Category: Miscellaneous

Aurobindo Pharma Ltd., a notable entity in the manufacture and sale of bulk drugs and Active Pharmaceutical Ingredients (APIs), filed its income return for the 2017-18 assessment year on November 28, 2017. Subsequently, the Transfer Pricing Officer (TPO) recommended upward adjustments concerning international transactions of corporate guarantee fees and interest on receivables, which the appellant did not contest initially. However, the resulting order by the Assessing Officer was subsequently challenged by Aurobindo Pharma, leading to an appeal by both the appellant and the Revenue before the Appellate Tribunal.

The Tribunal identified three pivotal issues in the appeal:

• Corporate Guarantee Commission
• Interest on Receivables
• Disallowance of Weighted Deduction under Section 35(2AB) of the Income Tax Act, 1961

Corporate Guarantee Commission: A Contentious Subject

Aurobindo Pharma argued that corporate guarantees do not constitute international transactions requiring benchmarking, classifying them as shareholder activities. The TPO dismissed this contention, levying a 2% charge on corporate guarantees exceeding Rs. 10 crores, a stance upheld by the Commissioner of Income Tax (Appeals). The appellant maintained that these guarantees, provided as part of parental obligations to subsidiaries, should not incur such high fees. They argued that the 0.53% commission rate was excessive, advocating for a 0.50% rate instead.

Conversely, the Revenue countered that the transaction involving corporate guarantees bore no costs to the assessee, and thus did not qualify as an international transaction under section 92B of the Act. They proposed a lower Arm’s Length Price (ALP) of 0.25% for corporate guarantee fees, referencing SEBI’s 0.20% charge for guarantees.

The Tribunal, reflecting on a precedent in Aurobindo Pharma’s own case from the 2018-19 assessment year, concluded that a 0.50% ALP on corporate guarantees was appropriate, directing the Assessing Officer/TPO to adopt this rate.

Interest on Receivables: Establishing a Precedent

The second issue mirrored the first in terms of stances taken by the appellant and the Revenue. The TPO used the SBI short-term deposit rate as the Comparable Uncontrolled Price (CUP) to determine the ALP for interest on overdue receivables. Post-amendment to section 92B by Finance Act, 2012, any delay in trade debt realization warranted a transfer pricing adjustment for uncharged interest. The Commissioner of Income Tax (Appeals) instructed the TPO to apply the SBI short-term deposit rates beyond the invoice-stipulated period.

The Revenue, citing a Delhi High Court judgment, affirmed that delays in credit realization necessitated benchmarking the arm’s length price of the interest on overdue receivables, with a proposed rate of 6% being deemed reasonable.

Aurobindo Pharma contended for an invoice-specified credit period rather than an arbitrary 90-day period, a stance upheld by the Commissioner of Income Tax (Appeals), who directed the Assessing Officer to verify invoices for accurate interest computation.

The Tribunal drew upon a Mumbai Bench decision, asserting that credit periods for non-AEs should extend to AEs, negating any additions for interest adjustments when credit periods varied up to 352 days for non-AEs. They determined that interest should accrue only beyond the agreed credit periods, aligning with established judicial precedents.

Disallowance of Weighted Deduction: A Nuanced Perspective

Aurobindo Pharma’s claim for weighted deduction on certain expenditures under section 35(2AB) was partially disallowed as these expenditures were not quantified by the DSIR in the approval reflected in Form 3CL, specifically regarding clinical trials. The Tribunal noted that unapproved expenditures, though related to scientific research, did not qualify for weighted deduction but were eligible for a 100% deduction.

Referencing a Gujarat High Court judgment, the Tribunal acknowledged that clinical trials might occur outside approved facilities, contradicting the Revenue’s restrictive interpretation. The Gujarat High Court emphasized that clinical drug trials and obtaining regulatory approvals, often conducted outside R&D facilities, should not be excluded from deductions.

Conclusion

The Tribunal partially upheld Aurobindo Pharma’s appeal while dismissing the Revenue’s appeal. This case underscores the complexities of transfer pricing adjustments and the intricate balance between statutory provisions and judicial precedents in determining corporate tax liabilities.

