Volume XXI, No. 11, November 2010aicas.in/blog_images/pdf_2010/11-2010.pdfVolume XXI, No. 11, November 2010 INDIA MOVING TO GLOBAL CENTRE STAGE : ROLE OF CHARTERED ACCOUNTANTS In the

EDITORIAL

Volume XXI, No. 11, November 2010

INDIA MOVING TO GLOBALCENTRE STAGE : ROLE OFCHARTERED ACCOUNTANTS

In the recent months several corruption orientedfinancial scams have come to surface. Seriousallegations and counter-allegations have been raisedagainst topmost politicians and bureaucrats of thecountry. Our Prime Minister Dr. Man Mohan Singhis known for his honesty and the time has come forhim to stand up and address the issue of corruptionaggressively by bringing out systematic changes inthe working and operations of the Government insuch a manner that the corruption cannot breed. It isimportant to bring complete transparency, honestyand dedication at the highest level of the politiciansas well as bureaucracy to enable India to grow in asustained manner.

The Government of India has set up various enquirycommittees; CBI has been mandated investigationbesides Public Accounts Committee has been advisedto review the CAG report matter. The UPAgovernment is clearly in a defensive mood. It isimportant that the topmost leadership of UPA standtogether and eradicate corrupt politicians from theircadres. Also the opposition led by BJP should fullysupport all such initiative and may provide politicalsupport to the Government on such crucial anddecisive actions needed. The government has to playits cards in a transparent and strategic manner.

The real test of Indian political system anddemocracy is ahead of us. In case the governmentfails to address this issue effectively, the workingof parliament may get derailed and the economyof the country will unnecessary suffer.

The profession of Chartered Accountants is highly

CORRUPTION UNABATED…

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India is poised to achieve a doubledigit growth of 10% plus in theyear 2011 and is expected to touchthe growth rate of 9% to 9.5% inthe year 2010. This is a great newsin the backdrop of limping growthof the US and European economyin the range of 2% to 3%. Otherdeveloped economies are also

growing between 1% to 4%. China is also expectedto grow between 9.5% to 11%. It is also important tonote that most of the developed economies have largenegative balance of trade during last 2 years and theUnited States of America has requested the G-20nations to allow more freedom in the exchange ratesto adjust according to economic reality and not toartificially manage the same.

India is moving towards the centre stage of the worldeconomy. The dream of every Indian to shift theworld economic market to India may become a realityvery soon. The American Financial Market as wellas the European Financial Market are having muchlower level of activity. Singapore, Hong Kong andMumbai can provide a larger supplementary strongmodern sophisticated market to the world tochannelized investment and financial resources.

The CA community in India is preparing itself fornew challenges and opportunities which are arisingfrom the economic development. The profession ofchartered accountants will need to play a veryimportant role in designing, development and

CA Vinod Jain*

* Mr. Vinod Jain, FCA, FCS, FICWA, LL.B., DISA (ICA), Chairman, INMACS Management Services Limited and Convenor, National Economic Forum (NEF). [email protected], [email protected], 9811040004

2 THE CHARTERED ACCOUNTANT WORLD – November 2010

LATEST IN FINANCE

LATEST IN FINANCE1.0 INFRA BONDS NOT TO BE TREATED

AS PUBLIC DEPOSITS

RBI has clarified that amount raised by issue ofinfrastructure bonds by infrastructure FinanceCompanies, as specified in the notification issuedfrom time to time by the Central Governmentunder Section 80CCF of the Income Tax Act,1961,shall not be treated as 'public deposit'.

2.0 SEBI WANTS MONTHLY INFO FORSECURITIZED PAPER LISTING

LENDERS who sell their loans through thesecuritization route will now have to makemonthly disclosures to stock exchange if theywish to list their securitized paper. SEBIannounced a standard listing agreement withcontinuous disclosure requirements for securitizedinstruments. Securitization refers to the processwhere an entity gets money upfront by convertingfuture cash inflows into marketable securities. Theprocess enables the lenders to transfer their loanassets to a special purpose vehicle which will makeregular payments to investors who put moneyupfront. Besides loan repayment, any form ofreceivables can be securitized. Instances ofsecuritization in the past include toll collection androyalty payment due to artists. In India bulk ofsecuritization deals relate to either mortgaged-backed securities or asset-backed securities.

