rnm alert vol xxxxiv august 2012

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Dear Readers, The recent announcements by the Government in regard to pro-economic measures to liberalise the FDI regime in Multi-brand retail, Broadcasting and steps towards disinvestment of Public Sector Units have brought a big cheer from India Inc. which is clamouring for even more bold steps to revitalize a flagging economy. Pro-active policy steps by the Government to bring the various State Governments on board for the speedy introduction of the GST regime would give a great impetus to economic growth and pundits are hoping that with the gumption back in the corridors of power, further steps would be taken. RBI in its recent Credit Policy review on September 17, 2012 has reduced the Cash Reserve Ratio (CRR) rate by 25 bps. CRR stipulates the minimum proportion of deposits that banks must hold with the central bank. The CRR cut should provide a further stimulus to improve the sentiment,eventhough India Inc. was expecting a repo rate cut to really charge up the economic batteries. I am pleased to inform you that RNM had along with Berkeley Homes, U.K., the largest real estate company of UK as per market capitalization, hosted an event on 5 th September in New Delhi in regard to the London property market and overseas direct investment by Indians there. The event was well covered by the media and a report prominently quoting, Mr. Raghu Marwah, Partner was published in the Economic Times on 11 th September, 2012. Persons interested in making such investments in a Central London property may contact our Corporate Finance Team. The last date for filing annual Income Tax Returns of 30 th September for corporates and large partnerships is fast approaching. I also hope that all assessee’s have filed their advance tax as per the due date on 15 th September. I would like to wish in advance all our readers a happy Gandhi Jayanti on 2 nd October. Regards, U.N. Marwah For and behalf of the RNM Alert Editorial Board www.rnm.in ISSUE NO.44 AUGUST, 2012 RNM ALERT Thinking of the Bottom Line – Think of Us

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Page 1: RNM Alert VOL XXXXIV AUGUST 2012

Dear Readers, The recent announcements by the Government in regard to pro-economic measures to liberalise the FDI regime in Multi-brand retail, Broadcasting and steps towards disinvestment of Public Sector Units have brought a big cheer from India Inc. which is clamouring for even more bold steps to revitalize a flagging economy. Pro-active policy steps by the Government to bring the various State Governments on board for the speedy introduction of the GST regime would give

a great impetus to economic growth and pundits are hoping that with the gumption back in the corridors of power, further steps would be taken. RBI in its recent Credit Policy review on September 17, 2012 has reduced the Cash Reserve Ratio (CRR) rate by 25 bps. CRR stipulates the minimum proportion of deposits that banks must hold with the central bank. The CRR cut should provide a further stimulus to improve the sentiment,eventhough India Inc. was expecting a repo rate cut to really charge up the economic batteries. I am pleased to inform you that RNM had along with Berkeley Homes, U.K., the largest real estate company of UK as per market capitalization, hosted an event on 5th September in New Delhi in regard to the London property market and overseas direct investment by Indians there. The event was well covered by the media and a report prominently quoting, Mr. Raghu Marwah, Partner was published in the Economic Times on 11thSeptember, 2012. Persons interested in making such investments in a Central London property may contact our Corporate Finance Team. The last date for filing annual Income Tax Returns of 30th September for corporates and large partnerships is fast approaching. I also hope that all assessee’s have filed their advance tax as per the due date on 15th September. I would like to wish in advance all our readers a happy Gandhi Jayanti on 2nd October.

Regards,

U.N. Marwah

For and behalf of the RNM Alert Editorial Board

www.rnm.in

ISSUE NO.44 AUGUST, 2012

RNM ALERT Thinking of the Bottom Line – Think of Us

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CONTENTS Direct Tax

- Case Laws

- Deemed Dividend & transfer u/s 2(22(e)) 4 - International Taxation & Charitable Trust 4 - Expenditure in relation to income not includible in total income 5 - Profit & Loss from Business and Profession 5-6 - Capital Gain 6-7 - Cash Credit 7 - Assessment Procedure 8-9 - Appellate Procedure 10 - Penalty 11

Indirect Tax Service Tax

- Case Laws - Refund of Cenvat Credit 12 - Amalgamation of Cos 12 - Cenvat Credit of Premium of insurance policy 12

- Notification/Circular - Payment of service tax under reverse charge 12 - Service tax on vocational education service 12-13

Central Excise/Custom

- Case Laws - Clandestine Removal 13 - Honing stones as capital goods 14 - Refund of excess paid duty 14 - Document for availing cenvat credit 14 - Coke transfer car as cenvat credit 14

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DIRECT TAX DIRECT TAX

Company Law Updates - Circular/ Notification/ Guidance

- Gazette notification GSR 534(e) dated 14/7/11 - Clarification 15 - Clarification on para 46A of notification no GSR 914(e) dated 29/12/11 15

on accounting standard 11 relating to “The effects of changes in foreign exchange rates” - Applicability of service tax on commission payable to non-whole time directors 15

of the Co. u/s 309(4) of Cos. Act 1956 - Amendment to the Cos, Rule 1999 15-16 - Imposing fees on certain e-forms filled with ROC, RD or MCA under MCA-21 16

where at present no fees is prescribed - Filing of B/S and P/L A/c by Cos. In non – XBRL for 16

accountingyr commencing on or after 1/4/11 - Investor education & Protection fund rules 2012 16

RBI & SEBI Updates - Circular

- Foreign Investment by qualified foreign investors (QFIs) – Hedging Facilities 17 - NR guarantee for non-fund based facilities entered between tow resident entities 17-18 - FDI by citizen/entity incorporated in Pakistan overseas 18 - Direct Investment – Rationalization of Form ODI 18 - Manner of Dealing with audit reports filed by listed Cos. 19

Corporate Finance - Latest News

- Pivate Equity 20-21 - Venture Capital 21-25 - Mergers & Acquisition 25-26

New Appointment 27

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DIRECT TAX Case Laws Deemed Dividend and Transfer u/s 2(22(e)) Sec. 2(22) - Deemed Dividend Loan advanced by company to its Managing director as per her pre-condition of granting bank guarantee and a collateral security for benefit of company would not partake character of deemed dividend. [Source: ACIT vs. Smt. G. Sreevidya - [2012] 24 taxmann.com 75 (Chennai - Trib.)]

International Taxation and Charitable Trust S.9(1)(vii): Income deemed to accrue or arise in India‐Fees for technical services‐ Technical repairs‐Fees for “routine technical repairs” not assessable as “fees for technical services”. [Source: ADIT v. BHEL‐GE‐Gas Turbine Servicing (Hyd.)(Trib.) www.itatonline.org] Upfront appraisal fees Upfront appraisal fees charged by foreign company was business income and neither interest nor Fee for Technical Services (FTS) under Double Taxation Avoidance Agreement (DTAA). However, since the respondent did not have Permanent Establishment (PE) in India, same could not be charged to tax. [Source: DIT (Intl. taxation) vs. Commonwealth Development - [2012] 24 taxmann.com 154 (Bombay)] AAR not bound by own rulings Authority for Advance Ruling (AAR) not bound by own rulings. Transfer Pricing andReturn of Income (ROI) filing provisions apply despite no income. Foreign company is liable for MAT u/s 115JB. In Re Castleton Investment Ltd (AAR) Promotion of vegetarianism is undoubtedly a charitable activity Whether since promotion of vegetarianism is undoubtedly a charitable activity, business of preparing vegetarian food items and selling same was very much incidental to object of assessee trust and such business could be conducted by a charitable trust as per provisions of section 11(4A) - Held, yes - Whether, therefore, assessee's claim for exemption under section 11 was to be allowed - Held, yes [In favour of assessee] [Source: Sri SriRadhaDamodar Charitable Trust - [2012] 24 taxmann.com 141 (Mumbai - Trib.)]