In the intricate web of international trade, customs brokers are the linchpins ensuring smooth transactions between traders and customs authorities. They meticulously handle documentation, compliance with customs laws, and the collection of duties and taxes, streamlining the clearance process. Beyond their traditional responsibilities, customs brokers are now expanding into consultancy roles, providing various supply chain services. While some countries mandate the use of licensed brokers, others leave this to the trader’s discretion. The global landscape for customs brokers is diverse, with varying licensing and regulatory requirements for individuals and entities. In India, for instance, Section 146 of the Customs Act of 1962 necessitates a license to operate as a customs broker at any customs station. The Customs Brokers Licensing Regulations (CBLR) 2018 outline the legal and procedural frameworks for obtaining a customs broker license, detailing the obligations and responsibilities involved. Notably, recent amendments have extended the validity of these licenses for a lifetime.

Application Process and Eligibility for a Customs Broker License

The CBLR 2018 assigns the National Academy of Customs Indirect Taxes & Narcotics (NACIN) the task of accepting applications each August for the examinations required to grant licenses. Applicants must meet several criteria, including being Indian citizens of sound mind, possessing an Aadhar number and a valid PAN card, demonstrating financial viability, meeting educational and professional prerequisites, and having no criminal convictions or pending proceedings. The qualifying examinations consist of a written and an oral component, with up to six attempts allowed. The written exam is conducted online in the first quarter of each year, followed by the oral exam in the second quarter, with results announced in July. Candidates must pass both exams to proceed.

Licensing Procedure

Successful candidates must pay a fee of five thousand rupees within two months of the oral exam results and communicate the payment details to the Principal Commissioner or Commissioner of Customs. The license is granted within a month of the fee payment. Failure to pay within the stipulated period results in forfeiture of the right to the license.

License Conditions

Individuals who pass the examination receive a license in Form B1, while companies, firms, or associations can obtain a license in Form B2 if at least one director, partner, or authorized employee has passed the exam. Licensees cannot conduct business on behalf of multiple entities simultaneously. Any changes in directors, managing directors, partners, or PAN must be reported to the Principal Commissioner of Customs within one month. A change in PAN requires applying for a fresh license within sixty days.

Extending Operations to Other Customs Stations

Licensed customs brokers can operate at all customs stations after notifying the Principal Commissioner or Commissioner of Customs using Form C. A copy of this notification must also be sent to the Commissioner who issued the original license. Brokers can begin transactions at a new customs station two years after the license issue date.

Bond and Security Requirements

Before a license is granted, the applicant must enter into a bond in Form D and, if specified, a surety bond in Form E. Additionally, a bank guarantee, postal security, National Saving Certificate, or a fixed deposit receipt from a nationalized bank for five lakh rupees is required. Interest from these instruments accrues to the customs broker.

License Validity

The license remains valid unless revoked according to regulations. It becomes invalid if the licensee is inactive for one year, but can be renewed upon application and payment of a fee.

Obligations of a Customs Broker

Customs brokers have various duties, including obtaining authorization from each employer, conducting business personally or through an approved employee, advising clients on compliance with laws and regulations, ensuring the accuracy of information provided to clients, promptly paying over government funds received for duties, maintaining up-to-date and orderly records, reporting the loss of the license, verifying client information with reliable documents, informing customs authorities of any changes in contact information, maintaining records for at least five years, and cooperating with customs authorities in investigations.

Engagement and Supervision of Employees

Regulations stipulate the qualifications for individuals involved in customs clearance, the issuance of photo-identity cards, and the employment conditions for non-cardholders. Customs brokers must supervise their employees and authorize them to sign documents. Changes in authorized personnel must be promptly communicated, and brokers are held accountable for their employees’ actions.

License Revocation and Penalties

The Principal Commissioner or Commissioner of Customs can revoke a license and forfeit security for reasons including non-compliance with bond conditions, regulatory non-compliance, misconduct, insolvency, unsound mind, or conviction for an offense involving moral turpitude. If obligations are unmet, the Principal Commissioner or Commissioner of Customs can prohibit a broker from conducting business in certain sections of the customs station, potentially suspending the license. A hearing within fifteen days can determine the continuation of the suspension.

Revocation and Penalty Procedures

Regulation 14 of CBLR 2018 outlines the procedure for revoking a license or imposing penalties. This involves issuing a written notice to the broker, allowing the broker to submit a defense within thirty days, conducting an inquiry by the Deputy Commissioner or Assistant Commissioner of Customs, permitting the broker to cross-examine witnesses and submit representations, and making a decision within ninety days based on the inquiry report and representations. Non-compliance can result in fines up to fifty thousand rupees, and a G cardholder may penalize a customs broker or F cardholder by up to ten thousand rupees.

Appeals

Customs brokers or F cardholders can appeal orders under Regulation 16 or 17 to the Customs Central Excise and Service Tax Appellate Tribunal. G cardholders can appeal orders to the Commissioner of Customs (Appeals), who must adjudicate within two months.

