Demerger & No Tax for promoting Cricket

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 Article 1: Demerger, Source: Economic times

  • Demerger: Demerger means sometimes businesses tend to separate one of the entity/divisions into an independent business.
  • There are 5 reasons why businesses perform demerger:
  1. Sometimes company performs demerger because they want to separate its core operational division into a whole and non-core division into an independent business so that its core operational business can run smoothly without any impediment caused by non-operational division.
  2. The company performs demerger because sometimes its non-operational divisions are loss-making and because of it its core activity is getting affected. Therefore company demerges its loss-making division.
  3. The company performs demerger because sometimes its one of the entities that started performing so well that it leaves another segment behind and the company wants to make this segment as a whole.
  4. The company performs demerger because sometimes its few segments have major debt and because of it its core segment is unable to raise funds and unable to grow smoothly. When you raise funds, risks of the overall segment are taken into consideration and if any segment has major debt then it becomes difficult to raise funds. Therefore company splits its core segment into an independent one.
  5. The company performs demerger because it doesn’t want to go through IPO process and wants to list its demerge segment publicly.

  • Here Johnson & Johnson plans to split its consumer health division which sells band-aids and baby powder from its pharmaceutical and medical division.
  • J&J planned the completion of separation in 18 to 24 months and from this news, its stock went up by 4% when it came.
  • The separated company will be a listed company.
  • One of the reasons behind this demerger is to unlock the value of the segment which gives focus and independence to run the segment.
  • Also currently in the healthcare sector, the selling of consumer products becomes a slow and steady business compared to pharmaceutical and medical segments.
  • J&J will keep its pharmaceutical and medical divisions which sell its covid-19 vaccines, other drugs such as cancer treatment Darzalex and medical devices.
  • Along with J&J, other giants like Toshiba and general electric also planning to demerge its divisions.

Article 2:  No tax for promoting Cricket!  Source: economic times

·     The board of control of cricket in India is registered as a charitable trust under Section 12A of the Income tax Act and enjoys the tax exemptions.

·      Whenever a board/company registered themselves as a trust, they have given tax exemptions on the income by government if the board/company does some charitable event.

·        Sometimes this process can be used for money laundry, not that I am accusing BCCI but it happens sometimes.

·        BCCI said to the taxman that they are making money through the Indian premier league (IPL) but their objective is to promote cricket. Hence they are not liable to pay any taxes as they are given permission from particular authority.

·        BCCI is a billion dollar board if the valuation has been applied.

·        Players are liable to pay tax as well as teams, as it is their personal income

source:No tax for promoting cricket! | FinnacleShahClasses





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