New Delhi: The Government said on Friday an Investor Protection Fund is proposed to be set up with amounts collected by the market regulator SEBI by way of fines and penalties.
Currently, fines and penalties collected by SEBI are credited to the Consolidated Fund of India as required under Securities Contracts (Regulations) Act, 1956, the SEBI Act, 1992 and the Depositories Act, 1996, Finance Minister P Chidambaram told the Lok Sabha in a written reply.
The IPF can be established after the relevant laws are amended, permitting credit of these amounts to the IPF, he said. While the broad objective of the IPF would be protection of investors in securities, the specific objectives would be determined in consultation with SEBI, the Finance Minister said.
The Investor Education and Protection Fund is set up under the Companies Act and is administered by the Company Affairs Ministry, while IPF is proposed to be set up under the aegis of SEBI under the security laws, he said.
No budgetary allocation has been made for IPF so far as it is to be set up with amounts collected by SEBI by way of fines and penalties, he said. The IPF was proposed in the Budget 2006-07.
Attaching of Brands: In reply to another question, Chidambaram denied that banks are insisting on attaching the brands of defaulting organisations alongwith the secured assets.
However, the bank concerned may take steps to attach the brands of the defaulting borrower if its value is significant compared to the outstanding dues of the borrower and the primary/collateral security available with the bank.
RBI has permitted 601 companies incorporated outside India to establish branch office in India and 5,794 companies incorporated outside India to open liaison office in India as on January 31, 2005, Chidambaram said in reply to another question.
The mechanism used by companies based in India to evade tax liabilities, if any, may depend upon the nature of business and type of transaction and it may vary from case to case basis, he said.
Some of the companies may either suppress the price charged by them for sale of goods and services to group companies abroad or pay inflated prices for purchase of goods and services to group companies abroad in order to avoid tax, he said.
After Transfer Pricing Legislation came into force from assessment year 2002-03, income from an international transaction is computed on the basis of Arm's Length Price, he said. Arm's length price refers to the consideration that would have been payable by third parties other than associated enterprise in uncontrolled conditions.
During the first year of Transfer Pricing audit, a total number of 999 cases of transfer pricing were decided and a total transfer pricing adjustment of Rs 1,212.96 crore was made, the Finance Minister said.
Ship Breaking Industry: Employment in ship breaking industry is coming down not because of duty structure but due to prices of old ships, shortage of ships for breaking, and shift of tanker breakage business to Bangladesh, he said in reply to another question.
No debt write-off has been awarded to the North Eastern states during the last three years, the Finance Minister said in reply to another question.
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