Association Membership

Every customs broker must join a registered and recognized Customs Brokers’ Association. A broker cannot be a member of more than one association. The Principal Commissioner of Customs or Commissioner of Customs can recognize multiple associations if each has at least thirty percent of the total licenses issued.

Conclusion

Navigating the complexities of obtaining and maintaining a customs broker license is essential for professionals in this field. The regulations ensure that brokers are qualified, compliant, and accountable, thereby facilitating efficient trade operations and adherence to customs laws.

Abstract

In the rapidly evolving digital landscape, the protection of intellectual property rights (IPR) in cyberspace has become increasingly complex and challenging. This paper delves into the multifaceted legal, economic, and social implications of IPR in the digital age, with a focus on copyright, trademark, and patent laws. It critically examines the inadequacies of the current legal framework in addressing the nuances of cyberspace and proposes robust solutions for better enforcement and protection of IPR globally.

Introduction

The internet’s expansion and the proliferation of digital technologies have revolutionized the creation and distribution of intellectual property (IP). However, this digital evolution has also amplified the challenges of protecting IPR in cyberspace. Traditional IP laws often fall short in the face of these new challenges, necessitating a reevaluation and enhancement of the legal frameworks governing IPR.

Current Legal Framework for IPR in Cyberspace

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), adopted by the World Trade Organization in 1994, forms the backbone of the international legal framework for IP protection. TRIPS mandates member states to uphold minimum standards for IP protection and enforcement, including civil and criminal penalties for infringement. However, the borderless nature of the internet complicates enforcement, as jurisdictional challenges arise when dealing with cross-border IP violations.

Regional agreements, such as the European Union’s directives on digital copyright, and national laws, like the U.S. Digital Millennium Copyright Act (DMCA), also contribute to the legal landscape. These regulations aim to adapt traditional IP protections to the digital environment, yet gaps and inconsistencies remain.

Challenges in Enforcing IPR in Cyberspace

The global nature of the internet poses significant enforcement challenges. Identifying and prosecuting infringers across jurisdictions is often daunting due to differing national laws and the anonymity afforded by digital platforms. Moreover, the rapid dissemination and replication of digital content exacerbate the difficulty of controlling IP infringement.

Determining whether a use constitutes infringement is also more complex online, where varying national laws and the lack of physical boundaries complicate jurisdictional decisions. The dynamic and transient nature of digital content requires a more agile and comprehensive approach to enforcement.

Initiatives for Strengthening IPR Enforcement

Governments and industries have undertaken several initiatives to address these enforcement challenges. Legislation such as the DMCA provides mechanisms like the “notice and takedown” system, enabling copyright holders to request the removal of infringing content swiftly. Specialized IP courts and dispute resolution programs, such as the U.S. Copyright Alternative Dispute Resolution (CADR) program, offer additional avenues for resolving IP disputes efficiently.

Industry groups, such as the International Intellectual Property Alliance (IIPA) and the Intellectual Property Constituency (IPC), work collaboratively to promote effective IP protection measures and best practices, fostering a cooperative approach to IP enforcement in the digital age.

Implications of IPR Enforcement in Cyberspace

The enforcement of IPR in cyberspace has profound legal, economic, and social implications. Legally, robust IP enforcement ensures creators and inventors are protected, incentivizing innovation and creativity. Economically, it fosters a competitive market by safeguarding the investments of creators and companies, encouraging further research and development.

Socially, effective IP protection promotes creative expression and the dissemination of knowledge while balancing the rights of users and the need for public access. Ensuring fair and transparent enforcement practices helps maintain this balance, supporting both IP holders and the broader public interest.

Addressing the Inadequacies of the Current Legal Framework

The current legal framework often struggles to keep pace with the complexities of cyberspace. Strengthening international cooperation is crucial, as harmonized treaties and agreements can provide a cohesive approach to IP protection. Developing new laws and regulations tailored to the digital environment, including criminalizing IP infringements, will enhance the existing framework’s effectiveness.

Technological tools, such as digital rights management systems, watermarking, and encryption, offer additional layers of protection. These technologies help monitor and enforce IP rights, making it easier to identify and address infringements swiftly.

Conclusion

The protection of intellectual property rights in cyberspace is an ongoing challenge that requires a multifaceted approach. Strengthening the legal framework through international cooperation, developing new laws, and leveraging technological advancements are essential steps. These measures will ensure that creators can protect and benefit from their work, fostering a vibrant and innovative digital economy while respecting the rights of users.

