Entries from October 2010 ↓

No Objection Certificate for conversion of Investment Company into LLP

The Limited Liability Partnership Act, 2008 (herein after called “Act”) has brought a new kind of business vehicle in the Country called LLP, allowing small business and entities to carry on business under a flexible business model. The Act is silent about Dividend Distribution Tax, Minimum Alternative Tax, allowing number of corporate houses to escape tax by converting their investment and holding companies (herein after called “Investment Company”) into LLP, which are spared of above mentioned tax incidence, resulting to pay higher payout as dividend to their promoters.
Further, at the time of conversion of Investment Company into LLP, Registrar of Companies ask for a “No Objection Certificate” form the Central Bank of India since the porposed LLP wold be dealing with investment activities. However, Reserve Bank of India is not willing to give NOC for the reason as these Investment Company would be out of the perview of supervision of RBI.
Adding to this, there is a need to amend the exixting Act in line with the requrirement of RBI. The Officials of RBI are in talk with Ministry of Corporate Affairs to arrive at a workable solution.

MAT on SEZ under DTC – Request to reduce the rate

The Commerce department is in talk with Ministry of Finance to push for lowring the minimum alternative tax (MAT), proposed in Direct Tax Code (DTC) Bill, on units in Special Economic Zone (SEZ). The department is set to raise this issue before the parliamentry committee on DTC, that 20% MAT on units is too high and does not make any commercial sense.
Further, the Chairman of Export Promotion Council for SEZ, Mr.R.K. Sonthalia expressed his views that DTC should not alter the objective and sprits of SEZ Act, 2005 after four and half years of its implemantation as it was aimed to acheive and provide long term stability.
Moreover, if this (rate of 20%) remains same, investing into SEZ would not be an attractive option. The Investor may open their units in Domestic Tarrif Area (DTA), where they could get benefits form incentive schemes such as Focus Market and/ or Foucs Products Shcemes under Foreign Trade Policy 2009-2014. It is of worth noting that these schemes are not available to units in SEZ.

Curtsy: Gaurav Garg (Company Secretary)

Department of Industrial Policy and Promotion (DIPP)discussion paper on Compulsory Licencing of Patents

The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India, has kick off the issue of compulsory licencing, in a direction of ramifications of policies. In a move to curb excessive monopolistic prices of medicines, DIPP has threw open a draft discussion paper on Compulsory Licencing of Patents.
This seems to be a magnificent tool to curb/ regulate such practices and to make sure the availability of medicines at a competitive prices.
Compulsory Licencing:
The Compulsory Licencing is noting but a Government order to patentee, compelling him to licence his patents to third party on certain terms and conditions. The third party is supposed to pay a royalty for using his patent. The Patent Act provides that a third party can apply for a Compulsory Licence, subject to certain grounds, after a period of three (3) years from the grant of patent to patanee.
It is to be noted that below are the grounds on which third party can apply for Compulsory Licencing:
  1. The prices of the products are excessive;
  2. The products are not suitably quantified to the general public;
  3. The products are not worked in the country; and
  4. The products are not manufactured in the country.
It is of worth noting that number of pharmaceutical patents have been granted since 2006 by the Indian Patent Office and despite of efflux of four (4) years, no Compulsory Licence has been issued so far.
By opening this issue to the public discussion, the DIPP seeks to unearth the cause of this situation.
Curtsy: Gaurav Garg (Company Secretary)