S.4: Income–Principle of mutuality – Co‐operative Housing Society – TDR Premium ‐TDR Premium received by Co‐op Hsg. Society from its members is exempt on ground of “mutuality” [Source: CIT v. Jai Hind CHS Ltd (Bom.) (High Court) www.itatonline.org]

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Expenditure in relation to income not includible in total income Sec14A: Sec14A applies even if the securities are held as stock-in-trade Sec14A talks of making disallowance of expenses incurred in relation to an income not chargeable totax. No exception, such as the dividend being main or incidental income, has been carved out in theprovision. The relation of expenses for disallowance is with the exempt income irrespective of thesource or nature of the exempt income. When the legislature in its wisdom has not spelt out anyexception coming in the way of applicability of s. 14A, it is wholly impermissible to artificially find anysuch exception contrary to the language of the provision and the intention of the legislature.Accordingly. s. 14A applies even if the securities are held as stock‐in‐trade (CIT v LeenaRamachandran(Smt)(2011)339 ITR 296 (Ker) (High Court)distinguished). (AY 1997‐98) [Source: JCIT v. American Express Bank Ltd. (Mum.)(Trib.) www.itatonline.org]

Profit and gain from Business and Profession Deduction wrongly claimed under section 10B instead of section 10A eligible for deduction in revised return if original return filed within due date. [Source: Hyd. ITAT – 24 taxmann.com 207] Sec 28: Non Compete Fee whether Business Income Where assessee, promoter and shareholder of another company, transferred its shares and controlling interest in said Company, amount received by assessee, on per share basis as non-compete fee in said transaction, was liable to tax as 'business income' and not as 'capital gains'. [Source: Sterling Re-rolling Mills (P.) Ltd.v. ACIT (ITAT Mum.) [2012] 23 taxmann.com 394 (Mum.)]

Sec32:Depreciation‐ Goodwill‐Intangible‐“Goodwill” is an intangible asset eligible for depreciation. [Source: CIT v. Smifs Securities Ltd. (SC) www.itatonline.org.]

Sec32(2):Depreciation‐ Set off –Unabsorbed depreciation‐Unabsorbed depreciation of AYs 1997‐98 to 2001‐02 is eligible for relief granted by amended s. 32(2) in AY 2002‐03. Prior to the Finance Act No.2 of 1996 unabsorbed depreciation could be carried forward indefinitely. The Finance Act No.2 of 1996 restricted the period of carry forward & set-off of unabsorbed depreciation to 8 years from AY1997-98. Circular No.762 dated 18.2.1998 clarified that the brought forward depreciation for the earlier years would be added to the depreciation for AY 1997-98 and the period of 8 years would begin from AY 1997-98 onwards. S. 32 (2) was amended by Finance Act, 2001 w.e.f. AY 2002-03 to restore the position as it was prevailing prior to the Finance Act No. 2 of 1996 and the period of 8 years was done away with. In Circular No.14 of 2001, the CBDT clarified that the removal of the 8 year time period was “with a view to enable the industry to conserve sufficient funds to replace plant and machinery“. The effect of the amendment is that the unabsorbed depreciation available to an assessee on 1.4.2002(AY 2002-03) has to be dealt with in accordance with the s. 32(2) as amended by the Finance Act, 2001 and not by s. 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow unabsorbed depreciation allowance worked out in AY 1997-98 only for eight subsequent assessment years even after the amendment of s. 32(2) by Finance Act, 2001 it would have incorporated a

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provision to that effect. However, it does not contain any such provision and so a purposive and harmonious interpretation has to be taken. Therefore, the unabsorbed depreciation pertaining to AY 1997-98 can be carried forward for set-off indefinitely. [Source: General Motors India Pvt. Ltd v. DCIT (Guj.)(High Court)] Sec35(2AB)(1) Expenses incurred on clinical trials would not be eligible for weighted deduction under section 35(2AB)(1). [Source: USV Ltd. vs. DCIT [2012] 24 taxmann.com 218 (Mumbai - Trib.)]

Sec36(1)(iii):Deductions‐Interest on borrowed capital‐Pre‐construction interest‐ Funds invested by the assessee and the interest earned were inextricably linked with the setting up of the power plant and, therefore, the interest earned on fixed deposit of amounts borrowed cannot be treated as a revenue receipt and it would be used to reduce the cost of the project. [Source: NTPC SAIL Power Company Ltd v. CIT (Delhi)(High Court)]

Sec36(1)(iii):Deductions‐Interest on borrowed capital‐Share capital‐No interest –bearing funds were utilized by the assessee for subscribing to the share capital of its subsidiary, hence additions cannot be made. [Source: Visen Industries Ltd v. Addl. CIT (2012) 74 DTR 57(TM)(Mum.)(Trib.)]

Sec40 (a) (ia): Amounts not deductible Where under consortium agreement amongst travel agents, assessee was authorized to enter into contracts, make collection and distribute monies to each member, whole amount collected could not be treated as income of assessee so as to attract provisions of sections 194H and 40(a)(ia).Team RNM represented the said appeal which was successfully argued and announced in favour of the assessee. [Source: ITO vs. Interserve Travels (P.) Ltd. - [2012] 24 taxmann.com 259 (Delhi – Trib)] Expenditure on sub-division of shares is revenue expenditure [Source: Gujarat State Fertilizer Ltd. vs. DCIT – Gujarat HC]

Shares sale Assessee is free to exercise his commercial wisdom to sell loss making shares at any point of time even though it may result in reduction in his tax liability. [Source: Ahmd.-High Court-Sept. 2012-TIOL ]

Capital Gain Assessee can set-off capital loss arising from sale of shares to sister concern Shares in question being pledged by assessee to IDBI and therefore it would not be possible for the assessee to deliver the original share certificates to its purchaser along with the duly signed transfer forms. As already noted, such special angle may have repercussion insofar as the legal

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relation between the assessee and the IDBI is concerned and insofar as the purchaser’s right to have shares transferred in its name is concerned. This, however, by itself would not establish that the sale of shares was only a paper transaction and a device contrived by the assessee to claim loss which it did not suffer and thereby seek set off against the capital gain received by it during the year under consideration. [Source: ACIT vs. Biraj Investment (P.) Ltd.- HIGH COURT OF GUJARAT - TAX APPEAL NO. 260 OF 2010]

Sec54: Profit on sale of property used for residence Capital Gains exemption u/s 54 – Surrender of a residential flat in an existing building by assessee to a developer under a development agreement in lieu of another flat to be allotted to him in the new building to be developed. Held – Agreement amounts to construction of new flat by assessee and not purchase. [Source: Jatinder Kumar Madan vs. ITO – [2012] 26 SOT 583 {Mum}{Trib}]

