KANTH AND ASSOCIATES. Newsletter CONTENTS K & A NEWS ALERTS TAX. Govt. issues draft GAAR guidelines

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1 TAX NEWS ALERTS Govt. issues draft GAAR guidelines The Government clarified at only income accruing st after 1 April, 2013 will be subject to e provisions of e General Anti-Avoidance Rules (GAAR). This essentially indicates at GAAR would not apply wi retrospective effect to taxpayers' income. The Income-Tax Department has spared e popular participatory notes, rough which many foreign investors invest in India, from e ambit of e controversial tax avoidance rules. The guidelines have put a time limit of 60 days for e assessing officer, in e event of a dispute, to approach e approving panel. The Government has proposed to keep foreign institutional investors subjecting emselves to India's income tax laws outside e purview of GAAR. Where an FII chooses to take a treaty benefit, GAAR provisions may be invoked in e case of e FII, but would not in any case be invoked in e case of e non-resident investors of e FII. If a FII chooses not to take any benefit under a treaty entered into by India and subjects itself to tax in accordance wi e domestic law provisions, en, e GAAR shall not apply to such FII or eir non-resident investors. The draft guidelines say at ough terms such as misuse or abuse, bona fide purpose and lacks commercial substance may be explained, it will only be an indicative list and not an exhaustive list. Furer, e guidelines provided rough examples are based on specific facts. Wheer GAAR may be invoked in any particular case would depend on e specific facts of at case. CORPORATE, CAPITAL MARKET & FOREIGN TRADE Amendment to Form DIN 1 / DIN 4 The Ministry of Corporate Affairs, Government of India vide a notification has made an amendment in e information to be submitted wi Form DIN 1 / DIN 4 and has included a verification of photograph & residential status to be included in e said forms. The Central Government has made rules, namely, Companies (Director Identification Number) Amendment Rules, 2012 which had to come into force wi effect from 29 May, CONTENTS News Alerts Tax 1 Corporate, Capital Market & Foreign Trade 1 Legislations and Regulations 2 Judgments 3 Article 4 Web Censorship And Intermediaries Guidelines LLP Registry merges wi MCA-21 The Ministry of Corporate Affairs, Government of India has integrated e-governance project for Limited Liability Partnership (LLP) under e platform of MCA21. This will result in provision of all state of e art services like credit card payment, online banking from six banks, payment ough NEFT from any bank and host of oer services. Accordingly instructions have been given to notify is decision to e stakeholders at from all LLP forms except Forms to be filed by Foreign LLP shall be processed and approved by respective Registrar of Companies (ROCs) of e concerned state. The forms to be filed by foreign LLPs shall be processed and approved by e ROC, Delhi & Haryana. MCA imposes fees on filing of various forms The Ministry of Corporate Affairs, Government of India vide its circular dated has decided to impose a filing fee on certain e-forms filed wi Registrar of Companies, Regional Directors, MCA (HQ) under MCA-21 where no fee was prescribed earlier. The forms wi respect to which filing fee has been made applicable include Form1 of Investor Education protection Fund Rule; 23B, 24A, 36, 61, 62 and 65. The said circular shall come into effect from RBI announces furer liberalization measures for Capital Account Transactions The Reserve Bank of India (RBI), in consultation wi e Government of India has decided to introduce e following measures wi immediate effect: It has been DISCLAIMER- Kan and Associates newsletter is for private circulation only. It does not purport to be or should not be treated as professional advice or legal opinion. Kan and Associates also disclaim any responsibility and hereby

2 decided to allow Indian companies in manufacturing and infrastructure sector and having foreign exchange earnings to avail of external commercial borrowing (ECB) for repayment of outstanding Rupee loans towards capital expenditure and/or fresh Rupee capital expenditure under e approval route. The overall ceiling for such ECBs would be USD 10 billion. The existing limit for investment by Securities and Exchange Board of India (SEBI) registered foreign institutional investors (FIIs) in Government securities has been enhanced by a furer amount of USD 5 billion. This would take e overall limit for FII investment in Government securities from USD 15 billion to USD 20 billion. In order to broad base e non-resident investor base for Government securities, it has also been decided to allow long term investors like Sovereign Weal Funds, multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks