Tuesday, 31 March 2015

Transfer Pricing

Transfer price is the price at which one part of an entity sells a product or service to another part of the same entity. In principle a transfer price should match either what the seller would charge an independent, arm's length customer, or what the buyer would pay an independent, arm's length supplier.

Transfer pricing is sometimes misused to lower profits in order to avoid paying income taxes in high-tax regions by shifting profits to related entities situated in less – tax regions that levies no or low taxes

Domestic Transfer pricing

In domestic transactions, the under-invoicing of sales and over-invoicing of expenses ordinarily will have no revenue impact in nature, except in two circumstances such as where one of the related entities is (i) loss making or (ii) liable to pay tax at a lower rate as some specified categories of business activities are given tax holidays by the government and the profits are shifted to such entity from the profit making related domestic entity in order to pay low or nil taxes. Here domestic transfer pricing arises.

In order to reduce the tax evasion by way of domestic transfer pricing, a concept of specified domestic transaction was inserted in Indian income tax act 1961 where provisions of transfer pricing would be applicable.

Threshold limit – For a taxpayer entity, if the aggregate of specified domestic transactions exceeds INR 20 crore (increased from INR 5 crore in budget 2015-16) in any year, provisions of transfer pricing would be applicable.





Monday, 30 March 2015

30-mar


European countries to join AIIB : A boost to China's "One belt One road" initiative

1)      European countries, including Germany, France, Britain, and now Russia along with Australia agreed to join the China-led Asian Infrastructure Investment Bank (AIIB).

Ø  It has imparted a new sense of realism to Beijing’s Silk Road plans.

2)      Consequences of this move :

                                i.            If implemented, it is likely to shift the global balance of economic power towards Eurasia.

                              ii.            The decision of key European powers along with South Korea to join the bank, overriding strong objections from the United States, has split the Atlantic Alliance on this issue.

3)      What is "One belt One Road"?

a)      China’s “One belt One road” initiative envisages connecting the Pacific coast with Europe by an extensive transport, cyber and energy network along the Eurasian corridor.

b)      Interlinked with the land route, China wants to establish the 21st century Maritime Silk Road (MSR) , which would connect China with a string of ports, from where would radiate economic corridors, in Southeast Asia, South Asia, West Asia and Africa. The MSR would terminate in Europe.

4)      China advocate, in reference to the AIIB, the creation of a regional hub for financial cooperation, apart from strengthening pragmatic cooperation in monetary stability, investment, financing, credit rating and other field.

5)      China consider this as the emergence of a multi-polar world.

6)      China’s ‘One belt One Road’ initiative requires massive investment, including finance from the $40 billion Silk Road fund, which the Chinese have separately established.

7)      ‘One Belt One Road’ initiative, backed by a solid financial institutional network, once implemented, is expected to accelerate the shift of geo-economic power away from the United States, towards Eurasia.

Ø  More than 4.4 billion people, or 63 per cent of the global population countries, are expected to benefit from China’s game changing plans.

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Sunday, 29 March 2015

29-mar


Price Stabilization Fund

1)      Announced in July, 2014 budget, a Price Stabilization Fund has been approved by Union Agriculture Ministry.

2)      The fund, with a corpus of Rs. 500 crore, will be used to support market interventions for managing prices of perishable agri-horticultural commodities.

3)      Initially, the fund is proposed to be used for onion and potato only.

4)      Losses incurred, if any, in the operations will be shared between the Centre and the States.

5)      The PSF will be used to advance interest-free loans to State governments and Central agencies to support their working capital and
other expenses on procurement and distribution interventions for such commodities.

6)      These commodities will be procured directly from farmers or farmers’ organisations right at the farm gate or mandi levels and be made available at reasonable prices to consumers.

7)      The States will set up a revolving fund to which the Centre and State will contribute equally, except for North-Eastern States where the ratio will be 75:25.

8)      The revolving fund is being mooted so that requirements for all future interventions can be decided and met at the State level itself.