Sec54F: Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house Residential house constructed on agricultural land would be eligible for exemption under section 54F. [Source: ACIT vs. Om PrakashGoyal - [2012] 24 taxmann.com 67 (Jaipur - Trib.)] Sec54F: Use of borrowed funds for investment in residential house Merely because capital gains earned had been utilized for other purposes and borrowed funds were deposited in capital gains investment account, benefit of section 54F exemption cannot be denied. [Source: J.V. Krishna Rao vs. Deputy Commissioner of Income-tax, Circle 3(3), Hyderabad - [2012] 24 taxmann.com 104 (Hyderabad - Trib.)] Sec74: Losses –Capital gains‐ Option to set off‐ Right to set‐off capital loss is a “vested right” not affected by amendment. (i) S. 74(1), as substituted w.e.f. 01.04.2003, applies to the long‐term capital loss of AY 2003‐04 onwards and not to theLong‐Term Capital Loss (LTCL) relating to the period prior to AY 2003‐04. The set‐off of long‐term capital lossrelating to a period prior to AY 2003‐04 is governed by s. 74(1) as it stood in that AY; (ii) The assessee’s contention, relying on Shah Sadiq, that it had a “vested right” in AY 2001‐02 to carryforward the LTCL & set it off against the STCG and that this right cannot be defeated without expresslanguage in the statute is also acceptable. In Govinddas and Others(1976)103 ITR 123 (SC) it was heldthat unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right otherwise than as regards the matters of procedure. [Source: Kotak Mahindra Capital Co. Ltd v. ACIT(SB)(Mum.)(Trib.)] Cash Credits Sec 68: Cash credits – Loans‐Account payee cheque‐Assessee need not prove the source of source. [Source: Dwarikadhish Sugar Industries v. ITO [2012] 137 ITD 200 (TM)(Lucknow)(Trib.)]

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Assessment Procedure Sec147: Assessment under section 143(1) cannot be reopened u/s 147 in absence of “new material”. (S.143(1)) [Source: Telco DadajeeDhackjee Ltd. v. DCIT(TM) (Mum.)(Trib.)] Sec 147:Reassessment‐Change of opinion‐Claim not considered‐If claim not considered by Assessing Officer, there is no “change of opinion”(S. 148) If claim not considered by AO in original assessment,then within 4 years assessment is possible if AO has some tangible material at his command on which he has reason to believe that income has escaped assessment and it will not be treated as change of opinion (even though the material is not new). The assessee’s argument that as the Full Bench judgement in CIT v. Kelivinator of India Ltd (2002) 256 ITR 1 (Delhi)(FB) was approved by the Supreme Court inCIT v. Kelvinator of India Ltd (2010) 320 ITR 561, the observations made by the Full Bench must be regarded as the ratio of the Supreme Court, isnot correct because the question before the Supreme Court was whether the concept of “change ofopinion” stands obliterated with effect from 1.4.1989 or not. The Supreme Court did not hold that the tangible material must be that which did not form part of the original record of the assessment proceedings. The ratio of the decision of the Supreme Court is what the judgement lays down and notwhat the decisions of the High Court under challenge held. Further, it is doubtful whether even the FullBench in Kelvinator meant to convey that a certain claim which has not been examined by the AO in theoriginal assessment, cannot be a subject matter of reopening on the basis of material already on record.Now, the Delhi High Court has itself referred the matter for reconsideration to another Full Bench in Usha International. [Source: Gujarat Power Corporation Ltd v. ACIT (Guj.)(High Court] Sec147: Reassessment Reopening after 4 years on mere “change of opinion” is not permissible. Though the AO was justified in his analysis that there was escapement of income, there was “nothing new” which had come to the notice of Revenue and that reopening was based on a “mere relook” which was not permissible. Assessee disclosed full details in the return and there is clearly a change of opinion and reopening the assessment after 4 years on the basis of change of opinion is not maintainable. [Source: ACIT v. ICICI Securities Primary Dealership Ltd. (SC) (www.itatonline.org)] S.153A: Assessment‐ Search or requisition‐Assessment completed‐De novo assessment‐ S. 153A applies if incriminating material is found even if assessments are completed

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High Court, Heldreversing the Tribunal: (i) U/s 153A, the AO is empowered to assess or reassess the “total income” (which includes thedisclosed & undisclosed income) of 6 years. This is a significant departure from the earlier blockassessment scheme (s. 158BC) in which only the undisclosed income could be assessed. U/s 153A, therecan be only one assessment order in respect of each of the six assessment years, in which both thedisclosed and the undisclosed income would be brought to tax. If the assessment proceedings arepending completion when the search is initiated, they will abate making way for the AO to determinethe total income of the assessee in which the undisclosed income would also be included. If theassessment proceedings have already been completed, there is no question of any abatement since noproceedings are pending & the AO will have to reopen the assessments (without having the need tofollow the strict provisions or complying with the strict conditions of s. 147, 148 &151) and determinethe total income of the assessee; (ii) The Tribunal’s view that since the returns filed by the assessee for the six years had beenprocessed u/s 143(1)(a) before the search took place, s. 153A cannot be invoked is not correct. The AOhas the power u/s 153A to make assessment for all the six years and compute the total income of theassessee, including the undisclosed income, notwithstanding that ROIs were filed which stood processedu/s 143(1)(a); (iii) On facts, the Tribunal’s finding that no material was found during the search is factuallyunsustainable since the entire case and arguments had proceeded on the basis that the documentembodying the transaction was recovered from the assessee. If a document is found in the course of thesearch, s. 153A is triggered & it is mandatory for the AO to complete the assessment u/s 153A. (AY 2000‐01, 2002‐03 to 2005‐06) [Source: CIT v. Anil Kumar Bhatia (Delhi)(High Court) www.itatonline.org]

Sec194-I: Tax Witholding on Rent whether applicable to aircraft landing charge No sec. 194-I for parking and landing charges paid by airlines; Madras HC refused to follows rulings of Delhi HCIT : TDS under section 194-I on 'rent' attracted only when payment is for use of specified area of land under an agreement having the character of lease or tenancy. [Source: CIT vs. Singapore Airlines Ltd. [2012] (Madras HC)taxmann.com] Sec195 – No TDS on reimbursement Assessee was not liable to deduct tax at source in respect of reimbursement of global management expenses, communication uplink charges and other expenses made to its parent company located abroad [Source: [2012] 24 taxmann.com 76 (Delhi High Court), CIT v. Expeditors International (India) (P.) Ltd. ] Sec214: Interest Payable by Government Advance tax - Interest payable by government –Tax deducted at source‐ Aggregate of advance tax/ TDS paid exceeds the assessed tax, advance tax or tax deducted at source loses its identity as soon as it is adjusted against the liability created by the assessment order and becomes tax paid pursuant to the assessment order hence the Judgement of Sandvik Asia requires reconsideration. [Source: CIT v. Gujarat Flouro Chemicals (SC) (www.itatonline.org)]

Sec245R: Advance rulings Mere filing of Return of Income disbars an advance ruling application. (S.139(1)) [Source: Netapp BV vs. The AAR (Delhi)(High Court) www.itatonline.org]

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Appellate Procedure Sec250(5): Appeal‐Commissioner of income ‐tax(Appeals)‐Additional ground‐Retrospective amendment of law ‐ Additional ground in view of retrospective amendment could be raised before the Commissioner of income ‐tax (Appeals). Before the Commissioner of income‐tax (Appeals), the assessee raised an additional ground praying forallowability of expenditure in respect of which TDS was paid before due date of filing of return in viewof the retrospective amendment in law amending section 40(a)(ia). The Commissioner of income‐tax(Appeals), rejected the claim relying on Goetze (India) Ltd v. CIT (2006) 284 ITR 323 (SC).The Tribunalheld that in view of retrospective amendment of law additional ground could be raised before the CIT(A) and directed the CIT (A) to entertain the claim. (A.Y. 2005‐06) [Source: NitinM.Panchamiya v. Addl.CIT (2012) 73 DTR 202(Mum.)(Trib.)] Sec251:Appeal‐Commissioner (Appeals)‐Powers – Admission of additional evidence is held to be justified.(Rule 46A) Assessee had already filed requisite details before Assessing Officer and further detail was to be filedbefore Assessing Officer, but latter refused to accept same. Such new evidence that was to be filed byassessee was from Government agency and same was essential for disposal of appeal. The Tribunalobserved that the CIT(A) had considered the new evidence and the facts and circumstances of the casein entirety and after recording reasons admitted the new evidences. Hence, admission of new evidenceby CIT(A) was justified. (A. Y.2006‐07) [Source: ITO v. BhagwanDass, [2012] 137 ITD 120/17 ITR 446 (Chandigarh)(Trib.)]

