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Policy & Regulation
Sunday, May 27, 2018
Tax dept to seek Flipkart’s share purchase pact

Tax dept to seek Flipkart’s share purchase pactThe tax department will seek share purchase agreement from Flipkart on the mega USD 16 billion buyout by US retail giant Walmart to assess the tax liability and also to find out whether the General Anti Avoidance Rules (GAAR) provisions can be invoked, an official said.

The department currently is going through the Section 9(1) of the Income Tax law, which deals with indirect transfer provisions, to see if the benefits under the bilateral tax treaties with countries like Singapore and Mauritius, could be available for foreign investors selling stakes to Walmart.

Singapore-registered Flipkart Pvt Ltd holds majority stake in Flipkart India. As per the definitive agreement between the companies last week, Walmart will acquire about 77 per cent stake in the Singapore entity for USD 16 billion. The agreement will effectively result in transfer of ultimate ownership in Flipkart India to Walmart.

To ascertain the exact tax liability, the revenue department will write to Flipkart seeking the share purchase agreement that the company had entered into with Walmart. “The department will seek the share purchase agreement once the formalities for the sale are completed. The agreement will help in tracking the flow of funds and the ultimate beneficiary,” the official told PTI.

As regards applicability of GAAR, the official said it would apply in cases where the investments were made to avoid taxes. In the Walmart-Flipkart deal, the revenue department will go through the share purchase agreement to ascertain the purpose of investment and the emanating gains.

On whether the benefits of bilateral tax treaties will be available in this deal, the official said the department will go through the details of different double taxation avoidance agreements (DTAAs) to ascertain whether taxes could be levied at concessional rate and investment made prior to a particular date can be grandfathered.

“There is likely to be capital gains withholding tax implications when the shares of Flipkart Singapore are sold by Softbank or other foreign investors. The tax rate will depend upon the facts of the case,” V Lakshmikumaran, Managing Partner of law firm Lakshmikumaran & Sridharan said.

The tax department had last week written to Bentonville-Arkansas based Walmart saying that the US company can seek guidance about the tax liability under Section 195 (2) of the I-T Act. Under Section 195 of the Act, anyone making payment to non-residents is required to deduct tax (commonly known as withholding tax).

As per Section 9 (1) of I-T Act dealing with indirect transfer provisions, the value of shares of a foreign company is deemed to be substantially derived from India, if the value of the Indian assets is greater than 50 per cent of its worldwide assets -- a criteria that is apparently met in Flipkart’s case. “In the Walmart-Flipkart deal, Section 9 (1) will apply as the assets of Flipkart Singapore are substantially based in India and hence the sellers would be liable to pay capital gains tax,” Titus & Co Managing Partner Diljeet Titus opined.

As regards the capital gains tax made by Indian founders Sachin Bansal and Binny Bansal, the official said they would have to pay 20 per cent tax with indexation benefit, which is applicable on sale of unlisted shares by Indian residents. (Source: The Hindu Businessline)

Telecom ministry to decide on Idea's 100% FDI proposal: Prabhu

Telecom ministry to decide on Idea's 100% FDI proposal: Prabhu"The matter is completely in the domain of the line ministry. We have already clarified. No need of our approval," Prabhu told PTI in an interview.

The telecom ministry is the competent authority to take the final call on Idea Cellular Ltd's proposal for infusing 100 per cent foreign direct investment (FDI) in the company, Commerce and Industry Minister Suresh Prabhu has said. The Department of Telecom (DoT) has put some condition while seeking views of the Department of Industrial Policy and Promotion (DIPP) on the proposal. "The matter is completely in the domain of the line ministry. We have already clarified. No need of our approval," Prabhu told PTI In an interview.

It was communicated to DoT that they are the competent authority to deal with the proposal, he said. "We have sent back (the proposal) immediately. We have stated that it is for you to decide," he said, adding that tax liabilities do not constitute additional condition.

Idea's proposal assumes significance against the backdrop of pending merger with Vodafone India to form the country's largest telecom operator.