to be registered wi SEBI, to also invest in Government securities for e entire limit of USD 20 billion. The sub-limit of USD 10 billion (existing USD 5 billion wi residual maturity of 5 years and additional limit of USD 5 billion) would have e residual maturity of ree years. The terms and conditions for e scheme for FII investment in infrastructure debt and e scheme for non-resident investment in Infrastructure Development Funds have been furer rationalized in terms of lock-in period and residual maturity. Furer, Qualified Foreign Investors (QFIs) can now invest in ose mutual fund schemes at hold at least 25 per cent of eir assets (eier in debt or in equity or bo) in infrastructure sector under e current USD 3 billion sub-limit for investment in mutual funds related to infrastructure. ECB Repayment of Rupee loans Liberalization Measures for Indian companies in manufacturing & infrastructure sector The Reserve Bank of India (RBI), vide its circular dated on External Commercial Borrowings (ECB) Repayment of Rupee loans, laid down at, it has been decided to allow Indian companies to avail of ECBs for repayment of Rupee loan(s) availed of from e domestic banking system and / or for fresh Rupee capital expenditure, under e approval route, subject to em satisfying e following conditions: only companies in e manufacturing and infrastructure sector will be eligible to avail of such ECBs; such companies shall be a consistent foreign exchange earner during e past ree financial years; such companies are not in e default list/caution list of e RBI; such ECBs shall only be utilized for repayment of e Rupee loan(s) availed of for 'capital expenditure' incurred earlier and are still outstanding in e books of e domestic banking system and / or for fresh Rupee capital expenditure; e overall ceiling for such ECBs shall be USD 10 (ten) billion; etc. This facility will come into wi immediate effect. DTAA wi Norway As per e notification dated , an Agreement between e Republic of India and e Kingdom of Norway for e Avoidance of Double Taxation and e Prevention of Fiscal Evasion wi respect to Taxes on Income and on Capital was signed at New Delhi on e nd 2 day of February, 2011.The date of entry into force of e said Protocol is e 20 day of December, 2011, being e date of later of e notifications of satisfaction of all legal requirements and procedures as required by e respective laws for entry into force of e Agreement. Furer, e said Agreement provides at e provisions ereof shall have effect in India in respect of income derived or capital owned in any fiscal st year beginning on or after e 1 day of April next following e calendar year in which e Agreement entered into force. Therefore, in exercise of e powers conferred by section 90 of e Income-tax Act, 1961, e Central Government has directed at all e provisions of e said Agreement shall be given effect to in e Union of India. DTAA between India & Nepal As per e Notification, dated , an Agreement between e Government of e Republic of India and e Government of Nepal for e avoidance of double taxation and e prevention of fiscal evasion wi respect to taxes on income was signed in Kamandu, Nepal on e 27 day of November, The said Agreement entered into force on e 16 day of March, 2012, being e date of e later of e notifications after completion of e procedures as required by e laws of e respective countries for e entry into force of e Agreement, in accordance wi e provisions of e Agreement. Therefore, in exercise of e powers conferred by sub-section (1) of section 90 of e DISCLAIMER- Kan and Associates newsletter is for private circulation only. It does not purport to be or should not be treated as professional advice or legal opinion. Kan and Associates also disclaim any responsibility and hereby

3 Income-tax Act, 1961, e Central Government has notified at all e provisions of e said Agreement shall be given effect to in e Union of India wi effect st from e 1 day of April, Extension of time in filing of annual return by LLPs The Ministry of Corporate Affairs has started e process of decentralization of e functions of e Registrar LLP by auorizing respective Registrar of Companies (ROC) to discharge e functions of Registrar LLP also on and from Consequently, e LLP system shall remain closed from to As per e provisions of section 35 of e Limited Liability Partnerships Act, LLPs which do not file Form 11 wiin a period of 60 days of e date of closure of eir financial year are required to pay additional fees. In order to avoid payment of additional fees by such LLPs due to closure of e system from to , it has been decided to extend e time limit prescribed under e provisions of section 35 of e LLP Act by 30 days. Thus, it is clarified at e time limit of 60 days shall be read as 90 days for filing of Form 11 by LLPs in respect