Decodifying SEBI’s New Tweak Rules Governing IPOs In 2022: Part 2 - The Daily Guardian
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Decodifying SEBI’s New Tweak Rules Governing IPOs In 2022: Part 2

2) SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015

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Shareholders must give permission before hiring or reappointing any individual, including a full-time director, managing director or manager, whose appointment or reappointment was rejected at a shareholder meeting. Furthermore, the regulations governing issuances of dematerialized securities have been amended to allow investors to request multiple share issuances, etc. Investing has never been easier, more convenient, and safer thanks to this move.

3) SEBI (ALTERNATIVE INVESTMENT FUNDS) REGULATIONS, 2012

As with Special Situation Funds (SSFs), the funds will only invest in stressed assets like distressed loans for purchase, security receipts issued by asset recovery companies, and security certificates issued by distressed companies. Individual investors will be able to invest Rs. 10 crores in SSFs, while accredited investors will be able to invest Rs. 5 crores.

4) SEBI (MUTUAL FUNDS) REGULATIONS, 1996

The trustees of closed-ended schemes must obtain unit holders’ consent before winding up or redeeming units prematurely. In the event of winding up of the corporation, the voting results must be published within 45 days of the publication of notice of winding up circumstances.

5) SEBI (FOREIGN PORTFOLIO INVESTORS) REGULATIONS, 2019

SEBI has approved amending its regulations to empower it to issue unique registration numbers to foreign portfolio investments upon the receipt of the basic information concerning the applicant seeking registration as a foreign portfolio investment. In spite of the fact that SEBI’s amended regulations have been approved to provide better investor protection, disclosure, and monitoring standards, these changes may present some challenges to companies seeking capital via an IPO or preferred stock issue.

ANALYSING NEW RULES OF IPO BY SEBI: BOON OR BANE?

Several large companies are raising funds through IPOs on Indian stock exchanges in 2021. These include Zomato, Paytm, etc. As well, more companies with some big IPOS are present, including life insurance Corporation of India, Mobikwik credit personal limited, Byju’s, etc. Therefore, SEBI is expected to protect the investors in this league, which is why the board amended the relevant rule in late December. Investors and firms need to understand how these amendments to regulations will affect them.

Firstly, a new amendment to SEBI’s regulation on Issue of Capital and Disclosure Requirements 2018 discusses draft red herring prospectuses (DRHP). The board imposed criteria for DRHP objects as well as a public offer of sale in an IPO when a DRHP was filed without the issuer’s stellar record. For companies planning to go public before the amendments, they were not required to show the percentage of funds raised that will go to acquisitions or routine investments. With the amendment, the company seeking a float will have to specify how much of the requested funds will be used for acquisitions and/or regular investments. The general corporate purpose will also be limited from acquiring unspecified targets and amounts in the future under the Amendments. Companies will be a bit more judicious when it comes to the exact amount of money they would like to raise and why.

Existing shareholders of an IPO company were previously not restricted from selling shares. As a result of the amended regulations, existing shareholders owning more than 20% of a pre-issue can no longer offer more than 50% of their shares in an IPO. Pre-issue holders can sell up to 10% of their shares, in contrast to those who own less than 20%. As a result, PE, VC, and other investors will be limited in their exit options. Since most IPOs result from investors wanting to exit the company, it is important to consider whether such a change is truly necessary.

Secondly, the entry of a monitoring agency with the board instead of public financial institutions will impact the inspection system while reporting of issues proceeds in the market quarterly. Earlier, IPO funds were not monitored by rating agencies before the Amendments. IPO proceeds can now be monitored by rating agencies until all the IPO proceeds have been spent. Consequently, companies are less likely to mismanage IPO funds. Several market watchers believe the rule will have little impact on compliance and will merely add to it. The enforcement of this rule is still unclear.

