Dear Readers, We are pleased to report that Mr. Raghu Marwah, Partner actively participated in the recent Geneva Group International (GGI) World Conference at Rome, Italy in October 2012 where he presented to the International Tax Practice Group a presentation on “Foreign Investors No Aggressive Tax Planning: Indian Context” and to the M&A Practice Group a presentation on “Indian M&A Landscape”.Both presentations were very well received by the audience of global

experts and professionals from over 50 countries whom were present. The newly introduced Circular implementing the requirements for a Tax Residency Certificate for all persons (resident and non residents) whom are desirous of obtaining the benefit of the Double Tax Avoidance Agreement entered into by India with foreign countries and jurisdictions is an important new requirement. The ease with which non-residents are able to obtain such a certificate from the government of their home country remains to be seen. The RBI has also recently amended the requirement for filing valuation certificate in regard to issue of equity shares to Non Residents whom are the Subscribers to the Memorandum of Association of newly incorporated companies. We would like to take this opportunity to wish all our readers a very happy Dussehra and all the happiness, health and prosperity for Deepawali!! We hope that the festival of lights brings new hope and that it marks a new milestone in the success of business of India Inc.

Regards,

U.N. Marwah

For and behalf of the RNM Alert Editorial Board

www.rnm.in

ISSUE NO.45 SEPTEMBER, 2012

RNM ALERT Thinking of the Bottom Line – Think of Us

Issue No. 45: September, 2012 Page 2 of 33

CONTENTS Direct Tax

- Case Laws

- Scope of Total income 4 - Income deemed to accrue or arise in India 4-5 - Profit & Loss from Business and Profession 5-8 - Capital Gain 8-10 - Double Taxation Avoidance Agreement 10 - Assessment Procedure 10-11 - Tax Deduction at Source 11 - Refunds 11 - Appellate Procedure 12 - Penalty 12

- Notification 12-13

Indirect Tax Central Excise

- Case Laws - Clandestine Removal 14 - Refund of Cenvat Credit 14 - Cenvat Credit of Service Tax 14 - Cenvat credit of Input shown as written off 14 - Valuation Physician samples 15

Service Tax

- Case Laws - Cenvat Credit of input service tax 15 - Installation of solar water heater system 15 - Cenvat credit of accessories 16

- Notification - Service tax return 16

Issue No. 45: September, 2012 Page 3 of 33

DIRECT TAX DIRECT TAX

Company Law Updates - Circular/ Notification/ Guidance

- Condition on conversion of ordinary society into Producer Company 17 - Cos. General Rules & forms Rules, 2012 17 - Extension of time for filing 23AC & 23ACA (non XBRL) 17 - Extension of time for filing 23B by statutory auditor for the accounting yr 2012-2013 17

RBI & SEBI Updates - Circular

- Overseas investment by Indian parties in Pakistan 18 - ECB Policy – Repayment of Rupee loan &/or fresh Rupee capital expenditure 18 - ECB Policy – Bridge Finance for infrastructure sector 18-19 - Overseas Direct investments by Indian party – Rationalization 19 - Establishment of LO/BO/PO in India by Foreign entities – Clarification 20 - Foreign investment in different sectors- amendment to the FDI Scheme 20 - Establishment of LO/BO/PO in India by Foreign entities – Reporting Requirement 20-21 - FDI in India – Allotment of shares to person NRI under MOA Of Indian Co. 21

Corporate Finance - Latest News

- Private Equity 22-23 - Mergers & Acquisition 23-28 - Venture Capital 29-31

New Appointment 32

Issue No. 45: September, 2012 Page 4 of 33

DIRECT TAX Case Laws Scope of Total Income Sec5: Scope of total income-Accrual-Lease rentals-It is only financing charges which represent real income which has to be offered for tax. The assessee a Non-Banking Finance Company received a sum of Rs 118.4 million as lease rentals. The assessee deducted a sum of Rs 43.5 million representing the lease equalization account from lease rentals. According to assessee lease equalization charges should not be added as income. The tax authorities, and Appellate Tribunal held that the assessee is not entitled to deduction. On appeal to High Court, the Court held that, lease rental may consist of financing charges as well as capital recovery. Amount received towards capital recovery constitute capital expenditure, whereas financing charges which represent real income has to be offered for tax. [Source: Prakash Leasing Ltd v. Dy.CIT (2012) 208 Taxman 464 (Karn.) (High Court)] Income deemed to accrue or arise in India Sec9: Income deemed to accrue or arise in India – Interest payment to head office and overseas branches – Held not taxable in India since payments were to self which did not give rise to income that was taxable in India [Source: BNP Paribas SA v. Dy. DIT (IT) (2012) 137 ITD 322 (Mum.)(Trib.)] Sec9: Income deemed to accrue or arise in India – Service fee –DTAA-India –Mauritius—Service fee paid to concerns at arm’s length price and assessee did not have any PE in India hence not taxable in India. (Art.5) The assessee is a foreign company incorporated in Mauritius, engaged in the business of telecasting of TV channels. B4U Multimedia International Ltd and B4U Broad Band Ltd. ‘(B)’ was granted general permission by RBI to act as advertisement collecting agent of the assessee. As per the agreement the ‘B’ had no powers to conclude the contract nor was dependent on the assessee. The assessee did not have any PE in India and hence not taxable in India. It was held that even if it is presumed that there was a PE of assessee in India, in view of the fact that payment of service fee by assessee to B was at arm’s length price, there was no need to attribute profits to the PE. (A.Y. 2001-02) [Source: DDIT (IT) v. B4U International Holdings Ltd. (2012) 137 ITD 346 / 148 TTJ 274 (Mum.)(Trib.)] Sec9(1)(vi):Income deemed to accrue or arise in India-Software- Royalty-DTAA-India- Finland – Offshore supply profits not taxable.(Art.13 ) The assessee, a French company, sold GSM equipment manufactured in Finland to Indian telecom operators from outside India on a principal to principal basis, under independent buyer-seller arrangements. Installation activities were undertaken by the assessee’s subsidiary. The Assessing Officer

