Will Euro leaders stay divided?

The Euro moved above a 3 week low as the markets are braced for the EU summit and as speculation grows ahead of possible ECB action. The Dollar has weakened against its major peers and the Aussie has advanced.

Earlier today the Euro had bounced off of a three week low against the U.S. Dollar. This was as a result of short-covering ahead of the European Union summit starting later in the day and on heightened expectations of more monetary intervention from the European Central Bank (ECB).

Most analysts expect the European leaders to struggle to agree on necessary steps to solve the region's debt crisis during the two day summit, however there is an element, among some market players, that are looking at playing it safe by squaring their positions in the event of there being a surprise breakthrough.

The EU leaders appear more divided than at any time since 2010, when the debt crisis erupted in Greece and then  spread over the Euro zone. They are due to discuss a plan for closer European integration at the summit.

German Chancellor, Angela Merkel, has been especially reluctant to heed calls from Spain and Italy, who are advocating emergency action in order to lower their rapidly rising borrowing costs, and she has shunnedthe idea of joint Euro zone debt.

The Euro rose 0.35% to $1.2511, having recoveredfurther from the three-week low of $1.24413 hitearlier in the week.

Now economists have heightened expectations that theEuropean Central Bank will take some measures in theweek to come.

Market players are increasingly betting that the ECB will intervene either by cutting rates or by announcing large long-term fund injections, after its policymeeting to be held in the new week. This is especially so after data released yesterday had shown that German inflation has eased to an 18 month low.

Just a few hours before the summit is set to start today, Italy will hold an auction of up to 5.5 billion Euro bonds and its borrowing costs are expected to rise above 6%. The 185-day bills sold yesterday achieved arate of 2.957%, while the zero-coupon, two year notes offered on June 26th yielded 4.712%, both being thehighest this year.

In contrast to a gloomy outlook over the Euro,U.S. economic data released yesterday was more upbeatwith durable goods orders and pending home sales both beating market expectations. This helped to boost risksentiment in the broader financial markets.

As a result, the Australian Dollar was lifted around0.3% earlier today to a one-week high of $1.0121 anda four month high against the Euro at A$1.2331.

The U.S. Dollar weakened against most of its majorcounterparts and was down 0.4% to the Yen at79.40 Yen, mainly due to month end selling byJapanese exporters.

Since the end of March, the Euro has dropped 10% tothe Yen and 6.2% against the Dollar. So far the Dollar has climbed 3.6% in 2012 versus the Euro and 3.3%against the Yen

S. 271(1)(c) penalty not levaiable for breach of s. 50C

Chimanlal Manilal Patel vs. ACIT (ITAT Ahmedabad)

The assessee sold land of which he was the owner for Rs.36 lakhs and offered capital gains on that basis. The AO reopened the assessment u/s 147 on the ground that the assessee ought to have taken the consideration at the market value of the land as per s. 50C. The assessee accepted and offered capital gains as per s. 50C. The AO levied penalty u/s 271(1)(c) which was confirmed by the CIT (A) on the ground that the assessee’s action of offering capital gains u/s 50C was after the s. 148 notice and not voluntary. On appeal by the assessee to the tribunal, HELD allowing the appeal.

JPM whaling loss could jump to $9B.

 JPMorgan's (JPM) trading loss could reach $9B, the NYT reports, with red ink piling up as JPM moves faster than expected to exit its money-losing positions. Jamie Dimon was way off when he warned in May that the initial $2B loss could double in coming quarters. JPM will disclose more details in its July 13 earnings report. Shares were -5.4% premarket.

'PIIGS'. This was the name coined for Portugal, Italy, Ireland, Greece and Spain. These were the countries in the Euro zone that posed to be a serious threat to the existence of the zone itself. Greece has an unstable economy. Spain has insufficiently capitalized banks. Ireland has huge deficits. But Italy the other 'I' in the equation has none of this. Yet its borrowing costs are one of the highest. So one wonders as to why this is the case. The big reason behind this is its erratic political leadership of the past. The former leader of the country had pushed its finances and deficits in the same direction as that of the other three struggling countries. Fortunately for Italy, the leadership changed this year. But even now, Italy is close to the brink of a disaster. A lot rests on the new leader. If he is able to sort things out, the country would be able to come out of this relatively unharmed. But if he follows his predecessor's footsteps, then Italy is headed the Ireland, Greece and Spain way. Unfortunately considering Italy's size, it would be too big for the Eurozone to bail out. So as Peter Spiegel of Financial Times rightly suggests- 'The really big show in Europe is actually Italy.'

“Education cess” is “additional surcharge” & is included in “tax” under DTAA. If DTAA caps the rate of “tax” payable, cess is not payable by foreign assessee

DIC Asia Pacific Pte Ltd vs. ADIT (ITAT Kolkata)
 The assessee, a Singapore company, offered interest and royalty income to tax at the rate of 15% & 10% as specified in Articles 11 & 12 of the India-Singapore DTAA respectively. The AO held that the assessee was also liable to pay surcharge and education cess in addition to the tax. The CIT (A) upheld the assessee’s claim that surcharge was not leviable though he rejected the claim with regard to cess. On further appeal by the assessee, HELD allowing the appeal:

Euro Hits 2-Week Low, Yen Bounces Back

The Euro went on the defensive after dropping close to a 2-week low against the US Dollar amidst fears that another European summit would be powerless in resolving the region's crippling debt crisis.
Meanwhile, the Japanese Yen bounced back from a 2-month low against the US Dollar but, the Yen could be hampered by political uncertainty due to a lack of support for the Japanese Prime Minister's tax hike plan.

Moody's has cut the long-term debt and deposit ratings of 28 Spanish banks by between one and four notches. The move follows this month's downgrade of the country's sovereign debt. The only banks rated above the sovereign are Banco Santander (SAN) and Santander Consumer Finance, due to their diversification and sufficient Tier 1 capital.