed entrepreneurs like Mr. Zuckerberg.
“If you’re 30 years old and you think you’re building a business that’s going to be a 100-year-old business, what year you’re public doesn’t really matter,” Mr. Bodnick said. “But if you think the steps you’re taking are laying the groundwork to long-term strategic growth, it’s good to be quiet, it’s good to be out of the light.”
Still, some experts say that the option to remain private is a luxury that only few start-ups will be able to enjoy.
“Things have changed dramatically for the 2 percent of companies that stand out from the pack like Facebook,” said Lise Buyer, the principal of the Class V Group, which advises private companies about going public. Ms. Buyer, a former Google executive who was involved in its public offering, added: “If you are a semiconductor, or a biotech company, or an enterprise software company, you are not going to have investors throwing money at you without any disclosure.”
By MIGUEL HELFT
Source: The NewYork Times
No more.
With its $500 million infusion from Goldman Sachs and other investors, Facebook is now flush with cash, and a market value of about $50 billion, giving it the financial muscle it needs to compete with better-heeled rivals like Google.
And Facebook hopes for an even bigger advantage from the deal, the ability to delay an initial public offering. That would allow it to remain free of government regulation and from the volatility of Wall Street. It would also allow Mark Zuckerberg, the company’s chief executive, to retain near absolute control over the company he co-founded in a Harvard dorm room in 2004.
This strategy was unthinkable in Silicon Valley just a few years ago, when hundreds of start-ups with scant revenue and no profits, like Pets.com and Webvan, raced to go public, and investors eagerly lined up to buy their shares.
Lots of people would stand in line to buy shares in Facebook, but for now, only an exclusive few — wealthy clients of Goldman Sachs — will be able to. On Monday, Goldman sent e-mail to certain clients, offering them the chance to invest in the company.
That offer is the latest sign of the emergence of active markets in the shares of closely held companies. Those markets are helping successful start-ups like Facebook develop the financial wherewithal to compete in the big leagues of business. They have also become an avenue for venture capitalists and start-up employees to cash in their stock, turning many overworked engineers into instant millionaires.
And so a young mogul like Mr. Zuckerberg, the world’s youngest billionaire at age 26, can enjoy many of the benefits of going public without having to tie the knot with Wall Street. Other hot technology companies like Twitter, Zynga and Groupon are also tapping secondary markets to keep stock market investors at bay. They are in no rush to go public and no longer need the bragging rights that a stock offering used to bestow.
“This is a topsy-turvy world,” said Scott Dettmer, a founding partner of Gunderson Dettmer, a law firm that has advised venture capitalists, start-ups and entrepreneurs since the 1980s. He added that even a few years ago, “there were all sorts of business reasons to go public, but for entrepreneurs it was also a badge of honor.”
Perhaps more than any company founder, Mr. Zuckerberg, who declined to comment for this article, has frequently expressed his lack of interest in Wall Street, though Facebook is clearly not above taking its cash. He passed on opportunities to make a killing, for example, when, at age 22, he rejected billion-dollar offers for Facebook.
“Mark would absolutely prefer not have an I.P.O. until he absolutely has to,” said David Kirkpatrick, the author of “The Facebook Effect.” “He absolutely doesn’t want to sacrifice control because he believes that his vision is necessary to keep powering the company forward.”
Mr. Zuckerberg’s quest to keep Facebook private, though, will not last forever. Federal regulations require companies with 500 or more investors to disclose their financial results, eliminating one of the principal advantages of staying private.
The Goldman Sachs investment, for a stake of less than 1 percent in the company, is formulated in part to skirt those rules. But it may help for only a limited time. The Securities and Exchange Commission is investigating private company trades in secondary markets, and regulators may decide that what is good for Facebook is not necessarily good for the investing public.
Still, the huge cash infusion is a coup both for Mr. Zuckerberg, who is said to own about a quarter of the company, and Facebook. The deal gives the company cash to hire employees or build data centers.
It also puts Facebook, which makes most of its money through advertising, on a path to surpass Google, by some measures, as the most successful Internet company to come out of Silicon Valley. Facebook is on track to bring in as much as $2 billion in revenue this year.
The deal with Goldman values Facebook at nearly twice the $27 billion that Google was worth after its first day as a public company in August 2004. Google did not cross the $50 billion mark until about six months later.