The FDI policy allows an overseas firm to buy up to 49 per cent stake in an Indian telecom company under automatic approval route. But the government approval is required for stake above 49 per cent. Idea and Vodafone announced last year that they would combine their operations to create the country's largest telecom operator worth over USD 23 billion, with a 35 per cent market share.

Foreign shareholding in Idea as on March 31, 2018, stood at around 34 per cent, including 7.49 per cent in promoter group and the rest as public shareholders. British telecom multinational Vodafone Group plc is a majority shareholder in Vodafone India.

Foreign shareholding in the combined Idea-Vodafone entity, thus, would breach the automatic approval limit of 49 per cent. According to the Idea-Vodafone merger announcement, Vodafone would own 45.1 per cent of the combined company after transferring a 4.9 per cent stake to Aditya Birla Group for Rs 3,900 crore in cash, concurrent with completion of the merger. As the DoT had added a condition in the proposal, the matter was sent to the DIPP.

After the abolition of foreign investment promotion board (FIPB), respective departments and ministries of 11 sectors, including telecom and print media, are the competent authorities for approval of FDI proposals unless they want to add some condition or reject the proposal. In such circumstances, they have to seek the views to the DIPP.

The merged Idea-Vodafone entity will have highest subscriber base of 41 crore accounting for over 35 per cent market share and second largest spectrum holding of 1,850 megahertz in the country. The debt of resultant entity is expected to be around 1.1 lakh crore as per debt situation of Idea and Vodafone India at the end of September 2017. (Source: ETtelecom)

Consulting international agencies, experts on spectrum auction: TRAI chief

Consulting international agencies, experts on spectrum auction: TRAI chiefAsked about the status of recommendation on spectrum auction, Sharma said that a review meeting on the same was held in the TRAI last week.

Telecom regulator TRAI is in the midst of consulting various international agencies and experts, and hopes to finalise its recommendation on spectrum auction "soon", Chairman R S Sharma has said. Asked about the status of recommendation on spectrum auction, Sharma said that a review meeting on the same was held in the Telecom Regulatory Authority of India(TRAI) last week.

"There is a lot of work being done. We are consulting international agencies, consultants we well as experts and we will come out with our recommendations soon," Sharma told PTI. But he declined to give a specific timeframe for the finalisation of recommendations on the issue.

The government is planning to hold the largest-ever spectrum auction of 3,000 MHz radiowaves in the upcoming sale. It has sought recommendations from TRAI on the applicable reserve price and related issues for auction of spectrum in the frequency bands 700 MHz, 800 MHz, 900 MHz, 1,800 MHz and 2,100 MHz, 2,300 MHz, 2,500 MHz, 3,300-3,400 MHz and 3,400-3,600 MHz.

TRAI is also expected to give its opinion on timing of the proposed spectrum auction. In the previous auction held in 2016, the government had put a total of 2,354.55 MHz of mobile airwaves for sale in the bands of 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz and 2,300 MHz, cumulatively valued at around Rs 5.63 lakh crore at base price.

However, nearly 60 per cent of the radio waves, including premium 4G bands, remained unsold in that auction. In the five-day auction in 2016, seven telecom companies made commitment of Rs 65,789 crore for buying 964.80 MHz of spectrum across multiple frequency bands.

The apex industry association COAI is of the view that operators are not ready for the next round of spectrum auction at this point, given the deep financial stress and ongoing consolidation in the sector. The telecom industry has been reeling under Rs 7.5 lakh crore cumulative debt and hyper-competition has only made matters worse for the established operators.

Engaged in a brutal and prolonged tariff war with newcomer Reliance Jio, the older players have seen erosion in their revenues, and are incurring losses. (Source: ETtelecom)

Display ticker for DD's telecast of games of 'national importance': I&B to Broadcasters

Display ticker for DD's telecast of games of 'national importance': I&B to Broadcasters India’s Ministry of Information and Broadcasting (MIB) on April 25 issued a notice mandating all TV channels broadcasting live sports of “national importance” to display a ticker with immediate effect stating the match was also available on DD’s free-to-air platform irking sports broadcasters.

