U.S. banks face $60B gap under Basel III.

 America's 19 biggest banks are at least $50B short of meeting Basel III requirements under new rules that the Fed approved yesterday, with smaller lenders about $10B short. The Fed surprised the sector by voting in favor of applying the complex regulations to all 7,307 U.S. banks, including even the smallest lenders

Composite contract cannot be split to exempt profits from offshore supply of goods. A joint contract constitutes an AOP despite separate responsibility of parties

Alstom Transport SA vs. DIT (AAR)

The Applicant, a foreign company, entered into a consortium agreement with three other cpmpanies for the submission of a joint bid in response to the Bangalore Metro Rail Corporation Ltd’s (BMRC) tender for “design, manufacture, supply, installation, testing & commissioning of signaling/ train control and communication systems”. The consortium parties agreed to be jointly and severally liable to BMRC for the performance of all obligations under the contract. However, the respective obligations of the parties was split up & each was separately responsible for its own profit/loss. The bid was accepted by BMRC and a contract between BMRC and the Consortium was entered into. The applicant filed an applicant for advance ruling and claimed, relying on Ishikawajima–Harima 288 ITR 408 (SC), Hyundai Heavy Industries 291 ITR 482 (SC) & Hyosung Corp 341 ITR 18 (AAR), that the income derived by it from offshore supply of plant and materials was not taxable in India as the title to the goods had passed, and payment was received, outside India. It was also claimed that as each consortium member had separate responsibility and was accountable for its own profit/ loss, the fact that the contract with BMRC was joint, did not make the consortium an “AOP”. HELD by the AAR rejecting the plea:

Germany industrial output sinks.

 Industrial output in Germany and Spain fell faster than expected in April, underscoring how the economies in the eurozone's core and periphery are suffering. Germany's output fell 2.2% on month vs. consensus of -1% and Spain's slumped 8.3% on year vs. -6.5% expected. Meanwhile, eurozone Q1 GDP was flat on quarter, confirming the initial estimate, but fell 0.1% on year vs. unchanged initially

The declining rupee will have a 'limited' impact on India's sovereign rating.

The  Indian rupee has been falling, recording new lows. This has had an adverse impact on corporate profitability as well as government finances. However, as per ratings agency Moody's Investor Service, the declining rupee will have a 'limited' impact on India's sovereign rating. The reason for this is that only 7% of total government debt is from overseas. As a percentage of GDP (Gross Domestic Product), this comes to about 5%. Comparatively, the private sector is set to be more hurt. The rupee depreciation has significantly increased the cost of repaying their foreign currency borrowings. Indian corporates have about US$ 96.6 bn in external debt.However, only 40-60% of this is estimated to have been hedged. Even then, the exposure of the private sector to external debt is "relatively low" at 16% of GDP. This means that the impact on the sovereign ratings due to this would not be too substantial. Fortunately, India's exposure to external debt is not too high. If that had been the case, India would have witnessed its own debt crisis akin to the troubled Eurozone economies.

Information cannot be disclosed u/A 28 of DTAA in absence of strong connection between requested information & India’s tax laws.

Comptroller of Income Tax v AZP (Singapore High Court)

 

The Indian tax authority seized documents from an Indian national which were believed to indicate the existence of undeclared income deposited in a company’s bank accounts in Singapore. Pursuant to Article 28 (1) of the India-Singapore DTAA, the Indian tax authority sent a request for information to its Singapore counterpart (the Comptroller of Income-tax). In support of the request, the Indian tax authority relied on unsigned transfer instructions allegedly issued by the Indian national as evidence that the Indian national remitted monies to the Singapore Company’s bank accounts. The Comptroller filed an application in the High Court u/s 105J of the Singapore Income-tax Act for an order requiring the bank to produce the company’s bank records. HELD dismissing the application:

Economy is slowing down with no sign of relief.

If we were to exclude flat index in the last week, markets closed negative for 5th consecutive week.  This has been accompanied by INR hitting an all time low if 56.46.
4QFY12 GDP growth at 5.3% came well below expectations; this was the lowest growth in nine years taking it below the Lehman low of 5.6%. This was led by significant upward revision in the base quarter leading to higher base. Al the sub sectors of GDP witnessed slowdown with services sector slowing down by 1% to 7.9%. The only good news is Brent is trading below $100.

India fares poorly compared to Asian peers

Over last several months, the inherent weaknesses of the Indian economy have come to the fore. The government been has putting the blame of India's deteriorating economic condition on the eurozone crisis. But several indicators hint that the India's current predicament is majorly the result of its own doing. Today's chart of the day compares the current account deficit of India with some Asian peers. It is evident from the chart that India has the highest current account deficit among major Asian economies. India's current account deficit has been adversely affected mainly due to high dependence on fuel imports, high subsidies and a falling rupee.