Tag Archives: LexCounsel Law Offices

ILN Today Post

Potential Tax Implications of Investment in Shares of a ‘For Profit’ Company by a Charitable Institution

India has a large number of ‘not for profit’ institutions in the form of public charitable trusts, societies and Section 8 companies. These institutions are not only engaged in socio-economic development activities for poor and economically backward classes but are also involved in education and health care sectors and have set up successful educational institutions and hospitals across India. Many of these charitable institutions have hugely profitable balance sheets and want to invest in share capital of other companies. The moot question that arises is whether these tax-exempt charitable institutions are entitled to participate and invest in other ‘for profit’ companies and continue to avail their tax exemptions.

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CYBERTURFING – SHROUDED PERILS IT POSES AND THE APPLICABLE LAW

‘Cyberturfing’ is the online equivalent of the off-line ‘astroturfing’, a term said to be coined by a US Senator back in 1985 and is understood to be a type of deceptive marketing or practice designed by marketers to create a false impression that a campaign has developed authentically and organically but in reality is powered by someone else behind the scenes1. Classic astroturfing involves the use of paid agents to falsely represent popular sentiment surrounding a product or a service2. As a result, consumers ‘follow the herd’3 as against the authentic grass root movements which operate at local level with community volunteers having a primary goal to support a local or a global cause considered good for the society or environment4.sumers ‘follow the herd’3 as against the authentic grass root movements which operate at local level with community volunteers having a primary goal to support a local or a global cause considered good for the society or environment4.

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Supreme Court of India Clarifies Retrospective Applicability of Amended Section 148 of Negotiable Instruments Act, 1881

The Negotiable Instruments Act, 1881 (“NI Act”) was amended last year and two new provisions, section 143A and section 148, were inserted in the NI Act, which were necessitated to deal with the delay tactics of drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings, leading to frustration in enforcement of section 138 of the NI Act. The amendments came into force with effect from September 1, 2018 vide the Negotiable Instruments (Amendment) Act, 2018 (“NI Amendment Act”).

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Statutory Dues are ‘Operational Debt’ under Insolvency and Bankruptcy Code

The Insolvency and Bankruptcy Code, 2016 (“Code”) is one of the most dynamic legislations in the recent times and is being interpreted by the courts to expand the ambit of the Code and also possibly provide maximum benefit to both financial and operational creditors whose dues are long outstanding. One of the recent changes was to include home buyers within the definition of ‘financial creditors’. The National Company Law Appellate Tribunal (“NCLAT”) has now upheld the view that statutory dues are included within the definition of ‘operational debts’(though much to the despair of statutory authorities).

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Liability of Guarantors and Possible Strategies for Mitigation of Liability

Large unpaid debts and continuing defaults by borrowers require the banks and financial institutions to initiate proceedings for recovery of dues against the principal borrowers as well as the guarantors under various legislations and forums, including the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for enforcement of security against the guarantors and under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 before the Debt Recovery Tribunals for recovery of debt against the guarantors. The Insolvency and Bankruptcy Code, which came into force on December 1, 2016, as a consolidated legislation to deal with insolvent and bankrupt persons, both natural and artificial, is also assisting the financial institutions to initiate corporate debt resolution process against guarantors.

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More Questions for Foreign NGOs/NPOs – FEMA Amendments

The Reserve Bank of India (RBI) on August 31, 2018 notified the Foreign Exchange Management (Establishment in India of a branch office or liaison office or a project office or any other place of business) (Amendment) Regulations, 2018 (Amendment Regulations).

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Payment of Gratuity to Teachers

The Hon’ble Supreme Court in its recent judgment pronounced on January 7, 2019 in the case of Birla Institute of Technology vs. State of Jharkhand [Civil Appeal No. 2530 of 2012] (“BIT Case”), has endorsed its earlier view taken in the case of Ahmadabad Pvt. Primary Teachers Association vs. Administrative Officer and Others [(2004) 1 SCC 755] (“APPTA Case”) that teachers are not employees for the purposes of Payment of Gratuity Act, 1972 (“PG Act”).

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GDPR Compliances by Indian Companies – A Brief Overview

The introduction of European Union’s (“EU”) regulations on protection of natural persons with regard to processing of personal data and free movement of such data (“GDPR”) has brought on certain significant implications on Indian entities processing personal data of EU Residents. Basically, since GDPR has extra-territorial application and applies to processing of personal data of EU residents even by entities situated outside EU, Indian entities who are acting as either a ‘controller’ (i.e. the person who determines the purposes and means of the processing of data) or a ‘processor’ (i.e. the person who processes the personal data on behalf of the controller), of personal data of persons of EU, in relation to offering of goods or services to such persons or monitoring their behaviour in so far as it takes place within EU, become subject to GDPR.

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Risks Mitigation Strategies under a Merger & Acquisition Transaction

Mergers and Acquisitions (“M&A”) are one of the most preferred methods for inorganic growth of businesses. However, M&As can go wrong due to various reasons: overenthusiasm about unquantifiable strategic benefits of the deal resulting in over valuation of the acquired company; post deal integration issues in systems, processes, human resources leading to lack of synergies; mismatch between vision and operating strategies of the new and old managers; undisclosed/unexpected liabilities or claims causing a dent in the benefits of the M&A, etc.

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Ever-Greening of Loans and Bad Debts – RBI’S Stand and its Implications

The Reserve Bank of India (“RBI”) has time and again, in its directions, reports and Master Circulars, reiterated that banks should not indulge in ever-greening of its loans. RBI strongly frowns upon the practice of ever-greening of bad debts where banks so as to avoid classifying their accounts as non-performing assets (NPAs) (which requires higher provisioning and ultimately affects the profitability of banks), extend more loans to debt-ridden companies to repay their old loans with such banks, much to the detriment of the interest of the stakeholders and general public interest.

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