by Rahul Chimanbhai Mehta at November 04, 2014 at 09:12AM

How operating profits can be converted into short term capital gains? . The operating profits including interest earned of Mauritius\Singapore companies are taxable but their short term and long capital gains arent taxable, Now here is a way how a group of investors can convert its operating profit into short term capital gains. . Say company A is main company, which is Mauritius based . The owners starts company-B as independent company. . Company-B floats a bond of Rs 100 payable after 1 year. Since company-B has no track record no buyer will show up. So company A buys the bond at low price, say Rs 50 !! . Company-B gets huge contract in railways or coal mining etc etc. So its bond's prices increase to as high as Rs 85 to Rs 89. . Company-A sells bonds to buyers at Rs 85 to Rs 89. Company-A made short term capital gains, which is tax free since it is based in Mauritius. . Say company-B earned Rs 50 of operating profit from mining or that contract. Now it pays Rs 100 for redemption of bond after 1 year. So tax on company-B will be zero. . The second buyer will pay normal tax on interest earned from the bond. . This is one way. They are several ways. , So the clause that only capital gains are exempt, but operating profits will be taxed isnt much useful. . Solution is to tax Mauritius\Singapore companies at par with Indian companies. But SoMoKe, SoMoKe-supporters and CoBhApSwaRa-workers have opposed this proposal. They all insist on continuation of Mauritius\Singapore route. The 4 AAP MPs and all Congress\BJP have refused to submit private member's bill to end Mauritius\Singapore route. . So activist who want to end Mauritius route should boycott slogan shouting, cap wearing, mask wearing, broom welding, jhadu welding CoBhAp workers and focus on "order your MP via SMS containing URL to law-draft". Some activist should post proposed law-draft to cancel Mauritius \ Singapore route. And pls stop wasting time with slogan shouters and their broom weilding and jhadu weilding.

by Rahul Chimanbhai Mehta



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