Ergo Update

On 26 March 2019, in the matter of Modern Transportation Consultation Services Private Limited & Anr. v Central Provident Fund Commissioner Employees Provident Fund Organisation & Ors. (Civil Appeal No. 7698 of 2009), a bench comprising Justices Abhay Manohar Sapre and Dinesh Maheshwari of the Supreme Court (Supreme Court), elucidated the meaning and scope of an “excluded employee” for the purpose of the Employees’ Provident Funds Scheme 1952 (1952 Scheme) in relation to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act).

Close on the heels of overhauling the external commercial borrowing regime in India, the Reserve Bank of India (RBI) released a revised framework on the extant policy on trade credits (Trade Credits) vide its circular titled “Trade Credit Policy – Revised Framework” dated 13 March 2019 (Revised Framework) in what appears to be an attempt to give impetus to the import of goods into India. The Revised Framework came into force with immediate effect from the date of issuance of the circular i.e., 13 March 2019.

In a bout of relief to foreign portfolio investors (FPIs), the Securities and Exchange of India (SEBI) in its board meeting on 21 August 2019 (Board Meeting) has given its nod of approval to the recommendations made by the HR Khan Committee report published on 24 May 2019 (Report) (Please see our ERGO on the Report here). This Newsflash deals exclusively with those aspects of the Board Meeting that are applicable to FPIs.

The Bengaluru bench of the Income-tax Appellate Tribunal (ITAT) vide order dated 28 February 2019, held that consideration received by non-resident entity from an Indian company for performing management services cannot be taxed as ‘fees for technical services’ (FTS) in the absence of a specific provision for taxing FTS in the relevant tax treaty (India – UAE tax treaty in the instant case) (Ruling).

The Supreme Court, in its recent judgment in ICOMM Tele Ltd. v Punjab State Water Supply and Sewerage Board & Anr., delivered on 11 March 2019, has ruled on the validity of an arbitral clause mandating deposit of a certain percentage of the claim amount as a pre-condition for initiating arbitration.

The issue of compounding of non-compoundable offences by a high court in exercise of its inherent power under Section 482 of the Code of Criminal Procedure (CrPC) has been addressed by the Supreme Court of India (Supreme Court) in a catena of decisions. However, there was a conflict in law due to varying observations made by the Supreme Court.

In M/s HDFC Property Fund v Income Tax Officer, the Mumbai bench of the Income Tax Appellate Tribunal (Tribunal) has, through an order dated 28 February 2019, ruled in favour of the taxpayer, a SEBI registered Venture Capital Fund (VCF) upholding its ‘pass-through’ status. The tax authorities had denied the exemption to the taxpayer on the basis that it had made investments in violation of the SEBI (Venture Capital Fund) Regulations 1996 (VCF Regulations).

Recently, in the case of Giriraj Garg v Coal India Limited and Others (Civil Appeal No. 1695 of 2019 decided on 15 February 2019), the Supreme Court has fortified the principle of incorporation of an arbitration clause by reference, where the arbitration clause was contained in the standard terms and conditions referred to, in the main contract between the parties.

The Reserve Bank of India (RBI), in its Statement on Developmental and Regulatory Policies dated  5 October 2018 recognised that while several measures had been undertaken in the recent past to facilitate foreign portfolio investment (FPI) in the Indian debt market, additional liberalized regimes were required to encourage FPIs willing to undertake long-term investments in India to invest into India and in this backdrop, a special route called ‘Voluntary Retention Route’ (VRR) was announced by the RBI.

In the case of Shrivardhan Mohta v Union of India [W.P. No. 568 of 2018, decided on 14 February 2019], the income tax authorities searched the premises of Mr Shrivardhan Mohta (Taxpayer) and found that the Taxpayer held four offshore bank accounts (held with HSBC Bank, Singapore) (Foreign Assets) which were not reported by the Taxpayer in his income tax returns. The Taxpayer explained such Foreign Assets as belonging to his deceased mother received as a part of his inheritance.