Bundesbank has raised its growth forecast for Germany

Expecting a growth of 1.9% this year, replacing the December forecast of 1.7%. As the euro zone's largest economy, Germany has been looked to as a source of euro zone recovery, especially given the ECB's cut yesterday to the deposit rate below zero. The Bundesbank growth forecasts for 2015 and 2016 are unchanged at 2% and 1.8% respectively.

Expl to s. 73: Speculation loss on transactions in derivatives can be set off against the gains of delivery shares

CIT vs. Baljeet Securities Pvt. Ltd (Calcutta High Court)

Under the Explanation to s. 73 where any part of the business of a company consists in the purchase and sale of shares of other companies, such company shall, for the purposes of the section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. Therefore, the entire transaction carried out by the assessee was within the umbrella of speculative transaction. There was, as such, no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares.

A transfer of shares under a family arrangement is for a determinable “consideration” & is not “voluntary”. Consequently, the shares are not received under a “gift” & the transferee cannot claim benefit of cost, and holding period, of the transferor

ACIT vs. Bilakhia Holdings P. Ltd (ITAT Ahmedabad)

The members of the Bilakhia family entered into a deed of family arrangement with a view to consolidate and equalize values of the assets held by each of the parties. Pursuance to the said family arrangement, the family members transferred the shares of Nestle India Ltd and Hindustan Lever Ltd held by them as investment to the assessee, an investment company in which the individual members of the family had equal interest. The assessee sold the shares and claimed that as it had acquired the shares vide a “gift”, in computing the capital gain, the cost of acquisition of the shares to, and the period of holding by, the transferors, had to be considered. The AO rejected the claim though the CIT(A) accepted it. On appeal by the department to the Tribunal HELD allowing the appeal:

(i) On the issue as to whether the shares received on family arrangement is pursuant to a “gift”, s. 122 of the Transfer of Property Act 1882 provides that a transfer of moveable or immovable property can be treated as a gift only if the same is made voluntarily and without any consideration. It cannot be said that a family arrangement is “without consideration”. In CWT vs. HH Vijayaba, Dowgner Maharani Saheb of Bhavnagar Palace 117 ITR 784 (SC) it was held that a family settlement or family arrangement which is to buy peace is for good consideration and creates an enforceable agreement between the parties. Consequently it cannot be said that a family arrangement is without consideration and a “gift”;

(ii) On the issue as to whether this consideration can be measured in money or monies worth, the purpose of the family arrangement was to equalize the holdings between the respective families of three brothers. Therefore, it cannot be said that consideration for transfer of shares cannot be measured in terms of money or monies worth. The equalization of wealth has only monetary connotation. To avoid disputes cannot be said to be without monetary consideration as it is common knowledge that family disputes ruin the family financially. The family disputes are being settled in monetary terms by resorting to arbitration and in case such settlements is not done, matter travels to the court and the family suffers heavily not only mentally but also financially. Thus, it cannot be said that the consideration for transfer of shares was not for monetary consideration;

(iii) On the issue as to whether the receipt of shares under the family arrangement was “voluntary” or not, the term “voluntary” is defined to mean “free choice; done with free will; without any compulsion ..”. The family arrangement cannot be said to be voluntary because it was enforceable and binding on the parties and with the purpose of equalization of wealth of the family members, which had monetary connotation.

Gold investors are a concerned lot these days. The price of the yellow metal has been in a down trend recently. In the month of May, the gold price fell by about 10%. The main reason for this correction was the Reserve Bank of India's (RBI) decision to ease gold import norms. However, there is more negative news in store. Keeping in mind the fall in global gold prices too, the Indian government has cut the import tariff value on gold from US$ 424 per 10 grams to US$ 408 per 10 grams. The import tariff value is the base price at which the customs duty on gold is calculated to prevent under-invoicing. Thus expectations are high that the new government will cut the import duty on gold in the upcoming budget. These measures would certainly result in more gold imports into the country.

Also, the months from June to September have traditionally witnessed weak demand for gold. All these factors have led many market participants to conclude that the price could fall another 5-10% over the next one to two months. Should these factors affect investors' allocation to Gold'? We don't think so. Gold should form 10-15% of an investor's portfolio as it is an effective portfolio diversifier and acts as a good hedge against inflation. Gold is a good long term investment and investors should not speculate on the price based on short term factors.

Euro zone flash inflation data for May is due today, with the consensus being a 0.7% rise year-on-year. The numbers are expected to reinforce the case for a heavy monetary stimulus from the European Central Bank. Barclays (BCS), RBS (RBS) and JPMorgan (JPM) predict an annual inflation reading of 0.5%, far below the ECB's target of 2%. A softer reading will also boost the chances of the ECB loosening its policy towards negative deposit rates.

Municipal-bond prices have soared so far in 2014

Bond prices have soared so far in 2014,compared to the same time one year ago. 2013 was the market's worst year in almost two decades, after registering losses nationwide - ranging from Detroit's municipal bankruptcy-protection filing to pension costs in Illinois. The revival of the $3.7T muni-market comes as bond buyers attempt to find higher returns amid dropping U.S. interest rates. Yields on municipal debt fell to 2.325% this past Wednesday - their lowest in almost a year.

The energy research group IHS has released a report stating the benefits of U.S. oil exports. Advantages include an added domestic investment of $750 billion, fuel prices lowered by 8 cents a gallon, and an added 394,000 jobs. Congress previously enacted a ban on exports after price shocks from the 1973 Arab oil embargo. With the possibility of Russia cutting its gas and oil supply to Europe, there is a greater focus on available U.S. energy.