Companies disappointed by FBT on ESOPs
Mumbai: Fringe benefits tax on employee stock options has upset nearly all companies who had recently decided to introduce ESOPs.

IT industry officials pointed out that this would make current ESOPs expensive and would also make it difficult for IT industry that uses ESOP as a major tool to attract talent.

The new ESOP norms are disappointing for smaller companies, as ESOPs have already become cumbersome owing to the new accounting norms said Atul Nishar, chairman, Hexaware.

Other officials said the Government was retracting on what was originally meant in the Income Tax act, that ESOPs would be a perquisite for the employee. It is basically a tool to benefit and retain employees.

However research firm Gartner had a different take on FBT on Esops. It said the two minor irritants for the IT industry, the MAT and ESOPs coming under the FBT, are a minor turbulence for an industry that is growing rapidly, is reaching some level of maturity and is not going to be affected in the medium to long term by blips like these.
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Nasscom finds budget disappointing
Hyderabad: The Nasscom has said the Budget is disappointing from the IT industry perspective. Various provisions of the Budget, such as Minimum Alternate Tax (MAT), Fringe Benefit Tax (FBT) when it comes to the applicability for ESOPs (Employee Stock Option Plan), would have an adverse impact on the sector Nasscom chairman, B. Ramalinga Raju, said. He added the industry would petition the Finance Minister about the sector concerns.

The Chairman of Satyam Computer, Raju, said the applicability of FBT on ESOPs is like a disincentive for companies as at the time of exercise of options they would have to pay taxes. This would impact talent retention and lead to higher attrition levels.

Regarding the service tax on lease rentals, he said that the IT sector was dependent on the lease of office and residential space and this only meant that the costs for companies would go up.

On MAT, he said that the FM's move is against the spirit of the sunset clause of the STPI units that ends by 2009. It is not clear if the imposition of this tax is a precursor to the extension of STPI benefits by 10 more years.

The underlying principle for the Government to levy fresh imposts is that the technology sector has matured and has turned competitive. But one must remember that it has just about begun to grow and needs to traverse a longer path.

While the levy of additional one per cent cess for the education sector and focus on human resources is a good move, he said that MAT would be a big dampener particularly for smaller companies and potentially upset their finances.

The Nasscom has conveyed its dismay over the MAT proposals and said it was a regressive step that withdraws the Government's commitment to provide tax incentives till 2009, on which companies have made their business plans and investment decisions. Further, this could affect investor confidence.

Nasscom said the small and medium IT companies will face the brunt of the MAT, while the larger firms such as TCS, Infosys Technologies and Wipro among others may not see a major impact.
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Exchangeable bonds provide ease of funding to corporates
Mumbai: Holding companies have been allowed to issue bonds that could be converted into shares of group companies after a fixed time.

There will be an enabling mechanism for issuing these bonds, which would allow companies to unlock part of their holdings in group companies for meeting financing requirements.

Exchangeable bonds will help group holding companies provide funding support for overseas takeovers or other large investment needs as the bonds can be converted into shares of subsidiaries, unlike in a convertible issue where bonds are converted into shares of the issuing company.

The measure impact the corporate debt market, which is currently quite illiquid and suffers from lack of demand from banks and institutions. The finance ministry, in association with the market regulator Sebi, will soon issue the final guidelines for issuing exchangeable bonds.

Exchangeable bonds could be issued in the domestic market as well as to overseas investors. Thus, the move provides companies with another instrument for raising funds.

The corporate debt market is currently seeing supply of bonds from banks, which are busy garnering funds to meet capital requirements. As the market is illiquid, most banks are entering into bilateral placements with provident funds and insurance companies.

Companies are not issuing bonds, as they get overseas funds at cheaper rates. Banks, on the other hand, are keener to sanction funds in the form of loans rather than issuing bonds because in a rising interest rate scenario, these investments lead to depreciation in value.
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Telcos may get a unified tax structure
New Delhi: The Department of Telecom has been asked to commission a study for working out a unified tax structure for the telecom sector.

At present, total levies in the telecom sector, including the annual revenue share that the companies pay to the government stand between 28-30 per cent, which is very high say telecom operators. The annual revenue share ranges between 6-10 per cent of their revenues depending upon the circle where they operate.

However, the telecom industry has expressed disappointment as none of their major demands found a mention in the Budget proposals.

Though the finance minister said the government would consider the industry's suggestion of replacing the existing multifarious levies and charges by a single levy, the industry was hoping for an initial reduction in their annual licence fee from a maximum of 10 per cent to a uniform 6 per cent of their revenues.
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HC directs Jet, Sahara to arbitration tribunal
Mumbai: The Bombay High Court on Wednesday asked Jet Airways to approach the arbitration tribunal for resolving the dispute over the bank guarantee given to Air Sahara for the failed takeover deal.

Jet Airways had last year submitted a bank guarantee of Rs500 crore for a share-purchase agreement (SPA) to acquire Air Sahara, but the deal did not work out.

The companies had earlier approached an Arbitration Tribunal (AT) in London to resolve the matter related to the failed takeover deal, but the issue of bank guarantee was not included.

Jet had moved the High Court to get the guarantee money back.
Sahara's counsel Fali Nariman had earlier contended that the guarantee money was incorporated as part of the SPA and should be dealt with by the tribunal.

However, Jet's lawyers Harish Salve and Janak Dwarkadas had opposed the contention, and had argued that it was a stand-alone guarantee and a liability to be paid on demand.

Jet had entered into a SPA with Sahara India Commercial Corporation Ltd for Rs2,000 crores on January 18 last year. The condition precedent to the SPA was acquiring necessary approvals from regulatory authority. But the deal did not go through on account of non-completion of this condition by the deadline of June 21, 2006.
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New Trend Micro tool
Coimbatore: Trend Micro has released the latest version of its messaging security products - InterScan Messaging Security Suite and InterScan Messaging Security Appliance. It has also announced the roll out of InterScan Messaging Hosted Security, which is a new-hosted service for enterprise customers in India. According to Trend Micro, the InterScan Messaging Security solutions integrate multi-tiered anti-spam and anti-phishing with anti-virus and anti-spyware. The solution blocks standalone, blended threats and targeted attacks at the gateway. By including three distinct anti-spam tiers integrated into one solution, the Network Reputation Services provide the initial tier of protection by verifying IP addresses of incoming e-mail and by applying a dynamic reputation service to identify new spam and phishing sources, including zombies and botnets as they first emerge. Patent-pending IP Profiler provides the second tier of protection.
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