of e Financial Year ending on The circular shall be effective from LEGISLATIONS AND REGULATIONS Securities Contracts (Regulations) (Stock Exchanges and Clearing Corporations) Regulations, 2012 The Securities and Exchange Board of India (SEBI) vide notification dated and in exercise of powers conferred by Section 4, 8A and 31 of e Securities Contracts (Regulations) 1956 read wi sections 11 and 30 of e SEBI Act, 1992 has notified new Regulations, namely, The Securities Contracts (Regulations) (Stock Exchanges and Clearing Corporations) Regulations, Wi e notification of ese Regulations, The Securities Contracts (Regulations) (Manner of Increasing and Maintaining Public shareholding in recognized Stock Exchanges) Regulations, 2006, which dealt only wi e Stock Exchanges stand repealed. The new Regulations provides for recognition, ownership, governance and listing provisions wi respect to Stock Exchanges as well as Clearing Corporations. The important provisions of e new Regulations are as follows: recognition of Stock Exchanges and Clearing Corporations; net wor requirements; ownership of stock exchanges; ownership of clearing corporations; Governance of Stock exchanges and clearing corporations; listing of securities; etc. As per e provisions of ese Regulations, all Stock Exchanges and Clearing Corporations are required to apply for recognition by e SEBI. Stock Exchanges and Clearing Corporations are required to maintain minimum net-wor requirements of Rs.100 Crores at all times. The existing recognized Stock Exchanges and Clearing Corporations are required to fulfill e networ requirement wiin a maximum period of 3 years from e date of commencement of ese Regulations. JUDGMENTS Guarantors to pay if debtors default: SC The Supreme Court has ruled at e guarantor of a loan is liable to pay it if e debtor fails to clear it. The bench also said e guarantor cannot insist at e creditor must first exhaust all remedies against e principal debtor before recovering e debts from e surety holders. There can be no dispute to e settled legal proposition at in view of e provisions of Section 128 of e Indian Contract Act, 1872, e liability of e guarantor / surety is co-extensive wi at of e debtor. Therefore, e creditor has a right to obtain a decree against e surety and e principal debtor. The Court furer stated at e surety has no right to restrain execution of e decree against him until e creditor has exhausted his remedy against e principal debtor for e reason at it is e business of e surety/ guarantor to see wheer e principal debtor has paid or not. The Court also observed at e conditions precedent for taking away someone's property or disposing of e secured assets, is at e auority must ensure compliance of e statutory provisions. The court said e guarantor does not have a right to dictate terms to e creditor as to how he should make e recovery but said e liability should be shared by e co-sureties if ere is more an one guarantor. DISCLAIMER- Kan and Associates newsletter is for private circulation only. It does not purport to be or should not be treated as professional advice or legal opinion. Kan and Associates also disclaim any responsibility and hereby

4 Copyright Board cannot grant interim relief: SC In e case of Super Cassettes Industries Ltd. Vs Music Broadcast (P) Ltd., (2012) 5 SCC 488, e power being sought to be attributed to e Copyright Board involves e grant of e final relief, which is e only relief contemplated under Section 31 of e Copyright Act. Even in matters under Order XXXIX Rules 1 and 2 and Section 151 of e Code of Civil Procedure, an interim relief granting e final relief should be given after exercise of great caution and in rare and exceptional cases. In e instant case, such a power is not even vested in e Copyright Board and hence e question of granting interim relief by grant of an interim compulsory license cannot arise. On conjoint reading of Section 12 and 31 of e Copyright Act, 1957, an interim compulsory license cannot be granted by e Copyright Board pending final determination of matter. The powers and jurisdiction of e Board flows from e Copyright Act, 1957 which does not contain any express provision for grant of interim license. Thus, in e absence of any statutory backing, e Copyright Board cannot be presumed to have power to grant interim compulsory license. ARTICLE WEB CENSORSHIP AND INTERMEDIARIES GUIDELINES The control over e Internet and e conventional media appears to be more intense an ever. Wi e Apex Court reserving its verdict on e Media 1 Guidelines and a petition pending before e Kerela 2 High Court challenging e constitutionality of Rule 4 of Information Technology (Intermediaries Guidelines) Rules, 2011 (hereinafter e Intermediaries Rules ), e limitations on e freedom of speech & expression wi respect to media are being tested