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Budget 2012: Live blog for lawyers

Live: The Budget 2012 speech is kicking off at 11am and Legally India will blog it live. What do you think it holds for lawyers and clients? Hike service tax for lawyers or abolish it? Increase FDI? Vodafone, round 27? DTC news? Tinker with near-unusable LLPs? Massive tax benefits for all? Damp squib? Share your thoughts and follow our live blog.

11:00 am Finance min Pranab Mukherjee starts – how can anyone hear anything with all the shouting?

Starts out on a sober depressing economic note, now it’s degenerated into FM begging “please please please please please”, in a plea for silence. Now this is entertainment folks!

11:05 Speaker Meira Kumar finally manages to calm the waters. Ok, take two. Everyone’s calmed down and Pranab is getting going again. Depressing economic performance and weak industrial growth.

11:08: Five objectives: Demand driven growth recovery. Create conditions for private investment in energy, transport sector, coal power, national railway, anti-corruption and pretty much everything else, it seems…

11:12 Inflation driven predominantly by agricultural supply constraints, claims Pranab.

11:14 Expects 7.6% Indian GDP growth plus/minus 0.25%.

11:18 @courtwitness1 reports on Twitter that Chief Justice Kapadia tearing through his caseload – at 10:50 he was half way through his board already, though he has no TV set up in court alas. Responding to @LegallyIndia, he adds: “i'm sure he can't wait to run back and find out if government's going to try and overturn #vodafone case by law”.

11:20 @arungiri tweets mysteriously about Kapadia / Vodafone overturning: “absolutely Government will, according to my sources..not only that, look out for a BIG surprise!”

11:22 DTC not to be introduced this year – no timetable ready. Guess tax lawyers get to bill clients for DTC compliance for a while longer yet… GST to be introduced by August 2012.

11:27 Lots of bullet points: Rs 30,000 crore disinvestment target this financial year. A new equity investment scheme named after – surprise, surprise – Rajiv Gandhi, which will have 2-year lock in. Also raised limit on external commercial borrowing (ECB).

11:31 Plus proposes about 5,000 different bills, including Banking Bill amendment – let’s see whether Parliament actually gets around to half of those… Also proposed electronic IPOs, which sounds interesting.

11:33 Banks to be recapitalised by Rs 16,000 crore, tweets @livemint

11:36 Lots of infrastructure plans, encourage PPP etc… @mint_ed tweets: “Unless there's something in the details, infrastructure has been dealt in pretty much the same way as it usually is: lots of lip service.”

11:38 Aircraft finance reform: “Airlines allowed to tap foreign loans for working capital. Lenders beware”, tweets @mint_ed

11:43 Pranab wants the second green revolution in Indian agriculture. Also talks urea – yumm – and how India will be self-sufficient.

11:50 Zoning out here at Legally India towers at times… Pranab could really work on polishing his delivery a little. Worse than the Shipping Forecast.

11:53 Public distribution system (PDS) will be computerised by December this year - interesting!

Rs 200 crores allocated for global warming fight or so? Well that oughta fix things!

11:57 From www.livemint.com’s live budget chat: “KPMG says ECB for working capital will help airlines to bring down interest cost by 3-5%age points, says KPMG. Huge positive for Jet Airways, Kingfisher Airlines and SpiceJet”

12:08 The govt is apparently committed to enactment of public procurement legislation (first come first served?) to enhance confidence in public procurement and to ensure transparency & efficiency in the process. Anti-corruption framework is in various stages of enactment, says Pranab. This could be funny.

12:10 More appeasements / poking the bear of Hazare & Bhushans: Dedicated to tracking black money, and tax evasion through PAN. Awesome commitments! (sarcasm)

12:12 @arungiri tweets: “Gross Tax Receipt estimated up 15% from FY 11-12.”

Hint that they’ll want to start taxing Vodafone-like deals more?

12:15 Hilarity in the chambers, MPs bullying the FM: “Madam speaker the life of a finance minister is not easy”… Hall erupts in laughter.

Although DTC will not be effective this year, FM proposes to intro DTC rate for income tax, and enhance non-taxable income slab for individual tax payers from Rs 1.8 lakh to Rs 2 lakh. Up to Rs 5 lakh is 10%; Above 10% got to pay 30%.

12:20: Service tax net widened, rate hiked! All services except 17 to be taxed. Govt services, education and films exempted ! The hiked rate of 12% will make 19,000 crore of extra revenue for the Govt

12:30: Duty on large cars hiked to 27%! Time to get smart about commuting, perhaps? Oops… duty on bicycles raised too… to 30%

12:40: gold imports have increased by almost 3% this last year…. thought so !! In order to prevent round-tripping a basic customs duty of 10% has been enhanced cut and polished gems

12:45: Gutkha and various kinds of tobacco subjected to enhanced duty. Thank you for smoking :)

12:50: Mukherjee wraps up by cheering everyone to be entrepreneurial !

12:52: He introduces the Finance Bill 2012! The House adjourned for Monday !