Sec253: Appeal‐ Appellate Tribunal‐ Non –payment of admitted tax‐ Stay‐Appeal is maintainable before the Tribunal. Assessee has shown a prima facie, an arguable case, stay was granted with certain conditions. (S. 220(6), 249(4)) In an appeal filed by the assessee the Revenue contended that as the admitted tax was not paid by theassessee, the appeal is not maintainable.The appellate Tribunal after relying on the Judgment of SupremeCourt in CIT v. Pawn Kumar Laddha (2010) 324 ITR 324 (SC), held that the appeal is maintainablebecause the provisions of section 249(4) in chapter XX‐A relating to filing of appeal before theCommissioner (Appeals) cannot be read in to section 253(1)(b) in Chapter XX‐B of the Income‐tax Actwhich relating to filing of an appeal before the Tribunal. Accordingly, the Tribunal held that the appeal ismaintainable. On the facts the Tribunal has found that the Assessing Officer has raised huge demandby passing an order under section 201(1) and 201(IA) where-under the bank accounts of assessee wasattached. The Tribunal also found that for fraction of financial year 2011‐12 demand was raised, whichis not permissible. Accordingly the Tribunal granted stay with certain conditions.(A.Y. 2010 to 2012‐13) [Source: Kingfisher Airlines Ltd v. ACIT ( 2012) 73 DTR 257 (Bang.)(Trib.)] Sec254(1):Appellate Tribunal‐Orders –Power‐Tribunal has the power to stay proceedings to give effect to s. 263 revision order. Plea as to jurisdiction of AO/CIT, even if given up, can always be raised.(S.263) [Source: CIT v. Income Tax Appellate Tribunal &Ors. (Delhi)(High Court)www.itatonline.org]

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Fate of assessee in a fresh assessment pursuant to remand by Tribunal – Assessee cannot be worse off than what he was in original assessment order. [Source: Kellogg India Pvt. Ltd vs. ACIT (Bom Trib.)www.itatonline.org]

Penalty Sec271(1)(c): Penalty‐Concealment‐ Ignorance of law‐Bonafide belief‐Ignorance of law caused by complicated provisions amounts to “bona fide belief”, deletion of penalty held to be justified. [Source: CIT v. Hans Christian Gass (Mum.)(High Court) www.itatonline.org] Sec271(1)(c):Penalty‐ Concealment –Revised return‐Survey‐Penalty for concealment cannot be levied if revised ROI filed after survey but before issue of s. 148 notice.(S. 133A,148) It is the settled law that if a revised return offering additional income is filed after investigation hasstarted but before the issue of the s. 148 notice, s. 271(1)(c) penalty is not leviable. In CIT v.Sureshchand Mittal(2001) 251 ITR 9, (SC)the Supreme Court held that even where the assessee surrenderedadditional income by way of a revised return after persistent queries by the AO, once the revised ROIhas been regularized by the Revenue, the assessee’s explanation that he had declared the additionalincome to buy peace had to be treated as bona fide and s. 271(1)(c) penalty could not be levied. Onfacts, as the assessee filed a revised ROI after survey but before the issue of the s. 148 notice, hencepenalty was not leviable.(A.Y. 2005‐06) [Source: RadheshyamSarda v. ACIT (Indore)(Trib.)www.itatonline.org] Sec271(1)(c):Penalty–Concealment‐Confirming addition in quantum appeal‐Mere fact of making or confirming the addition in quantum cannot ipso facto lead to inference that there has been concealment of income or furnishing of inaccurate particulars of such income by assessee so as to levy penalty under section 271(l)(c). [Source: Narangs International Hotels (P.) Ltd. v. DCIT [2012] 137 ITD 53 (TM)(Mum.)(Trib.)]

High Court seeks to end TDS & Refund harassment by Department. [Source: Court on Its Own Motion vs. CIT (Delhi High Court)]

Sec391-394 scheme of arrangement is not a “tax avoidance scheme” [Source: Vodafone Essar Gujarat Ltd vs. Deptt. of Income-tax (Gujarat High Court )www.itatonline.org]

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INDIRECT TAX

Service Tax Case Laws Refund of CENVAT Credit CENVAT Credit:- Refund of-Export of software, a non-taxable item- Service Tax paid on input services, which remained unutilized- Exporter is entitled to refund of such unutilized credit on furnishing of particulars of tax paid by them- It cannot be denied on ground of limitation under Section 11B of Central Excise Act, 1944, further, registration with Department is not a prerequisite for claiming the credit. [Source: Mportalindia Wireless Solutions P. Ltd. v CST, Bangalore, 2012 (27) STR 134 (Kar.)] Amalgamation of Companies Tax Liability- - Effective Date- High Courts allowed the amalgamation of two companies with the parent company with effect from 1-4-2004 i.e., the appointed date as per Amalgamation Scheme duly approved by two High Courts- Holding company paying Service Tax under the category of ‘Management Consultant Services’ to subsidiaries from 1-4-2004 till Sept. 2004- Appointed date as approved by High Courts i.e., 1-4-2004 is required to be taken as the date of amalgamation and not the date on which entire formalities were completed and application was filed with the Registrar of Companies i.e., 23-3-2005 to be taken as relevant date for amalgamation- Having held that amalgamation is effective from 1-4-2004, the service provided by assessee to be considered as provided to himself, in which case, no service tax would arise against them. [Source: Commissioner of Service Tax, Delhi-I v ITC Hotels Ltd., 2012 (27) STR 145 (Tri-Del.)] CENVAT Credit of Premium of Insurance Policy CENVAT Credit of Service Tax- Input service- Service Tax paid on premium of insurance policy is relatable to business activity of the manufacturer hence eligible for CENVAT Credit as input service- Rule 3 of CENVAT Credit Rules, 2004. [Source: Harsha Engineers Ltd v 2012 (27) STR 164 (Tri- Ahmd.)] Notification/Circular

Payment of Service Tax under Reverse Charge Service receiver is now liable to pay 100% service tax under reverse charge mechanism in respect of services provided or agreed to be provided by a Director of a company to the said company. [Source: Notification No. 45/2012 dated 07.08.2012- Service Tax]

Service Tax on Vocational Education Service A clarification has been made in respect of levy of service tax on certain vocational education/training/ skill development courses (VEC) offered by the Government (Central Government or State Government) or local authority themselves or by an entity independently established by the Government under the law, as a society or any other similar body.