Thirdly, the increment of price band in floor price in accordance with the cases of book built issues will be applicable for all issues. Previously, companies filing for an IPO were free to choose their own price band. A minimum of 105% of the upper price band must exceed the lower price band under the amendment. Increasing retail investor protection may be a result of the amendment, which will allow companies to price their IPOs more realistically and appropriately.

Fourthly, the revised lock-in period portion allocation for anchor investors on and after April 01, 2022, will be a bigger mind game for investors. In light of the change from 30 to 90 days, non-genuine anchor investors will have to think twice about recommending security just for the sake of investing and withdrawing once the lock-in period has expired.

Lastly, reduced lock-in tenure for promoters and non-promoters resulting from a preferential issue will benefit the market. Promoter and non-promoter shareholders can both sell their shares in the company now, resulting in faster exits from the company. It is indeed welcoming news that SEBI has taken steps to protect retail and other investors through these amendments, which will surely help promote the growth of IPOs in India. To ensure compliance with these Amendments, issuer companies will need to be diligent and cautious.

IMPACT OF NEW RULES OF IPO IN THE MARKET OF 2022

The IPO market has been experiencing a flurry of initial public offerings in the previous year and many more are expected in 2022, prompting the watchdog to tighten norms, including limiting the amount of proceeds a company can use for unidentified inorganic growth. Also, a cap will be put on the number of shares that can be offered by shareholders who are selling, as well as an extension of the lock-in period for investors who subscribe for shares. Henceforth, it should be noted that many new-age companies are raising funds or are selling shares to raise cash.

Over the past few years, companies across the world have sold IPOs in record numbers. This year alone, India has raised capital to the tune of over $1.5 trillion through IPOs. When a bull market is in full swing, IPOs both in number and size tends to increase. Investors usually flock to bull markets in which stocks are overvalued due to investor money chasing them, thinking that this will provide them with the funds to grow. There may also be opportunities for many owners of companies to sell their stakes at an attractive price during the IPO boom. In contrast to last year, not nearly as many loss-making companies this year raised funds through their IPOs, such as Zomato, Paytm, etc. Investors who have placed their money into these IPOs may suffer massive losses if the price of these shares falls sharply. According to Paytm, its value has slumped by approximately a third since going public. Promoter exposure is expected to increase under proposed regulations. While the price band rule appears to be designed to counter the trend of companies setting narrow price bands for their issues, it does not appear to be intended to solve that problem. A narrow price band hampers price discovery, according to the SEBI.

While the IPO market is booming, SEBI’s new rules should help protect retail investors despite the booming market. However, a number of companies worry that the new capital raising rules will hinder their ability to raise capital for growth. If companies are not allowed to disclose the purpose or target of IPO fundraising, it could turn out they had no specific purpose for the IPO funding, or they raised money not because they needed it, but only because the market was soaring high and there was a strong demand for IPOs. It may be that this new rule that involves closer scrutiny will cause companies to be more selective about the amount of money they raise and why. No freehand rule on price bands should help companies price their IPOs more realistically and appropriately, as price bands in book building are essential to proper price discovery. In this case, it is however a bit dubious to put restrictions on existing shareholders’ ability to sell shares. In the wake of the stock market boom, early investors who were holding higher valuations have now been forced to accept some risk. Though any setback in the secondary market might make it impossible for these investors to sell their remaining shares, lowering the secondary market’s uncertainty will indirectly contribute to a higher IPO price.

Likewise, Traditionally, many companies have allotted shares to big names to create a positive image and ensure retail and institutional investors enjoyed their IPOs, resulting in anchor investors exiting their investment after 30 days (because they went along with the plan). In particular, non-institutional shareholders who purchased shares during the initial public offering and held on to them were most affected. Therefore, these non-genuine anchor investors may be adversely affected by the limitations SEBI has placed on anchor investors’ share sales, insofar as they might refrain from investing just to back the issue and play along until the lock-in period is completed.

