22 Dec 2013

Corporate Governance Laws In India

Perry4Law and Perry4Law’s Techno Legal Base (PTLB) thank their viewers and readers for their continued support and commitment.

In order to provide more comprehensive and holistic views and opinions about the corporate laws of India, we have shifted this platform to another platform titled Corporate Governance Laws in India.

This is also an attempt to discuss the provisions of Indian Companies Act 2013 in a holistic and techno legal manner.

We have also added additional fields like e-discovery, cyber forensics, cyber security, cyber crimes investigation, etc to the new platforms so that techno legal analysis of the corporate environment is possible.

Perry4Law and PTLB hope that our readers would find the new platform worth reading and enjoying.

18 Mar 2013

Finance Ministry And RBI Investigating Money Laundering Accusations Against ICICI, HDFC And Axis Bank

Banking frauds in India have crossed all the limits and there is an urgent need on the part of Reserve Bank of India and Finance Ministry of India to take strict penal action against the offending banks.

RBI has in the past imposed penalties upon many banks for failure to comply with various laws and regulations. RBI is also investigating the cyber fraud happened at YES Bank.

Now it has been reported by media that ICICI, HDFC and Axis Banks have been accused of indulging in money laundering and benami transactions.

Reacting to this gross and poor state of banking industry of India, the Reserve Bank of India (RBI) and Finance Ministry of India have decided to investigate the money laundering allegations against ICICI, HDFC and Axis banks.

We would share the result of the investigation the moment it would be made public by Finance Ministry and RBI.

Banking Frauds In India Have Increased And RBI Is Sleeping

Banking frauds in India have increased tremendously. This is partly due to lack of stringent banking fraud laws in India and partly because the Reserve Bank of India (RBI) has failed to do the needful in this regard.

ATM frauds, Internet banking frauds, online banking frauds, RTGS frauds, money laundering offences, etc are on rise and all this is happening right under the nose of RBI.

In the absence of any deterrent punishment, Indian banks and their official are openly flouting the rules and regulations applicable to them. They are also flouting the bank's code of conduct and ethical standards.

Banks of India are also not following cyber law due diligence in India.

Banks of India have also failed to appoint chief information officers (CIOs) and adopt cyber security requirements as prescribed by the Reserve Bank of India (RBI).


At Perry4Law and Perry4Law’s Techno Legal Base (PTLB) we strongly believe that the regulatory environment for banks in India needs a rejuvenation that must bring transparency, accountability and responsibility among banks of India.

ICICI, HDFC And Axis Banks Alleged To Be Indulging In Money Laundering And Benami Transactions

Banking frauds in India have reached a level where if immediate action is not taken then public would loose faith in the banking industry of India.

As per media reports, it has been alleged that senior executive of private banks like ICICI, HDFC and Axis Banks have agreed to receive unverified sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws of India.

These allegations are serious in nature and a thorough investigation must be conducted by enforcement officials, serious fraud investigation office (SFIO) and Reserve Bank of India (RBI).

If found guilt, strict legal and administrative actions must be taken against the guilty banks and their officials.

The banking license of banks repeatedly violating rules and regulations applicable in India must also be cancelled by the RBI.

Further, it is also high time to formulate phishing laws and regulations for banks and financial institutions of India as well as complaint against more and more banks are filed these days.

At Perry4Law and Perry4Law’s Techno Legal Base (PTLB) we strongly believe that the regulatory environment for banks in India needs a rejuvenation that must bring transparency, accountability and responsibility among banks of India.

The sooner this is done the better it would be for the larger interest of all stakeholders.

13 Feb 2013

Transfer Pricing Laws And Regulations In India Need Clarification


Further, Income Tax Act, 1961 of India also incorporates provisions pertaining to avoidance of income-tax by transactions resulting in transfer of income to non residents and avoidance of tax by certain transactions in securities. Despite all these provisions, the transfer pricing regulatory framework of India needs further clarification form Indian government.

The finance ministry is now in the process of devising clear guidelines for contentious transfer pricing cases, especially for handling the grey areas. We at Perry4Law and Perry4Law’s Techno Legal Base (PTLB) believe that this clarification of the transfer pricing laws and regulations of India would be beneficial for both foreign companies and FDI entities and Indian government.

We also welcome the move of Indian government and Central Board of Direct Taxes (CBDT) for analysing the modalities for handling transfer pricing cases in India. An I-T department’s committee has been assigned with the task of drafting rules for foreign tax credit and it is also looking at transfer pricing issues. The committee will work out the modalities for handling such cases and submit its report to the finance ministry.