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Rajya Sabha prorogued

1)      The Rajya Sabha’s Budget Session being prorogued clearing the decks for re-promulgation of the contentious Land
Acquisition Ordinance.

2)      Prorogue means cutting short the Budget Session of the Upper House which had gone into recess from March 20 and would have met again on April 20.

Ø  The session was to conclude on May 8 but with the Rajya Sabha getting prorogued, the session has ended for the House.

3)      Cabinet can now recommend to the President reissuance of the land ordinance, which is due to lapse on April 5.

4)      Bill on land acquisition was passed by the Lok Sabha during the first half of the Budget Session with some amendments but was blocked by the Opposition in the Rajya Sabha, where the government falls short of numbers.

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Saturday, 28 March 2015

Yemen crisis


Present situation : Saudi Arab led campaign in Yemen

1)      Saudi warplanes bombed Huthi rebels in Yemen, launching an Arab military intervention in support of its embattled President.

2)      The rebels and their allies within the armed forces had been closing in on main southern city Aden where President Mansour Hadi has been holed up since fleeing the rebel-controlled capital Sana’a last month.

3)      Huthi rebels advance had raised fears in Saudi Arabia that the Shia minority rebels would seize control of the whole of its Sunni-majority neighbour and take it into the orbit of Shia Iran.

4)      Iran condemned the Saudi led intervention against its coreligionists as “a dangerous step” that violated “international responsibilities and national sovereignty.”

5)      Riyadh’s move is the latest front in a growing regional contest for power with Iran.

Ø  The contest is also playing out in Syria, where Tehran backs Mr. Assad’s government against mainly Sunni rebels

Ø  It is also being played in Iraq, where Iranian-backed Shia militias are playing a major role in fighting



Yemen crisis
1)      Yemen is in the grip of its most severe crisis in years, as competing forces fight for control of the country.  

2)      The tussle for power in Yemen has serious implications for the region and the security of the West.

Who is fighting whom?
1)      The main fight is between forces loyal to the beleaguered President, Abdrabbuh Mansour Hadi, and those allied to Zaidi Shia rebels known as Huthis, who forced Mr .Hadi to flee the capital Sanaa in February.

2)      Yemen's security forces have split loyalties, with some units backing Mr Hadi, and others the Huthi and Mr Hadi's predecessor Ali Abdullah Saleh.

3)      Mr Hadi is also supported in the predominantly Sunni south of the country by militia known as Popular Resistance Committees and local tribesmen.

4)      Both President Hadi and the Huthi are opposed by al-Qaeda in the Arabian Peninsula (AQAP).

5)      The picture is further complicated by the emergence in late 2014 of a Yemen affiliate of the jihadist group Islamic State, which seeks to eclipse AQAP.


Saudi intervention
1)      After rebel forces closed in on the President's southern stronghold of Aden in late March, a coalition led by Saudi Arabia responded to a request by Mr Hadi to intervene.

2)      The coalition comprises five Gulf Arab states and Jordan, Egypt, Morocco, Pakistan and Sudan.

Implication of the crisis around the world
1)      Yemen crisis can greatly exacerbate regional tensions.

2)      It also worries the West because of the threat of attacks emanating from the country as it becomes more unstable.

3)      The conflict between the Huthi and the elected government is also seen as part of a regional power struggle between Shia-ruled Iran and Sunni-ruled Saudi Arabia.

Ø  Gulf Arab states have accused Iran of backing the Huthi financially and militarily

4)      Yemen is strategically important because it sits on the Bab al-Mandab strait, a narrow waterway linking the Red Sea with the Gulf of Aden, through which much of the world's oil shipments pass.

Ø  Egypt and Saudi Arabia fear a Huthi takeover would threaten free passage through the strait.

28-mar


NITI Aayog to set up working group

1)      A sub-group of 11 Chief Ministers of the NITI Aayog decided to set up a working group to recommend steps to make Centrally sponsored schemes more effective and their implementation by the States more flexible.

2)      The working group will prepare a draft report which will be taken up for discussion at the next meeting of the panel.

