17 june 2000

initial block cleared for maruti divestment
new delhi: it seems that the divestment process in the country’s first joint sector auto company has begun. the core group on divestment today cleared the decks that will allow the government to offload 50 per cent stake in the automobile major, by the end of the current fiscal.

it is understood that the core group has also cleared a divestment plan which involves divestment in 21 psus, including mtnl, vsnl, ibp, rashtriya ispat nigam and indian oil.

the core group also considered divestment of 26 per cent stake in hindustan zinc. however, a final decision will be dependent on technical clarifications that have got to be sorted out by the department of disinvestment in consultation with the administrative ministry.

the divestment in mineral exploration corporation will, however only be done in 2003 once the prospecting licence has been obtained by the company. divestment in bharat breaks & walls have, however, been left to parent burn standard.

supreme court drives last nail in leasing industry’s coffin
calcutta: for an industry already besieged by problems of sales tax, the latest ruling by the supreme court, is the proverbial last nail in its coffin.

until now, the sales tax issue on leasing industry has been governed by two schools of thought. one based on the bombay high court ruling in the case of 20th century finance corporation and the state of maharashtra, where it was decided that sales tax was applicable where goods are put to use, and the other based on the andhra pradesh high court ruling in th matter involving itc classic finance, which exempt sales tax on inter-state movement of goods.

by ruling that the place of signing will now determine the tax jurisdiction of a lease transaction, the apex court has given a totally new twist to the balance altogether.

by this ruling, the already-bleeding leasing industry would probably find it excruciating to learn all leases till now presumed to be tax-free are indeed taxable. besides, the leases on which tax has been paid in one state might now be taxable in another. in other words, the supreme court ruling has brought in a principle, which was never envisaged by the tax payers, let alone complied with.

leading experts are of the opinion that inaction on the part of the government to amend the constitution to include "deemed sales" into the fold of "sales" for sales-tax purposes, has led to this situation of the apex court passing a "judicial law", which has compounded the industry’s problems.

therefore, the understanding based on which lease sales tax was administered by almost every leasing company was, either on the basis of the bombay high court ruling or the ap high court, where the only difference was that inter-state leases were not taxable, but where the lease was intra-state, the jurisdiction was still based on the place of use or delivery of the goods.

thus, if leasing companies have paid tax based on place of delivery or use and such place was different from the place of execution of the contract, the tax was wrongly paid, or wrongly not paid, for last 16 years!