Issue No. 45: September, 2012 Page 5 of 33

and Commissioner (Appeals) held that the assessee’s liaison office and subsidiary constituted a Permanent Establishment(PE) and a portion of revenue was attributable to the PE and the whole of software revenue was held as assessable as “royalty” under section 9(1)(vii) and Article 13. The Tribunal decided the issue in favour of assessee. On appeal by revenue, the court held that the only relevant factor is as to where the property in the goods passes. As the goods were manufactured outside India and the sale has taken place outside India, even in a “composite contract”, the supply has to be segregated from the installation and only then would question of apportionment arise to the determine the extent to which it arises in section 9(1)(i). The departmental argument that composite contracts cannot be split so as to exempt supply profit is not acceptable. [Source: DIT v. Nokia Networks OY and others (Delhi) (High Court)&DIT v.CIT Alcatel New Delhi/ (Delhi) (High Court)] Sec9(1)(vii): Income deemed to accrue or arise in India- Fees for technical services-Necessary that some sort of ‘managerial’ ‘technical’ or ‘consultancy’ services should have been rendered in consideration. It was held that to constitute “fees for technical services”, it is necessary that some sort of ‘managerial’ ‘technical’ or ‘consultancy’ services should have been rendered in consideration. In the instant case, services rendered under a buying service agency agreement are routine services offering procurement assistance. They consist of negotiating between the Principal and manufacturers for purchase of merchandise. Hence, consideration received was classified as “commission” and not for “fees for technical services” Appeal of the assessee was allowed. (A.Y. 2007-08)(ITA no 5300/Del/2010 Bench ‘D’ dated 18-9-2012) [Source: Adidas Sourcing Limited v.ADI (Delhi) (Trib.)]

Profit & Gain from Business & Profession Sec14A: Business expenditure-Disallowance– Exempt Income –Pro-rata-Interest- Assessing Officer was not justified in estimating interest expense incurred by the assessee in relation to exempt income on pro-rata basis and in making disallowance invoking provisions of section 14A(Sec10(33)) The assessee earned dividend income in shares of a company and same was claimed as exemption u/s 10(33). The assessee claimed that the said investment was made by from its own funds. It was held that AO was not justified in estimating interest expense incurred by the assessee in relation to exempt income on pro-rata basis and in making disallowance invoking provisions of section 14A. (A.Ys. 2002-03 & 2003-04) [Source: BNP Paribas SA v. Dy. DIT (2012) 137 ITD 322 (Mum.)(Trib.)] Sec4A: Business expenditure- Disallowance-Exempt income- Premium paid to premium note holders could not be disallowed under section 14A.(S.10(23G)) The assessee’s are investment and trading companies. They issued unsecured optionally convertible premium notes of Rs 1 lakh. The Assessing Officer found that income arising from the said investment was exempt under section 10(23G), therefore disallowed the premium paid on redemption of premium notes. The disallowance was confirmed in appeal by Commissioner(Appeals). On appeal the Tribunal held that, premium paid to premium note holders could not be disallowed under section 14A, since the

Issue No. 45: September, 2012 Page 6 of 33

said investment had the potentiality of earning taxable income also such as short term capital gains, fees for providingsecurities,collaterals etc.(A.Ys. 2003-04 & 2004-05) [Source: Avshesh Mercantile (P) Ltd &Ors v. Dy.CIT(2012) 75 DTR 229 (Mum.)(Trib.)]

