Informal Guidance - SEBI

Who can request for Informal Guidance?	Intermediary registered with SEBI
	Listed Company
	Company intending to get its shares listed and who has filled listing application or draft offer
	Mutual fund trustee company
	Asset Management Company
	Acquirer or Prospective Acquirer
Forms of Informal Guidance	No Action Letters: SEBI indicates that the Department would or would not recommend any action under any Act
	Interpretive Letters: Department of SEBI provides an interpretation of a specific provision of any Act, Rules, Regulations, Guidelines
Fees for Informal Guidance	Every application shall be accompanied with a fees of Rs. 25,000
Disposal of Request	Request is to be disposed off within 60 days. Department may give a hearing or conduct an interview if it feels necessary to do so.
Rejection of Application	Application may be rejected if any condition is not complied with
	Application money will be refunded after deducting Rs. 5000 as processing fees
Confidentiality of Request	Request to give the application a confidential treatment can be made by the applicant
	The period of confidential treatment will not exceed 90 days
	Department will communicate the applicant if no special treatment can be given
	In case of such communication applicant may withdrew the application within 30 days of communication

Advance Pricing Agreement (APA) Provisions under I.T. Act

APA provisions have been introduced under the Income Tax Act, 1961 through Finance Act 2012. This provision was initially under the Direct tax Code but now has been incorporated under I.T. Act. This was one of the steps taken by the ministry to incorporate some of the provisions of Direct Tax Code under the Income Tax Act 1961.  

APA is nothing but the determination of arms length price between the assesse and the income tax authority in advance for a specified period of time. This scheme was first introduced in Japan and was then followed by various other countries including United States. Currently transfer prices are determined by the associated parties though various given methods which lead to large number of litigations. Entering into APA will certainly reduce the number of transfer pricing litigations. There will be three forms of APA –

A Unilateral APA is the one which is entered into between the tax assesse and government of a country with respect to taxability of particular cross-border transfer pricing transaction(s) in that country.

A Bilateral APA is the agreement entered into between two countries having a Double Tax Avoidance Agreement (‘DTAA’) between them, in accordance with article of Mutual Agreement Procedure therein; with respect to taxability of transfer pricing transactions affecting both.

A Multilateral APA is an extension of Bilateral APA, whereby more than two countries involved in certain transfer pricing transaction(s)  – under their respective DTAA with each other – decide on the tax sharing thereof.

The key difference between the APA in India and the other parts of the world is that APA is applicable to all persons and is not restricted to legal entity, business, etc as specified in APA provisions in other parts of the world.

The provisions, contained in the proposed section 92CC of the Income-tax Act, 1961, (‘the Act’) provide that the CBDT, with the approval of Central Government, may enter into an APA with any person, determining the arm’s length price or specifying the manner (including the TP Method to be applied) in which the same would be determined, with respect to an international transaction to be entered into by that person

Government has also secured the power to declare any APA to be void ab initio if it is found that the agreement was obtained by fraud, misrepresentations, etc.

The most sophisticated APA provisions is said to be in Australia where the authority set to deal in these matters are working efficiently and this is one of the key draw back which is argued by many learned people. It is argued that whether bring such provisions with no adequate infrastructure will serve its purpose. 

SEBI’s intervention in SREI v FITCH case

SEBI has recently filed a petition in the Calcutta HC stating that it want to intervene in the SREI v FITCH case. FITCH credit rating agency has downgraded the credit rating of SREI from AA- to A+ against which SREI Infrastructure finance has obtained a stay order from the Calcutta HC this April stating that they have already terminated the contract with FITCH and in the absence of any contract the credit rating agency cannot public its credit rating. Calcutta HC granted stay to SREI restraining FITCH to make the new credit rating public. In the mean time SREI has obtained an upgraded credit rating from another credit rating agency CARE.

                Now, SEBI has filed a petition to Calcutta HC seeking its permission to intervene into the case. SEBI has also asked court to remove its stay order stating the credit rating agency has a right to rate a security throughout its life even though the contract is terminated. It is pertinent to note that under SEBI (Credit rating agencies) Regulation a credit rating agency is bound to publish the credit rating of an issuer in print media and its own website failing which his license may be terminated.

                This kind of “Rating Shopping” has been very frequent these days in the absence of any regulatory protection for the credit rating agency and cash significant doubt on the future of credit rating agencies. In order to protect the business companies often switch to another credit rating agency which provides a higher credit rating than those which downgrades its credit rating. In India the companies can decide whether to accept or not the credit rating of an agency when they first apply for service but after its initial acceptance the agency can unilaterally modify the credit rating.

Congress Governed States likely to move with FDI in retail

The UPA2 is all set to move with FDI in multi brand retailing in congress led states. This seems to be a welcome move for a government which is suffering from an image of policy paralysis. Since FDI in retail does not require any parliamentary approval and is more state subject thus it seems to be the correct move from the government. But the million dollar question is it politically correct? Commerce Minister Anand Sharma has been making it very clear, as have other members of this government, that they are keen to push forward with FDI in multi-brand retail.

With West Bengal Chief Minister Mamta Banerjee giving a brain storming session to UPA 2 it is clearly evident that she acts as a NATURAL ally to NDA. Especially after a recent setback on presidential election candidature won’t this step of UPA provoke her? Who single handedly fought the battle against FDI in retail that led to rollback of FDI.

With monsoon session of parliament knocking on the door this could be a big issue. Especially when the Indo-Bangladesh constitution amendment bill has to be table by the UPA and for which Mamta Banerjee has already shown its distrust. Passing of constitutional amendment bill requires approval of 2/3 of the members. UPA -2 has already lost the last constitutional amendment poll in relation to giving lokpal a constitutional status and if this time also the result is same it could be a big trouble for the government. 

Post on Companies Bill

Please check my post on taxguru.in here is the link of the post -

http://taxguru.in/company-law/companies-bill-2011-higher-level-transparency-accountability.html#comment-510205

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