• 5% tolerance in arm's length pricing continued for the current assessment year.
• Finance Act 2012 has fixed a 3% upper limit from the next assessment year on wards.
• APA norms expected to be notified.

When an Indian company provides interest-free funds to its wholly-owned subsidiary, the
Transfer Pricing Officer (TPO) should not add the prevailing interest rates in India but the ones
in the country where the subsidiary is located.

The Delhi High court has set aside the arbitral award in a dispute between Shakti Bhog food
Ltd. and Kola Shipping Ltd. as the constitution of the arbitral tribunal was held to be invalid. One
of the main grounds for quashing the award was the main arbitrator failed to disclose the fact
concerning his having been an arbitrator on a related issue involving it. It gave rise to "justifiable
doubts as to his independence and impartiality." The High court further stated that the award was
also opposed to public policy on a collective reading of Sections 12 (3), 13 (5) and 34 (2) (b)
(ii) of the Arbitration and Conciliation Act.

Mutual Funds

• Total expense ratio for MFs made fungible.
• Extra TER of up to 30bps for new inflows beyond top 15 cities.
• Service tax to be borne by investors.
• Exit loads to be credited to the scheme, AMCs can charge extra TER of 20 bps.
• Long-term policy for MFs on the anvil.
• E-IPOs a reality.
• Incentives for ASBA.

The Supreme Court has ruled that an arbitration clause in a deed which is compulsorily registrable
but not registered and insufficiently stamped cannot be enforced.

If the government does not issue a public notification regarding acquisition of land, the
acquisition will be invalid and illegal. Notification in the official gazette is not enough. On the
reasoning, The Supreme Court has quashed a land acquisition by the Maharashtra government
as it did not issue public notification to that effect. The land acquisition act makes it mandatory to
announce the acquisition in the official gazette as well as publicly.

Foreign Institutional Invbestors (FIIs) can now buy up to $5 billion in corporate bonds. It has
been decided that entities like NHB, housing finance cos. will be included as eligible borrowers
for financing such low-cost housing projects. Refinancing of buyers' credit for import of capital
goods in infrastructure sector will be put on the automatic route subject to certain conditions. The
maturity for such credit has been increased to five years. The official said SIDBI will be allowed
to tap the ECB market for funding the MSME sector subject to some conditions to be finalised
by the Reserve Bank of India (RBI) shortly. The government also hiked the maximum limit
of funding rupee loans via ECBs to 75% of forex earnings recorded in the previous three years or
50% of the highest forex earnings recorded in one of the previous three years. Special purpose
vehicles will also allowed to avail this facility. Also, eligible non-resident entities will now be
allowed to credit enhances the issue of rupee bonds by all companies.

The Delhi High Court has issued a fresh notice to Bharti Walmart on a petition seeking
investigation of alleged violation of Foreign Direct Investment (FDI) policy by the company.

The Reserve Bank of India (RBI) has said that the ODI form has been revised to include a
declaration from the company. The Auditors are also required to certify investment being as per Foreign Exchange Management Act (FEMA) norms, within limits, correct valuation and
submission of annual reports in a revised format. The Reserve Bank of India (RBI) has also decided
to add the following items in Section 'F' of Form ODI Part I, to be submitted by every Indian party
while undertaking ODI transaction.

The Reserve Bank of India (RBI) has said that a person who is a citizen of Pakistan or an entity
incorporated in Pakistan may, with the prior approval of the Foreign Investment Promotion
Board of the Government of India, purchase shares and convertible debentures of an Indian
company under Foreign Direct Investment Scheme, subject to conditions provided the Indian
company, receiving such foreign direct investment, is not engaged or shall not engage in
sectors / activities pertaining to defence, space and atomic energy and sectors/activities
prohibited for foreign investment.

The Reserve Bank of India (RBI) has decided to extend the facility of non-resident guarantee under
the general permission for non-fund based facilities [such as Letters of Credit/Guarantees/
Letter of Undertaking (LoU) / Letter of Comfort (LoC)] entered into between two persons resident
in India. The method of discharge of liability by the non-resident guarantor under the guarantee
and the subsequent repayment of the liability by the principal debtor would continue, as hitherto.

The Reserve bank of India (RBI) has decided to allow qualified Foreign Investors (QFIs) to hedge
their currency risk on account of their permissible investments (in equity and debt instruments)
subject to conditions.

The auditors of Bartronics India have indicated a "material uncertainty" on the absence of a
concrete plan or financing arrangement to address foreign currency convertible bonds (FCCBs) to
the tune of ` 377 crore that are coming up for redemption in next year.

The Comptroller and Auditor General (CAG) has found that oil and Natural Gas Corporation
(ONGC) did not put adequate efforts to complete its committed work in 75 percent of the highly
prospective blocks acquired through bidding. It also could not monetize the discoveries during
2002 to 2011, which led to low production.