Since business conditions can change rapidly in real life, companies may be less flexible if they are mandated to be particular about how they plan to use IPO proceeds. It is also possible that anchor buyer restrictions can affect market liquidity, as huge investors may feel uncomfortable with the idea of holding their investments for longer than 90 days, and remain steadfastly unwilling to participate in IPOs.

The question of whether SEBI should guide consumers in any way when making investment decisions is also raised by critics. Those investors who stand to lose or gain the most from their investment selections are the greatest potential investors to undertake due diligence on before investing in the initial public offering. These IPOs are priced similarly no matter how firms decide to price them. Since the capital they will gain could be affected, most companies avoid under-pricing or overpricing their points. Slender worth bands may be a useful method to keep valuation uncertainty at bay and keep fundraising from becoming an issue.

CONCLUSION

In an effort to protect investors’ interests, Sebi has proposed tweaking rules regarding initial public offerings so that they are more transparent and accountable. Companies, primarily start-ups, are restricted in how much they can raise for their inorganic growth initiatives as well as being restricted on how much their existing shareholders have the right to sell in an IPO. Additionally, Sebi proposes to extend anchor investor lock-in from 30 to 90 days. IPO proceeds will also be monitored. Many modified regulations will be seen to boost up the Indian stock market.

The proposals have not yet been adopted, but industry players are concerned changes around anchor investors and caps on offer on sale (OFS) may have a negative impact on the Indian capital market. Experts have analysed that India’s economy will grow at a good pace this year, but in light of the country’s growth prospects, they believe that Investors should concentrate their attention on the country’s reform strategy. Market volatility is likely to continue in the days to come with these developments, as well as inflationary and valuation concerns. The risk of new-age IPOs for retail investors is much greater as a result of abnormal valuations and inherent business risks, however, it is doubtful whether these safeguards will mitigate the risk entirely.

Considering that many new-age ventures raising IPO funds already have big war chests raised from private investors, they do not seem to really need the IPO funds to expand or acquire customers. It is not uncommon for applicants to provide vague descriptions of what will be done with proceeds, such as ‘general business purposes’ or ‘inorganic growth initiatives.’ A regulation proposed by SEBI seeks to restrict this practice by capping at 35 per cent the portion of offer proceeds that can be used for unspecified acquisitions or general corporate purposes, and by employing monitoring agencies to oversee them. The acquisition of vast businesses in lines of business makes perfect sense in view of the fact that it has a substantial impact on the very nature of the business and the risk profile, which determines investor participation in initial public offerings. Several new firms are losing money, confounding conventional value measurements, yet investors have noticed the lines that form for reserved anchor parts before launch day.

Furthermore, the proposal allowing private-equity-backed companies to sell only half their shares in an initial public offering regardless of vintage could have a serious negative impact on local listings. Considering SEBI intends to give existing management a stake in the business, it would benefit this goal if controlling shareholders and promoters had a significant influence on management. In order for companies to be listed, sponsors must retain at least 20 per cent of equity stakes, and the shares must be locked in for 18 months. After a thorough analysis of IPOs in 2021, the economists are generally satisfied with every amendment made by SEBI. A streamlined guideline will be provided for companies to use the funds for only earmarked purposes, which will protect the interests of small investors. IPO sizes are likely to reduce in the upcoming years, and valuations will be more realistic. The start-ups planning to list in FY 2022 should reassess their plans because many amendments to the listing process such as pricing, also the performance of the listing will be influenced by the offer for sale limitations and anchor investors. While more IPOs are expected in 2022, the total amount might be at a level similar to or below what was raised in 2021 alone. It is certainly commendable that SEBI aims to bring transparency and improved governance in the stock market in order to benefit investors. On the other hand, some experts believe this will limit an organization’s ability to take advantage of the stock market. It remains to be seen whether this move from SEBI will have a lasting impact on India’s stock market.