The two companies have become enemies, but their founders share a deep suspicion of Wall Street, born in part from witnessing the devastation that followed the dot-com bubble. Like Mr. Zuckerberg, the founders of Google, Larry Page and Sergey Brin, set up two classes of shares, which kept them in control after the public offering. They also vowed not to be beholden to short-term investors.
Mr. Zuckerberg is exhibiting many of the same misgivings about the stock market. Mr. Zuckerberg has frequently demurred when asked about an eventual public offering. One of Facebook’s earliest investors said recently that the company would not go public before 2012.
But Mr. Zuckerberg is benefiting from the fast-growing market for trading in the shares of privately held tech companies, which the Google founders did not have. Through private exchanges like Secondmarket and Sharespost, and through direct transactions between investors, closely held companies, their investors and their employees have been able to sell their shares to others. For start-ups today, that has opened new options to going public.
“Companies have financing alternatives that they didn’t have,” said Marc Bodnick, a managing partner at Elevation Partners, which invested in Facebook in the last year.
Those alternatives have become more attractive for companies, in part because of the increased regulations imposed on public companies but also because of the rise in short-term trading, which leaves some executives feeling they have lost control of their companies.
Ben Horowitz, a partner with Andreessen Horowitz, a venture capital firm, said the cost of being a public company had risen to about $5 million a year, from about $1 million a year. Mr. Horowitz, an early employee of Netscape, said that such costs would have eaten into the meager profits of the pioneering Internet company when it went public in 1995. Additionally, accounting and legal requirements have become distractions for many start-ups, said Mr. Horowitz, whose firm is an investor in Facebook.
Those distractions are bothersome for strong-willed entrepreneurs like Mr. Zuckerberg.
“If you’re 30 years old and you think you’re building a business that’s going to be a 100-year-old business, what year you’re public doesn’t really matter,” Mr. Bodnick said. “But if you think the steps you’re taking are laying the groundwork to long-term strategic growth, it’s good to be quiet, it’s good to be out of the light.”
Still, some experts say that the option to remain private is a luxury that only few start-ups will be able to enjoy.
“Things have changed dramatically for the 2 percent of companies that stand out from the pack like Facebook,” said Lise Buyer, the principal of the Class V Group, which advises private companies about going public. Ms. Buyer, a former Google executive who was involved in its public offering, added: “If you are a semiconductor, or a biotech company, or an enterprise software company, you are not going to have investors throwing money at you without any disclosure.”
By MIGUEL HELFT
Source: The NewYork Times
RIM offers interception solution using Cloud Computing
With the approaching deadline to offer complete solution for monitoring of its contents by January 31, BlackBerry maker Research in Motion (RIM) has offered lawful interception in its security architecture through cloud computing from Indian operators. Cloud computing is Internet-based service, whereby shared servers provide software and data to computers and other devices on demand.
RIM infrastructure is ready to receive and process through the cloud computing-based system, lawfully intercepted
BlackBerry Messenger data from Indian service providers, the Canada-based firm said in a letter to the government.
Earlier, RIM had assured the Government that they will provide the 'final solution' for the lawful interception of BlackBerry Messenger services by January 31, 2011. The company has said that this was the understanding that they were to put in place the system by January 31.
According to sources in the know, the Ministry of Home Affairs has asked the Intelligence Bureau (IB) to validate the technology (cloud computing) being offered by RIM.
BlackBerry has over one million subscribers in India, which is one of the fastest growing markets in the world in terms of new subscriber additions.
The Canada-based company made it clear that its security systems are still cutting edge by saying, "RIM maintains a consistent global standard for lawful access requirements that does not include special deals for specific countries.
Last year, RIM had assured the Government that it would provide a final solution for lawful interception of BlackBerry Messenger services by January next year. The project is likely to be completed by the end of January 2011.
With regard to Blackberry's Enterprise mail service, however, it had asserted that the company had no ability to provide customers' encryption keys.
With respect to the same issue, Robert E Crow, Vice President, Industry, Government and University Relations, RIM, had met Home Minister P Chidambaram and explained the status of its project.
Company had also claimed that there was no deadline from the government and it was RIM that had said it would work with operators to ensure that security agencies were able to intercept BlackBerry Messenger data.
The company had also asserted that there was "no change" in its security architecture and sought to dispel talks of its ban in India as mere rumours.