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It has been clarified that when a VEC is offered by an institution of the Government or a local authority, question of service tax does not arise. In terms of section 66D (a), only specified services provided by the Government are liable to tax and VEC is excluded from the service tax. But when the VEC is offered by an institution, as an independent entity in the form of society or any other similar body, service tax treatment is determinable by the application of either sub-clause (ii) or (iii) of clause (l) of section 66D of the Finance Act, 1994. Sub-clause (ii) refers to “qualification recognized by any law” and sub-clause (iii) refers to “approved VEC”. In the context of VEC, qualification implies a Certificate, Diploma, Degree or any other similar Certificate. The words “recognized by any law” will include such courses as are approved or recognized by any entity established under a central or state law including delegated legislation, for the purpose of granting recognition to any education course including a VEC. [Source: Circular No. 164/15/2012-ST dated 28th August, 2012]

Central Excise Case Law

Clandestine Removal No Proper stock taking, no evidence showing the manufacture of goods and their clearances without payment of duty- Clandestine removal being a positive act, the burden of proving the same is on the Revenue and cannot be discharged on the basis of conjectures and assumptions- Effect of shortages by itself cannot lead to findings of clandestine removal, especially when such act does not stand accepted by the assessee- Assessee’s authorized representative has nowhere accepted that such shortages are on account of clandestine removal. [Source: Commissioner of Central Excise, Lucknow v Sigma Castings Ltd., 2012 (282) ELT 414 (Tri- Del.)]

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Honing Stones as Capital Goods CENVAT Credit- Capital goods- Honing Stones used in Honing Machine used for smoothening and polishing the outer surface of ball bearing, without which performance of ball bearing is hampered- Held: Assessee is entitled to credit of duty paid on honing stones. [Source: TATA Steel Ltd. v Commisioner of Central Excise, Haldia, 2012 (282) ELT 450 (Tri- Kolkata)] Refund of Excess paid Duty Refund- Claim of excess duty paid inadvertently without taking benefit of notification available to importer- Its refund cannot be rejected on ground that no appeal was filed against assessment order- It’s a case where there is no ‘contest’ or ‘lis’ between assessee and Department at time of clearance of goods- Section 27 of Customs Act, 1962. [Source: Anupam Products Ltd. v Commissioner of CUS. ICD, TKD, New Delhi, 2012 (282) ELT 451 (Tri- Del.)] Document for Availing CENVAT Credit CENVAT Credit- Duty paying documents- Goods sold by importer- Bill of Entry endorsed by importer in favour of assessee, indicating that imported goods came directly to factory of assessee from the Port- HELD: CENVAT Credit could not be denied on ground that bill of entry was not endorsed by Port authority in favour of assessee- There was no prescription under Customs Law for such endorsement- It was more so as arrival of goods in factory of assessee was not questioned- In such case, procedure prescribed in Rule 11(2) of Central Excise Rules, 2002 is not applicable- Rule 9 of CENVAT Credit Rules, 2004. [Source: Hindustan Zinc Ltd. v Commissioner of C. Ex., Jaipur-II, 2012 (282) ELT 453 (Tri- Del.)] Coke Transfer Cars as CENVAT Credit CENVAT Credit- Capital Goods- Coke Transfer Cars- Used for transfer of coke from oven to furnace- HELD: These were used as material handling equipment- Without them, coke could not be transferred from oven to furnace- In that view, they were accessory of oven, and assessee was entitled to take credit of duty paid on them-. [Source: TATA Steel Ltd. v Commissioner of Central Excise, JSR, 2012 (282) ELT 459 (Tri- Kolkata)]

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COMPANY LAW UPDATES

Circular/ Notification/ Guidance Gazette notification GSR 534(E) dated 14/07/2011-clarification It is hereby clarified that any employee of a Company holding shares of the company upto 0.5% of paid up share capital thereof under any scheme formulated for allotment of shares to such employees including under Employees’ Stock Option Plan or by way of qualification shares are also covered under the category of ‘persons not having any interest in the capital of the company’ in terms of the Ministry’s notification GSR 534(E) dated 14.07.2011. [Source: NotificationNo. G.S.R. 534(E)dated 16th August, 2012] Clarification on Para 46A of notification number G.S.R. 914(E) dated 29.12.2011 on Accounting Standard 11 relating to "The effects of Changes in Foreign Exchange Rates” It is hereby clarified that Para 6 of Accounting Standard-11 and Para 4(e) of the Accounting Standard-16 shall not apply to a Company which is applying clause 46-A of Accounting Standard-11. [Source: General CircularNo.25/2012 dated 09thAugust, 2012] Applicability of Service Tax on commission payable to Non-Whole Time Directors of a company under Section 309(4) of the Companies act, 1956 The Finance Act, 2012 has introduced Service Tax which is applicable to anyone who provides a Service not covered under the negative/exempted list and if the value of annual revenue is more than Rs. 10 lakh. The Non-whole Time Directors of the Company are presently not covered under the exempted list and as such, the sitting fee/commission payable to them by the company is liable to Service Tax. It has now been decided that any increase in remuneration of Non-Whole Time Director(s) of a Company solely on account of payment of service on commission payable to them by the company shall not require approval of Central Government under section 309 and 310 of the Companies Act even if it exceeds the limit 1% or 3% of the profit [u/s 309(4)] of the company, as the case may be, in the financial year 2012-13. [Source: General CircularNo.24/2012 dated 09thAugust, 2012] Amendment to the Companies (Fees on Applications) Rules, 1999 In exercise of the powers conferred by sub-section (1) of section 642, read with sub-section (2) of section 637A of the Companies Act, 1956 (1 of 1956), the Central Government hereby amends the notification of the Government of India in the erstwhile Ministry of Law, Justice and Company Affairs (Department of Company Affairs) number G.S.R. 501(E), dated the 6th July, 1999 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 6th July, 1999, namely:- In the said notification, after sub-rule (3), and Table-III, the following sub-rule (4) and Table-IV shall be inserted, namely:-

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“(4) In case of delays in filing applications with the Central Government under sub-section (2) of section 233B of the said Act, the fee as specified in the Table- IV below shall be applicable:

Table – IV Period of Delay Fee Payable with the Application

Upto 30 days Two times of normal fee More than 30 days and upto 60 days Four times of normal fee More than 60 days and upto 90 days Six times of normal fee More than 90 days Nine times of normal fee

[Source: NotificationNo. G.S.R. 617(E)dated 07th August, 2012] Imposing fees on certain e-forms filled with ROC, RD or MCA (HQ) under MCA-21 where at present no fee is prescribed In reference to the Ministry’s General Circular no. 14/2012 dated 21st June 2012 & General Circular no. 19/2012 dated 27th July 2012, the fees on Form 23B (Information by statutory auditor to the Registrar) has been further deferred for one week and shall now be applicable from 12th August, 2012. [Source: General CircularNo.22/2012 dated 03rdAugust, 2012] Filling of Balance Sheet and Profit and Loss Account by companies in Non-XBRL for accounting year commencing on or after 01.04.2011 All companies who are required to file non XBRL eform 23AC & ACA as per revised Schedule VI be allowed to file their financial statement without any additional fee/penalty upto 15th September, 2012 or within 30 days from the date of their AGM, whichever is later. [Source: General CircularNo.21/2012 dated 02ndAugust, 2012] Investor Education and protection Fund (uploading of information regarding unpaid and unclaimed amount lying with companies) Rules 2012 The Ministry has noted that some Companies have filed multiple Form No.5 INV in respect unpaid/unclaimed amounts lying with them instead of filing one form. To remove this anomaly and for better understanding of the issue, it is clarified:

(a) Any Company, which has filed multiple Form 5 INV while uploading the information for the year 2010-11 on or before the date of issue of this circular, should again file Form 5 INV (single) and upload the details of investors in excel template. This process should be completed by 31stAugust, 2012.

(b) All companies, which have not yet filed Form No. 5 INV are allowed to file Form 5 INV along with details of investors in excel template upto 31st August, 2012.