Companies, primarily start-ups, are restricted in how much they can raise for their inorganic growth initiatives as well as being restricted on how much their existing shareholders have the right to sell in an IPO. Additionally, Sebi proposes to extend anchor investor lock-in from 30 to 90 days. IPO proceeds will also be monitored. Many modified regulations will be seen to boost up the Indian stock market.

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NCLT BAR ASSOCIATION’S PLEA CHALLENGING 3-YEAR TENURE OF NCLT MEMBERS IN JUNE: A PLEA IN SUPREME COURT

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The Supreme Court in the case National Company Law Tribunal Bar Association Vs Union Of India observed in a petition filed by the NCLT Bar Association challenging the notification of the Ministry of Corporate Affairs fixing the tenure of the members of National Company Law Tribunal as 3 years, while adjourning the hearing.

It was being argued before the court that the discharge of full five years is necessary for Tribunals to functions effectively and efficiently and by the time the members achieve the required knowledge, efficiency and expertise and a term of three years is very short as one term will be over.

On April 5, a notice is being issued on the petition to the Centre by the bench comprising of Justice L Nageswara Rao.

Further it was argued that the Notification is contrary to the judgments passed by the Supreme Court in Madras Bar Association v. Union of India & Anr. (2010) and Madras Bar Association v. Union of India & Anr. (2021) The Court held that the term of members should be 5 years. It was also being observed in the Madras Bar Association Case in which the Supreme Court observed that a longer term was necessary to ensure independence and the Court disapproved the shorter term.

It was being argued by the Association that the said notification is contrary as according to Section 413 of the Companies Act, 2013 which clearly prescribes the term of members for 5 years and even also the early expiration of the tenure will create a void and will add to the pendency of cases before Tribunals.

The Committee is considering all aspects of the matter including the verification report, assessment of suitability etc As on June 20, one of the members is due to retire and it was being submitted by Solicitor General the matter can be considered on June 15.

Solicitor General Tushar Mehta submitted that a meeting was held by the committee On April 20.

The term prescribed by Companies Act, 2013 is 5 years was being submitted before the court by Senior Advocate Tushar Malhotra, Appearing for the Petitioner.

The Bench comprising of Justice DY Chandrachud and the Justice Bela M Trivedi observed deferred the hearing to June 15 as the bench was being told that a committee chaired by the Chief Justice of India and consisting of Justice Surya Kant and the Secretary of the MCA is holding a meeting to deliberate on the term of 23 NCLT members appointed in 2019 by the Solicitor General of India.

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UNDER COMMERCIAL COURTS ACTS, SC ORDERS EXCLUDING PERIOD FROM 15.03.2020 TILL 28.02.2022 AS PRESCRIBED UNDER THE ACT

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The Supreme Court in the case Babasaheb Raosaheb Kobarne vs Pyrotek India Private Limited observed with respect to the limitation prescribed under the Commercial Courts Act, 2015. The Court observed that for the purposes of limitation the period from 15.03.2020 till 28.02.2022 is also applicable.

In an order dated 10.01.2022, The Supreme Court had issued the following directives:

It is directed from 15.03.2020 till 28.02.2022 the period shall extend stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings and the order dated 23rd March, 2020 is restored and in continuation of the subsequent orders dated 8th March 2021, 27th April 2021 and 23rd September 2021.

It shall become available with effect from 1st March 2022 Consequently, the balance period of limitation remaining as on 3rd October 2021, if any

In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply and in cases where the limitation during the period between 15th March 2020 till 28th Feb 2022, would have expired all persons shall have a limitation period of 90 days from 01.03.2022, notwithstanding the actual balance period of limitation remaining.

The Sections which prescribe the outer limits i.e., within which the court or tribunal can condone delay and the period(s) of limitation for instituting proceeding includes Section 12 A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and as prescribed Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996 including the termination of proceedings and any other laws and it is further being clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods, The court observed while referring to the case Centaur Pharmaceuticals Pvt. Ltd. And Anr. v. Stanford Laboratories Pvt. Ltd

Therefore, the bench directed the Trial Court to take on record the written statement filled by the appellant-respondent.