on e altars of e constitutionality. On 26 December, 2011 e Mumbai Police Crime Branch imposed a ban on cartoonist Aseem Trivedi's website following a complaint at his cartoons were disrespectful to e nation. Evidently, e ban was placed wiout serving of a legal notice, or obtaining a court order. Additionally, e matter was also not deemed fit for serving an advance warning or a letter/ requesting for removal of e objectionable content. The event magnifies e debate on e constitutionality of e Intermediaries Rules, 2011, on e touch stone of Article 19(1)(a) of e Constitution of India (hereinafter e Constitution ) which guarantees every Indian citizen a right to freedom of speech & expression. As per e Constitution, e State is permitted to legislate statutes providing for reasonable restriction on e exercise of e right to freedom of speech and expression conferred by Article 19(1)(a) of e 3 Constitution. However, any restriction so provided shall be wiin e scope of clause (2) of Article 19 of e Constitution. Thus, any limitation imposed on e exercise of e fundamental right under Art. 19(1)(a), which does not fall wiin e ambit of Article 19(2) of 4 e Constitution would be ultra vires. Intermediaries Rules On 13 April, 2011, e Central Government issued e Intermediaries Rules to regulate and restrict web content at are designated as disparaging, harassing, blasphemous or hateful. The Intermediaries Rules were issued in exercise of e power conferred upon e Central Government under Section 87(2)(zg) read wi Section 79 of e 5 Information Technology Act, (hereinafter e IT Act ). The Intermediaries Rules as well as e amendments to Section 79 of e IT Act were introduced in light of e increased litigation against online service providers who were arraigned as parties and co-accused in cases of unlawful or illegal conduct by end users. Pursuant to e matter of Avnish Bajaj v. NCT Delhi, 150 (2008) DLT 769, wherein intermediary was also made a party, ere was a demand for more clarity on e rules exempting intermediaries from liability for illegal conduct of endusers. Section 79 of e IT Act was ereafter, amended to exempt e intermediary from any liability subject to e conditions at e intermediary: (a) was not a source of e illegal content; (b) on receiving notice took steps to cure e illegal activity or disable access to e illegal content. Hence, it was essential for e Intermediaries Rules, 2011 to precisely define, (a) e sort of due diligence which should be followed by an intermediary; (b) e framework and e timelines of providing e actual notice and e intermediaries compliance. DISCLAIMER- Kan and Associates newsletter is for private circulation only. It does not purport to be or should not be treated as professional advice or legal opinion. Kan and Associates also disclaim any responsibility and hereby

5 As per e Rule 3(4) of e Intermediaries Rules, e Central Government has delegated e power to disable any content at appears on e internet to e intermediaries. It also mandates at e intermediary, upon obtaining knowledge by itself or been brought to actual knowledge by an affected person about any such information as mentioned in Rule 3(2), shall act wiin 36 hours to disable such information at is in contravention of Rule 3(2). However, ere are no provisions wi respect to providing an opportunity to e owner of such content. It is pertinent to note at e intermediaries are companies who have business interest and are prone to influence by persons who wield power. They can not be expected to be e custodian of free speech for internet above all influence and may engage in blocking, censoring internet content arbitrarily and on e basis of any frivolous complaint. Rule 3(2) of e Intermediaries Rules mandates intermediaries to place restrictions on e kind of content at a user can post by enumerating a broad list 6 of information. These categories are too broad and go beyond e blocking of content which is contemplated specifically under Section 69A of e IT Act. It is significant to mention here at e provisions of Section 69A and Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules, 2009 (hereinafter e Blocking of Information Rules ) have been evolved keeping in mind e fundamental rights of right to life as well as e right to freedom of speech and expression and going beyond em would vest extraordinary powers of censorship on private institutions. Rule 3 of e Blocking of Information Rules specifically provides for e appointment of a designated officer rough a notification in e Official Gazette for e 7 purpose of issuing directions for blocking access. The Intermediary Rules, 2011 not only go beyond e concept of e designated officer but is also susceptible to abuse as it includes ambiguous terms having a grave possibility of being given a wide interpretation. Furer, e Intermediaries