The rumours around BlackBerry services stems from the fact that Indian government had earlier asked Blackberry to provide complete access or face a ban.
Source: Hindustan Times
RIM infrastructure is ready to receive and process through the cloud computing-based system, lawfully intercepted
BlackBerry Messenger data from Indian service providers, the Canada-based firm said in a letter to the government.
Earlier, RIM had assured the Government that they will provide the 'final solution' for the lawful interception of BlackBerry Messenger services by January 31, 2011. The company has said that this was the understanding that they were to put in place the system by January 31.
According to sources in the know, the Ministry of Home Affairs has asked the Intelligence Bureau (IB) to validate the technology (cloud computing) being offered by RIM.
BlackBerry has over one million subscribers in India, which is one of the fastest growing markets in the world in terms of new subscriber additions.
The Canada-based company made it clear that its security systems are still cutting edge by saying, "RIM maintains a consistent global standard for lawful access requirements that does not include special deals for specific countries.
Last year, RIM had assured the Government that it would provide a final solution for lawful interception of BlackBerry Messenger services by January next year. The project is likely to be completed by the end of January 2011.
With regard to Blackberry's Enterprise mail service, however, it had asserted that the company had no ability to provide customers' encryption keys.
With respect to the same issue, Robert E Crow, Vice President, Industry, Government and University Relations, RIM, had met Home Minister P Chidambaram and explained the status of its project.
Company had also claimed that there was no deadline from the government and it was RIM that had said it would work with operators to ensure that security agencies were able to intercept BlackBerry Messenger data.
The company had also asserted that there was "no change" in its security architecture and sought to dispel talks of its ban in India as mere rumours.
The rumours around BlackBerry services stems from the fact that Indian government had earlier asked Blackberry to provide complete access or face a ban.
Source: Hindustan Times
4 January 2011
Where while deleting penalty, Tribunal had not considered decision of jurisdictional High Court, Tribunal's order was liable to be set aside
Where while deleting penalty, Tribunal had not considered decision of jurisdictional High Court, Tribunal's order was liable to be set aside - [2010] 8 TAXMANN.COM 265 (KAR.)
Goldman Sachs - Facebook
Facebook, the popular social networking site, has raised $500 million from Goldman Sachs and a Russian investor in a deal that values the company at $50 billion, according to people involved in the transaction.
The deal makes Facebook now worth more than companies like eBay, Yahoo and Time Warner.
The stake by Goldman Sachs, considered one of Wall Street’s savviest investors, signals the increasing might of Facebook, which has already been bearing down on giants like Google.
The new money will give Facebook more firepower to steal away valuable employees, develop new products and possibly pursue acquisitions — all without being a publicly traded company. The investment may also allow earlier shareholders, including Facebook employees, to cash out at least some of their stakes.
The new investment comes as the Securities and Exchange Commission has begun an inquiry into the increasingly hot private market for shares in Internet companies, including Facebook, Twitter, the gaming site Zynga and LinkedIn, an online professional networking site. Some experts suggest the inquiry is focused on whether certain companies are improperly using the private market to get around public disclosure requirements.
The deal could add pressure on Facebook to go public even as its executives have resisted. The popularity of shares of Microsoft and Google in the private market ultimately pressured them to pursue initial public offerings.
So far, Facebook’s chief executive, Mark Zuckerberg, has brushed aside the possibility of an initial public offering or a sale of the company. At an industry conference in November, he said on the topic, “Don’t hold your breath.” However, people involved in the fund-raising effort suggest that Facebook’s board has indicated an intention to consider a public offering in 2012.
There has been an explosion in user interest in social media sites. The social buying site Groupon, which recently rejected a $6 billion takeover bid from Google, is in the process of raising as much as $950 million from major institutional investors, at a valuation near $5 billion, according to people briefed on the matter who were not authorized to speak publicly.
“When you think back to the early days of Google, they were kind of ignored by Wall Street investors, until it was time to go public,” said Chris Sacca, an angel investor in Silicon Valley who is a former Google employee and an investor in Twitter. “This time, the Street is smartening up. They realize there are true growth businesses out here. Facebook has become a real business, and investors are coming out here and saying, ‘We want a piece of it.’ ”
The Facebook investment deal is likely to stir up a debate about what the company would be worth in the public market. Though it does not disclose its financial performance, analysts estimate the company is profitable and could bring in as much as $2 billion in revenue annually.