The Commercial Courts Act, 2015 being a Special Law, the said order shall also be applicable with respect to the limitation prescribed under the Commercial Courts Act, 2015 also and the period from 15.03.2020 till 28.02.2022, in the view of this matter and for the purposes of limitation as may be prescribed under any General or SPECIAL LAWS shall have to be excluded as may be prescribed under any General or SPECIAL LAWS with respect to all quasi-judicial or judicial proceedings.

The Bench comprising of Justice MR Shah and the Justice BV Nagarathna observed while allowing the appeal filled by the defendant the purpose of filing the written statement and ought to have permitted to take the written statement on record as the High Court ought to have excluded the aforesaid period.

In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply and in cases where the limitation during the period between 15th March 2020 till 28th Feb 2022, would have expired all persons shall have a limitation period of 90 days from 01.03.2022, notwithstanding the actual balance period of limitation remaining.

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Supreme Court expresses disapproval of judicial officer for not releasing accused despite order granting bail

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The Supreme Court in the case Gopal Verma v State of UP observed the recently deprecated act of a judicial officer on the release of the accused despite Court’s order of directing his release against whom FIR was registered u/s 498A, 304B of IPC and section 3/4 of Dowry Prohibition Act.

Since October, 2020 the appellant has been in custody and the bench had granted bail to the accused after being apprised of the fact that the charge of the accused was as under Sections 304B and 498A, Indian Penal Code, 1860

In December, 2021, the charge sheet was filed and as yet only one witness had been examined whereas the prosecution had cited 64 witnesses, the counsel argued before the Court.

the bench while considering criminal appeal assailing Allahabad High Court’s order of refusing to grant bail to the accused on 17.05.202, the bench granted bail to the appellant on terms and conditions to the satisfaction of the Trial court and upon hearing learned counsel for both the parties.

The bench comprising of Justice SK Kaul and the justice MM Sundresh while observing in their order said:

the appellant was not released and that should have been the matter of concern by the trial court as from December 2021, only one witness has been examined rather than what is sought to be raised ad the bench have no hesitation in adding those provisions to the order but don’t appreciate the conduct of the judicial officer whereby despite the orders of this Court.

on the pretext that while the order mentions the charges under Sections 304B and 498A, IPC it does not mention Sections 3/4 of the Dowry Prohibition Act, The Judicial Officer refused to release the accused.

The bench further added that the bench has no hesitation in adding those provisions to the order but the conduct of the judicial officer won’t be appreciated despite the order of this courts the appellant was not released.

Further the court added that only one witness has been examined by the trial Court from December 2021 and that should have been the matter of concern rather than what is sought to be raised by the trial Court.

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The Unresolved Issue of AMP Expenses in Transfer Pricing – India

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One of the most perplexing yet significant concepts within the Transfer Pricing Dispute Resolution is with regards to the Advertisement, Marking and Promoting (AMP) Expenses that are drawn by the Indian Entities of a company for the products of its foreign Associate Entity. This concept has been surrounded by controversy and confusion since its inception within the practice and study of Transfer Pricing and this is because of the absence of any statutes or regulations dealing with it and its jurisprudence is built purely on the judicial precedents that have been delivered by the Tribunals and High Courts, however, interestingly even the courts appear to have a tough time dealing with issues pertaining to AMP expenses.

The origin of this dispute can be traced back to the United States Tax Court in the case of United States v. DHL Corporation, after the introduction of the US Regulations of 1968 which introduced an important concept pertaining to “Developer Assister Rules” as per which the entity which has incurred the AMP Expenses (Developer) would be treated as the economic owner of the brand which is being marketed even though it might not be its legal owner, and the legal owner of the Brand i.e., the Assister need not pay any compensation for the use of the brand by the developer. These regulations were grounded on the notion of equitable ownership of a brand on the basis of the fiscal expenditure and the risk incurred by them, and the legal ownership of the brand has not to be taken as one of the criteria for ascertaining who would be considered as the developer of the Brand or the intangible property in question.