3.0 CII OPPOSE NBFC PREFERENCE FORBANK LICENCE

The Confederation of Indian Industry (CII) toldthe Reserve Bank of India that it did not favourautomatic conversion of non-banking financecompanies (NBFCs) into banks. The industrybody sought minimum capital requirement of Rs.1,000 crore for setting up a bank. NBFCs, whetherpart of an industrial group or not, (should) betreated on par with other applicants and allowedto promote a bank with fresh capital. NBFCs arecomplementary financial institutions to banks,typically focusing on niches that are underservedand neglected by the normal banking channel.

4.0 IMF PROJECT INDIA'S GROWTH AT9.7 % IN 2010

The International Monetary Fund (IMF) raised

India's growth forecast for 2010, citing robustindustrial output and strong macro-economicindicators, but warned that global economicalrecovery remained fragile. Indian economy willexpand 9.7% this year, up from July forecast of9.4%, IMF said in its World Economic OutlookReport. Asia's third largest economy is projectedto slow down to 8.4% in 2011.

5.0 MFIs TO INCREASE LOAN TENURE UPTO 100 WEEKS

Microfinance Institutions (MFIs) have agreed torestructure loans from 50 weeks to 75 or even 100weeks for those who find it difficult to repay thesame, according to Microfinance Institutions'Network (MFIN) president, and founder of Basix,Vijay Mahajan. The interest rates, however, wouldbe only for 50 weeks. The five members of MFIN-who account for 60 per cent of all loans disbursedhave agreed to restructure the loans. Thesemembers are SKS, Spandana, Basix, Share andTrident. More members are expected to follow suit.

6.0 ICRA LAUNCHES EQUITY RESEARCHSERVICES

Credit Rating Agency (ICRA) launched its equityresearch service, through its wholly-ownedsubsidiary, ICRA Online. The assessments by theagency will not specify any target price for theshares evaluated, but will look into two key factors- Fundamental earning quality or fundamentalgrade and relative valuation or valuation grade.The fundamental grades are on a five-point scale,with 5 being the highest grade and one the lowest.

7.0 PRUDENTIAL NORMS ONINVESTMENT IN ZERO COUPONBONDS

RBI has decided that:

• Banks should henceforth not invest inZCBs unless the issuer builds up sinkingfund for all accrued interest and keeps itinvested in liquid investments/securities(Government bonds), and

• Banks should put in place conservativelimits for their investments in ZCBs.

8.0 RBI MAY CHECK RUPEE EXCHANGERATE RISE

Reserve Bank of India ruled out curbs on foreign

3A JOURNAL OF ALL INDIA CHARTERED ACCOUNTANTS’ SOCIETY

EDITORIAL / LATEST IN FINANCE / ICAI

implement of a rugged market infrastructure andregulatory mechanism which is more open,transparent and liberal. Government need toconsider limited capital account convertibility andprovide for a free international market in India.

The proposals of the Direct Taxes Code are to bereconsidered with a view to provide for certainspecial economic zones, where InternationalFinancial Market may be established with acomplete freedom for currency inflow and outflow.The financial market regulatory mechanism hasto be upgraded to international levels with adevelopmental mindset rather than control.

qualified and experienced to address this menaceand through the columns of this journal we herebyoffer services of profession of charteredaccountants to the Government of India as wellas to the State Government to design and developoperating procedures, operating systems, controlsand guidelines in such a transparent manner thatthe likelihood of corrupt practices can beminimized substantially.

It will also be important to have a propermandatory double entry accounting system to beimplemented in various government departmentsincluding a detailed methodology for accountingof fixed assets and other resources. The professionof Chartered Accountants will be glad to design,develop and implement most sophisticated,transparent and simple internal control system sothat the menace of corruption can be completelyeradicated.

It is important to provide for 100% detailedaudit of all government expenditure includinggovernment department, autonomousinstitutions and other bodies created by an Actof Parliament or are promoted by theGovernment.

We are here to support our great nation in the waragainst corruption. Dr. Manmohan Singh andother honest politicians and bureaucrats can fullyrely on the team of independent charteredaccountants to eradicate corruption from the rootof the Indian Economic System.

INDIA MOVING TO.................

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CORRUPTION .................

Contd...................from page 1

LATEST IN FINANCEportfolio investment into the equity market but saidthe Central Bank may intervene in the forex marketto check rupee appreciation that was hurtingexports. Finance minister Pranab Mukherjee saidat the Annual Economic Editors' conference thathe was not thinking of putting any cap on FII(Foreign Institutional Investment) inflows. SEBIhas also confirmed of having no plans to curb FIIinflow.

