Samir Arora, fund manager, Helios Capital, says that the fact needs to be appreciated that the government has become very responsive. He is of the view that volatility in the market can be avoided if a more careful approach is adopted. On TRC issue, he says that for the time being it can be understood that the Mauritius treaty and the Tax Residency Certificate will be accepted as evidence of residence by the I-T authorities.
"Earlier, I thought that there was an issue between beneficial owner and the person holding the Tax Residency Certificate, these things should be removed. From the government's point of view the clause is not intended or not applicable to capital gains which is what the market is interested," says Arora.
Below is the edited transcript of his interview to CNBC-TV18.
Q: Are you feeling any better than yesterday?
A: We have to appreciate the fact that the government has become very responsive but maybe the volatility that we saw in our market can be avoided, if a more careful approach is adopted.
Q: As far as Paragraph 6 of the finance ministry’s latest statement, the CBDT statement is concerned that the language of sub-section 5 of section 90 which was at the heart of this, this concern will be addressed suitably when the Finance Bill is taken up for consideration. What you want to state in this regard because clearly this clause which has been there even in the previous year is not going to be dropped completely by the finance ministry?
A: Basically, without reading, what I can understood from the current form is, that for the moment the Mauritius treaty, the Tax Residency Certificate should be enough. Second, on P-notes, earlier I thought that there was an issue between beneficial owner and holder of the Tax Residency Certificate, these things should be removed. I later learnt that the market slipped yesterday from this point of view. From the government's point of view it is not intended or not applicable to capital gains which is the thing the market is interested in. So, basically just stay away for two years because already the GAAR has been postponed and don't bring it back from indirect form either using a clause from an old treaty or highlighting a new point.
Q: Do you think the point where the finance ministry statement says and I read out – Tax Residency Certificate by a contracting staging, income tax authorities in India will not go behind the TRC and question his residence status. Does this short statement address their concern regarding P-notes and whatever else has crept up on that account? Is this satisfactory enough at this stage?
A: For the moment it looks enough. The whole point was whether you will connect the TRC to a beneficial owner which P-notes will be different and the second one for FII was that, whether the TRC is sufficient and necessary. Right now, I would interpret that, TRC is necessary and sufficient as mentioned in the SC ruling, for the moment it is okay.
Once you spoil the momentum of the market, people will not reward, returning the two percent fall that we had yesterday, giving it back immediately and appreciating this. Because people lose money, positions and along the way and they lose part of their portfolio along the way in terms of trades that they may do.
Q: The legal change will happen only when the Finance Bill is debated. There are still some days, several weeks away from that possibly in the second half of the Budget session. Between now and then, based on the statement do you think market momentum will factor this, take this in good faith and move on and make investment decisions not with this overhang over their shoulders?
A: Yes, 90 percent of the people should be enough for the moment with the hope and faith that this will come through. When the market fell yesterday on this news and if one now says that the news was wrong or wrongly interpreted it does not immediately lead to reversal of 2-3 percent effectively in currency loss yesterday. We will all take it for hereon as if this will be removed or dwelt with properly as communicated today.