However, it is pertinent to consider that the Transfer Pricing Rules in America create a clear distinction between “Routine” and “Non-Routine” expenditure, which is essential to understand the issue of the monetary remuneration that is given to the domestic associated entity for marketing intangibles. In DHL, the court framed the Bright Line Test (BLT) which created a distinction between the routine and non-routine expenses that were incurred by the companies. According to the Bright Line Test, it is necessary to ascertain the non-routine expenses that have been incurred i.e., for marketing purposes in contrast to the routine expenses that the incurred by the brand’s distributor for product promotion while ascertaining the economic ownership of the intangible in question.

The issue pertaining to AMP expenses was first dealt with in the case of Maruti Suzuki India Ltd. v. Additional Commissioner of Income Tax [(2010) 328 ITR 210] before the Delhi High Court, where the Bench held that the Advertisement, Marketing and Promoting Expenses will be considered as an international transaction only in cases where it exceeds the costs and expenses that have been incurred by comparable domestic entities which are similarly situated. However, the Delhi High Court’s judgement was remanded following which it was challenged before the Honourable Supreme Court in Maruti Suzuki v. Additional Commissioner of Income Tax [2011] 335 ITR 121 (SC) where it was overturned by the Apex Court.

In LG Electronics India Pvt. Ltd. v Assistant Commissioner of Income Tax [(2013) 140 ITD 41 (Delhi) (SB)], the Delhi Bench of the ITAT referred to the precedent by the Delhi High Court in Maruti Suzuki and held that the as per Chapter X of the Income Tax Act, 1961 the Assessing Officer has the right to make an adjustment for Transfer Pricing vide application of the Bright Line Test in issues pertaining to the AMP expenses that have been drawn by the Indian Entity, since this would fall within the ambit of an international transaction, and this would be deduced from the proportionally higher AMP expenses that were incurred by the Domestic Entity in contrast to two similarly situated domestic entities. The Revenue’s understanding that the AMP expenses which are incurred by the Domestic Associated Entity will inevitably result in a benefit to the Foreign Associated Entity in terms of increasing its brand value along with the lack of lack adequate compensation to the latter for the same, is the primary reason behind its attempt to bring all expenses pertaining to advertising, marketing and promotion within the ambit of the country’s Transfer Pricing Laws, thus it takes the job of applying an Arm’s Length Prince on such transactions which are used for AMP and the test that is most widely employed for this purpose is the Bright Line Test which used by the court in the case of LG Electronics, where it looked at the Bright Line, which is a line drawn within the total expenditure for the purposes of AMP which signified the average spending for the same purpose by comparable entities and any amount which would exceed the line would be considered as an international transaction which would represent the expenses that were drawn by the domestic entity for the building the brand value of the Foreign Associated Entity’s product.

The precedent in Sony Ericsson proved to be a gamechanger wherein the court went to the extent of overruling all of the abovementioned judgements with regards to whether AMP Expenses by the Domestic Entity would be considered as an internal transaction. In this case, the court did not face any issues in determining whether it would constitute an international transaction since the entities had submitted that the international between the Foreign Associated Entity and the Domestic Entity also included the money for the purposes of AMP. While the Revenue had relied on the precedent in LG Electronics to show cause for their application of the Bright Line Test in determining the part of the expenses towards AMP that would be considered as an international transaction. However, the court reject the Revenue’s submissions and reasoning while holding that the Bright Line Test did not have legislative or statutory backing and thus the precedent in LG Electronics was overruled with regards to the use and applicability of the Bright Line Test for ascertaining international transactions since this would be considered as an outcome of judicial legislation.