The Comptroller & Auditor General (CAG) has said that allocation of blocks without bidding
would lead to financial benefits, totaling Rs 1.8 lakh crore, to private companies.

Capital market regulator the Securities and Exchange Board of India (SEBI) is looking to
bar audit firms from certifying accounts of listed companies for a certain period if accounts of
books, certified by them earlier, are found to have been manipulated.

India's nuclear power regulator Atomic Energy Regulatory Board (AERB) has downplayed
observations made by the Comptroller and Auditor General (CAG) in its report, as rose in
the national auditor's report, Bhattacharya said that there are many instances when AERB took
actions on the nuclear power plants to stop operation and construction of some units. The
auditor also pulled up AERB for failing to prepare any safety policy for the country even after three
decades of its existence.

The Listed companies shall now be required to submit the following forms, as may be applicable,
along with copies of annual reports submitted to stock exchanges:

• Form A: Unqualified/Matter of Emphasis Report
• Form B: Qualified/Subject To/Except For Audit Report

The Delhi High Court has issued notices to the Securities and Exchange Board of India (SEBI)
and Ministry of Finance on a petition seeking a ban on automated and algorithm trading. The
petition sought a direction to the Finance Ministry and the Securities and Exchange Board of India
(SEBI) to immediately abolish or suspend such trading. The petition also seeks removal of co-location servers that were allowed to be established by some brokers.

The Securities and Exchange Board of India (SEBI) has introduced a no-frills or basic trading
account for small shareholders. The regulator has directed all depository participants to provide a
"basic services demat account" (BSDA), which would have a substantially lower cost and come
with basic services. BSDAs will have no annual maintenance charges if the value of securities
held in the account is less than Rs 50,000. If the value of securities is between Rs 50,000 and
Rs 2 lakhs, the investor will have to pay an annual charge of Rs 100.

The Securities and Exchange Board of India (SEBI) is making it mandatory for all listed
companies to update every year the offer documents filed at the time of their IPOs and
wants a much stricter disclosure regime to safeguard the interest of investors. As per the
proposed measure, which has been approved by the Securities and Exchange Board of India (SEBI)
board and would be soon notified, all the listed companies would have to file a comprehensive
annual disclosure statement, in addition to the existing requirements, to provide updated
information to investors.

Capital markets regulator the Securities and Exchange Board of India (SEBI) has cleared the
proposal for the launch of AMFI's mutual fund transaction routing platform. The platform will
provide investors with a Common Account Number (CAN) so that investors can invest across
schemes and fund houses using this number. The MFs utility platform will also have a single
cheque payment system and common account statement for all the schemes that investors have
invested in across fund houses. At present, investors need to have to give separate cheques
for making investments in each scheme. The platform, called MF utility is expected to go online
in the first half of 2013.

The Securities and Exchange Board of India (SEBI) has cracked down on the misuse of
Employee Stock Option Plans (ESOPs) and other employee benefit schemes by promoters. In its
latest board meeting, the regulator decided such schemes would not be allowed to make purchases
from the secondary market.

The Securities and Exchange Board of India (SEBI) has said PE funds can pitch in to fill the
shortfall in promoters' lock-in during initial public offerings (IPO). According to the Securities and
Exchange Board of India (SEBI) rules, promoters have to lock in a minimum of 20 per cent of the
post-issue capital for three years.

The Securities and Exchange Board of India (SEBI) has made Business Responsibility (BR)
reporting mandatory for the top 100 listed companies by market capitalization on the NSE
and the BSE. This report will disclose steps taken by listed companies from an environmental,
social and governance perspective. The circular will come into force for financial year ending
December 31, 2012 on wards.

The Securities and Exchange Board of India (SEBI) has said that sub-brokers wishing to
become authorised persons (of the same broker and the same exchange) are not required to
advertise in newspaper regarding surrender of sub-broker registration.

The Securities and Exchange Board of India (SEBI) has issued a circular on manner of
achieving minimum public shareholding requirements. According to the circular, the
following additional methods shall be available:-

• Rights Issues to public shareholders, with promoters/promoter group shareholders forgoing their rights entitlement.
• Bonus Issues to public shareholders, with promoters/promoter group shareholders forgoing their bonus entitlement.

The Reserve Bank of India (RBI) has removed the twelve months repayment period on the loans
taken by farmers on Kisan Credit Cards (KCC). The Reserve Bank of India (RBI) also said that
now the banks might fix repayment period according to the anticipated harvesting and
marketing period for the crops for which a loan has been granted. The Central bank also said the
extent prudential norms for income recognition, asset-classification and provisioning would
continue to apply for loans granted under revised KCC schemes.

