The SEBI Board decided on the introduction of Exchange Traded Currency Futures Market. A SEBI board took note of the report of the RBI-SEBI Standing Technical Committee on Exchange Traded Currency Futures. It also noted that applications had been received from two exchanges – the National Stock Exchange of India Ltd. and the Multi Commodity Exchange India Ltd. – for starting exchange traded currency futures platform.

It is clarified that PAN may not be insisted in the case of Central Government, State Government, and the officials appointed by the courts e.g. Official liquidator, Court receiver etc. (under the category of Government) for transacting in the securities market.

Indian Accounting Standards will fully converge with the International Financial Reporting Standards (IFRS) by 2011.The National Advisory Committee on Accounting Standards (NACAS) is reviewing AS-30, AS-31 and AS-32. Following this, AS-32 will become mandatory from April 2011.There are now more than 100 countries across the world where IFRS is followed. Once the Indian accounting standards converge with the IFRS, it would be first applicable for the listed companies and then for other entities in phases. The convergence to IFRS would greatly enhance Indian entities’ ability to raise and attract foreign capital at low cost. The US is proposing that foreign filers may comply the US GAAP if they adopt the IFRS standards.

The finance and accounting fraternity is concerned over the change in accounting practices and procedures and recruiting and retaining talent to deal with International Financial Reporting Standards (IFRS) that will become effective from April 1, 2011. Bodies like Accounting Standard Board of Institute of Chartered Accountants of India (ICAI) have kicked started series of awareness
programmes to manage the conversion from Generally Accepted Accounting Standards in India (Indian GAAP) to IFRS and meet the deadline without any hiccup. ICAI is considering coming up with a certificate course for its members to equip them with accounting and reporting based on IFRS.

The Supreme Court has ruled that criminal proceedings for issuing a cheque without sufficient balance in the account would be valid only if it is drawn for discharging a debt or liability. If it is issued to satisfy the term of a compromise or settlement, Section 138 of the Negotiable Instruments Act could not be used to proceed against the drawer of the cheque.

The Supreme Court has ruled that the Monopolies and Restrictive Trade Practices Commission (MRTPC) has no power to order a housing authority to allot a plot to an applicant. It can impose damages or order compensation to a person who complains against the authority for practicing unfair trade practice but it cannot order allotment of plots to the applicant. This power belonged to the civil court.

The documents filed on the portal (www.mca.gov.in), on or after 6th July 2008 for registration /modification of the charge or for giving of intimation of payment or satisfaction thereof after a period of 60 days or 30 days respectively, shall not be registered by the concerned Registrar until the delay is condoned by the Honorable Company Law Board.

Truck Owners who rent out their vehicles to goods transport agencies (GTAs) have got a major relief with the finance ministry clarifying that they are exempt from service tax. However, the agencies, which were also seeking exemption from service tax, are disappointed that they will have to continue to pay the tax.

It has been clarified by the Finance Ministry that Pre-closure or foreclosure charges collected by banks and other companies, as part of their lending and financial services activities, would attract service tax.

The Central Government, on being satisfied that it is necessary in the public interest so to do, has exempted the taxable service of supply of a goods carriage, without transferring right of possession and effective control of such goods carriage, referred to in sub-clause (zzzzj) of clause (105) of section 65 of the Finance Act, provided by any person to a goods transport agency for use by the said goods transport agency to provide any service, referred to in sub-clause (zzp) of clause (105) of section 65 of the Finance Act, to a customer in relation to transport of goods by road in the said goods carriage, from the whole of the service tax leviable thereon under section 66 of the Finance Act.

In a recent ruling, the Authority of Advance Rulings has said that project monitoring services do not
amount to “making available” the technical knowledge, experience etc and so, cannot be taxed as “fees for technical services” under Double Taxation Convention . The income from such receipts would be taxed as business profits under Article 7 of the Convention. In this case, an Australian company provided professional services to an Indian company. The nature of services was to monitor the detailed project schedule, generate project monitoring report and provide fortnightly status report to the Indian Company. AAR has laid down the pre-requisite for the application of the concept of
“make available” is that the recipient of the services should be able to use the technical knowledge, experience etc. subsequently on its own without any recourse to the service provider.