The order requires channels to run the scroll — ‘This match/game can also be viewed on DD Sports channel on DD Free Dish DTH and DD’s terrestrial network on freeto-air basis’ — in appropriate colour, font and size making it prominently visible every 15 minutes.

Former I&B Minister Manish Tewari called the directive “absurd”.

“Asking channels to run a scroll is a logic-defying move as only those who have subscribed to pay channels will be able to see the scroll. Is I&B Ministry telling those viewers to unsubscribe and move to free-to-air platforms?” Tewari told ET.

The fundamental question that needs to be asked is does the public broadcaster have a unique and special place in a liberated media environment that stretched back 27 years to 1991 when satellite television entered India, Tewari said.

“In an environment where we have 891 TV channels, is there a case for Prasar Bharati is a question no one is asking. And if the answer is no, the entire act needs to be revisited,” Tewari said.

A questionnaire sent to the ministry seeking a reason behind the notice did not elicit any response till press time Sunday.

Most TV broadcasters and media experts see this as an irritant and as a free marketing ploy for DD Sports.

“This diktat lacks any statutory or policy foundation. Rather, it goes way beyond the remit of the Sport Mandatory Sharing Act as adjudicated upon by the Supreme Court in its judgement in the matter of Union of India vs BCCI dated August 22, 2017. If this notice is not challenged or allowed to be implemented, then it will undermine the investments made by private broadcasters in acquiring rights from sports federations,” said one broadcasting executive, who did not wish to be identified.

Star India and Sony Pictures Networks India did not respond to ET’s request for comment on their next course of action and impact of the order. But sources said both broadcasters are looking at legal options and may move court against the order.

“This is an illogical move as after the Supreme Court order, the DD channel, where the matches will be shared, will not be available on private DTH or cable. So there is no advantage to DD, apart from getting free publicity,” an industry expert said.

Earlier, MIB had tried to get Indian Premier League (IPL) matches under the ambit of games of “national importance.”

However, the sports ministry had rejected the proposal after which, Star India agreed to share one IPL match every week with DD with one hour delay.

Games of national importance are typically those in which India is playing global sporting events and the finals of top tournaments. The Sports Broadcasting Signals (Mandatory Sharing with Prasar Bharati) Act, 2007, made it compulsory for private broadcasters to provide access to sporting events of “national importance” to the largest number of listeners and viewers on a free-to-air basis.

DD National then started getting live feed of Indian cricket matches, the Olympics and other important events and Prasar Bharati shared advertising revenues with the rights holder.

The private broadcasters went to court and on August 22 last year, the Supreme Court asked Prasar Bharati to air the events only on terrestrial networks or on DD Free-Dish and not on channels like DD 1, which is notified as a must-carry channel for all pay TV (cable and DTH) operators according to the Cable Television Networks (Regulation) Act, 1995.

In March last year, the MIB notified the Commonwealth Games, Asian Games, summer and special Olympics, Paralympics and certain tennis, hockey and football events as sporting events of national importance. In October 2016, the ministry declared that all official one-day internationals, Twenty20 and Test matches played by the Indian men’s cricket team, semifinals and finals of the men’s World Cup and International Cricket Council Championship Trophy as cricketing events of national importance. (Source: Economic Times)

Trai views on data privacy, security in telecom sector by month-end
Trai views on data privacy, security in telecom sector by month-end

Trai will finalise its recommendation on privacy, security and ownership of data in telecom sector by the month-end, its Chairman R S Sharma has said asserting that the regulator intends to give the issue its due importance. The comments by the sector regulator assume significance as issues around data protection have come under the spotlight, and privacy concerns have amplified in the wake of the recent Facebook data leak fiasco.

The Telecom Regulatory Authority of India (Trai) had floated a consultation paper on the privacy, security and ownership of data in telecom sector last year and followed it up with an open house discussion in February this year. "Our recommendation on data privacy, security and ownership of data in the sector will come by the end of this month," Sharma told in an interview.