[Source: General CircularNo.20/2012 dated 01stAugust, 2012]

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RBI& SEBI UPDATES CircularForeign investment by Qualified Foreign Investors (QFIs) – Hedging facilities It has now been decided to allow Qualified Foreign Investors (QFIs) to hedge their currency risk on account of their permissible investments (in equity and debt instruments). [Source:RBI/2012-13/185 A. P. (DIR Series) Circular No. 21 dated 31stAugust, 2012] Non-resident guarantee for non-fund based facilities entered between two resident entities Borrowing and lending of Indian Rupees between two persons resident in India does not attract the provisions of the Foreign Exchange Management Act, 1999. In case where a Rupee loan is granted against the guarantee provided by a person resident outside India, there is no transaction involving foreign exchange until the guarantee is invoked and the non-resident guarantor is required to meet the liability under the guarantee. The Reserve Bank vide Notification No. FEMA 29/2000-RB dated September 26, 2000 has granted general permission to a person resident in India, being a principal debtor, to make payment to a person resident outside India, who has met the liability under a guarantee.

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On a review, it has been decided to extend the facility of non-resident guarantee under the general permission for non-fund based facilities (such as Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) ) entered into between two persons resident in India. The method of discharge of liability by the non-resident guarantor under the guarantee and the subsequent repayment of the liability by the principal debtor would continue, as hitherto, as detailed in A.P. (DIR Series) Circular No. 28 dated March 30, 2001. It has also been decided to introduce a reporting format to capture such guarantees issued and invoked. [Source:RBI/2012-13/179 A. P. (DIR Series) Circular No. 20 dated 29thAugust, 2012] Foreign Direct Investment by citizen / entity incorporated in Pakistan Overseas It has now been decided that notwithstanding anything contained in sub-regulation (1) of Regulation 5 of the Notification No. FEMA. 20, a person who is a citizen of Pakistan or an entity incorporated in Pakistan may, with the prior approval of the Foreign Investment Promotion Board of the Government of India, purchase shares and convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1 of the Notification, ibid, provided further that notwithstanding anything contained in Schedule 1 of the Notification, ibid, the Indian company, receiving such foreign direct investment, is not engaged or shall not engage in sectors / activities pertaining to defence, space and atomic energy and sectors/ activities prohibited for foreign investment. [Source:RBI/2012-13/ 173A. P. (DIR Series) Circular No. 16 dated 22ndAugust, 2012] Direct Investments – Rationalisation of Form ODI It has been decided to add the following items in Section “E” and “F”of Form ODI Part I, to be submitted by every Indian party in terms of Regulation 6(2) (vi) of the Notification, while undertaking ODI transactions:

a) In Section “E‟, after item (c), item “(d) Wherever applicable, the Annual Performance Report, as required in terms of Regulation 15(iii) of the Notification No. FEMA 120 / RB - 2004 dated July 07, 2004, as amended from time to time, in respect of all the existing JV / WOS of the Indian party has been submitted.”

b) In Section “F, after item (v), a clause “Further, certified that, wherever applicable, the Annual Performance Report, as required in terms of Regulation 15(iii) of the Notification ibid, in respect of all the existing JV / WOS of the Indian party has been submitted.”

[Source:RBI/2012-13/171 A. P. (DIR Series) Circular No. 15 dated 21stAugust, 2012]

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Manner of Dealing with Audit Reports filed by listed companies Clause 31(a) of Equity Listing Agreement, inter-alia, requires listed companies to submit six copies of annual reports containing audited annual financial statements to the stock exchanges. SEBI, in its continuous endeavor to enhance the quality of financial reporting being done by listed companies, has now decided to put in place a system to monitor the audit qualifications contained in the audit report accompanying the audited annual financial statements submitted by listed companies. Accordingly, listed companies shall now be required to submit the following forms, as may be applicable, along with copies of annual reports submitted to stock exchanges: Form A: Unqualified/ Matter of Emphasis Report Form B: Qualified/ Subject To/ Except For Audit Report

These forms shall be signed by the a) Chief Executive Officer / Managing Director, b) Chief Financial Officer, c) Auditor and d) Chairman of the Audit Committee. The information submitted as per these forms shall also draw attention to relevant notes in the annual financial statements, management's response to qualifications in the Directors’ report and comments of the Board/ Chair of the Audit Committee. [Source:CIR/CFD/DIL/7/2012 dated 13thAugust, 2012]

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CORPORATE FINANCE

Latest News Private Equity Goldman Sachs Picks Up 26% in Nova Specialty Surgery Short-stay surgery provider Nova Specialty Surgery has raised 300 crore from Goldman Sachs and existing investor New Enterprise Associates, to expand its network of centres and fertility clinics in the country. The private equity arm of Goldman Sachs Group, which led the round, has invested 220 crore for a 26% stake in the company that makes it the largest shareholder. Other investors in the company include Omani industrial group OMZEST and GTI Group, a New York-based investment firm. [Source: Economic Times; August 14, 2012] Standard Chartered PE Invests $45M in Engineering Firm Inox India Standard Chartered Private Equity (SCPE) has invested Rs 250 crore to pick up a minority stake in Vadodara-based Inox India Ltd (INOXCVA), a manufacturer of cryogenic storage and transportation equipment. Cryogenic storage equipment is a precision engineering product used for storage and distribution of liquefied gases used in industrial applications. The growing use of shale gas as a fuel source has also resulted into strong demand for cryogenic storage equipment for liquefied natural gas (LNG) across the globe, especially in the US. Inox claims to be the largest player in India and one of the top five global players in cryogenic equipment manufacturing business. [Source: Reuters; August 23, 2012] Founder Buys Back Sequoia Stake in Café Coffee Day Founder-chairman V.G. Siddhartha of Amalgamated Bean Coffee Trading Co. Ltd (ABCTL) has bought back the entire stake that venture capital investor Sequoia Capital acquired in the company that runs the Café Coffee Day chain of coffee shops, said two persons close to the development. It’s the latestin a series of stake buy-backs by company promoters. Sequoia had invested $20 million (Rs.110 crore today) in 2006 for an undisclosed stake in ABCTL, which runs 1,300 cafes that it plans to expand to 2,000 by the end of 2014 [Source: Livemint, August 25, 2012]

Flipkart Raises $150m in Latest Funding Round A south African medium giant Nasper is leading $150-million investment in online retailer Flipkart, a deal which is said to secure the company’s finances for next three years. Iconiq Capital, one of Silicon Valley’s hottest wealth managers with the likes of Mark Zuckerberg as clients, will be another new investor, while existing shareholders Tiger Global and Accel Partners make follow-on investments in the latest round of fund raise. The Nasper-led deal values India’s e-commerce leader at around $800 million. MIH India, an arm of Nasper, is pumping a little over $90 million into the five year-old Flipkart and becomes its second

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largest shareholder after Tiger. Flipkart’s fund raising was closely tracked after media speculated on the ability of India’s e-commerce poster boy to attract big funding in tough market conditions [Source: Livemint; August 25, 2012]