The Bangalore Income Tax Tribunal has held that where an assessee has deducted the tax at source (TDS) on salary every month and adjusted the shortfall of tax in the last month of that year in view of change in structure of salary payment, it cannot be considered as short-fall in deduction of TDS on a month-to-month basis. The tribunal held that Section 192(3) of the IT Act provides liberty to the employer at the time of making of deduction, to increase or reduce the amount to be deducted for the purpose of adjusting any excess or deficiency in the deduction in the financial year. The assessee having exercised this liberty has adjusted the shortfall in the last month of the year and so there was no case of shortfall. Hence, it was held that interest for short deduction of TDS was not leviable.

In a ruling that will help companies planning to transfer capital assets to other companies, including group entities, at the cost price, which may be significantly lower than the market price, the Mumbai tax tribunal has held that no capital gains tax needs to be paid in such transactions. The tribunal rules against the income-tax department’s order that considered the difference between the transactions value and the prevailing market price as capital gains on which tax would be levied. The tribunal felt that capital gains tax cannot be levied since no gain had accrued.

In a landmark decision, the Bangalore Tribunal has ruled that the income arising from non-resident Indians’ (NRIs’) sourcing operations through liaison offices in India is not taxable. The liaison offices have of late come under the scanner of the revenue department. The tax authorities are of the view that sourcing goods from India through agents is a revenue generating activity and so income from it should be taxed. The ruling is a breather for NRIs buying goods through agents in India for
exports. The ruling is also important as it sets a principle that the purchase activity is not taxable in India, irrespective of whether the goods are purchased by the principal or the agent.

Land acquisition by special economic zones (SEZs) has come under tax scanner. The income tax department has upped the ante zero tax deduction at source (TDS) on payments made for purchase of land for these projects. Inspections and surveys by the I.T. department have revealed that in several recent SEZ land transactions, there was no deduction of tax. TDS in such cases has to be deducted
at the rate of 1% for payments exceeding Rs. 15 Lakh.

The wait for rolling out mobile banking seems to be over, with the Reserve Bank of India’s (RBI) issuing draft operative norms for such payment system. According to RBI said, now it will be easier and safer to use mobile phones for carrying out a gamut of banking transactions.

The Information Technology Investment Regions (ITIRS) being planned across the country will lay stress only on creating infrastructure. The ITIRs will not be eligible for new tax benefits. A policy resolution for the ITIRs was gazetted on May 28. The ITIRs, which will be mostly built on the private public partnership model, are planned to promote investment in the IT, IT-enabled services sectors and electronic hardware manufacturing. If there are any special economic zones in the ITIR area, they will get existing tax benefits eligible for them. INVESTMENT REGIONS The idea of ITIRs is to create huge IT investment regions where the Central Government will provide infrastructure like airports, roads and telecom, and States will provide land and power.

In a relief to exporters, the Reserve Bank of India has said that credit insurance claims settled by private insurers would qualify for compliance with foreign exchange obligations. So far, only claims settled by the Export Credit Guarantee Corporation (ECGC) were considered for discharging forex
obligations in case a payment from the overseas buyer was not received by an exporter.

The Reserve Bank of India made it mandatory for regional rural banks (RRBs) to report all suspicious transactions above Rs. 10 Lakh to the directorate of financial intelligence as part of exercise to strengthen the anti money laundering drive. The central bank had earlier issued similar guidelines for the commercial banks.

It has been decided to allow Registered Trusts and Societies engaged in manufacturing / educational sector to make investment in the same sector(s) in a Joint Venture or Wholly Owned Subsidiary outside India, with the prior approval of the Reserve Bank. Trusts /Societies satisfying the eligibility criteria as prescribed in the Annex, may submit the application/ sin Form ODI-Part I, through their AD Category-I bank/s. The AD Category–I bank, after ensuring that the applicant satisfies the prescribed criteria, may forward the application/s with their comments / recommendations, to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Overseas Investment Division, Central Office.