Trai will also share the views with the Justice B N Srikrishna Committee, which is working on a detailed data protection framework for the country. "We will be making the recommendations available to the Justice Srikrishna Committee. Essentially, we will provide these as our inputs...We have already written to them saying we are expected to come out with our views and we will be sharing them," Sharma said. Over the last few weeks, there has been a loud outcry over data privacy and protection issues after British data analytics and political consulting firm Cambridge Analytica was accused of harvesting personal information of 87 million Facebook users illegally to help political campaigns and influence polls in several countries.

The Indian government too shot off notices to both the companies questioning them on the impact of the data breach, following which Facebook admitted that nearly 5.62 lakh people in India were "potentially affected" by the incident. While the Indian Government is examining the responses furnished by Facebook and Cambridge Analytica, IT Minister Ravi Shankar Prasad last week said the new data protection law - currently in the works - will be finalised "soon".

The Trai chairman termed data privacy, security and ownership "extremely important and relevant issues" but declined to comment further on the regulator's ensuing recommendations. "I will not be able to lay out the contours, but we treat this subject as extremely sensitive and important and we give it the importance which it deserves," he said. Trai's consultation paper has sought to define personal data, who should be its owner, responsibilities of entities storing or controlling data of subscribers for delivering services among various other aspects, to give users more control over their digital data. It had noted that many mobile applications seek access to subscriber data like call records, access to microphone, pictures, SMS and the likes which may not be required for providing the service desired by the user, and had even flagged the "one-sided nature of these arrangements with an uneven bargaining power between the provider and the user". (Source: Times of India)

Department of Telecom awaits foreign direct investment clearance for Idea-Vodafone merger approval

Department of Telecom awaits foreign direct investment clearance for Idea-Vodafone merger approvalDoT is waiting for DIPP to give clearance for raising the foreign direct investment (FDI) limit in Idea Cellular to 100 per cent before approving the merger of Vodafone India with the Aditya Birla group firm, as per official sources. "Only FDI clearance for Idea is pending before merger of Vodafone (India) with it. FDI limit needs to be raised in FDI for clearing both the deals of Idea -- sale of tower to ATC and Vodafone merger," a government official told PTI. Idea Cellular has sought to raise FDI limit in the company to 100 per cent. The official added that the Department of Telecom (DoT) had approached the Department of Industrial Policy and Promotion (DIPP) for its remarks around two weeks back and waiting to hear from it.

"Both the companies (Idea and Vodafone) will be asked to clear their dues before merger is taken on record. DoT has not calculated the final amount," the source said.

According to the standard operating procedure (SOP) for processing FDI proposals, all the ministries concerned are required to submit their comments within 4 weeks of the proposal. In absence of comments, it is presumed that ministries or departments have no comments to offer. However, FDI clearance in telecom sector also requires approval from the Home Ministry which should be granted within six weeks. In case it is unable to provide its comment within six weeks, it needs to indicate time frame within which it will provide the comments.

The merged Idea-Vodafone entity will have highest subscriber base of 41 crore accounting for over 35 per cent market share and second largest spectrum holding of 1,850 megahertz in the country. The merger is expected replace Bharti Airtel from its numero uno position which it has maintained in Indian telecom market with highest number of subscriber base at least since last one decade as per reports of the Telecom Regulatory Authority of India.

The debt of resultant entity is expected to be around 1.1 lakh crore as per debt situation of Idea and Vodafone India at the end of September 2017. The amalgamation will result in capex synergies, since it will eliminate the duplication of spectrum capacity and infrastructure related requirements.

Idea and Vodafone are separately paying rental for 6,300 mobile sites which will be synced for merged entity within two years. (Source: The New India Express)

Companies may redefine social media dos, don’ts
Companies may redefine social media dos, don’ts

Companies may revise their policies on the online behaviour of employees, even in their private capacity, as some comments face a backlash from social media users in the country, CEOs and HR managers said. For instance, Kotak Mahindra BankNSE 1.45 % sacked an employee in Kerala on Friday following a contemptuous Facebook post about the rape and murder of an eight-year-old girl that was met with furious condemnation. The bank, however, said it had terminated the employee due to “poor performance”.