After the precedent in Sony Ericsson there has been a drastic change in the judicial approach towards issues pertaining to AMP expenses within the realm of transfer pricing. However, since the Court has failed to elaborate upon what would constitute an international transaction in Sony Ericsson, the courts and tribunals have gone back to the phase of drowning in confusion to deal with cases pertaining to AMP expenses and have struggled with determining a proper method for the same.

A transfer pricing adjustment can only be made when it has met the statutory framework of highlighting the existence of an international transaction, determination of the price and fixing an ALP in compliance with Section 92 C of the Income Tax Act. While the element of the international transaction was not disputed in all of the aforementioned cases, the primary issue was with regards what would constitute an international a transaction. The definition of an international transaction as per the Income Tax Act includes the parties to have an agreement between themselves for such a transaction and a shared understanding with regards to the transaction and its purpose. In LG Electronics and other cases prior to Sony Ericson, the primary criteria that were adopted by the courted in ascertaining international transactions and unsaid understanding, were on the basis of proportionally higher expenses with reference to comparable i.e. the courts had adopted the Bright Line Test which had been deemed incompatible with the Income Tax Act of 1961

At a glance at most of the cases pertaining to this issue, the Revenue has resorted to proving the existence of international transactions on the basis of the Bright Line Test, and most of the revenue’s judgements also fail to highlight or prove the same, otherwise except for the unique cases in which the Assessee Domestic Associated Entity and the Foreign Associated Entity had a written agreement between the two of them. This issue is purely because of the lack of any regulatory or statutory provisions within the Income Tax Act, and this was also brought to attention by the court in Maruti Suzuki(2011). In the absence of Statutory provisions and the inability to apply the Bright Line Test because of the precedent in Sony Ericsson, it becomes impossible for the revenue in such cases, especially in the absence of a written or express agreement between the Domestic and Foreign Associated Entities, where it is forced to assess the Domestic Entity’s subjective intentions however this method was also rejected in Maruti Suzuki(2011).

While the decision in Sony Ericsson has left the Revenue and Courts baffled with regards to the method, they should use to ascertain international transactions in matters pertaining to AMP expenses, hopefully, this will finally come to a conclusion since it is currently being heard by the Country’s Apex Court. It is of the utmost importance for the Apex Court to elaborate upon the method and procedure that must be followed by the revenue in determining cases pertaining AMP expenses and issue guidelines for the same.

The origin of this dispute can be traced back to the United States Tax Court in the case of United States v. DHL Corporation, after the introduction of the US Regulations of 1968 which introduced an important concept pertaining to “Developer Assister Rules” as per which the entity which has incurred the AMP Expenses (Developer) would be treated as the economic owner of the brand which is being marketed even though it might not be its legal owner, and the legal owner of the Brand i.e., the Assister need not pay any compensation for the use of the brand by the developer. These regulations were grounded on the notion of equitable ownership of a brand on the basis of the fiscal expenditure and the risk incurred by them, and the legal ownership of the brand has not to be taken as one of the criteria for ascertaining who would be considered as the developer of the Brand or the intangible property in question.

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INSURANCE COMPANY SHOULD NOT SEEK DOCUMENTS WHICH ARE BEYOND THE CONTROL OF INSURED TO FURNISH, SAYS SUPREME COURT WHILE SETTLING CLAIM

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The Supreme Court in the case Gurmel Singh vs Branch Manager, National Insurance Co. Ltd observed that due to circumstances which is beyond the insured control and which the insured is not in a position to produce while settling the claims, the insurance company need not be too technical and ask for documents.

While settling the claim, it is found that the insurance companies are refusing the claim on flimsy grounds and/ or technical grounds further which the insured is not in a position to produce due to circumstances beyond his control, While settling the claims, the insurance company should not be too technical and ask for the document As the insurance company ought not to have become too technical and ought not to have refused to settle the claim on non­ submission of the duplicate certified copy of certificate of registration as due to the circumstances beyond his control, the appellant could not produce on payment of huge sum by way of premium and the Truck was stolen, once there was a valid insurance. As the appellant was asked to produce the documents which are beyond the control of the appellant to produce and furnish those documents.