As a buyer of immovable property, you may soon be able to electronically check whether the
property concerned is free of encumbrances. CERSAI, a Government company, plans to soon
allow individuals to access the information recorded with the central registry. CERSAI was
examining the possibility of enlarging the scope of the registry to cover search on title status and
the credit profile of borrowers, for which it is in talks with State Government authorities (sub-
registrar of assurances).

Lanco Infratech is engaged in talks with private equity firms Bain Capital and Kohlberg Kravis
Roberts (KKR) to sell stake in its power business.

Standard Chartered, the British bank, has agreed to pay New York's top banking regulator $340
million to settle claims that it laundered hundreds of billions of dollars in tainted money for Iran
and lied to regulators.

The International Finance Corporation (IFC) has announced a commitment of $20 million in
Nereus India Alternative Energy Fund, a new private equity fund domiciled in Mauritius.
Billed as India's first renewable dedicated fund, the offshore vehicle will invest in companies
engaged in development, construction and operation of renewable and clean energy power
generation assets in India.

Europe, which is battling a financial crisis, is progressing on the right track and the results will
start coming in after a year, Klaus Regling, chief executive officer, European Financial Stability
Facility based in Luxembourg, EFSF is set up and financed by the 17 member countries of the
European Union in 2010 to address the sovereign debt crisis in the region.

The fuel supply tussle between Coal India Ltd (CIL), the near-monopoly producer, and power
companies moved a step closer to an end after the board of the state-owned miner relented on
the contentious issue of a penalty in new supply pacts.

The central board of trustees of the Employees' Provident Fund organisation (EPFO) approved
Reliance Capital Asset Management Ltd's plan to sell a 26% stake to Japanese insurer Nippon Life,
amid objection from some of the trade union members. EPFO appointed Reliance AMC, State Bank of India, HSBC Asset Management (India) Private Ltd and ICICI Securities Primary Dealership Ltd
as fund managers with a rider that companies have to take written permission for any mergers,
takeover or stake sale.

Existing power purchase agreements (PPAs) can be reopened by the concerned regulator for
revision of tariff, but the interests of consumers must also be taken into account. The attorney
general has provided this clarification in reply to a reference received from the Forum of Regulators (FOR), a body of electricity regulators.

British regulatory authorities are preparing to overhaul Libor, the now discredited inter bank
lending rate that serves as a benchmark for the pricing of trillions of dollars of assets globally.
The review will examine whether banks should be required to submit actual figures on the trades
they make rather than the notional data as well as an improved governance system.

India plans to drop a controversial clause from its proposed telecom security policy that
mandates at least 50% of all 'core telecom network equipment' to be indigenous developed.

Government approved the policy document for National Electric Mobility-2020 Mission plan, an
ambitious plan that entails to set up an 'electric vehicle' ecosystem around the country with public
investment of around Rs 14,000 crore by 2020. The auto industry is expected to invest another
Rs 6,000 crore in the project taking the entire investment to about Rs 20,000 crore. Government
was also eying sales of close to 6 million vehicles with the help of the plan. Initial projections estimate a saving of as much as Rs 30,000 crore in fuel costs through this plan.

The Reserve Bank of India (RBI) has tightened the Non-banking finance company (NBFCs) securitization norms. The Reserve bank of India (RBI) has said that a loan up to two years can be
securitized only after payment of three monthly installments by the borrower. The limit for loans
between two and five years is six monthly installments and above five years, 12 monthly installments. With regard to minimum retention requirement (MRR) for securitization, the
guidelines said the NBFCs selling loans will have to retain five per cent of the amount if the loan is
for less than two year period and 10 per cent if it is of over two years.

MCX Stock Exchange (MCX-SX), which recently got the regulatory approval for operating as a
full-fledged equity bourse, has launched trading in currency options, which is currently dominated
by the National Stock Exchange (NSE).

With a view to improving customer services and speeding up fund transfer, the Reserve Bank has
asked all core banking solutions (CBS) enabled banks to issue multi-city cheques to all eligible
customers and refrain from levying clearing charges on them. A 'payable at par' or 'multi-city' cheque of a bank can be cleared by any branch of the same bank in the country. The process has significantly
reduced the outstation cheque clearance time.

The Reserve Bank of India (RBI) has directed banks to incorporate the "either or survivor" or
"former or survivor" clause in their account opening forms. The central bank has also asked
banks to inform their existing as well as future term deposit holders about the availability of such
an option. The Reserve Bank of India (RBI) also said that if such a mandate ("either or survivor" or "former or survivor") is obtained, banks can allow premature withdrawal of term/fixed deposits by
the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder.