Rules also do not provide any burden e Intermediaries wi e obligation and responsibility to verify e auenticity of e complaint received. No provisions as to e conditionalities making e said notice as a valid notice for reporting e content has been provided under e Rules and in e absence of such a detailed procedure, intermediaries will be under an obligation to comply wi requests to remove content even from private parties which is not consistent wi e principles of natural justice like notice and fair hearing. The Intermediaries Rules may, however be considered to be a positive step in terms of exempting e intermediaries from e liability of content posted by end user but e effect of such rules as prescribed on an internet user's fundamental right to freedom of speech and expression can not be ignored. It is erefore, suggested at owner of content (which is sought to be removed), must be given prior notice before e content is banned. Also, after e content is taken down, a reasoned order must follow clearly stating e objections and e basis for e objections to e content. A reasonable restriction based on e edifice and principles of constitutionality has always been upheld to be valid. However, an unreasonable restriction flouting e basic fundamental rights has to be viewed strictly and remedied accordingly. References: 1. Sahara India Real Estate Corporation Ltd. & Ors vs. Securities and Exchange Board of India & Anr., Civil Appeal No. 9813/2011 & 9833/ Shojan Jacob vs.union of India & Oers, WP(C) 5236 of Article 19(2) permits e state to make laws mandating reasonable restrictions on e exercise of e right conferred by Art. 19(1)(a) in e interests of e sovereignty and integrity of India, e security of e State, friendly relations wi foreign States, public order, decency or morality or in relation to contempt of court, defamation or incitement to an offence. 4. Express Newspapers (Private) Ltd. and Anr. Vs. The Union of India (UOI) and Ors., AIR 1958 SC Section 79 Network service providers not to be liable in certain cases: For e removal of doubts, it is hereby declared at no person providing any service as a network service provider shall be liable under is Act, rules or regulations made ereunder for any ird party information or data made available by him if he proves at e offence or contravention was committed wiout his knowledge or at he had exercised all due diligence to prevent e commission of such offence or contravention. 6. Rule 3(2) of Intermediaries Rules, 2011: Such rules and regulations, terms and conditions or user agreement shall inform e users of computer resource not to host, display, upload, modify, publish, transmit, update or share any information at - (a) belongs to anoer person and to DISCLAIMER- Kan and Associates newsletter is for private circulation only. It does not purport to be or should not be treated as professional advice or legal opinion. Kan and Associates also disclaim any responsibility and hereby

6 which e user does not have any right to; (b) is grossly harmful, harassing, blasphemous defamatory, obscene, pornographic, paedophilic, libellous, invasive of anoer's privacy, hateful, or racially, enically objectionable, disparaging, relating or encouraging money laundering or gambling, or oerwise unlawful in any manner whatever; (c) harm minors in any way; (d) infringes any patent, trademark, copyright or oer proprietary rights; (e) violates any law for e time being in force; (f) deceives or misleads e addressee about e origin of such messages or communicates any information which is grossly offensive or menacing in nature; (g) impersonate anoer person; contains software viruses or any oer computer code, files or programs designed to interrupt, destroy or limit e functionality of any computer resource; (i) reatens e unity, integrity, defence, security or sovereignty of India, friendly relations wi foreign states, or public order or causes incitement to e commission of any cognisable offence or prevents investigation of any offence or is insulting any oer nation. 7. Rule 3 of e Blocking of Information Rules, 2009: The Central Government shall designate by notification in Official gazette, an officer of e Central Government not below e rank of a Joint secretary, as e Designated officer, for e purpose of issuing direction for blocking for access by e public any information generated, transmitted, received, stored or hosted in any computer resource under sub-section (2) of Section 69A of e Act. Contact details: A-9, Nizamuddin East, New Delhi , India Phone No: (+91) (11) / 4 / 7; Fax: (+91) (11) info@kancorp.com DISCLAIMER- Kan and Associates newsletter is for private circulation only. It does not purport to be or should not be treated as professional advice or legal opinion. Kan and Associates also disclaim any responsibility and hereby