So advocates, now that the service tax umbrella is set to include almost everything under the sun, where does this leave us? Does the lawyers’ writ against service tax lose steam?

courtwitness1 opines: nope. lawyers don't want government to know how much they earn. Service tax fight will continue to bitter end.

Union Budget 2012 is available for download at indiabudget.nic.in

13:40: BIG NEWS: Vodafone screwed into tax net with RETROSPECTIVE effect. See section 4 of Finance Bill: http://bit.ly/y6X5Ap via arungiri

4. In section 9 of the Income-tax Act, in sub-section (1),—
(a) in clause (i), after Explanation 3, the following Explanations shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1962, namely:—
‘Explanation 4.—For the removal of doubts, it is hereby clarified that the expression “through” shall mean and include and shall be deemed to have always meant and included “by means of”, “in consequence of” or “by reason of”.
Explanation 5.—For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.’;

The effect of these explanations being to clarify that the law inherently had the power to tax cross-border deals such as in Vodafone [Mint]

14:12: Vodafone Lawyer Fereshte Sethna says the restrospective amendment is unconstitutional and will attract judicial scrutiny, ALMT partner Hitesh Jain holds a contrary view though admitting that this would ring foreign investor alarm bells

15:06: DK Mahant: Proposed Service Tax Bill, in Clause 44(c), EXEMPTS lawyers from paying service tax for court appearances indiabudget.nic.in

15:39: Lalit Bhasin tells Legally India how service tax exemption to fees earned by lawyers in courts and tribunals is “a good but an inadequate step”

Meanwhile, the tax bigwigs are having their say on everything ranging from Advance Pricing Agreements (KPMG), checking black money (BMR), GAAR (General Electric), the negative list of services (ELP) & more… [Taxsutra]

16:08: Updates! While Sethna and Jain had their say, earlier, Bhasin rues that by trying to frustrate the entire exercise of the Vodafone judgment, instead of honouring it, the lawmakers are going against the spirit of rule of law, and not at all inspiring confidence in foreign investors

16:44: Email from J Sagar Associates proffers JSA partners’ two cents -

Somasekhar Sundaresan says: “Introduction of electronic voting is a critical step for companies. The regulators have been working on the concept for a while now, and making it easier for shareholders to vote, would be a step towards better governance.”

Nitin Potdar says: “Major focus on Infrastructure and Industrial Development and firm steps towards deepening the Capital Market to increase the investor base for capital building will help accelerate economic growth. The Viability Gap Funding (VGF) under the Scheme for Support to PPP in infrastructure will help channel private investment into the sector. Additionally, the launch of Rs. 60,000 crores worth of infrastructure bonds will serve as a huge positive for the infrastructure sector. This augurs well for the India growth story”

16:45: The 244 word (separated by 30 commas!) bombshell dropped on Vodafone and like companies, through Finance Bill 2012, reads like this:

113. Notwithstanding anything contained in any judgment, decree or order of any Court or Tribunal or any authority, all notices sent or purporting to have been sent, or taxes levied, demanded, assessed, imposed, collected or recovered or purporting to have been levied, demanded, assessed, imposed, collected or recovered under the provisions of Income-tax Act, 1961, in respect of income accruing or arising through or from the transfer of a capital asset situate in India in consequence of the transfer of a share or shares of a company registered or incorporated outside India or in consequence of an agreement, or otherwise, outside India, shall be deemed to have been validly made, and the notice, levy, demand, assessment, imposition, collection or recovery of tax shall be valid and shall be deemed always to have been valid and shall not be called in question on the ground that the tax was not chargeable or any ground including that it is a tax on capital gains arising out of transactions which have taken place outside India, and accordingly, any tax levied, demanded, assessed, imposed or deposited before the commencement of this Act and chargeable for a period prior to such commencement but not collected or recovered before such commencement, may be collected or recovered and appropriated in accordance with the provisions of the Income-tax Act, 1961 as amended by this Act, and the rules made thereunder and there shall be no liability or obligation to make any refund whatsoever.

It means that the government is trying to basically say:”Vodafone, you may have won fair and square in the highest court of the land after years of battle in our courts, but you know what, just hand over those Rs. 11,218 crore that we claimed you owed us anyway”. they say here. Okay.

17:15: The Firm: BMR Advisors parnter Shefali Goradia calls Clause 113 in Finance Bill a ‘Fatwa’ !! Courtwitness1 describes it as theft, while Mint explains how it is simply a specimen of the dadagiri of the Indian government!

Indian Corporate Law Blog briefly analyses how explanations inserted through clarificatory amendments to section 2 and 9 will become the machinery to overturn the fulcrum of Supreme court’s judgment in Vodafone.

19:13: More from the Vox Populi

JSA partners Amit Kapur and Vishnu Sudarsan are pragmatic about award and implementation of infrastructure projects in the next fiscal, while the health and education sectors don’t seem as promising even though the Viability Gap Funding Scheme had been introduced in these sectors last year itself.

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