11 Feb 2013

Avoidance Of Tax By Certain Transactions In Securities


In this article we would discuss a related concept that results in tax evasion by mode of certain transactions in securities.

Section 94 (1) of the Act provides that where the owner of any securities (in this sub-section and in subsection (2) referred to as “the owner”) sells or transfers those securities, and buys back or reacquires the securities, then, if the result of the transaction is that any interest becoming payable in respect of the securities is receivable otherwise than by the owner, the interest payable as aforesaid shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this sub-section, be deemed, for all the purposes of this Act, to be the income of the owner and not to be the income of any other person.

Explanation.-The references in this sub-section to buying back or reacquiring the securities shall be deemed to include references to buying or acquiring similar securities, so, however, that where similar securities are bought or acquired, the owner shall be under no greater liability to income-tax than he would have been under if the original securities had been bought back or reacquired.

Section 94 (2) of the Act provides that where any person has had at any time during any previous year any beneficial interest in any securities, and the result of any transaction relating to such securities or the income thereof is that, in respect of such securities within such year, either no income is received by him or the income received by him is less than the sum to which the income would have amounted if the income from such securities had accrued from day to day and been apportioned accordingly, then the income from such securities for such year shall be deemed to be the income of such person.

Section 94 (3) of the Act provides that the provisions of sub-section (1) or sub-section (2) shall not apply if the owner, or the person who has had a beneficial interest in the securities, as the case may be, proves to the satisfaction of the Assessing Officer-

(a) That there has been no avoidance of income-tax, or

(b) That the avoidance of income-tax was exceptional and not systematic and that there was not in his case in any of the three preceding years any avoidance of income-tax by a transaction of the nature referred to in sub-section (1) or sub-section (2).

Section 94 (4) of the Act provides that where any person carrying on a business which consists wholly or partly in dealing in securities, buys or acquires any securities and sells back or retransfers the securities, then, if the result of the transaction is that interest becoming payable in respect of the securities is receivable by him but is not deemed to be his income by reason of the provisions contained in sub-section (1), no account shall be taken of the transaction in computing for any of the purposes of this Act the profits arising from or loss sustained in the business.

Section 94 (5) of the Act provides that sub-section (4) shall have effect, subject to any necessary modifications, as if references to selling back or retransferring the securities included references to selling or transferring similar securities.

Section 94 (6) of the Act provides that the Assessing Officer may, by notice in writing, require any person to furnish him within such time as he may direct (not being less than twenty-eight days), in respect of all securities of which such person was the owner or in which he had a beneficial interest at any time during the period specified in the notice, such particulars as he considers necessary for the purposes of this section and for the purpose of discovering whether income-tax has been borne in respect of the interest on all those securities.

Section 94 (7) of the Act provides that where-

(a) Any person buys or acquires any securities or unit within a period of three months prior to the record date;

(b) Such person sells or transfers-

(i) Such securities within a period of three months after such date; or

(ii) Such unit within a period of nine months after such date;]

(c) The dividend or income on such securities or unit received or receivable by such person is exempt, then, the loss, if any, arising to him on account of such purchase and sale of securities or unit, to the extent such loss does not exceed the amount of dividend or income received or receivable on such securities or unit, shall be ignored for the purposes of computing his income chargeable to tax.

Section 94 (8) of the Act provides that where-

(a) Any person buys or acquires any units within a period of three months prior to the record date;

(b) Such person is allotted additional units without any payment on the basis of holding of such units on such date;

(c) Such person sells or transfers all or any of the units referred to in clause (a) within a period of nine months after such date, while continuing to hold all or any of the additional units referred to in clause (b), then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units shall be ignored for the purposes of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in clause (b) as are held by him on the date of such sale or transfer.

Explanation.-For the purposes of this section,

(a) “Interest” includes a dividend;

(aa) “Record date” means such date as may be fixed by-

(i) A company for the purposes of entitlement of the holder of the securities to receive dividend; or

(ii) A Mutual Fund or the Administrator of the specified undertaking or the specified company as referred to in the Explanation to clause (35) of section 10, for the purposes of entitlement of the holder of the units to receive income, or additional unit without any consideration, as the case may be;

(b) “Securities” includes stocks and shares;

(c) Securities shall be deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or in the manner in which they can be transferred;

(d) “Unit” shall have the meaning assigned to it in clause (b) of the Explanation to section 115AB.