9.0 RBI RELAXES CDR NORMS

In a notification issued RBI said that promoters ofcompanies seeking debt recast could be allowedto bring in 50 per cent of their sacrifice upfrontand the balance within a period of one year.

10.0 RBI HIKES SHORT-TERM RATES,TIGHTENS HOUSING LOAN NORM

Measures to rein Curbs on home loansin inflationRepo and reverse repo Banks' home loan-to-rate raised by 25 bps value ratio shouldeach exceed 80%

GDP growth projection Standard Assetretained at 8.5%. provisioning on

'teaser (home) loans'upped to 2% from 0.4%

Wholesale Price Inde Increase in risk weightx-based Inflation on home loans of Rs.75 lakhprojection unchanged at and above to 125%5.5%. Inflation risks are from 100%.

largely on the Upside.

ICAI1.0 ICAI OPPOSES NACAAS

The proposal to create an over-arching regulatorto oversee auditing norms in the country has beenopposed by the Institute of Chartered Accountantsof India (ICAI).

2.0 ICAI PLANS CODE NUMBERS TOCHECK FORGED ATTESTATION

Copies of the balance-sheet, tax audit reports andsimilar documents attested by charteredaccountants as part of several million mandatoryfilings done by companies across the country eachyear may soon have a unique code number asauthentication.

4 THE CHARTERED ACCOUNTANT WORLD – November 2010

TAXATION

TAXATION

1.0 SOFTWARE TAXABLE AS ROYALTY

The Delhi Income-Tax Appellate Tribunal (ITAT)has held that payments received by MicrosoftCorporation from end user (in India) throughdistributors for sale of Microsoft software, aretaxable as royalty. This would also be applicablefor all the payments made before January 1, 1999,the ITAT has said. From January 1, 1999, thebusiness model was changed and Microsoftgranted exclusive licence to GracemacCorporation of the US to manufacture theMicrosoft software and distribute it in terms of thelicence agreement. Even under the changedbusiness model, the ITAT has now held thatpayments for the software licensing should betreated as royalty for tax purposes. The Judgementhas also not fully accepted the supremacy of DTATover Indian Tax Law.

2.0 CAPITAL-GOODS TRANSFER TO SEZLIMIT CLARIFIED

The Government clarified the policy concerningthe transfer of used capital goods into specialeconomic zones (SEZ) from outside of theenclaves, stating that a company can shift theequipment to set up units into the SEZs. However,the value of such second-hand goods should notexceed (20 per cent) to avail of the tax benefits.

INCOME TAX CASES

1.0 DOES THE APPELLATE TRIBUNALHAVE THE POWER TO RECALL ITSOWN ORDER UNDER SECTION 254(2)?

In this case, the High Court observed that thepower under section 254(2) is limited torectification of a mistake apparent on record andtherefore, the Tribunal must restrict itself withinthose parameters. Section 254(2) is not a carteblanche for the Tribunal to change its own viewby substituting a view which it believes shouldhave been taken in the first instance.

CIT v. Earnest Exports Ltd. (2010) 323 ITR 577 (Bom.)

2.0 CAN THE ASSESSING OFFICERREOPEN AN ASSESSMENT ON THEBASIS OF MERELY A CHANGE OFOPINION?

The power to reopen an assessment is conditionalon the formation of a reason to believe that incomechargeable to tax has escaped assessment. Theexistence of tangible material is essential tosafeguard against an arbitrary exercise of thispower. In this case, the High Court observed thatthere was no tangible material before theAssessing Officer to hold that income had escapedassessment within the meaning of section 147 andthe reasons recorded for reopening the assessmentconstituted a mere change of opinion. Therefore,thereassessment was not valid.

Aventis Pharma Ltd. v. ACIT (2010) 323 ITR 0570 (Bom.)

3.0 DOES THE CENTRAL BOARD OFDIRECT TAXES (CBDT) HAVE THEPOWER UNDER SECTION 119(2)(B) TOCONDONE THE DELAY IN FILINGRETURN OF INCOME?

The High Court held that the Board has the powerto condone the delay in case of a return whichwas filed late and where a claim for carry forwardof losses was made. The delay was only one dayand the assessee had shown sufficient reason forthe delay of one day in filing the return of income.If the delay is not condoned, it would causegenuine hardship to the petitioner. Therefore, theCourt held that the delay of one day in filing ofthe return was to be condoned.