3)      The funding pattern of the Central schemes is expected to undergo further changes, considering acceptance of recommendations of 14th Finance Commission relating to increase in the States’ share of Central taxes to 42 per cent from 32 per cent.

4)      Finance Ministry proposed in the Centre’s fiscal policy strategy statement that the expenditure on 30 such schemes (CSS), which has already been taken into account as State expenditure, be transferred to the States.

Ø  MNREGA and the National Food Security Act are neither being discontinued nor transferred as they are being implemented under laws passed by Parliament.

5)      At its first meeting, the Governing Council of the NITI Aayog constituted three subgroups of Chief Ministers :

                                i.            on rationalisation of the Central schemes

                              ii.            skill development

                            iii.            Swachh Bharat Abhiyaan

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IAEA review of Indian nuclear power plant

1)      U.N.’s International Atomic Energy Agency conducted a 12-day review of India’s nuclear safety standards.

2)      IAEA consider that India has a “strong commitment to safety” but the Atomic Energy Regulatory Board (AERB) needs more independence and separation from the government.

3)      It also called for the Indian government to allow more on-site inspections at the nuclear power plants (NPPs) under international safeguards.

4)      Six preliminary suggestions were given at the end of the review which were accepted by the Indian agency.

5)      Among other suggestions, the international agency said India needs a “national policy” for nuclear safety and radioactive waste management, and needs more “internal emergency arrangements.”

6)      IAEA review came at the invitation of the Indian government after it concluded handing over its civilian nuclear reactors for international scrutiny, and submitted to IAEA requirements for accounting for spent fuel and other nuclear processes.

7)      India had last year ratified IAEA's Additional Protocol and also brought 22 nuclear facilities, including 14 atomic power reactors, under the agency's safeguards, enabling it to have greater role in inspection of these units.

8)      India is keen to get backing for a future bid for membership to the Nuclear Suppliers Group, which it has been kept out of as India has refused to sign the Non-Proliferation Treaty (NPT).

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Rajasthan amends Panchayati Raj law

1)      Rajasthan became the first State in the country to fix a minimum educational qualification for contesting elections to the Panchayati Raj Institutions.

2)      Rajasthan Panchayati Raj (amendment) Bill, 2015, makes Class VIII pass mandatory for the post of sarpanch and Class X for Zila Parishad or Panchayat Samiti elections.

Ø  except in tribal reserved areas, where the minimum qualification is Class V

3)      The amendments to Section 19 of the Rajasthan Panchayat Raj Act, 1994 also make a functional toilet mandatory in the house of a contestant.

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27-mar


Whistleblower Mr. X - Vyapam scam

1)      Mr. X is the whistleblower in the Vyapam scam : corruption in the Madhya Pradesh Professional Examination Board.

2)      Vyapam scam involves massive irregularities and corruption in the Madhya Pradesh Professional Examination Board (MPPEB) or M.P. Vyavsayik Pareeksha Mandal, abbreviated in Hindi as Vyapam.

3)      It has been alleged that officials at the board took money to compromise the examination and recruitment for several professional courses, mostly teaching recruitments.

4)      The accused are powerful politicians, senior bureaucrats and top businessmen.

5)      “Mr. X”, the whistleblower, is an IT expert who claimed to have sensitive information from the computers of the main accused.

6)      The Delhi High Court has refused to allow the M.P. High Court constituted-Special Task Force and the Special Investigation Team to have exclusive access to information about the scandal or interrogate the whistleblower.

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Maritime Silk Road to reset SL-China ties

1)      China and Sri Lanka have decided to carve a new strategic framework for their relationship defined by the Maritime Silk Road (MSR).

2)      Both the countries also agreed to avoid a clash with India through a Beijing-Colombo-New Delhi trilateral partnership.

3)      The Chinese President said that Sri Lanka was a strategic partner and Beijing wanted to again promote and elevate the China-Sri Lanka relationship to fulfil an important purpose.

4)      Sri Lankan assured China that work on the stalled $1.4-billion Colombo Port City Project, would resume after problems were “sorted out".

