Hello and Welcome to The Week that Was, TIOL’s weekly news round up. Today we bring you news on the novel method adopted by the Trademark office to reduce the backlog of cases, an anti-trust motion against Google in Europe, India's bid to improve ease of doing business for multinationals with international transactions and easing withdrawals from the Provident Fund.
There is also news on the grim outlook for the global economy and new guidelines on Foreign tax credit. But first lets hear about the Supreme Court setting a historic precedent against abuse of the judicial process.
SC Fines Companies to set a historic precedent
An aggravated Supreme Courtlevied major fines against three companies for abusing the judicial process, which could set an important precedent for others.
The Supreme Court of India, by its very nomenclature, is meant to deal with vital constitutional issues or questions of law or cases of grave injustice. However, Article 136 of the Indian Constitution, grants the apex court special discretionary powers to entertain special leave petition, for appeal against any order of any court or tribunal in India.
As the Indian Constitution is silent on the kind of cases in which this discretionary power must be exercised, it has become a regular practice by parties to file SLPs against all kinds of orders. As a result, the Supreme court has been practically working as an ordinary appellate court, and not quite the apex constitutional court of the land, as originally intended. Consequently, the backlog of cases in the Supreme court has mounted and the justice delivery mechanism is badly clogged.
In this scenario, enter three companies, a German company that purchased the shares of two Indian companies,one of which belonged to the powerful RUIA group. These parties were involved in multiple litigations and arbitration relating to purchase of shares, which dragged on for 18 long years and culminated in the Supreme court. The company counsels urged the apex court to examine every question of fact and law in the huge litigation records. Arguments were advanced for 18 working days as if the apex Court was a Court of Original Jurisdiction.
The Supreme Court bench, headed by Justice J Chelameswar, observed that the case was a classic example of the abuse of the judicial process by unscrupulous litigants with money power. The conduct of none of the parties to this litigation was wholesome as each of the parties was guilty of misconduct, having resorted to halftruths, misleading representations and suppression of facts. The apex court imposed a fine of Rs 75 lakhs on these three companies for unscrupulously abusing the judicial process.
It is high time that the apex court used its discretionary powers to entertain SLPs only in exceptional cases to unjam the judicial process.
Govt To Issue Order For Workers Welfare
Intro: The labour ministry may soon pass an order for better payments to contract workers.
The government may soon change the rules to ensure that contract workers get a minimum wage of Rs 10,000 per month.
When the Supreme court directed the government to increase the minimum wage for workers, the government made changes to Rule 25 of the central Rules of Contract Labour Regulation and Abolition Act. But with Parliament not functioning optimally, this labour law reform could not be cleared.
Hence the government is considering the issue of an executive order to ensure that contract workers get a minimum wage of Rs 10,000 per month. Contractors would be required to register with the labour ministry, which would benefit crores of workers across India.
CBDT Issues Draft Guidelines On Foreign Tax Credit
Intro: New rules on Foreign Tax Credit will bring relief to those who have paid tax in a foreign country.
To make the taxation regime fair, and reduce tax disputes, the Central Board of Direct Taxes has introduced a draft framework of foreign tax credit rules, which will allow assessees to claim credit for tax paid overseas.These rules will bring relief to companies with foreign income, that end up paying taxes in both countries, as there is no provision for taking credit for such tax under the Income Tax Act.
The draft framework will apply when tax is paid in a foreign country and the same income is subject to tax in India. The rules will allow the resident taxpayer to take credit for such tax or claim a deduction on the taxes paid in any foreign country, including those with which India has a Double Taxation Avoidance Agreement.
Such credit shall be available against the amount of tax, surcharge and cess payable under the Act, including the assessee’s MAT liability, but not against any interest, fee, or penalty liable to be paid by the taxpayer. Also, no credit shall be allowed on foreign tax being disputed by the taxpayer. The taxpayer shall need to submit specific documents to claim such credit.
PF Withdrawals Eased
Intro: Is the provident Fund an instrument of social security on retirement or to be treated as a savings bank account? The government has eased PF withdrawals.
The government has been forced to withdraw with immediate effect, the notification tightening provident fund withdrawal norms. Following widespread protests from trade unions, the Employees Provident Fund Organisation has rolled back the February 10 notification, restricting the withdrawal of the employer's contribution to the PF corpus, until the employee turned 58 years of age.
Employees can now withdraw the entire amount from the provident fund as per existing provisions of the EPF Scheme, including the employers’ share of 3.67 per cent. This is the second reversal relating to provident fund withdrawal. Earlier, the government was forced to reverse the Budget proposal to tax 60 per cent of the PF corpus at the time of withdrawal.
India Set to Resolve 100 TP disputes
Intro: The CBDT is set on signing 100 advance pricing agreements with multinationals this year.
To improve the ease of doing business, and resolve transfer pricing disputes with multinationals, the CBDT has set an ambitious target of signing 100 advance pricing agreements with MNC companies within this financial year.
An Advance Pricing Agreement or APA helps to resolve disputes because most transfer pricing disputes are connected either with the calculation of profit by the multinational company, or profit shifting to the parent company. So, considering the payer's future international transactions,an agreement is signed between the tax authority and a multinational company pre-determining the transfer pricing methodology to calculate taxes for an stipulated period of time.
With officials already working on 175 cases, the target of 100 APAs seems achievable. In 2015-16, the CBDT had signed 55 APA's, bringing the total number of APAs signed in the last two years to 62.
The Indian government's recent shift to a progressive taxation regime has already lowered the number of transfer pricing adjustments made by tax officials and fewer cases are picked up for scrutiny following the CBDT circular on which cases may be referred for transfer pricing assessment.
