Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TDS :: ACCOUNTING STANDARD :: VAT Audit :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: due date for vat payment :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4% :: VAT RATES :: list of goods taxed at 4% :: empanelment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt
« News Headlines »
 India is moving towards a flawed GST
 ICAI to organise two-day international conference in Hyderabad
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers
 Finance ministry warns tax officials of action against GST protest
 Big changes for small units under GST
 Parliament’s winter session to begin on November 16 to expedite GST rollout
 Income-tax (27th Amendment) Rules, 2016 - 92/2016

Dialling Mayawati
January, 07th 2008
Let us accept the Congress partys position that the government is not behind the Income Tax Appellate Tribunals shocking ruling to let Uttar Pradesh Chief Minister Mayawati off the hook on the disproportionate wealth case by accepting her assertion that her followers had given her the money. But given how quickly this was followed up with the Cabinet approving the Noida airport that Mayawati wanted despite it not meeting the aviation policy criterion, its difficult to shake off the feeling the government is keeping her sweet for a possible electoral alliance. Of course, the government will defend itself by saying the approval is an in-principle one, and that the details have still to be ironed out by a Group of Ministers (GoM).
The details, of course, involve ensuring the GMR Group, which has the franchise to run the Delhi airport, does not go to court citing the aviation policy, level playing field and other arguments it has already said that, when it signed the request for proposal, there was no talk of a second airport, unlike in Mumbai, where it was known a second airport was coming up. Under the aviation policy, the minimum distance between two international airports has to be 150 km the Noida one is only 72 km from the Delhi one. GMR also asserts the Delhi airport will be able to handle 100 million passengers by 2026 as compared to the projected traffic of 80 million. So, GMR can argue that had it known the Noida airport was going to come up, it would have bid lower for Delhi. Of course, since the State Support Agreement talks of the possibility of a new airport within 150 km and gives GMR the right of first refusal, a legal claim may be a bit difficult to sustain.
It is possible, however, that under the guise of ensuring there is no legal hurdle, the GoM will undo the work done by the ministry of civil aviation in safeguarding the Airports Authority of Indias (AAIs) interests under the bid, the GMR Groups Delhi International Airport Limited (DIAL) was to share 46 per cent of all top line revenue with the AAI.
Enough has been written about how DIAL interpreted the revenue share concepts in a manner which would have denied the AAI a large part of this top-line share (see Bumps on the PPP runway, Oct 29, 2007). One way was by claiming that the interest-free deposits of (at least) Rs 63 crore it got per acre on the 250 acres it can develop commercially were not revenue and therefore did not need to be shared; and the other by forming subsidiaries to run various operations since a subsidiary is a separate legal entity, only the dividend it declares can be shared. If the subsidiary makes a profit of 20 per cent, say, and decides to declare all of it as dividend, the AAI will just get Rs 9.2 out of each Rs 100 of top line revenue as opposed to the Rs 46 it would get if there was no subsidiary. The AAI, however, has written to DIAL asking it not to proceed with either of these schemes till it further examines the Attorney Generals opinion, which most felt okayed DIALs plans (see No all-clear for DIAL yet, Dec 18, 2007).
Take the land deposits that DIAL wanted to go ahead with. A Merrill Lynch report on GMR Infrastructure, prepared when the firm was looking to sell part of its equity (it sold 9 per cent for $1bn last month), points out that these interest-free deposits will lower DIALs cost of capital to around 7.6 per cent as compared to 12.1 per cent for GMRs Hyderabad airport and 13.4 per cent for its Turkish one. Just a 0.5 per cent change in the cost of capital, the report adds, would change its asset valuation of the Delhi airport project by 5-10 per cent (its different for different phases of the development)! Similarly, the subsidiaries that reduce its outflow to the AAI, Merrill Lynchs model estimates, adds around Rs 4,500 crore (or Rs 27 in a share that cost Rs 243 at that time) to GMR Infrastructures present value. Similarly, if the FSI allowed on the 250 acres is increased from current levels, this will also make the airport a lot more attractive.
Given that DIAL desperately needs to go ahead with its plans, the GoM is likely to negotiate on these conditions to come out with a win-win situation. A win-win for Mayawati and perhaps for DIAL, but not for the AAI.

Sunil Jain
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Internet Marketing Website Marketing Internet Promotion Internet Marketing India Website Marketing India Internet Promotion India Internet Marketing Consultancy Website Marketing Consulta

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions