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Today's Hot Stories - January 08, 2013

10 Headlines for Today

(1) Arjun Munda resigns after JMM ends support
(2) Hate speech: Akbaruddin Owaisi to undergo medical tests today
(3) Hundreds protest violence against women in Nepal
(4) Lenders set to ask KFA to clear dues
(5) PC gaming makes a fighting comeback
(6) Britannia announces new management appointments
(7) Messi wins record 4th FIFA Ballon d'Or |
(8) Stars sweat it out in Sydney 'sauna'
(9) NBA: Short-handed Celtics down NY Knicks
(10) NASA's Kepler mission discovers 461 more potential planets

5 Stories for Today

(1) India says Pakistan violated ceasefire
(2) Obama lines up second term national security team
(3) Budget interest payments on refunds: PAC
(4) Bank of America to pay $11.6 billion in Fannie Mae deal
(5) Government tightens tax recovery norms

(1) India says Pakistan violated ceasefire

Even as the Pakistan foreign office in Islamabad on Monday summoned the Indian deputy high commissioner there to protest against what it called a ceasefire violation by Indian troops, New Delhi flatly denied the allegation.

Pakistan strongly urged India to take "appropriate measures'' to avoid recurrence of such incidents in future. "The Deputy High Commissioner of India was called to the Foreign Office today and handed over a protest note on the unprovoked Indian attack on a Pakistani post in the Hajipir sector on January 06, 2013 which resulted in the Shahadat of a Pakistani soldier and injuries to the other,'' the Pakistan foreign ministry said in a statement.

The Indian Army, in turn, said it was actually Pakistani Army posts that had "opened unprovoked heavy machine gun and mortar fire" on Indian posts in the Uri sector of Jammu and Kashmir "to help terrorists infiltrate across the Line of Control" at about 3.30 am on Sunday.

"The Indian Army gave a calibrated response and foiled their attempt to sneak across. The firing continued till about 8 am. There was no cross border movement by Indian troops. Ceasefire violations by Pakistani Army has escalated in recent times, attempting as it is to push in maximum number of infiltrators into J&K under the cover of heavy firing and poor weather conditions," said an officer.

"In just the last 30 days, Pakistani Army has violated the ceasefire agreement nearly a dozen times. Most of these firing incidents were in Rajouri, Uri and Keran sectors to assist infiltration attempts by terrorists. In 2012, there were almost 120 ceasefire violations by Pakistani Army," he added.

(2) Obama lines up second term national security team

US President Barack Obama is nominating a decorated Vietnam veteran and former Republican senator Chuck Hagel for defence secretary in a bold choice that is likely to a trigger a political scrap with both his own party faithfuls and Republican hardliners.

Hagel is regarded as somewhat of a maverick who does not subscribe to typical Republican prescriptions about muscular unilateral interventions. He had a change of heart on the US war in Iraq (after initially voting to authorize it) and is against bare-knuckle remedies for Iran, broadly conforming to Obama's own outlook. He is also a votary of a quick exit from Afghanistan and a pared down military.

While all this makes Hagel acceptable to many liberals and will suit Obama's agenda and his bipartisan approach to cabinet composition, it makes his confirmation process tricky.

Senators are typically respectful of one of their own tribe during confirmations hearings, but Hagel has rubbed enough conservatives the wrong way to forestall any smooth sailing like the one John Kerry is expected to have on his way to becoming secretary of state.

Republican hardliners are leery of his support for cuts to the defence budget, which has doubled since 9/11, and liberal Democrats have reservations over his views on gays in the military and his utterances on Israel where he is seen as being opposed to what he once referred to as the "Jewish lobby". Both fringes have indicated they will oppose Obama's choice of Hagel in a list that included Pentagon veterans Ashton Carter and Michelle Flournoy, although the White House believes it has enough votes to get him through.

But the president is likely to press ahead with Hagel's nomination, in part because he wouldn't like to be seen as backing down for a second time after he was forced to drop Susan Rice's possible nomination as secretary.

The president is also expected to nominate his long time counterterrorism chief John Brennan as director of the CIA, replacing David Petraeus who resigned after an affair with his biographer.

If Obama can get Hagel and Brennan through the confirmation process, they will join John Kerry as the president's core national security team, replacing Clinton-Panetta-Petraeus.

Hillary Clinton is expected to return to work on Monday after recovering from illness in what could be her last couple of weeks in the state department.

(3) Budget interest payments on refunds: PAC

The Union finance ministry pays more than Rs 10,000 crore every year as interest on delayed IT refunds. In the five years till 2010-11, it had paid over Rs 37,000 crore as interest, and without the approval of Parliament or any budgetary provision.

The Parliament's Public Accounts Committee (PAC) — the watchdog that reviews all expenditure made by the government out of the Consolidated Fund — has now finalized a report on this issue asking the government to take Parliament's prior approval for making any expenditure of this kind. The payment of interest on refunds of excess tax lies with the Consolidated Fund of India, and is payable only after having been authorized by Parliament.

Sources said the PAC has called the expenditure illegal, saying the government cannot make such huge payments unless it is provided in the Budget and Parliament's approval is taken for it. The PAC report is likely to be tabled in the Budget session.

This is only going to make the job of revenue department officials difficult as even during the current fiscal, the I-T department has only been clearing refunds below Rs 5 lakh. Refunds of bigger amounts have been delayed to show the net tax mop up positive.

The PAC recommendations have been made over a report of the Comptroller and Auditor General (CAG) on the Union Accounts for 2010-11 tabled in Parliament last year. The CAG report had said that CBDT violated provisions of Article 114(3) of the Constitution which stipulates that no money shall be withdrawn from the Consolidated Fund except under appropriation made by law.