The Reserve Bank of India (RBI) has directed banks to incorporate the "either or survivor" or
"former or survivor" clause in their account opening forms. The central bank has also asked
banks to inform their existing as well as future term deposit holders about the availability of such
an option. The Reserve Bank of India (RBI) also said that if such a mandate ("either or survivor" or "former or survivor") is obtained, banks can allow premature withdrawal of term/fixed deposits by
the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder.

The chartered accountants have been playing very important role in sustained growth of Indian businesses, service sector, and manufacturing sector and have also been providing the key support in tax administration and compliance of various laws and regulations.The expectations of the businesses and stakeholders are increasing with increasing size of business, complexity, financial and regulatory requirements. In this backdrop it is very important for the profession and specially the Institute of Chartered Accountants of India to ensure that education and training are integrated in such a manner that the quality of chartered accountants is significantly upgraded to meet the increasing complexities
and expectations of various stake holders. On the one hand ICAI examination system needs to ensure to include practical case studies, comprehensive coverage of all theoretical and practical aspects of various subjects in a deep manner. The syllabus may be revised to exclude un required modules and
to have adequate and in depth coverage of all important subjects to enable chartered accountants to play a direct role in adding significant value to their clients, employers and other stake holders.
An in depth practical training with tough discipline is the backbone of the profession. The focus on classes need to be shifted outside office hours and should not disturb training.It is important to ensure by the Institute, chartered accountants and the entire student fraternity that training is taken very
seriously by all the students and is inculcated in a very effective and efficient manner while ensuring complete commitment and discipline among students. The students need to be convinced that an in depth study of ICAI study material, text books and reference books is a must to ensure their development as a complete and able chartered accountant. The tendency of studying only with the objective of passing the examination will defeat the basic objective of creating competent and able professional chartered accountants. The success of CA students entirely depends on level of expertise
and competence to solve practical problems and to effectively deal with all kinds of business situations. ICAI also need to ensure that only high quality students are able to pass the entry level examinations so that effective training can be provided to all such persons. A swift strategic move at this stage is very necessary to ensure a long term survival and growth of the profession and to ensure high level of value addition, reputation, salaries and fee scale for all the members. We need to give adequate time and attention for exam preparation and theoretical studies and balance it with training
needs. Effective and tough steps are immediately required in all the aforesaid areas.

CAG : A HIGH PERFORMING AUDITOR

The Comptroller & Auditor General of India is a sovereign institution primarily set up under the Constitution of India to undertake proprietary audit of all financial transactions undertaken by the government. The CAG have wide power of access to all government records, policies and procedures
and is expected to critically examine various decisions taken by the government for ensuring financial propriety and financial discipline in various organs of the government.

2G Scam

CAG has indicted the government and specially the telecom ministry for awarding 2G telecom licenses on the basis of a faulty policy and procedure of allocation on first come first serve basis. CAG had estimated a loss of more than Rs. 1.76 lakh crore towards the revenue of the government due to allocation of licenses without an open bidding process. It is clearly observed by the society that several ministers and other VIPs have been undergoing prosecution in this regard. Also it is noted that the government is re-issuing the 2G licenses on Supreme Court Directive and it is expected that a sum of Rs. 1,36,000 crore approximately may be received by the government towards the licenses. This is a direct gain to the Indian treasury arising out of CAG observation.

Coal Block

The CAG has now questioned the manner in which coal mine blocks have been allocated by the government to various private sector organizations on the basis of review by a screening committee and without an open bidding process. CAG has estimated a loss of more Rs.1.86 lakh crore to the
government due to faulty and non transparent process. There is an allegation made by the media that certain parties have been favoured on the basis of political recommendations. It is also alleged that certain companies having no prior track records and without having any captive usage have been
granted the mining leases for providing undue gains to such parties.

Positive outlook

Hon'ble CAG have been doing a very significant professional job in highlighting proprietary and policy issues in respect of government working and it will be important for the government to positively react to such observation by ensuring that transparent and fair processes are brought in
force, wherever any licenses or rights are being allocated. The audit process of CAG ensures an independent review and should be construed as positive critic. A corrective action and punitive process need to be initiated wherever it is appropriate. The coal block mining leases provided to parties will need closer and transparent scrutiny by the government to enable the government to take necessary appropriate action. CAG had also made important comments in respect of PPP Projects including Delhi High Court, few highways etc. Rather than criticising CAG for politicalising the issue or creating unending litigation and / or prosecution, it is very important to take necessary preventive and corrective action in the systems and processes by the government, in consultation with CAG on all crucial matters. Advance consultation with CAG on critical issues will ensure non recurrence of such revelations, embarrassing the government.The profession of chartered accountants is also ready to support the government in designing various systems and procedures which will ensure transparency, integrity, fairness and eradication of corruption.