Note - Section 119(2)(b) empowers the CBDT toauthorise any income tax authority to admit anapplication or claim for any exemption, deduction,refund or any other relief under the Act after theexpiry of the period specified under the Act, toavoid genuine hardship in any case or class ofcases. The claim for carry forward of loss in caseof a loss return is relatable to a claim arising underthe category of any other relief available underthe Act. Therefore, the CBDT has the power tocondone delay in filing of such loss return due togenuine reasons.

Lodhi Property Company Ltd. v. Under Secretary, (ITA-II),Department of Revenue (2010] 323 ITR 0441 (Del.)

5A JOURNAL OF ALL INDIA CHARTERED ACCOUNTANTS’ SOCIETY

INDIRECT TAXATION / CORPORATE LAW

INDIRECT TAXATION

1.0 AFTER-SALES SERVICE CHARGESAND INSPECTION COST TO BEINCLUDED IN COST OF GOODS FOREXCISE DUTY LEVY

TThe freebies such as extended warranty and freemaintenance and service thrown in with cars andconsumer durables will now be included in thecosts of goods and taxed appropriately, pushingtheir prices higher. The apex indirect taxes body,the Central Board for Excise and Customs, hassaid after-sales service and pre-delivery inspectioncharges are to be included in the assessable value,the value on which excise duty is levied.

2.0 SERVICE TAX ON LEASING SERVICESGETS SC NOD

The Supreme Court has held that banks andfinancial institutions, including non-bankingfinancial companies (NBFCs), are liable to payservice tax on transactions of leasing and hirepurchase of moveable goods. While bringing suchservice within the service tax net, a Bench headedby chief justice SH Kapadia has upheld the levyof service tax on hire purchase and leasingtransactions, notwithstanding that the sametransactions are chargeable to the sales tax (nowVAT). The decision in effect has upheld thedouble taxation of the same transaction of hirepurchase and leasing to both the service tax aswell as the VAT.3.0 NEW SERVICE TAX PAYMENT

SCHEME FOR LOTTERY TICKETDISTRIBUTORS AND PRIZE PAYOUT

Under the composition scheme, a distributor orlottery selling agent who is liable to pay servicetax, can opt to pay flat service tax of Rs.6000 onevery Rs 10 lakh of aggregate face value of lotteryticket printed by the organizing state for a draw.This rate will apply in those lottery schemes werethe guaranteed prize payout is more than 80 percent, the Finance Ministry has said. For lotteryschemes where the guaranteed prize payout is lessthan 80 per cent, a distributor or selling agent willhave to pay service tax of Rs.9000 on every Rs10 lakh of aggregate face value of lottery ticketprinted by the organizing state for a draw.

CORPORATE LAW1.0 CII- RECOMMENDATIONS ON THE

COMPANIES BILL 2009

• Rotation of audit firms should not be mademandatory.

• Pyramid Structure

On the recommendation of the standingCommittee of dismantling the pyramid structuresof companies, CII is of the view that no suchrestrictions should be imposed. Allow flexibilityof corporate planning, structuring and businessoperations as per CII.

• CSR should be left to the board. Promotevoluntary CSR backed by Governmentrecognittion and honour.

• Independent Directors Recomendations

The committee had suggested thatindependent directors should not be entitledto stock options in order to preserve theirindependence. CII is of the opinion that theboard should be free to design remunerationstructures, including stock options subject toshareholders' approval.

• Tenure

The tenure of independent directors should be leftto the board and shareholders to decide. It may befixed by companies in their Article of Association,said CII. The committee had recommended a six-year tenure for the independent directors with alapse of three year in between two tenures withthe same company.

Directors Responsibility

CII recommends that non-obstante clause shouldbe incorporated in the bill to exclude non-executive directors, including independentdirectors from any criminal liability for theoffences committed by the company. Thisprovision should have overriding effect on allother laws. The committee had not suggestedimmunity from other laws for independentdirectors. The liability of independent directorswould arise only when any act of omission orcommission occurred with his knowledge andconsent or connivance and where he had not acted

6 THE CHARTERED ACCOUNTANT WORLD – November 2010

CORPORATE LAW / CAPITAL MARKET / INSURANCE

diligently, the committee had said. CIIrecommends that devolution from liability shouldalso be extended to non-executive directors.

2.0 CHAIRMAN ABSOLVED FROMCHARGE AGAINST COMPANY

In the case of MSEB vs Datar Switchgear Ltd. theSupreme Court has decided that though the ex-chairman was in charge then, it is a settledproposition of law; one cannot draw a presumptionthat the chairman of a company is responsible forall acts committed by or on behalf of the company.