“Social media is redefining the boundaries of what is private communication and what is public—imposes new responsibility on management and rightly so,” said Ramesh Tainwala, global CEO at Samsonite International. Many companies, especially consumerfacing ones, maintain there is a fine line between what is acceptable and what is not. But comments should not be contrary to the belief of a company, neither should they be hateful or insensitive.

“Social media is a platform that is fast changing and we need to not just evolve around it but also be sensitive about every issue in the country,” said Kishore Biyani, founder of Future Group, the country’s biggest retailer. Last year, Facebook users in India crossed the 240-million mark.

India has become the largest audience country for the social media giant. The country has also emerged as Twitter's fastest-growing market in terms of daily active users. With these platforms exploding, companies are increasingly confronted with the consequences social media can have on company image. With every user an existing or potential consumer for companies, any disparaging comment could hurt brand image and even sales.

“In this day and age, all employees need to be sensitive about what they are posting on social media because of the ever-increasing impact and reach of social platforms,” Britannia MD Varun Berry said. “Every employee is, in a way, a brand ambassador of the company he or she represents— so responsible conduct on social media is a given.” While social media policy is already part of employee contractual terms, guidelines have to evolve further, companies said. This can also help put employers in a stronger position when they want to take action against employees doing things they don't approve of.

“A code of conduct of any company has to be a living document which must get updated from time to time to reflect the contemporary expectation of conduct by the organisation and its employees,” said Santrupt B Misra, head of group HR at Aditya Birla Management Corp. “As new facets of lifestyle and behaviours emerge as social trends, these living documents must capture the new realities.”

Unthinking use of such mediums can heighten the risk. “So sensitisation and informed usage have to be encouraged through structured education and interactive understanding of the dos and don’ts,” Misra said. Several people have lost their jobs globally after posting comments deemed offensive on social media. For instance, a Bank of America employee lost her job after posting a racist rant on Facebook nearly two years ago while another was sacked from internet firm InterActive Corp for a tweet that linked Aids with race.

Job seekers also need to be careful as recruiters are keeping track. “With people increasingly exposing themselves on social media, organisations are starting to scan potential employee profiles to watch out for any inappropriate content being posted by the candidates,” said Vibhav Dhawan, managing partner at executive search firm Positive Moves.

“Though the processes are not refined yet, going forward, social media behaviour will increasingly influence decision making by recruiters.” Employee messages should also feel connected to the brand’s values, something that is already established in HR policies. “We believe that all Godrejites are brand ambassadors of our company, both in their individual capacity, as well as together as a group,” said Sumit Mitra, head, group HR, Godrej IndustriesNSE -0.06 % and associate companies.

The group said its code of conduct that applies to all team members across geographies and details its business principles and guidelines about representing Godrej appropriately, across different platforms including social media, within and outside the company. (Source: Economic Times)

BSNL approaches DoT for recovery of Aircel's outstanding dues

BSNL approaches DoT for recovery of Aircel's outstanding duesThe telecom PSU, in a letter to the Department of Telecom (DoT), has also said it is exploring options including legal remedies for recovery of its outstanding dues of about Rs 42 crore. State-owned Bharat Sanchar Nigam Ltd (BSNL) has approached the Communications Ministry for recovery of its outstanding dues from the troubled telecom firm Aircel, which recently filed for bankruptcy. The telecom PSU, in a letter to the Department of Telecom (DoT), has also said it is exploring options including legal remedies for recovery of its outstanding dues of about Rs 42 crore.
The move comes at a time when Aircel has filed for bankruptcy citing "troubled times" in the "highly financially stressed" industry.

When contacted, BSNL Chairman and Managing Director Anupam Shrivastava confirmed that the company had written to DoT, flagging the issue of outstanding dues of Aircel.

"As regards to recovery of outstanding dues, BSNL could recover Rs 32 crore from bank guarantees (BG) and balance will be recovered after reconciliation of some other BGs held by us or by BGs held by Government of India or through legal process," Shrivastava told PTI.

Aircel did not respond to an e-mail query.

