ArchiveMarch 2009

Directors are persons in control; failure to disclose their shareholding violates Takeover Regulations

In a far-reaching decision, the Securities and Exchange Board of India has ruled in an adjudication order that members of the board of directors of a listed company (“Target Company”) would be persons having control of the Target Company. Consequently, directors of the Target Company ought to make disclosures of their holdings under the disclosure requirements set out in the SEBI (Substantial...

Securitisation and Debt Recovery – A Centre-States Conflict?

The Constitution has devised an elaborate scheme of distribution of legislative powers, and the competence of a legislature to enact a law has normally been challenged by a private citizen to whom the law applies. The latest battleground looks to be the fairly recent structure of securitization, debt recovery and other FI-friendly legislation. The first major decision of the Supreme Court on this...

The Continuing Debate on Governance in Government Companies

When Government companies list their shares on stock exchanges, they are required to deal with two distinct constituencies from a corporate governance standpoint: one, being the Government itself as the controlling shareholder or promoter, and the other, being the minority (public) shareholders. When the Government is in a controlling position in the company, the obvious question that arises is...

Non-Discrimination: Protecting foreign-owned subsidiaries

A recent decision of the Pune Bench of the Income Tax Appellate Tribunal in Daimler Chrysler v. DCIT deals with several important issues. One of these was whether the provisions of a Double Taxation Avoidance Agreement would apply in the absence of double taxation. The Tribunal held that given the role DTAAs play in modern economies, the incidence of double taxation cannot be a prerequisite...

Further watering down of section 14A, Income Tax Act

Close on the heels of the decision of the Bombay High Court in Reliance Utilities & Power, which possibly has significant implications on the interpretation of section 14A of the Income Tax Act, the Bombay ITAT has, in a recent decision, taken a further step with the potential of limiting the inequity resulting from the current interpretation of the provision. The current position with regard...

Indirect FDI: A Further Press Note

Continuing with the series of press notes on the issue of indirect foreign direct investment (FDI), the Government has issued Press Note 4 of 2009 that clarifies the position on downstream investment by Indian companies. Here are some quick thoughts on the new Press Note: 1. The Press Note divides downstream investments into three categories: a. Only operating companies: Here, the usual foreign...

Taxing times for the software industry

ET reports that the software industry has witnessed a 40 % drop in sales as a result of recently introduced taxation provisions. After the decision of the Supreme Court in Tata Consultancy Services v. State of Andhra Pradesh, (2005) 1 SCC 308, the sale of ‘branded’ software like Microsoft products has been subject to the sales tax/VAT regime, on the theory that when software is stored on a...

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