Tuesday, February 23, 2016

Despite the recent gains, Standard & Poor's has downgraded the credit ratings of several Middle East nations, in its second mass cut of large oil producers in almost exactly a year. Citing pressures from the drop in crude prices, the ratings agency lowered Saudi Arabia by two notches to A- stable, and stripped Bahrain of its investment grade status. S&P also cut the ratings of Bahrain and Oman to reflect lower oil price assumptions.

German Business sentiment slid in feburary----mounting fears of slowing growth

German business sentiment fell in February, according to the closely-watched survey by the Ifo Institute, spurring worries that Europe's economic motor is slowing down. The Ifo business climate index showed that morale slid to 105.7 from 107.3 in January, marking the third consecutive month the number has dropped. Germany also confirmed today that its economy expanded 0.3% in the fourth quarter, a rate that could prompt more concerns amid fears about slowing growth.

Wednesday, February 17, 2016

A Power of Attorney executed by the Head Office in favour of the Liaison Office in India does not create a Permanent Establishment if the powers are specific to the liaison office and are not unfettered powers to enable to Liaison Office to act on behalf of the enterprise

Kawasaki Heavy Industries Ltd vs. ACIT (ITAT Mumbai)

The sole basis on which the AO as well as the DRP came to a conclusion that the assessee had a P.E. in India is the clauses in power of attorney executed by the head office in favour of its employee in the L.O. in India. Reliance was also placed on the permission granted by the RBI to the assessee for setting up the L.O. A plain reading of the clauses in the power of attorney takes us to a conclusion that the powers given therein are L.O. specific. The AO’s conclusion that the power of attorney granted unfettered powers to its L.O. employee, to do all or any acts for and on behalf of the assessee, is incorrect. In our view the finding of the AO that the power of attorney is an open ended document, which is clearly outside the scope of initial permission granted by the RBI is also perverse. No doubt the AO can investigate, call for evidences and come to a conclusion where any income earning activity has been carried out by the L.O. so as to construe it as fixed P.E. but, in our view it is beyond the jurisdiction of the AO to adjudicate and conclude that the assessee has filed false declarations before the RBI. At best, he can bring his findings to the notice of the RBI which may consider the same in accordance with law. The RBI has not found any violation of conditions laid down by it while permitting the assessee to have an L.O. In such circumstances, no adverse inference can be drawn

Monday, February 1, 2016

China's official factory activity (PMI index) shrank to three year low in January

China's official factory activity skidded to a three-year low in January, adding to further gloom about the state of the world's second-largest economy. The official Purchasing Managers' Index stood at 49.4, compared with the previous month's reading of 49.7, deepening the case for near-term stimulus and marking the sixth consecutive month of factory activity contraction. The mood was worsened by a private survey from Markit/Caixin that showed January manufacturing activity shrinking for the eleventh straight month.