ArchiveAugust 2012

The AAR’s ruling in Schellenberg Wittmer: Partnerships and Tax Treaties

The entitlement of partnerships to the benefits of a double taxation avoidance agreement [“DTAA”] is a contentious issue. The main reason is asymmetry in the manner in which partnership income is taxed in the two Contracting States – India, for example, in certain circumstances taxes the income of a partnership in the partnership’s hands, but the Contracting State with which it has a DTAA (for...

Relaxations on IDR Redemption

Last year, SEBI issued a circular that imposed some curbs on redemption by holders of Indian depository receipts (IDRs). Under that circular, redemption was permitted only if the IDRs are infrequently traded on the stock exchanges in India. This was a method of limiting exit options to investor exclusively to the Indian markets, except where they are illiquid (in which case conversion into...

Committee for Reforming the Regulatory Environment for Doing Business in India

The Ministry of Corporate Affairs (MCA) has established a 20-member committee to make recommendations to improve the regulatory environment for conducting business in India. Some of the background to this effort is contained in the MCA’s office memorandum: 1. The report of The World Bank and the International Finance Corporation, entitled “Doing Business 2012: Doing business in a very Transparent...

Prohibition on Acquisition of Shares by Employee Trusts

One of the decisions taken at SEBI’s board meeting escaped attention until some recent discussion in the financial press (here and here). The relevant paragraph in SEBI’s press release is as follows: Listed entities shall frame employee benefit schemes only in accordance with SEBI (ESOS and ESPS) Guidelines, 1999.  Entities whose schemes are not in conformity with the same would be given...

Liberalisation of FDI from Pakistan

Hitherto, a person resident in Pakistan or an entity incorporated in that country was not allowed to purchase shares or convertible debentures in an Indian company. This was by virtue of Regulation 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. By way of a circular dated August 22, 2012, the Reserve Bank fo India (RBI)...

Lord Saville: 15 Years of the English Arbitration Act

The UKSC Blog has highlighted a speech by Lord Saville, “Reflections on the English Arbitration Act 1996 after fifteen years”. Lord Saville, who was intimately connected with the drafting of the English Act, makes several interesting points. He deals with the narrow right of appeal on questions of law u/s 69 of the English Act. In does so, he addresses the argument that having a narrow right of...

Recent AAR Rulings on the ‘Mauritius route’

Some recent reports have pointed out that the Authority for Authority for Advance Rulings has once again sanctified the “Mauritius route”.  While the law since Azadi Bachao Andolan’s case has upheld the sanctity of a tax residency certificate (TRC), the Revenue has not given up its efforts to find the “hidden reality” or “true facts”.  The Revenue has also met with some success in its...

Indemnity clauses in intra-group asset transfers

The English Court of Appeal recently considered an interesting and important issue arising out of an indemnity clause in an agreement for a transfer of assets and liabilities between two wholly owned subsidiaries in a corporate group. Dealing with a scenario not uncommon in intra-group transfers of assets and liabilities, the Court of Appeal in Rust Consulting v PB [2012] EWCA Civ 1070 considers...

Business Responsibility Reporting

The debate continues over the nature of the corporate social responsibility (CSR) requirements that should be imposed on Indian companies through the Companies Bill, 2011, i.e. whether voluntary or mandatory. Although the Government had proposed a hybrid approach, the Parliamentary Standing Committee on Finance appears to be keen on retaining the mandatory approach, as we had previously discussed...

SEBI’s Capital Market Reforms

In what is clearly the most extensive set of capital market reforms in recent years, SEBI announced a series of measures following its board meeting last week. These are intended to boost the capital markets in India (both primary and secondary), and also to streamline various process. The principal recommendations have been divided into the following categories (in the words used in SEBI’s board...

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