Conditions for Trust/ Society

• The Trust/Society should be registered.
• The Trust deed/ Society bye-laws permits the proposed investment overseas.
• The proposed investment should be approved by the trustee/governing body
• The Authorised Dealer bank is satisfied that the Trust/Society is KYC (Know Your Customer) compliant and is engaged in a bonafide activity.
• The Trust/Society has been in existence at least for a period of three years.
• The Trust/Society has not come under the adverse notice of any Regulatory/Enforcement agency like the Directorate of Enforcement, CBI etc.

Research and development, IT and ITES would now qualify for inclusion in the industrial parks scheme. The Central Board of Direct Taxes notified the amendments that the Industrial parks are eligible for a 10-year income-tax holiday under sub-section (4) of Section 80 IA of the Income Tax Act, 1961. According to the amendment scheme, the ambit of industrial activity has been expanded to include research and experimental development on natural sciences and engineering, development of computer software and information technology enabled services. The minimum constructed floor area has been reduced to 15,000 sq.m from the earlier 50,000 sq.m. The CBDT had notified the original scheme on January 8.

The Reserve Bank of India has decided to increase the fixed repo rate under the liquidity Adjustment Facility (LAF) by 50 basis points to 8.50 per cent from 8.00 per cent with effect from June 25, 2008. The reverse repo rate under LAF remains unchanged at 6.00 per cent.

The media has reported recommendation of Parliamentary Standing Committee to have a separate corporate bench in courts, which will hear cases of big corporate houses for enhanced fee to be paid by them is shocking. The fast track justice to be provided to those who can afford higher cost is against the basic tenets of our constitution to provide justice and equality to all the citizens. The Honorable Supreme Court may kindly consider constituting a special committee of judges to be drawn from various high courts to suggest the ways and means as to how to reduce the delays in justice and how fast track justice can be provided to the poor and needy, who really needed. The corporate sectors and businesses also need fast track justice and may be special additional benches can be created not only for criminal cases but also for civil cases including corporate and business claims. The benchmark and guidelines are to be provided to various courts at various levels to deter
mine maximum number of days for a case can be kept with them before disposal, the circumstances in which adjournments can be granted and also ensuring that most of the evidences and arguments are completed in 1 or 2 hearings. All the parties to the dispute can be advised to supply all necessary supporting evidences and documents in advance before the case is taken up for consideration and then in maximum 2 or 3 hearings the case has to be disposed off. The current practice of listing large
number of cases and then their hurried interim disposal by adjournment or small hearing has to be completely avoided. The High Power Committee so appointed by Honorable Supreme Court may set up necessary guidelines for the government for increasing number of judges, their facilities, computerization of judicial cases and all other necessary steps as may be required. The profession of chartered accountants is ready to help the highest court of justice in evolving proper procedures and practices and designing the same for the approval of the Honorable Court so that justice is not delayed.

JUSTICE DELAYED IS JUSTICE NOT DONE

It has been reported in the media that the government is likely to opt for certain sector specific restrictions on foreign direct investment (FDI) to protect national security rather than imposing countries specific curbs, as recommended by a High Level Committee set up by the PMO. In terms of current FDI guidelines there are restrictions on Pakistan and Bangla Desh nationals to invest in India and there are certain specific restrictions on nationals from Sri Lanka, China, Afganistan, Iran, Nepal and Bhutan. It may be appropriate for the government to prune down the aforesaid list of countries to a smaller number but to completely expunge the prohibition based on nationality could be a serious security threat. It may also be important for the government to examine that declaration is filed by the investing company, duly verified by a chartered accountant that the effective control and management and / or the beneficial ownership of such investors do not relate to certain specific alien nations. Also the KYC norms can be further strengthened in certain specific sectors like telecom, financial
services, accounting, legal, consultancy, NGO’s (trust, society and section 25 companies) and similar other vulnerable areas. The entities taking up foreign direct investments or foreign collaborations may be directed to give a declaration to the government that the ownership, management and control of the foreign investor and / or collaborator do not include specific alien nations nor they are involved in money laundering activities including terrorism, arm supply, narcotics (drugs) or similar other prohibited activities. The Indian chartered accountants, who may be requested to verify the aforesaid declaration may be empowered to receive necessary declaration and details from their counterparts in the respective countries to ensure that money laundering, anti-national activities or terrorism is not supported by foreign direct investment.