Ø  citing lack of transparency, the Sirisena administration has called for review of the multimillion infrastructure projects that had been granted by the rival government of former President Mahinda Rajapaksa.

5)      Defining a new conceptual framework for the future, both the countries agreed to put all the projects in Sri Lanka in the general framework of the 21st century Maritime Silk Road.

6)      Benefits : The decision implies that additional sources of funding would be available to Sri Lanka, including the $40 billion China-backed Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB).

7)      Recalibration of military ties : The recalibration of the military relationship comes after Sri Lanka made it clear that the country would no longer host the docking of foreign submarines in its ports, following India’s strong objections to the visit last year of a Chinese submarine on two occasions in Colombo.

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Thursday, 26 March 2015

26-mar


CAG audit in Rice mill scam

1)      The CAG is conducting an audit of financial dealings between government institutions and rice mills in eight major rice producing States - Andhra Pradesh, Punjab, Haryana, Uttar Pradesh, Tamil Nadu, Chhattisgarh, Odisha and West Bengal.

2)      There are serious allegations that black money to the tune of Rs. 200 crore is being generated every day through under or non-reporting of earnings from sale of paddy by-products by the millers.

3)      Paddy by-products :

                                i.            Rice bran is used to extract oil

                              ii.            husk is used to fuel power plants

                            iii.            apart from human consumption, broken rice is used in breweries, to make laundry starch and other products.

4)      The Central and State governments procure rice through the Custom Milled Rice (CMR) and the Levy Rice mechanisms for public distribution system.

A.      Under CMR, government institutions get paddy from farmers at the minimum support price and give it to mills under an agreement.

B.      Under the levy system, millers purchase paddy from farmers, mill it into rice and sell it to the government.

5)      Under both schemes, the government collects 68 kg of parboiled or 67 kg of raw rice per 100 kg paddy.

Ø  There is no clarity about the total quantity and pricing of the rest of the 32-33 kg by-products of paddy, neither in government audited balance-sheets nor in rice millers’ accounts.

6)      The custom milling agreement with the government stipulates that millers will retain the by-products.

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Spectrum auction fetches record amount

1)      Facts & Figures :

a)      bidding for spectrum allocation in 4 bands of airwaves : 2100 MHz, 1800 MHz, 900 MHz and 800 MHz

b)      the permits will be valid for 20 years

c)      19 days of fierce bidding

d)      8 operators

e)      115 rounds in auctions

f)       govt. was expecting to raise about Rs. 82000 crore

g)      the auction concluded at Rs. 1,09,874 crores

h)      About 11 per cent of the spectrum went unsold

2)      The govt. will not announce the name of the successful bidders as a case is pending before the Supreme Court.

3)      The high bidding for spectrum is also likely to impact consumers with call and SMS tariff going up.

4)      Depending on the band, carriers will have to pay as much as 33 per cent of their final bid within 10 days of the auction's conclusion and the rest in ten annual installments starting in 2017.

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J&K not under Disturbed Areas Act

1)      The J&K govt. has admitted that the Disturbed Areas Act, 1997 has expired.

2)      It means that the J&K police does not have the kind of powers that Central forces enjoy under the Armed Forces (Jammu and Kashmir) Special Powers Act.

3)      The J&K government would denotify some areas from the Disturbed Areas Act, although the process will be gradual.

4)      The fact that the DAA is no longer in force does not mean that the Armed Forces (Jammu and Kashmir) Special Powers Act is no longer valid.

5)      The DAA of 1997 has nothing to do with AF(JK)SPA. For the AF(JK)SPA to be applicable, a region or regions has to be notified as a disturbed area under section 3 of the AF (JK)SPA and not under DAA.

6)      The government in 2001 notified the whole of Jammu and Kashmir (leaving out Leh and Kargil) as disturbed under section 3 of AF(JK)SPA.

7)      According to a Supreme Court ruling in 1997, the notification for places as Disturbed Areas cannot exist in perpetuity and has to be for a limited duration and there should be periodic review of the declaration before the expiry of six months.

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