The excess expenditure, as pointed out by the auditor, works out to over 2.3 times of the total expenditure budget of CBDT (Rs 4,522 crore) for 2010-11, and the trend was similar in past financial years as well. Sources said by not making a budgetary provision for interest payments, the government has been trying to avoid a debate in Parliament over such a huge expenditure.

The revenue department sources said the average growth of 8% in gross direct tax collection in the current fiscal may result in the shortfall in Budget target exceeding Rs 30,000 crore. An average growth of 15% was required to meet budget estimates of Rs 5.70 lakh crore for 2012-13. The situation is all that rosy on the indirect tax front either. Against an average growth of 27% required to meet the budget estimate of Rs 5.07 lakh crore, the indirect taxes collections have grown at an average of 15% so far. The shortfall estimated could exceed Rs 45,000 crore, say sources.

(4) Bank of America to pay $11.6 billion in Fannie Mae deal

Bank of America said on Monday it would pay $11.6 billion to settle claims on soured loans sold to government-backed mortgage finance giant Fannie Mae during the home price bubble.

Under the agreements, Bank of America Corp. said it would pay $3.55 billion in cash to Fannie Mae and repurchase for $6.75 billion some residential mortgage loans it had sold to the government-controlled firm.

In addition, Bank of America will pay $1.3 billion to address mortgage servicing issues, Fannie Mae said in a separate statement.

"A favorable resolution of this long-standing dispute between Fannie Mae and Bank of America is in the best interest of taxpayers," said Bradley Lerman, Fannie Mae executive vice president.

Fannie Mae said the deal would compensate it for actual and projected losses resulting from the loans.

The loans had been bundled into mortgage-backed securities and bought by the finance giant over 2000-2008, but had not met its underwriting standards.

The Bank of America settlement covers residential mortgage loans originated by its own home loan unit and by entities related to Countrywide Financial Corporation, which Bank of America acquired in 2008.

"These agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time," said Brian Moynihan, Bank of America chief executive.

The Charlotte, North Carolina-based bank estimated the measures would reduce pre-tax earnings for the 2012 fourth quarter by $2.7 billion.

Shares in Bank of America were up 0.6 percent at $12.18 in opening trade in New York.

Fannie Mae and sister firm Freddie Mac were saved from collapse amid the 2008 financial crisis in a combined $180 government bailout.

(5) Government tightens tax recovery norms

The Central Board of Excise and Customs (CBEC) has sought to initiate recovery proceedings on custom, excise and service tax orders raised if the tax evader is unable to obtain a stay within 30 days.

After 30 days of filing of an appeal together with a stay application by the taxpayer with the Commissioner (Appeals) or the Customs, Excise and Service Tax Tribunal (CESTAT), the indirect tax authorities will move to recover the demands raised, even if the stay application has not been heard. In case of appeals before the courts, even this 30-day period is not available and recovery will be initiated immediately, according to a CBEC circular issued last week.

Practically, it is difficult for taxpayers to obtain a stay order within such a short period. The irony is that the law itself permits the appellate authorities, both the Commissioner (Appeals) and the higher authority CESTAT to hear a stay petition within six months from the date of filing a stay appeal. There are various other situations outlined in this circular, but the essence in each case is the same—it all boils down to expediting recovery proceedings.

For indirect tax matters, the taxpayer when filing a litigation appeal in parallel also files a stay application. Prior to the issue of this circular, dated January 1, 2013, which is addressed to the chief commissioners, the
indirect tax authorities did not resort to coercive action to recover the demand raised, till the stay application was heard. This circular has also rescinded seven
earlier circulars, some of which were more beneficial to the taxpayer.

This circular will not only impact India Inc—both large and small entities—but will also impact service providers and professionals that pay service tax. Bipin Sapra, partner, Ernst & Young, said: "While this circular refers specifically to excise, the procedure set out would be applicable to service tax matters also." Today almost all services, apart from 17 exempt heads under the negative list, such as school educational services, public transport, health care, services provided by an individual advocate to other individuals, to name a few, are covered under the service tax net and taxed at 12.36%. Ramifications of this circular are wide, as the cash flow situation now arising owing to prompt payment of service tax demand, may cascade down to consumers through higher pricing.

Sunil Gabhawalla, a chartered accountant, said: "The circular is draconian and detrimental to the interests of taxpayers. Taxpayers will have to follow up aggressively to ensure they get a stay within 30 days.

However, if for instance, the Commissioner (Appeals) or the Tribunal bench does not hear the matter due to huge pendency or non-availability of bench members,
it may be difficult to obtain the stay. Typically, even the government department representatives ask for an alternative date for hearing
of the stay application which results in delays."

A government official said: "This circular was issued after a Supreme Court order. The Supreme Court in the case of Krishna Sales had observed: 'As it is well known, mere filing of appeal does not operate as a stay or suspension of the order appealed against'." He also added that taxpayers delay hearing proceedings to buy time to pay the demands. An added procedural problem arises for taxpayers.

"Once a stay is obtained, refund will have to be given. However, obtaining a refund is time consuming. The circular will cause an added administrative burden to both taxpayers and tax authorities," added Sapra.

During the first half of the current financial year 2012-13, indirect tax collections had arisen at a low rate of 15.6% to Rs 2.17 lakh crore only. The government has fixed the target of indirect tax collection, comprising customs, excise and service tax, at Rs 5.05 lakh crore for the current fiscal.




           
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