References

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2. Batt, R. (2005). Global intellectual property protection in cyberspace. Computer Law & Security Report, 21(1), 71-76.
3. Bressler, J. (2005). International intellectual property protection in cyberspace. International and comparative law quarterly, 54(3), 721-732.
4. Campbell, C. (2011). Intellectual property protection in cyberspace: Its problems and possible solutions. Hastings International and Comparative Law Review, 35(1), 1-37.
5. Chen, B. (2006). The need for an international framework for intellectual property protection in cyberspace. Michigan Telecommunications and Technology Law Review, 12(2), 439-448.
6. Donahey, E. (2009). Intellectual property protection in cyberspace: Developing a global legal framework. Berkeley Technology Law Journal, 24(2), 591-619.
7. Gordon, W. J., & Jaffe, A. B. (2006). Intellectual property protection in cyberspace. Science, 313(5786), 480-482.
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10. Walter, J. (2007). International intellectual property protection in cyberspace: The need for a new WIPO treaty. William & Mary Law Review, 48(2), 581-621.

The landscape of Indian criminal law is set for a transformative shift with the introduction of three groundbreaking legislations: the Bharatiya Nyaya Sanhita (BNS), the Bharatiya Nagarik Suraksha Sanhita (BNSS), and the Bharatiya Saksha Adhiniyam (BSA). These statutes, aimed at replacing the archaic Indian Penal Code (IPC), the Criminal Procedure Code (CrPC), and the Indian Evidence Act, will be implemented from July 1 this year, as announced by the Central Government.

Arjun Ram Meghwal, the newly appointed Minister of Law and Justice, has initiated a comprehensive review of the litigation system in India. This review seeks to gather stakeholder feedback and streamline the backlog of government lawsuits, all under the aegis of a new National Litigation Policy. His first act in office underscores the urgency and commitment to overhaul the existing legal framework.

The government notification declared that the majority of BNS provisions, barring sub-section (2) of Section 106, will be enacted from July 1, 2024. Identical timelines have been set for BNSS and BSA. Notably, Section 106(2) of BNS, which addresses hit-and-run cases with stringent penalties including a ₹7 lakh fine and a decade-long imprisonment, has been postponed following substantial protests from the trucking community earlier this year.

Significant reforms in these new laws include a focused approach on terrorism, state offenses, digital FIRs, and corruption in electoral processes. They also recognize electronic evidence as primary proof and provide distinct definitions for crimes such as lynching. Enhanced punishments are prescribed for offenses against women and children, marking a progressive stride in protecting vulnerable groups.

Home Minister Amit Shah highlighted the colonial vestiges of the existing laws, emphasizing their punitive rather than justice-oriented nature. In a parliamentary address, he stated, “These laws were designed by the British to control us, not to deliver justice.” With this reform, Prime Minister Narendra Modi aims to erase these colonial imprints.

The BNS, comprising 356 sections compared to the IPC’s 511, introduces eight new sections, amends 175, and repeals 22. Similarly, BNSS, the new avatar of CrPC, now has 533 sections, with 160 amendments, nine additions, and nine repeals. The BSA, replacing the Indian Evidence Act, includes 170 sections, up from 167.

The new legal framework emphasizes electronic documentation, including zero-FIRs, e-FIRs, and digital charge sheets. Victims will receive information digitally. A Directorate of Prosecution is established, outlining the roles and responsibilities of prosecuting authorities and ensuring coordination during investigations through prosecutorial oversight.

Prakash Singh, former Director General of Police of Uttar Pradesh, praised the transparency and intent behind the new codes but cautioned against the rapid implementation. He observed, “The British-era laws have served us for years. We need thoroughness in our new laws, and training thousands of officers will take time.”

The Ministry of Home Affairs has assured that these laws will be implemented nationwide within a year, starting with union territories like Chandigarh and Delhi. They are also investing in 900 forensic labs and training 3,000 police trainers to educate officers on the new laws. Confidential sources reveal that training sessions are already underway in Chandigarh and Delhi.

In his inaugural press briefing, Meghwal envisioned India as a future arbitration hub. He questioned the necessity of arbitration in foreign locales like Singapore and London when it can be effectively conducted in India. Highlighting the Mediation Act’s passage, he emphasized the potential for swift dispute resolution and reduced court backlogs.

The new criminal laws signify a pivotal moment in India’s legal history, promising a justice system that aligns with contemporary needs and societal aspirations.