Under the terms of the deal, Goldman has invested $450 million, and Digital Sky Technologies, a Russian investment firm that has already sunk about half a billion dollars into Facebook, invested $50 million, people involved in the talks said.
Goldman has the right to sell part of its stake, up to $75 million, to the Russian firm, these people said. For Digital Sky Technologies, the deal means its original investment in Facebook, at a valuation of $10 billion, has gone up fivefold.
Representatives for Facebook, Goldman and Digital Sky Technologies all declined to comment.
Goldman’s involvement means it may be in a strong position to take Facebook public when it decides to do so in what is likely to be a lucrative and prominent deal.
As part of the deal, Goldman is expected to raise as much as $1.5 billion from investors for Facebook at the $50 billion valuation, people involved in the discussions said, speaking on the condition of anonymity because the transaction was not supposed to be made public until the fund-raising had been completed.
In a rare move, Goldman is planning to create a “special purpose vehicle” to allow its high-net-worth clients to invest in Facebook, these people said. While the S.E.C. requires companies with more than 499 investors to disclose their financial results to the public, Goldman’s proposed special purpose vehicle may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients.
It is unclear whether the S.E.C. will look favorably upon the arrangement.
Already, a thriving secondary market exists for shares of Facebook and other private Internet companies. In November, $40 million worth of Facebook shares changed hands in an auction on a private exchange called SecondMarket. According to SharesPost, Facebook’s value has roughly tripled over the last year, to $42.4 billion. Some investors appear to have bought Facebook shares at a price that implies a valuation of $56 billion. But the credibility of one of Wall Street’s largest names, Goldman, may help justify the company’s worth.
Facebook also surpassed Google as the most visited Web site in 2010, according to the Internet tracking firm Experian Hitwise.
Facebook received 8.9 percent of all Web visits in the United States between January and November 2010. Google’s main site was second with 7.2 percent, followed by Yahoo Mail service, Yahoo’s Web portal and YouTube, part of Google.
For Mr. Zuckerberg, the deal may double his personal fortune, which Forbes estimated at $6.9 billion when Facebook was valued at $23 billion. That would put him in a league with the founders of Google, Larry Page and Sergey Brin, who are reportedly worth $15 billion apiece.
Even as Goldman takes a stake in Facebook, its employees may struggle to view what they invested in. Like those at most major Wall Street firms, Goldman’s computers automatically block access to social networking sites, including Facebook.
By ANDREW ROSS SORKIN and EVELYN M. RUSLI
Source: The New York Times
The deal makes Facebook now worth more than companies like eBay, Yahoo and Time Warner.
The stake by Goldman Sachs, considered one of Wall Street’s savviest investors, signals the increasing might of Facebook, which has already been bearing down on giants like Google.
The new money will give Facebook more firepower to steal away valuable employees, develop new products and possibly pursue acquisitions — all without being a publicly traded company. The investment may also allow earlier shareholders, including Facebook employees, to cash out at least some of their stakes.
The new investment comes as the Securities and Exchange Commission has begun an inquiry into the increasingly hot private market for shares in Internet companies, including Facebook, Twitter, the gaming site Zynga and LinkedIn, an online professional networking site. Some experts suggest the inquiry is focused on whether certain companies are improperly using the private market to get around public disclosure requirements.
The deal could add pressure on Facebook to go public even as its executives have resisted. The popularity of shares of Microsoft and Google in the private market ultimately pressured them to pursue initial public offerings.
So far, Facebook’s chief executive, Mark Zuckerberg, has brushed aside the possibility of an initial public offering or a sale of the company. At an industry conference in November, he said on the topic, “Don’t hold your breath.” However, people involved in the fund-raising effort suggest that Facebook’s board has indicated an intention to consider a public offering in 2012.
There has been an explosion in user interest in social media sites. The social buying site Groupon, which recently rejected a $6 billion takeover bid from Google, is in the process of raising as much as $950 million from major institutional investors, at a valuation near $5 billion, according to people briefed on the matter who were not authorized to speak publicly.
“When you think back to the early days of Google, they were kind of ignored by Wall Street investors, until it was time to go public,” said Chris Sacca, an angel investor in Silicon Valley who is a former Google employee and an investor in Twitter. “This time, the Street is smartening up. They realize there are true growth businesses out here. Facebook has become a real business, and investors are coming out here and saying, ‘We want a piece of it.’ ”
The Facebook investment deal is likely to stir up a debate about what the company would be worth in the public market. Though it does not disclose its financial performance, analysts estimate the company is profitable and could bring in as much as $2 billion in revenue annually.