Venture Capital BrainNook Secures Seed Investment from Imagine K12 Educational games portal, BrainNook has secured seed funding from Imagine K12. Founded by AbhijeetVijayakar, BrainNook is online educational games based on important concept in the critical foundational subjects of Math and English Grammar. The startup started off with a focus on India, but is now solely focused on US market. The games can be played by multiple users also. BrainNook partnered education-focused social networking platforms like Edmodo to sell its products in US. Imagine K12 is a Silicon Valley incubator focusing on education startups. Imagine K12 Incubates the edu-startup from early stage to the point of being a company investable by seed investors or traditional venture capitalists.The startup will spend three months with the incubator in California with the goal to get the business in the best shape possible for success, both product / business and within the venture ecosystem. The three months will involve a lot of interaction between the companies, the Imagine staff, and other individuals brought to meet with and speak to the teams.The possible funding is in between $14,000 - $20,000 depending upon the team size, against 4-8% stake in the company. [Source: Deal Curry; August 1, 2012] SBI Holdings Invests in eLearning Content Provider – LIQVID LIQVID, an integrated eLearning content solutions company specializing in English Language Training, has raised $3 Mn funding from SBI Ven Capital, a subsidiary of SBI Holdings, Japan. Following this investment, BrijeshPande, board member of SBI Ven Capital, Singapore is joining the board of LIQVID. The company plans deeper penetration into the school market with its 'EnglishEdge Portable Language Lab'and to expand its offerings in the college segment with a comprehensive solution that caters to the growing demand for English Language Enhancement, Business Communication skills and Personality development. LIQVID is focused on providing technology-aided English Learning & Training (ELT) solutions to individuals and organizations under the EnglishEdge brand name. The solutions are offered on PCs, Tablets and Mobiles. EnglishEdge has more than 250,000 learners across schools, colleges, vocational

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institutes and corporate and its customers include IIT Delhi, JamiaMillia, Pinegrove School, Kimberley International School, Shemford Schools, British Council and Educomp. [Source: www.delhitie.org; August 1, 2012] Lok Capital, Omidyar Invests in Vistaar Financial Services Vistaar Financial Services has raised R40Cr in Series B round from Lok Capital, Omidyar Network and existing investors - Elevar Equity and SVB Capital Partners. The funds raised will be utilized to expand the Vistaar’s network to 180 branches across the country over the next four years, with a projected portfolio of R1600Cr. In 2010, Vistaar had raised R15Cr from Elevar Equity and SVB Capital Partners which was used to set up 14 branches in Tamil Nadu and Karnataka.Founded in 2010 by BrahmanandHegde and Ramakrishna Nishtala, Vistaar Financial Services provides loans to the underserved micro and small enterprise market, which is estimated to consist of over 26 million enterprises.As a product offering to its customers, it has both a lower sized loan (up to R70,000) backed by hypothecation of stock as well as a higher ticket size product backed by mortgage of property (upto R15 lakhs). The company has disbursed loans worth over R60Cr since 2010. It charges a weighted average interest rate of between 26.5% and 27.5% per loan and the average tenure per loan is 42 months, according to pluggd.in [Source: Vccircle; August 1, 2012] India Innovation Fund Invests in iKen Solutions IIT Bombay research spin-off iKen Solutions has raised funds from India Innovation Fund. As a part of the deal, AshwinRaguraman, VP, IIF will join the board of iKen Solutions as nominee.Started in 2005 by Rajendra Sonar and SiddharthGoel, iKen specialize in Artificial Intelligence (expert system, case-based reasoning, neural networks and genetic algorithms) based Consumer Analytics for offering highly personalized end user experiences.iKen Solutions has developed Mooga, a state-of-the-art hybrid artificial intelligence analytics framework for personalization at the individual consumer level in real time.The technology will enable consumer centric companies in Telecom, Digital Content Delivery, Media, Internet, and Banking and Financial Services provide a high degree of personalised service to their customers [Source: The Hindu Business Line; August 9, 2012]

PurpleStream Secures Investments from Mercatus Capital Video content provider PurpleStream has received its first round of funding from Mercatus Capital and Hub Media Group. These funds are raised for the ‘Go to Market Strategy’ along with the global launch of PurpleCloud – broadband video delivery platform of PurpleStream. The company is also planning to shift it’s headquarter to Singapore from Chennai. Nova Capital Advisors was the advisor to PurpleStream for the transaction. The investment will enable PurpleStream to leverage on Mercatus Capital for incubation and acceleration services out of Singapore and have access to global content providers through Hub Media Group. Founded by Karthik Subramanian, PurpleStream Convergence enables organizations across all industries to stream LIVE & On-Demand Videos to any Internet Enabled Device. Its paradigm shifting

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technology delivers HD quality video to Any Network, Any Device in Any Territory at a massive cost advantage. [Source: Reuters; August 10, 2012] Accel Partners Invests in Mind Edutainment Mind Edutainment Private Limited has raised R2.7 Cr from AccelPartnersand group of angels led by Meena Ganesh - CEO & MD Pearson Education. The funds raised will be used to scale the initial pilot project of THOTS Lab from 3 cities to 8 cities and to integrate ICT in delivery process to create an ideal mix of ICT and Experiential Learning. Earlier, the company had received funding from the Department of Science and Technology and individual angel investors. Founded in 2007 by SangeetaKhurana and AshutoshKhurana, Mind Edutainment develops and provides solutions to improve social and emotional thinking skills among school-going children. The company has developed 'Higher Order Thinking Skills' program with the use of physical Thinking Tools and Mind Games. The program created has been adopted by 40 plus schools and 50000 plus students of UKG to Grade VIII as a complete subject on thinking skills development. [Source: Deal Curry; August 13, 2012]

Mystery Shopping Firm RedQuanta Gets Seed Funds RedQuanta secured a round of seed funding from various investors including India Quotient, Blume Ventures, India Venture Partners and other angel investors, Startupcentral reports. The amount of money received is undisclosed. India Quotient had commenced its debut fund in June this year and had listed RedQuanta in its portfolio at that time. The company had also joined The Morpheus VP Batch 3 in July 2009. RedQuanta was founded by PankajGuglani - an alumni of MDI Gurgaon and is backed by senior alumni/ investors from IIM’s. Guglani was earlier working with Zapak Digital Entertainment as the business head. The Company enables its clients to improve customer service experience, using their crowd-sourcing powered mystery shopping platform. Mystery shoppers pose as regular customers and perform specified tasks like asking questions, buying merchandise or behaving in a pre-determined way to access the quality and quickness of response and service of the service provider. It has a client base of industry leaders in prime sectors like retail, restaurants, fast food chains, cinemas, banks, health clubs etc [Source: Vccircle; August 16, 2012] Eco Shopping Portal - Natural Mantra Raises Funds Natural Mantra raised an undisclosed amount from Freemont Partners. These funds will be used to shore up the current 4 member team along with expansion of operations.Started in 2011 and founded by NishantNayak, Natural Mantra concentrates on selling natural, organic and eco friendly products – free from harmful chemicals and pesticides. It currently has over 2000 organic products on its portal and the operations are mainly concentrated in the metro cities of Bangalore, Mumbai and Delhi. Its product range includes bath & body, personal care, food & nutrition, baby & kids and gifts among others and has an office in Mumbai. Freemont Partners terms itself as a global incubator and accelerator