In its communication to the DoT, BSNL said that following Aircel and Dishnet Wireless filing for bankruptcy, the state-owned telecom corporation had moved swiftly to recover the outstanding amounts through follow-ups and invoking available bank guarantees furnished by them. The outstanding dues related to various arrangements such as inter-operator settlements like call connect usage charges, tower sharing and intra-circle roaming pacts.

BSNL has said that while it has been able to recover Rs 32.2 crore, the net outstanding amount now stands at Rs 42 crore as of March 28, 2018.

The company has said it is exploring other options, including legal remedies, for recovering balance amount.

It has also sought the government's intervention for recovering the balance outstanding dues "by way of setting off any excess amounts of the company that may be available with the Department of Telecommunications".

Aircel announced in February that it has filed for bankruptcy. The telecom operator had said that intense competition following the disruptive entry of a new player, legal and regulatory challenges, high level of unsustainable debt and increased losses had together caused significant "negative business and reputational impact" on the company.

Aircel had also stated that it believes resolution process under the Insolvency and Bankruptcy Code is an "appropriate recourse" given the circumstances.

BSNL's Shrivastava said that the telecom corporation has been able to port in about 35 lakh Aircel customers. As per the latest report by telecom regulator, BSNL had 9.40 per cent share of mobile services market as on January 31 and added 3.96 lakh customers during that month.

The corporation's losses stood at Rs 4,793 crore during 2016-17, lower than Rs 4,859 crore in 2015-16 and Rs 8,235 crore in 2014-15.(Source: ETtelecom)

UK regulators search Cambridge Analytica offices

UK regulators search Cambridge Analytica officesBritish regulators today began searching the London offices of Cambridge Analytica (CA), the scandal-hit communications firm at the heart of the Facebook data scandal, shortly after a judge approved a search warrant.
Around 18 enforcement agents from the office of Information Commissioner Elizabeth Denham entered the company’s London headquarters at around 1:30 am IST to execute the warrant. The High Court granted the raid request less than an hour earlier, as Denham investigates claims that Cambridge Analytica may have illegally harvested Facebook data for political ends.

A full explanation of the legal ruling by Judge Anthony James Leonard will be issued on Tuesday, according to the court. “We’re pleased with the decision of the judge,” Denham’s office said on Twitter. “This is just one part of a larger investigation into the use of personal data and analytics for political purposes,” it added in a statement. “As you will expect, we will now need to collect, assess and consider the evidence before coming to any conclusions.”

The data watchdog’s probe comes amid whistleblower accusations that CA, hired by Donald Trump during his primary campaign, illegally mined tens of millions of users’ Facebook data and then used it to target potential voters. Fresh allegations also emerged Friday night about the firm’s involvement in the 2016 Brexit referendum campaign.

Brittany Kaiser, CA’s business development director until two weeks ago, revealed it conducted data research for Leave.EU, one of the leading campaign groups, via the UK Independence Party (UKIP), according to The Guardian. Kaiser, 30, told the newspaper she felt the company’s repeated public denials it ever worked on the poll misled British lawmakers and the public. “In my opinion, I was lying,” she said. “In my opinion I felt like we should say, ‘this is exactly what we did.’”

CA’s suspended chief executive Alexander Nix told MPs last month, “We did not work for Leave.EU. We have not undertaken any paid or unpaid work for them, OK?” Nix was suspended this week following the Facebook revelations and a further media sting in which he boasts about entrapping politicians and secretly operating in elections around the world through shadowy front companies. He has already been called to reappear before British lawmakers to explain “inconsistencies” in past testimony about the firm’s use of the data.

Meanwhile Facebook founder Mark Zuckerberg has been forced to issue a statement outlining his firm’s role in the scandal and apologised Wednesday to its billions of users for the breach. The company has seen its stock market value plunge by around USD 75 million amid the crisis, as shares closed the week down 13 per cent -- their worst seven days since July 2012.

Cambridge Analytica denies any wrongdoing, and said Friday it was undertaking an independent third-party audit to verify that it no longer holds any of the mined data. (Source: The Hindu BusinessLine)

Rahul Commerce
ITU Telecom World 2018
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