Rural India Goes for FMCG products
Intro: Surprise! Sale of low cost FMCG products have shown amazing growth in Indian villages.
The economic slowdown may have impacted consumer choices in urban India, but the trend in rural India was different. Household consumption of fast moving consumer goods in rural areas grew at 5.4 per cent, showing twice the growth as compared with urban India in 2015. Date with IMRB, the market research agency, showed that rural consumers go for the right product if available at the right price and in the right pack size.
Another reason for this positive growth in rural consumption of non-durables was the optimism for a good monsoon and harvest in the second and third quarters of 2015.With the weather department having predicted an above normal monsoon in 2016, agricultural output and rural demand are expected to show an upturn.
Tax Toolkits to be provided for developing countries.
Intro: Cross border transactions are most susceptible to tax evasion and governments are together targeting illicit financial flows by trying to plug legal and information loopholes with internationally uniform laws.
Governments, globally have come together to launch the Platform for Collaboration on Tax, in order to implement uniform standards on international tax issues. The Platform, set up by four international organisations, - the International Monetary Fund, the Organisation for Economic Co-operation and Development, or OECD, the United Nations, and the World Bank Group, will formalise regular discussions between these Big four organisations, in order to intensify their cooperation to share information on operational and knowledge activities.
Besides framing technical advise for developing countries seeking greater capacity support and helping to design international rules, the Platform shall also deliver a number of toolkits to help developing countries implement the measures developed under the Base Erosion and Profit Shifting Project. The first of these toolkits, on tax incentives, shall be delivered November 2016. Money-laundering, tax evasion and international bribery form the bulk of Illicit financial flows and affect all countries.
Anti Trust motion Against Google
Intro: Is Google, the search giant, breaking anti-trust rules?
The European Union has charged Google with breaking antitrust rules by unfairly squeezing the competition in mobile services.
Is it a sly strategy by Google to provide cell phone manufacturers the basic Android software for free, which is used to piggy back its own applications like the Google Chrome web browser and Google Maps?
Members of the European Parliament have stated that Google has provided unfair incentives to smartphone manufacturers and telecom carriers to favour the company's mobile services over those of rivals. By unfairly promoting its own services with cellphone manufacturers, it had limited rival companies from operating in the fast-growing smartphone software market and restricted innovation.
Google contends that it has not broken any antitrust rules as rival mobile services are readily available on its Android software.
Popularity has a downside. It is not the first time Google is facing an anti-trust motion. It has been charged with a series of antitrust and privacy investigations across the 28-member bloc, and the verdict is still awaited. Even other countries, including US and India are investigating google’s dominance.
Google holds more than 80 per cent of the smartphone operating system market worldwide and is expected to earn more than 30 billion dollars in revenue from its mobile activities this year.
Tata Steel Goes to Court over Trademark Application
Intro: India's trademark office, to clear up its huge backlog of cases, seems to have abandoned legitimate applications, including that of Tata Steel.
India's patent office is in the eye of a storm for the wrong reasons. The Controller General of Patent design and trademark, to clear up the backlog of cases, seems to have abandoned nearly 2 lakh applications without sending out notices to the applicants.
One of these applicant's was TATA Steel, that had applied for an ACE+ trademark for its service centre certification program. Following the abandonment of its proposed trademark without due notice, Tata Steel approached the Delhi High Court, along with the Intellectual Property Attorneys Association.
The High Court has stayed all the abandoned orders passed between March 20th and April 4th, 2016 and directed authorities not pass any new abandonment order without prior notice to the parties.
The Trademark office shall need to find other ways of reducing the pendency.
India will sign Paris Agreement on Climate change
Intro: A record number of 150 countries shall sign the Paris Agreement on climate change in New York on opening day.
India, along with 149 countries, will sign the Paris Agreement on climate change in New York. This will break the previous record of 119 signatures for an opening day signing of an international agreement. The environment Minister Mr PrakashJavadekar shall sign the agreement for India at the signature ceremony convened by the secretary general of the united Nations, Ban ki moon and expected to be attended by 60 Heads of State and governments.
The Paris agreement sets out a legally binding global action plan to limit global warming and avoid dangerous climate change. Adopted by 195 countries, the Paris agreement shall enter into force in 2020.
Kohinoor diamond Gifted
Intro: The government probably killed the hopes of many who want Britain to return the Kohinoor Diamond to India. But then quickly took a U turn.
Opinion in India is divided between those who want Britain to return India’s Kohinoor Diamond, that occupies pride of place in the Tower of London Museum, and those who feel it never will.
Anyway, the Centre categorically told the Supreme court this week, that this famous diamond was never stolen. It was gifted to Britain by the Sikh ruler Duleep Singh. Some historians believe that the ruler was tricked into parting with the famous diamond, as compensation for the Anglo-Sikh war, and the East India Company then gifted it to Queen Victoria. It must be legitimately be returned to India.
The apex court was hearing a public interest litigation by the NGO, All India Human Rights and Social Justice Front, seeking the return of stolen precious items from India. The Court was in a quandary as dismissing this petition could serve as a negative precedent for return of India’s treasures and impede the government’s future efforts to reclaim precious artifacts, spirited away from India. Foreign countries could cite the decision for rejection of such return claims in the future.
Faced with criticism by the apex court, the Centre quickly backtracked and resolved to make all possible efforts to bring back the Kohinoor Diamond in an amicable manner.
The apex court bench observed that India was colonised and ruled by several foreign power and the government needed to consider all dimensions before filing its affidavit on the official stand on return of the Kohinoor and other precious items taken out of the country.
On this note, we conclude this bulletin of The Week That Was. Thank you for watching.
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