Market-participants are clapping in the aisles, cheering wildly as corporate India declared its Advance Tax numbers.

Why? There has been a healthy rise in the advance tax payments by banks, oil and gas as well as auto companies suggesting that the collections from the second installment could exceed the Rs.40,000 crore mark collected in September last year.

Between February and March this year, two significant events took place. First, a corporate dole out packaged under the Yankee euphemism of 'stimulus package'. Then, the much more serious action of deferring AS-11 reporting by two years ensuring that corporates with huge Mark to Market (MTM) losses do not get exposed with their pants down.

After all, what shareholders do not know cannot hurt them, isn’t it ? Were’nt  Sataym’s shareholders a happy lot, till good old Ramalinga turned evangelical and confessed?

These two actions changed equations at the bourses immediately as market participants sensed that the Government was willing to bend backwards to accommodate a whining corporate India, even as debt ridden Indian farmers committed suicide and their families died hungry.

Notwithstanding this irony, the two bend-overs by the Government infused a new lease of life into not just corporate India but also the bourses, and thus far there has been no looking back with the Sensex growing at an abnormal pace.

The improvement in this year's advance tax numbers can be attributed yet again to the banking sector where again it must be noted, some stringent NPA reporting norms still stand relaxed. But this time around, there are also significant contributors from sectors such as oil and gas, automobiles and infrastructure, clocking tax payment growth of 35 per cent  to 40 per cent.

For the record, the country's largest bank, State Bank of India coughed up Rs 1,838 crore while the second-largest bank, ICICI Bank paid Rs 501 crore as advance tax. This represents a 17 per cent and 100 per cent growth respectively over their contributions in the corresponding period of the last fiscal year.

Even Reliance Industries, India's largest company in terms of market capitalisation and currently embroiled in a bitter legal dispute, paid Rs 1,157 crore as advance tax against Rs 314 crore in the immediately preceding quarter of the current fiscal.

Enthused by this spurt in Advance Tax flows, the Finance Ministry seems to have upped its direct tax receipts estimates. For the record, the target for direct tax collections for 2009-10 was fixed at Rs 3,70,000 crore, roughly 10 per cent higher than Rs 3,38,212 crore last year. However, just last month, anticipating good Advance Tax numbers, the Finance Ministry had revised upwards its direct tax receipts target to Rs 4,00,000 crore.

Is this upward revision a hasty one? Time will tell, but one fact that the Finance Ministry seems to have missed out is that whereas in absolute terms the Advance Tax numbers cheer, there seems to have been a marginal downward  revision of total direct tax payable for the year by many banks (including State Bank of India) between the end of the first quarter and the recent payment of Advance Tax.

So, while this time around, the chances of a repeat of the nightmare of October 2008, is minimal, it may still not be time to uncork the bubbly!

(ASHOK KUMAR is Promoter, theIPOguru.com and Director, Lotus Knowlwealth)

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