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Aviation

India

A recent deal between Jet Airways and Etihad Airways, valued at $379 million, forms part of the government's new policy to encourage foreign direct investment in India. It is hoped that the infusion of foreign direct investment into civil aviation will result in improvements to the economy, a growth in traffic at Indian airports and the creation of job opportunities.

Corporate Tax

India

In a recent tribunal case, the Indian Revenue Service demanded service tax from an assessee under the reverse charge mechanism, as it considered the arrangement between the assessee and owners of offshore supply vessels to be a tangible goods service. The tribunal had to determine, among other things, whether the arrangement fell under a proviso to Rule 3(iii) of the Import Rules.

In a recent case, an assessee purchased compressed natural gas from Mahanagar Gas Limited (MGL) for further sale to its dealers, providing space for MGL to install machinery and equipment. Revenue alleged that the assessee had provided marketing services to MGL; hence the commission earned by the assessee was taxable as a business auxiliary service. However, the tribunal ruled out the applicability of service tax.

The Delhi High Court recently held that gains arising from the sale of a share of a company incorporated overseas, which derives less than 50% of its value from assets situated in India, is not taxable under Section 9(1)(i) of the Income Tax Act 1961, read with Explanation 5 thereto. This decision has defined the term 'substantial' to be at a threshold of 50%.

In a recent decision, the Delhi High Court held that the mere presence of multiple entities in joint execution of an agreement does not constitute an 'association of persons' and thus cannot be taxed as a separate taxable entity. The court emphatically rejected, among other things, the Income Tax Department's stance that creation of a consortium by joint executors is sufficient to discard the separate taxable status of the entities.

The Supreme Court recently ruled on the criteria for determining whether a contract is a works contract or a sales contract. The decision will help to resolve a significant amount of pending litigation and will have a significant financial impact on the elevator industry.

In furtherance of the final safe harbour rules issued by the Central Board of Direct Taxes in September 2013, the board has now issued a letter in which it put forth certain significant directives and clarifications regarding the implementation of the safe harbour rules. Although the letter is insufficient to clarify all the issues pertaining to safe harbour, it is a welcome step by the government.

More updates >

International Trade

India

In a recent Customs, Excise and Service Tax Appellate Tribunal case, the assessee had entered into a licence and technology agreement with a holding company for the transfer of technical know-how with regard to the manufacture of float glass.The issue was whether the royalty paid to the holding company should be included in the value of the imported capital goods.

Recent trade developments include the introduction of an online complaint resolution system for electronic data interface issues and a new procedure for tracking and tracing export consignments of drugs and pharmaceuticals. Every exporter of drugs and pharmaceuticals must now submit a certificate of analysis issued by the specified entities when goods are shipped and incorporate barcodes on medicines.

In the complex and ever-evolving world of trade, it is common for manufacturers to sell their products through trading houses. More often than not, the trading house is involved in invoicing only. This update briefly examines the effect of such trade arrangements with regard to the Indian anti-dumping regime and the interesting dichotomy observed therein.

The addition of royalty payments to the assessable value of imported goods has long been a contentious issue. In a recent case, it was held that the lump sum royalty paid to the supplier for the grant of cinematic rights, television rights and video rights of films and programmes could be included in the assessable value of the master tapes of the films and programmes.

The High Court recently ruled that the department has no power to adjudicate in respect of property held by a person other than the defaulter. The case involved a defaulter who had failed to pay anti-dumping duty on goods imported by him in the course of his business. In response, the department imposed a restraint order with respect to property held in the name of the defaulter's wife and children.

The Customs, Excise and Service Tax Appellate Tribunal recently observed that when an appellant discharges its duty liability as a 100% export-oriented unit, it is no longer entitled to claim the benefits available to such a unit. However, the benefits available to a domestic tariff area unit would now become available to the appellant. Accordingly, the appellant was allowed to file shipping bills under the drawback claim.

More updates >

Litigation

India

In 2012 public interest litigations were filed against the central government for alleged illegal allocations of coal blocks between 1993 and 2010. The Supreme Court has found the allocation of coal blocks arbitrary and illegal and cancelled them accordingly. The government has promulgated an ordinance to deal with the cancellation of the licences, but the judgment has had a significant impact on an already struggling industry.

The Supreme Court has held that Part 1 of the Arbitration and Conciliation Act is not applicable if parties have chosen the seat of arbitration and the law governing the arbitration agreement to be outside India, even if Indian law is chosen as the law governing the substantive contract and the agreement was entered into before September 6 2013.

The judiciary has often shown that it is by far the most mature of the three institutions that form the backbone of the Constitution. In a recent case, the judiciary has stepped in to balance the equities in an unequal match by balancing the rights of a lawful lessee against the rights of banks under the Transfer of Property Act and by recognising that that the rights of a bona fide lessee in lawful possession of property cannot be trampled.

A recent Supreme Court decision has held that a court exercising jurisdiction under Sections 8 and 11 of the Arbitration and Conciliation Act is not rendered powerless to refer the dispute to arbitration just because a contract is said to be void from the outset. The court reconsidered its much-criticised decision in Maestro in favour of arbitration, holding that the Maestro decision was incorrect and could not be relied on.

The Bombay High Court recently considered whether the requirement to hold shareholders' meetings under the Companies Act 1956 can be dispensed with and substituted by electronic voting and postal ballot under Section 110 of the Companies Act 2013. The court's final determination is pending, but an order has been released which provides the court's prima-facie views.

The Supreme Court was recently required to consider whether the comptroller and auditor general is competent to conduct an audit of the accounts of private companies. The court stressed that the comptroller and auditor general's powers do not include carrying out a statutory audit of service providers' accounts, but are limited to ascertaining whether the union is getting its legitimate share by way of revenue sharing.