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.

S&P has upgraded Spain's credit rating

For the first time since stripping the country of its AAA grade in 2009, increasing its assessment to BBB from BBB- and saying the outlook is stable. "The upgrade reflects our view of improving economic growth and competitiveness as a result of Spain's structural reform efforts since 2010."

 

Jwellery Industry gets some respite

The jewellery industry in India has been going through difficult times. Ever since the RBI put restrictions on Gold imports in August last year, the cost of funds for jewellers had increased significantly. Now there seems to be light at the end of the tunnel. The RBI has liberalized its 80:20 rule, under which 20% of the gold imported would have had to be exported. Although the ratio has been maintained, the central bank has now allowed designated export houses to import the commodity. Also, banks are now allowed to make Gold available to jewellers.

This is welcome news for the domestic jewellery industry. The restrictions had led to a sharp fall in Gold imports and this can now be expected to reverse. As per an article in the Business Standard, monthly Gold imports could double to 60 tonnes from 25-30 tonnes currently. This will increase the supply of the yellow metal in the country leading to a minor fall in prices. However the most important impact of this decision could be on Gold imports via illegal channels. With more gold available through legal imports, smuggling of the yellow metal should see a fall in the coming months.

No s. 14A & Rule 8D disallowance if there is no tax-free income

CIT vs. Shivam Motors (P) Ltd (Allahabad High Court)

In AY 2008-09, the assessee claimed that no s. 14A & Rule 8D disallowance could be made on the ground that (i) the assessee had not earned any tax-free income during the year and (ii) the assessee had sufficient surplus fund and borrowed funds were not utilized for making the tax-free investments. The AO rejected the claim and made a disallowance though the CIT(A) and Tribunal (included in file) deleted it on the basis that no s. 14A disallowance could be made in the absence of tax-free income. The Tribunal noted the judgement in Cheminvest 121 ITD 318 (Delhi) (SB) (which holds that s. 14A disallowance has to be made even if there is no tax-free income) but followed Siva Industries (Che). On appeal by the department to the High Court HELD dismissing the appeal:

 

S. 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Hence, what s. 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the CIT(A) & Tribunal does not give rise to any substantial question of law.

 

China's HSBC flash PMI seen improving

HSBC flash PMI reading came in at 49.7 to mark an improvement of 160 basis points from the level recorded in April and beat the median estimate of analysts calling for 48.3. Though the factory activity index is on track to reach a five-month high, it still sits in contraction territory. Analysts think stimulus measures from the government are starting to provide a small lift.

The Bank of Russia moved to limit the volatility of the ruble

By reducing the number of daily currency interventions. Currently, the ruble is trading in a corridor where the central bank can let it float free. The central bank says it will still step in to intervene to maintain financial stability if needed. Next year, the bank is expected to adopt inflation targeting.

U.K. retail sales grew at the fastest rate since May 2004

Retail Sales grew in April, jumping 6.9% on year vs 4.8% in March and beating consensus of 5.2. While the U.K. government will probably welcome the figures, the data raises questions about how balanced the U.K.'s economic recovery is.