Under the terms of the deal, Goldman has invested $450 million, and Digital Sky Technologies, a Russian investment firm that has already sunk about half a billion dollars into Facebook, invested $50 million, people involved in the talks said.
Goldman has the right to sell part of its stake, up to $75 million, to the Russian firm, these people said. For Digital Sky Technologies, the deal means its original investment in Facebook, at a valuation of $10 billion, has gone up fivefold.
Representatives for Facebook, Goldman and Digital Sky Technologies all declined to comment.
Goldman’s involvement means it may be in a strong position to take Facebook public when it decides to do so in what is likely to be a lucrative and prominent deal.
As part of the deal, Goldman is expected to raise as much as $1.5 billion from investors for Facebook at the $50 billion valuation, people involved in the discussions said, speaking on the condition of anonymity because the transaction was not supposed to be made public until the fund-raising had been completed.
In a rare move, Goldman is planning to create a “special purpose vehicle” to allow its high-net-worth clients to invest in Facebook, these people said. While the S.E.C. requires companies with more than 499 investors to disclose their financial results to the public, Goldman’s proposed special purpose vehicle may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients.
It is unclear whether the S.E.C. will look favorably upon the arrangement.
Already, a thriving secondary market exists for shares of Facebook and other private Internet companies. In November, $40 million worth of Facebook shares changed hands in an auction on a private exchange called SecondMarket. According to SharesPost, Facebook’s value has roughly tripled over the last year, to $42.4 billion. Some investors appear to have bought Facebook shares at a price that implies a valuation of $56 billion. But the credibility of one of Wall Street’s largest names, Goldman, may help justify the company’s worth.
Facebook also surpassed Google as the most visited Web site in 2010, according to the Internet tracking firm Experian Hitwise.
Facebook received 8.9 percent of all Web visits in the United States between January and November 2010. Google’s main site was second with 7.2 percent, followed by Yahoo Mail service, Yahoo’s Web portal and YouTube, part of Google.
For Mr. Zuckerberg, the deal may double his personal fortune, which Forbes estimated at $6.9 billion when Facebook was valued at $23 billion. That would put him in a league with the founders of Google, Larry Page and Sergey Brin, who are reportedly worth $15 billion apiece.
Even as Goldman takes a stake in Facebook, its employees may struggle to view what they invested in. Like those at most major Wall Street firms, Goldman’s computers automatically block access to social networking sites, including Facebook.
By ANDREW ROSS SORKIN and EVELYN M. RUSLI
Source: The New York Times
After Vodafone, Govt mulls taxing Kraft-Cadbury deal
The finance ministry is looking into whether Kraft Foods will have to pay taxes to Indian authorities in its $19 bn takeover of Cadbury last year, in response to a public interest petition.
The case is the second in recent years where questions have been raised on global firms' tax liability in India following a blockbuster deal, adding to regulatory uncertainty for foreign companies chasing the India growth story.
Indian tax authorities last year asked Vodafone to pay $2.5 billion tax on its 2007 purchase of Hutchison Whampoa Ltd's mobile business in the country, which the company is currently fighting in court.
Uncertainty over taxes, environmental clearances and other regulations, on top of a slew of corruption scandals, have eroded Asia's third-largest economy's appeal among overseas corporate investors.
"These types of cases are something the Indian authorities have been pursuing for the past two or three years, but it is not a widespread international practice," said Abhishek Goenka, a partner at BMR Advisors in Bangalore.
"We are expecting a number of similar cases which will obviously create an element of concern for cross-border M&A from an Indian perspective," he added.
Foreign direct investment in India fell more than 24 percent in the first seven months of the current fiscal year to $12.56 billion, and analysts have said flows were likely to remain subdued for the near term on concerns over the slow pace of reforms and political volatility in India.
WEAK CASE?
Last month, a New Delhi-based law firm filed a writ petition on behalf of a social activist Ved Prakash in the Delhi High Court, saying Cadbury evaded substantial tax liability in India, as a global deal in which U.S.-based Kraft took over Cadbury also included assets in India.