CAPITAL MARKET1.0 NON-PROMOTER HOLDING TO

EXCLUDE GOVT STAKE

The market regulator Securities and ExchangeBoard of India (SEBI) said the government holdingin non-promoter category may be excluded whilecomputing the requirement of minimum 50%shareholding of non-promoters in demat form ina company.

2.0 USE, NSE GET NOD FOR CURRENCYOPTIONS

The booming exchange-traded currencyderivatives segment will soon see the introductionof options trading. The National Stock Exchange(NSE) and the United Stock Exchange (USE) havereceived the regulator's approval for launchingoptions trading on the rupee-dollar spot rate.According to market participants, the move willboost the turnover of exchange-traded currencyderivatives, where only futures trading is allowedat present. Options will provide an additional toolto hedge against currency volatility. Apart fromNSE and USE, the MCX stock exchange(MCXSX) offers currency futures.

3.0 USE SIGNS MOU WITH ICAI FORCURRENCY DERIVATIVES

In a move to impart knowledge about financialmarkets, United Stock Exchange (USE) has signedon MoU with the Institute of Chartered

Accountants of India (ICAI). As part of MoU, theexchange plans to educate members of ICAI byorganizing seminars, workshops on financialmarkets and corporate governance.

4.0 15-MIN CALL-AUCTION WINDOW

NSE and BSE have introduced a special call auction window

to enable market to determine opening rates of major

securities in a systematic manner

• Call-auction session for Sensex & Nifty sharesto last 15 mins from 9-9.15 am

• Orders for this session not executed directly,but will go to a common pool

• Price for maximum orders matched to be theequilibrium price for each share.

• Orders priced other than at equilibrium willbe shifted to the normal segment.

5.0 FII INFLOWS RISE

Fund flows from overseas investors have crossedthe earlier record of Rs. 99,700 crore ($21.6 billion)this year and are set to breach the magical Rs 1lakh crore mark for the first time since they wereallowed to invest here.

6.0 IPO GRADING FUTILE

An analysis by the capital market regulator SEBIhas concluded there is no correlation between thegrades and the performance of the shares afterlisting.

7.0 EXCHANGES ALLOWED TO SELECTEUROPE / US STYLE OPTIONS

The Securities and Exchange Board of India (SEBI)has decided to provide exchanges the flexibilityto choose between the European and Americanstyles of exercising stock option contracts.

INSURANCE

1.0 DECLARE ALL CONSIGNMENT FORTRANSIT TO CLAIM INSURANCE

7A JOURNAL OF ALL INDIA CHARTERED ACCOUNTANTS’ SOCIETY

INSURANCE / FEMA

When the insurance policy for transit of goodsinsists on declaration of 'each and everyconsignment', failure to comply with it wouldresult in rejection of the claim by the insurer, theSupreme Court stated while dismissing the appealcase, Suraj Mal Ram Niwas Oil Mills vs UnitedIndia Insurance Co. A huge consignment of oiltins from Jaipur to Agartala was damaged in a railaccident. The surveyors found that it containedmore than that was declared. So the insurancecompany rejected the claim, arguing that it wasagainst the term of the cover note. Though themill was successful in the Rajasthan consumercommission, the national commission and theSupreme Court justified the stand of the insurancecompany and dismissed its appeal.

2.0 IRDA BANS SALE OF UNIVERSAL LIFEINSURANCE POLICIES

The Insurance Regulatory and DevelopmentAuthority has banned further sale of universal lifeinsurance policies from October 22 till guidelinesfor these products are issued.

FEMA

1.0 HYBRID SECURITY FDI COMPLIANCENORMS

The Reserve Bank of India (RBI) has thrown aspanner in the works of a government proposalto liberalise the pricing guidelines of hybridsecurities such as foreign direct investment (FDI)compliant instruments. RBI fees that only shares,as well as fully and compulsorily convertibledebentures (CCDs) and preference shares (CCPs),should continue to be considered FDI compliant.If any of these instruments have an option, underwhich the price is determined at a future date basedon performance, it ought not to be considered FDIcompliant.

2.0 SLBM SCHEME

• The SLB mechanism enables an investor tosell security in the cash market withoutactually owing them.

• Investor need not square off their positions asthe SLB platform enables borrowing via anapproved intermediary

• SLBM period extended upto 1 year

• 100% upfront margin is called.

• Stock borrowers must return dividends tolender on record date on T + basis.