An amount of Rs. 12 lakhs along with interest @ 7 per cent from the date of submitting the claim, the appellant is entitled to the insurance and to pay the litigation cost of Rs. 25,000 to the appellant, the court held while allowing the appeal.

the insurance company has become too technical while settling the claim and the insurance company has acted arbitrarily, observed by the court in this case.

As when an appellant produced the registration particulars which has been provided by the RTO and further the appellant had produced the photocopy of certificate of registration and was just being solely on the ground that the original certificate of registration i.e., which has been stolen is not produced and the non-settlement of claim can be said to be deficiency in service. Therefore, the Insurance companies are refusing the claim on flimsy grounds and/or technical grounds, the facts and circumstances of the case. Furthermore, the appellant had tried his best to get the duplicate certified copy of certificate of registration of the Truck. the insurance company must have received the copy of the certificate of registration, even at the time of taking the insurance policy and getting the insurance.

the appellant has not produced either the original certificate of registration or even the duplicate certified copy of certificate of registration issued by the RTO, mainly on the ground the insurance company has not been settled in an appeal before the Apex Court. The bench further noted that the photocopy 5 of certificate of registration and other registration particulars as provided by the RTO, was being produced by the appellant.

The bench comprising of Justice MR Shah and the justice BV Nagarathna observed and contended that, in many cases, it is found that the insurance companies are refusing the claim on flimsy grounds and/or technical grounds.

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Supreme Court seeks response of Union and states on plea for guidelines to prevent sexual harassment of students in schools

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The Supreme Court in the case Nakkheeran Gopal v UOI & Or’s observed that any kind of harassment including the sexual harassment being carried out at educational institutions The Court while allowing the writ petition issued a notice seeking protection of children.

The plea stated that there is a vicarious liability upon the State Government to implement any law for the well-being and also for the protection of the children in their respective states.

the petition states that to implement any law for the well-being of children and also for the protection of the children in their respective states, it is the responsibility of the State Government and the plea further mentioned that it the vicarious liability of the State Government and It will be considered the lapse on the part of the State Government if there is Any lapse on the part of the educational institution as it remains a crucial department in the State Government With respect to the relevant organization, including Educational Institution, stated in the plea before the court.

The petitioner argued that till date no specific mandate or the law or the guidelines have been issued by the respective States and inspire of alarming rate in the offence against the children especially at school premises.

The petition further states with this regard that children can also themselves be coerced into becoming tools in furtherance of illegal and dangerous activities and under this circumstance the Increased online time can lead to grooming and both online and offline exploitation.

It is essential to ensure the constitutional right to dignity of children provided under Article 21 of the Constitution of India, while protecting children against sexual abuse when they are exposed to predators, which is compromised, stated by the petitioner in the plea.

The petition states that it indicates immediate concerns and measures for intervention are of paramount significance and further the court stated that this calls for the implementation of legislative actions and community-based interventions through virtual media to prevent a further rise in the statistics and to ensure child protection and when the safety of the children is at stake especially at educational institutions which is supposedly to be the safest shelter, and that too during this tough time. As it is necessary to Protecting the basic rights of children and is of utmost concern as otherwise there will be a posting of a substantial threat to the future and this would leave a regressive impression.

It is the fundamental right of the children under Constitution of India to engage and study in an environment when he/ she feels safe from any kind of emotional or physical abuse and is free, further being argued in the petition.

The bench comprising of Justice Indira Banerjee and the Justice CT Ravikumar observed and sought responses of the Union and the States for guidelines for the educational institutions for the protection of the children and also for the enforcement of the fundamental rights of Children at the educational institutions.

It is essential to ensure the constitutional right to dignity of children provided under Article 21 of the Constitution of India, while protecting children against sexual abuse when they are exposed to predators, which is compromised, stated by the petitioner in the plea.

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