"On paper, it looks weak," N.C. Hegde, a tax partner at Deloitte Haskins & Sells in Mumbai, told Reuters on Tuesday.
Kraft's Cadbury acquisition was global, with India just a part of the transaction, and thus should not be subject to Indian taxes, he said.
The Delhi High Court asked the petitioners to make a representation before the ministry of finance.
"It seems to be very premature now. The court could not ignore a public interest litigation ... the court will ask the government to look into the matter, the government will look into if they have any kind of case against Cadbury," Hegde said.
Source: The Economic Times
3 January 2011
Whether, for expenses to be allowed against 'income from other sources' a nexus between expenditur and income is mandatory? [Sec 57(iii)]
Sec 57(iii) - Whether, for expenses to be allowed against 'income from other sources' a nexus between expenditur and income is mandatory?
-YES, says ITAT
BANGALORE, DEC 21, 2010: THE issues before the ITAT are - whether, for expenses to be allowed against 'income from other sources' u/s 57, nexus between the expenditure and the receipt is mandatory. YES, says Tribunal. The nex questin is - Whether such expenses can be allowed in the manner business expenditure is allowed. NO, says the Tribunal.
Facts of the case
The assessee is the owner of a hotel property at Bangalore consisting of land, building and other facilities, which was given on lease to Taj Group of Hotels. The assessee receives lease rent computed on the basis of the profit of the business. In the previous year relevant to the assessment year under appeal, the assessee received a license fee of Rs.3,59,88,998/-. It is the principal source of income of the assessee company. It has also received an interest income of Rs.13,36,240/. After claiming the expenditure under different heads, a total income of Rs.3,07,71,200/- was returned by the assessee company. The assessee had always claimed that the lease income was received under the head `business income'. But this proposition was not accepted by the Revenue. The Revenue treated the license fee and other incidental income as `income from other sources'. This dispute reached up to the High Court of Karnataka and the HC held that the Revenue was right in treating the income under the head `income from other sources'. Thus, the dispute on the head of income was resolved and the assessee also accepted the same.
In the course of assessment proceedings, the Assessing Officer found that the assessee company had claimed expenditure to the extent of Rs.68,09,588/- under different heads. The Assessing Officer observed that the assessee company was earning income as licence fee under the head `income from other sources' and it was not carrying on defacto business and, therefore, the expenses allowable in the computation of income must be confined to the rule provided u/s 57 of the Income-tax Act. The Assessing Officer held that the expenses cannot be held as deduction in the nature of business expenditure. The expenses can be allowed only to the extent permitted u/s 57. Initially he proposed to disallow all the expenditure claimed by the assessee company. In response to that proposal, the assessee submitted that the expenses were allowable under the head `income from other sources' and the claim of the assessee has already been accepted by the ITAT Bangalore Bench in its own case relating to the assessment years 1995-96 to 1998-99 and, therefore, based on the order of the ITAT, expenses need to be allowed.
The Assessing Officer accepted some of the contentions of the assessee and agreed to allow essential expenditure in the nature of salaries, PF, ESI etc. The Assessing Officer allowed expenditure necessary for the assessee company to retain its corporate status and other establishment expenses. But the Assessing Officer held that many of the expenses claimed by the assessee company as deduction are not directly connected to its income assessed under the head `income from other sources'. For eg. he found that salary, wages and bonus amounting of Rs.17,08,300/- included the commission of Rs.15,26,770/- paid to the executive Chairman of the assessee company which cannot be allowed. Finally, the Assessing Officer disallowed expenditure to the extent of Rs.49,27,648/- as against a total amount of Rs.68,09,588/- claimed by the assessee company. The CIT (A) confirmed the additions made by the assessing officer except depreciation allowance.
On further appeal, the Tribunal held,
- it is one thing that the assessee company might have incurred expenses under the above heads and it is another thing that whether all those expenses could be allowed as deduction in computing income from other sources;
- expenses could be allowed as deduction u/s 57(iii) only if the assessee has established the nexus between the expenditure and the income earned;
- in the present case, the assessee was not able to establish any nexus between the various disallowances confirmed by the CIT(A) and the income earned by the assessee company by way of lease rentals. The assessee could not produce evidence to prove the nexus of the traveling expenses of the directors, entertainment expenses and the commission expenses with the income from other sources that whether these have resulted into any increase in lease rentals. Hence, addition is confirmed.
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