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which provides seed capital from its own funds upto R50 lakhs. It has a partnership with Mumbai Angels. [Source: siliconindia; August 21, 2012] Chennai Angels Invests In Social Learning Network – Classle Classle, an online social learning network has raised $500,000 from Chennai Angels.Private Limited was started by Vaidya Nathan, an alumnus of IIT-Madras. It is a Social Learning Network; a network with focus on Learning and education. Classle built its platform using open-source technologies, wherein students and learners interact with their peers, teachers, professors and professionals. The modules, features and content can be accessed and delivered offline, as well as through the Internet and mobile technology. Once students register online, they can access content, attend live online classes, review audio and video recordings, ask questions and consult experts on topics they choose. Classle is working on building multimedia apps and is aiming at a target of 2.5 Mn students in 18 months. [Source: Deal Curry; August 22, 2012] India Innovation Fund, IAN Invest In Consure Medical Consure Medical has received Series A investment led by India Innovation Fund and HemantKanakia of Indian Angel Network. Other co-investors in the round include India Venture Partners, ShrikumarSuryanarayan and SaurabhSrivatsava. The company plans to use the funds to complete product development, execute their clinical & regular strategy, and commercialize its proprietary technology. As a part of transaction, Rajesh Rai, CEO, India Innovation Fund will join the board of the company. Founded in 2011 by NishithChasmawala and Amit Sharma, Consure Medical is a healthcare startup which has developed a novel, disruptive technology that will benefit more than 16 MN patients in India and over 100 Mn patients worldwide, according to pluggd.in. [Source: Deal Curry ; August 23, 2012] Bookmyshow Raises Rs 100 Crore from Accel Partners Bigtree Entertainment, the Network18 backed company which runs movie and event ticketing website, BookMyShow, has raised $18 million or Rs 100 crore from Accel Partners, acquiring a minority stake in the company, reports The Times Of India. The report mentions that the investment was made by Accel’s US and India funds, and that BookMyShow will use the funds to expand into tier-II and III cities and for increasing its non-movie ticketing business. [Source: Media Nama; August 26, 2012] Edu Platform - Simplilearn Receives Funds from IndoUS Simplilearn.com received an undisclosed amount of funds from IndoUS Venture Partners. The web portal providing services like education and training for professional certification courses, plans to utilize the funds for adding more to the certification courses, spreading into new geographies and double its workforce.

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The website, started in Bangalore, is an online/offline course training platform. Currently conducting classroom trainings of over 300 per month, the company offers courses in the project management, IT service/security management, quality management, technological certification and financial management fields. [Source: Deal Curry; August 28, 2012]

Merger & Acquisition India’s PVR Cinemas Sells 10% Stake to L Capital Indian exhibitor PVR Cinemas is set to receive a $19.3m cash injection after selling a 10% stake to L Capital Asia, a private equity fund backed by French luxury goods manufacturer Louis Vuitton Moet Hennessy (LVMH). PVR and L Capital are also setting up a joint venture to invest in companies operating entertainment, gaming, food and other leisure facilities in shopping malls. L Capital will invest $9m in the joint venture and PVR is contributing Blu-O Entertainment, its bowling alley operation which was founded in partnership with Thai exhibitor Major Cineplex. [Source: Reuters; August 11, 2012] Gita Piramal Divests 95% Stake in BP Ergo To HNI Corp Gita Piramal, business historian and the author of Business Maharajas, has divested her entire 95% stake in office furniture company BP Ergo for an undisclosed amount to American furniture major HNI Corp. Investment banking officials said the total enterprise valuation of the company is around Rs 200 crore. The deal will help the world’s second largest furniture company to own capacities capable of providing furniture to two lakh people annually in a fast-growing market like India. [Source: Economic Times; August 14, 2012] Piramal Enterprises Picks Up 27% Stake in Bluebird Aero Systems Piramal Enterprises, of the Ajay Piramal-led group, joins the list of Indian companies that see a growing opportunity in the Defence sector. It has picked up a 27.83 per cent stake in Bluebird Aero Systems, an Israel-based unmanned air systems manufacturer, for about Rs 40 crore ($7 million). Bluebird is set to bid for contracts in India. Piramal’s deal with Bluebird Aero Systems is considered unique as the company is an initiative of former engineers of the Israel Defence Forces. [Source: Business Line; August 17, 2012]

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Dentsu picks up 51% stake in Taproot India When advertising professional Agnello Dias, or Aggie to those who know him well, quit J Walter Thompson (JWT) and started his own agency Taproot India Communication Pvt. Ltd in 2009 with SantoshPadhi, he didn’t know it would so soon emerge as a magnet for investors.On Tuesday, Japanese advertising agency Dentsu Inc. said it had acquired a majority stake 51% in Taproot for an undisclosed sum, putting at rest speculation that had been rife about a stake sale by the Mumbai-based company, which said the deal would enable it to service clients more efficiently. The alliance raised the question whether creative individuals who turn entrepreneurs eventually need the shelter of bigger ad networks to survive and grow. In the three years since its inception, Taproot India has built a formidable reputation, beating larger agencies to win coveted clients such as beverage maker PepsiCo India Holdings Pvt. Ltd, mobile services provider BhartiAirtel Ltd, media company the Times group, consumer products maker Marico Ltd, handset maker Karbonn Mobiles India Pvt. Ltd and DSP BlackRock Mutual Fund, among others. [Source: Livemint; August 29, 2012]

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New Appointments We are pleased to announce the following new appointments to Team RNM:-

Swati Sharma Associate – Corporate Finance: Graduated in Pharma from Mumbai University in 2009 and Post Graduation in Finance from Mumbai university in 2011.Worked as trainee in CRISIL Ltd, Mumbai. Joined team RNM as Associate in August 2012.

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OUR OFFICES

HEAD OFFICE: Mr. U.N. Marwah, Managing Partner 4/80, Janpath New Delhi-1100 01 (India) Tel: +91-11-43192000 Fax: +91-11-43192021 E-mail: [email protected] BRANCH OFFICE: Mr. Rathna Kumar 813 Oxford Towers, 139 Airport Road, Bangalore-560 008 E-mail: [email protected] AFFILIATE OFFICES: Mumbai Mr. AshishBairagra, F11, 3rd Floor, ManekMahal, 90 Veer Nariman Road, Church Gate, Mumbai-400 020 Tel. +91 22 6117 4949

Fax. +91 22 6117 4950 E-mail: [email protected] Pune Mr. NitinKhangaonkar 9 ‘B’ & ‘C’ Wing, Supriya Gardens, Aundh, Pune- 411 007 Tel: +91 98230 81701 E-Mail: [email protected] Coimbatore Mr. D. Purushthoman Kaanchan, No. 6, North Hozur Road, Coimbatore- 641 018 Tel. +91 422 2212548, +91 422 2215407 Fax. +91 422 2201206 E-mail: [email protected]

Chennai Mr. Ashok Deora SF 6, Golden Enclave, 184 Poonamallee High Road, Chennai- 600 010 Tel: + 91 44 4217 8153, + 91 44 2641 5805 Fax : + 91 44 2641 5805 E-mail: [email protected]

Mauritius Mr. KamalHawabhay, 365 Royal Road Rose Hill, Mauritius Tel : + 230 4542110 Fax : + 230 4549671 E-mail: [email protected]

Hong Kong Mr. Raymond Choi 3705 Bank of America Tower 12 Harcourt Road Central Hong Kong Tel: +852 2115 9878 Fax: +852 2115 9818 E-mail: [email protected]

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R.N. Marwah& Company (hereafter referred as RNM) has taken due care and caution in compilation and presenting factually correct data contained herein above. While RNM has made every effort to ensure that the information /data being provided is accurate, RNM does not guarantee the accuracy, adequacy or completeness of any data/information in this newsletter and the same is meant for the use of the recipient and not for circulation. Readers are advised to satisfy themselves about the merits and details of each article and the information contained therein, before taking any decision. RNM does not hold themselves liable for any consequences, legal or otherwise arising out of the use of any such information/data and further states that it has no financial liability whatsoever to the recipient/readers of this newsletter. RNM nor any of its partners/employees/representatives do not accept any liability for any direct or consequential loss arising from the use of information /data contained in this newsletter or any information /data generated from this newsletter. Any dispute arising in future shall be, subject to the court(s) at Delhi.