Avoidance Of Income-Tax By Transactions Resulting In Transfer Of Income To Non Residents

So far Perry4Law and Perry4Law’s Techno Legal Base (PTLB) have discussed the legal issues pertaining to transfer pricing laws in India. In this post we would discuss a related concept that results in tax evasion by transferring income to non residents.

Section 93 of the Income Tax Act, 1961 deals with the provision pertaining to avoidance of income-tax by transactions resulting by transfer of income to non residents. This way income tax liability is reduced that is otherwise payable.

Section 93 (1) of the Act provides that where there is a transfer of assets by virtue or in consequence whereof, either alone or in conjunction with associated operations, any income becomes payable to a non-resident, the following provisions shall apply-

(a) Where any person has, by means of any such transfer, either alone or in conjunction with associated operations, acquired any rights by virtue of which he has, within the meaning of this section, power to enjoy, whether forthwith or in the future, any income of a nonresident person which, if it were income of the first-mentioned person, would be chargeable to income-tax, that income shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this section, be deemed to be income of the first mentioned person for all the purposes of this Act;

(b) Where, whether before or after any such transfer, any such first mentioned person receives or is entitled to receive any capital sum the payment whereof is in any way connected with the transfer or any associated operations, then any income which, by virtue or in consequence of the transfer, either alone or in conjunction with associated operations, has become the income of a non-resident shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this section, be deemed to be the income of the first mentioned person for all the purposes of this Act.

Explanation.-The provisions of this sub-section shall apply also in relation to transfers of assets and associated operations carried out before the commencement of this Act.

Section 93 (2) of the Act provides that where any person has been charged to income-tax on any income deemed to be his under the provisions of this section and that income is subsequently received by him, whether as income or in any other form, it shall not again be deemed to form part of his income for the purposes of this Act.

Section 93 (3) of the Act provides that the provisions of this section shall not apply if the first-mentioned person in sub-section (1) shows to the satisfaction of the [Assessing] Officer that-

(a) Neither the transfer nor any associated operation had for its purpose or for one of its purposes the avoidance of liability to taxation; or

(b) The transfer and all associated operations were bona fide commercial transactions and were not designed for the purpose of avoiding liability to taxation.

Explanation.-For the purposes of this section,

(a) References to assets representing any assets, income or accumulations of income include references to shares in or obligation of any company to which, or obligation of any other person to whom, those assets, that income or those accumulations are or have been transferred;

(b) Any body corporate incorporated outside India shall be treated as if it were a non-resident;

(c) A person shall be deemed to have power to enjoy the income of a nonresident if-

(i) The income is in fact so dealt with by any person as to be calculated at some point of time and, whether in the form of income or not, to enure for the benefit of the first-mentioned person in sub-section (1), or

(ii) The receipt or accrual of the income operates to increase the value to such first-mentioned person of any assets held by him or for his benefit, or

(iii) Such first-mentioned person receives or is entitled to receive at any time any benefit provided or to be provided out of that income or out of moneys which are or will be available for the purpose by reason of the effect or successive effects of the associated operations on that income and assets which represent that income, or

(iv) Such first-mentioned person has power by means of the exercise of any power of appointment or power of revocation or otherwise to obtain for himself, whether with or without the consent of any other person, the beneficial enjoyment of the income, or

(v) Such first-mentioned person is able, in any manner whatsoever and whether directly or indirectly, to control the application of the income;

(d) In determining whether a person has power to enjoy income, regard shall be had to the substantial result and effect of the transfer and any associated operations, and all benefits which may at any time accrue to such person as a result of the transfer and any associated operations shall be taken into account irrespective of the nature or form of the benefits.

Section 93 (4) of the Act provides that-

(a) “Assets” includes property or rights of any kind and “transfer” in relation to rights includes the creation of those rights;

(b) “Associated operation”, in relation to any transfer, means an operation of any kind effected by any person in relation to-

(i) Any of the assets transferred, or

(ii) Any assets representing, whether directly or indirectly, any of the assets transferred, or

(iii) The income arising from any such assets, or

(iv) Any assets representing, whether directly or indirectly, the accumulations of income arising from any such assets;

(c) “Benefit” includes a payment of any kind;

(d) “Capital sum” means—

(i) Any sum paid or payable by way of a loan or repayment of a loan; and

(ii) Any other sum paid or payable otherwise than as income, being a sum which is not paid or payable for full consideration in money or money’s worth.