3.0 AUTHORITIES NOT OBLIGED TOHAND OVER DOCUMENTS ON FEMAAGAINST FIRM

The Supreme Court stated that the adjudicatingauthorities under the Foreign ExchangeManagement Act and Rules are not bound tofurnish all documents in their possession to theperson to whom they issue show cause notice.Only those documents they rely on are requiredto be shown to the person under notice.

4.0 FINMIN, RESERVE BANK OPPOSE ECBFOR LLPs

LIMITED Liability Partnerships in the countrymay not have access to cheap overseas funds,which could discourage big firms from switchingto this form of business that combines the featuresof companies and partnerships. The financeministry and the Reserve Bank of India (RBI) haveopposed changes in the external commercialborrowings (ECB) policy to allow overseasborrowings by LLPs.

FINANCIAL INDICATORSCurrent Rate* Month Ago

(in %) (in %)3 Month LIBOR 0.28 0.293 Month MIBOR 8.08 7.70SENSEX 19585 19872NIFTY 5890 5982CRR 6 6REPO 6.25 6REVERSE REPO 5.25 5Gold (per 10 gm) 20096 19510Silver (per kg) 41498 35540Crude (USD/bbl) 84.34 81.82Rs. vs USD 45.26 44.29Rs. vs Euro 61.78 61.05

(Sources: Bloomberg, NSE, BSE,RBI)

8 THE CHARTERED ACCOUNTANT WORLD – November 2010

� Contact details : Dharampal (9013363257) All India Chartered Accountants’ Society - CFO World 504, Chiranjiv Tower, 43, Nehru Place,New Delhi-110019. Ph: 26223712, 26228410, 26226933 E-mail:[email protected] / [email protected] �EDITOR: Pankaj Gupta, LLB, FCSE-mail: [email protected] �PUBLISHED & PRINTED: At New Delhi by Satish Chandra, Administrative Officer, on behalf of All India CharteredAccountants’ Society, 4696, Brij Bhawan, 21A, Ansari Road, Darya Ganj, New Delhi-110 002 Phone 23265320, 23288101 E-mail : [email protected] at: EIH Ltd., Unit : Printing Press, No. 7, Sham Nath Marg, Delhi-110054. Views expressed by contributors are their own and the Society does not acceptany responsibility.

If undelivered, please return to :All India Chartered Accountants’ Society4696, Brij Bhawan 21A, Ansari Road,Darya Ganj, New Delhi-110 002

Date of Publishing : 13th NOVEMBER, 2010R.N.I. No. 50796/90Posting Date: 14/15 November, 2010

Registration No. DL(c)-01/1268/2009-11Licenced to post without prepayment No. U-(C)-82/2009-11

Global Business Structuring

With businesses in all sectors going global andexpanding business operations beyond nationalterritories, the concept of “Global Village” is emergingfast. Almost all Indian business corporate today, includingsmall and medium businesses, are not restricted todomestic operations and are in some way or the otherextending their arms in international territories. Thesedevelopments in the business front have madeInternational Taxation an import consideration forbusinesses while planning their international operations.

Businesses may go global for different purposes /reasons. A trading or manufacturing company may intendto sell locally in global markets. A research companymay plan to use specialized technology, humanresources available in some foreign countries. Somebusinesses may seek foreign investments or some mayplan to invest in foreign ventures and so on. Dependingon the purpose and requirements of business, it isimperative to establish an International CorporateStructure which will be most appropriate for the business.

International Tax Implications of the proposed structureare one of the most crucial determinants in decidingappropriate International Corporate Structure. Some ofthe important aspects to be considered are:

1. Minimising tax incidence on

a. Business profits arising in differentjurisdictions

b. Taxation of foreign dividends

c. Withholding taxes on interest, royalty,dividends

d. branch profits tax

2. Flexibility for inter company transfer of funds, assetsand businesses

3. Retention of profits in offshore jurisdiction

4. Ease in international trading and service delivery

5. Treaty shopping to facilitate better avoidance ofdouble taxation

6. Transfer pricing issue management

7. Tax saving in low tax jurisdictions by divertingactivities outside India to international jurisdictions

8. Future restructuring to be easy

9. Creation of wealth in a suitable jurisdiction with fullflexibility to invest or use funds

10. International funding and resource raising andleveraging of existing strengths

In view of the above, the corporate structure forinternational operations is to be designed after dueconsideration of all above aspects as it is the foundationfor the success of global operations of the business.

Advt.