Sec14A: Business expenditure- Disallowance-Exempt income-Expenditure neither incurred nor claimed in the profit and loss account disallowance cannot be made. For the assessment year 2008-09 the Assessing Officer made disallowance under section 14A read with Rule 8D of the Income tax Rules, though neither any expenditure was incurred nor claimed in the profit and loss account. In appeal Commissioner (Appeals) deleted the addition. On appeal by revenue the Tribunal held that as the assessee has not claimed any expenditure in the profit and loss account for earning the exempt income, the appeal of revenue was dismissed.(A.Y. 2008-09) [Source: ACIT v. TarunChandmal Jain (2012) Income tax review –Sept P.90(Mum.)(Trib.)(ITA No.6310/Mum/2011, Bench “E” dated 10-8-2012)] Sec28(i): Business Income - Contingent deposits - Contingent deposits received from leasing /hire purchase customers with a view to protect from potential sales tax liability, which is credited to turnover is assessable to income-tax. The Assessee is engaged in the business of hire purchase, financing equipment, leasing and allied activities. The assessee has been collecting certain sum as ‘contingent deposit’ from the leasing hire purchase customers, with a view to protect them from sales tax liability. The collection was on ad hoc basis. The assessee has shown this amount as contingent deposit. The assessee contended that the deposit was collected in the anticipation of sale tax liability. Apex court negated the submission and held that contingent deposits received from leasing /hire purchase customers with a view to protect from potential sales tax liability, which is credited to turnover , is assessable to income-tax. (A.Y.1998-99)(C.A.no 5895 of 2008 dated 11-9-2012) [Source: Sundaram Finance Ltd v. ACIT (SC)] Sec35AB: Expenditure on known how-Lump sum- Business expenditure-Lump sum technical know-how fees are deductible only u/s35AB and not under sec37(1)( S37(1)) The assessee entered into a “Licence and Technical Assistance Agreement” with an American company pursuant to which the American company agreed to transfer technical know-how to the assessee in consideration of US $2,25,000 to be paid in three installments. The assessee paid the first installment amounting to Rs.17.49 lakhs. Subsequently, disputes arose between the contracting parties and the know-how was not transferred by the American company. The assessee claimed that as the technical know-how was not received, the amount paid was deductible u/s 37(1) and not under s. 35AB. The AO &CIT(A) rejected the claim though the Tribunal upheld it. The High Court reversed the Tribunal. On appeal by theassessee to the Supreme Court, held: Once S. 35AB comes into play, then S. 37 of the Act has no application. (A. Y. 1993-94) [Source: Drilcos (India) Pvt. Ltd v. CIT (SC)]

Issue No. 45: September, 2012 Page 7 of 33

Sec36(1)(iii): Deductions – Interest on borrowed capital – Interest free advances to sister concern, disallowance of interest is not justified Total cash profits of the assessee company in the relevant year being far more than the total interest free advances given by it to subsidiary companies it has to be presumed that the entire interest free advances were given out of interest free funds available with the assessee and no part of the borrowed funds can be said to have been diverted as non interest bearing advances to the subsidiary companies and, therefore no disallowance can be made out of interest paid on borrowings. (A.Y. 2006-07 & 2007-08) [Source: S.P. Jaiswal Estates (P.) Ltd. v. CIT (2012) 147 TTJ 649/74 DTR 294 (Kol.)(Trib.)] Sec37(1): Business expenditure-Capital or revenue-Software expenses- Software/ERP expenses is revenue in nature and treatment in books of account is not conclusive. [Source: CIT v. Asahi India Safety Glass Ltd ( 2012) 346 ITR 329 (Delhi) (High Court) Chief CIT v. O.K.Play India Ltd ( 2012) 346 ITR 57 (P&H) (High Court) CIT v. Amway India Enterprises( 2012) 346 ITR 341(Delhi)(High Court) ACIT v. Torrent Pharmaceutical Ltd. (2012) 137 ITD 301 (Ahd.)(Trib.)] Sec37(1): Business expenditure – Repairs-Improve condition of building – Building used for business purpose hence repair expenses incurred to improve a condition of building held to be allowable revenue expenditure. [Source: Dy. CIT v. Sandoz (P.) Ltd. (2012) 137 ITD 326 (Mum)(Trib.)] Sec40(a)(i): Amounts not deductible-Deduction at source- Royalty- Retrospective amendment of law- Due to retrospective amendment of law, No obligation for TDS as the law cannot compel a person to do something which is impossible to perform(Sec9(1)(vi). The assessee is a company engaged in the business of financing, leasing, hire purchase, production anddistribution of internet media and manufacturing of towels. In the said year the video channel started by the assessee became functional. In the course of Video channel business the assessee entered in to an agreement with with M/s Shan Satellite Public Co Ltd (SSA). The payment was made on the certificate issued by the Chartered accountant, that the said payment constituted business income of that non-resident partyand since they did not have a Permanent Establishment (PE) in India, business income earned by them wasnot chargeable to tax in India in accordance with the Article 7 of DTAA between India and Thailand, andthus, no tax at source was therefore deductible. The Tribunal held that amount

Issue No. 45: September, 2012 Page 8 of 33

paid by the assessee to SSA was not taxable in India in the hands of SSA either undersection 9(1)(vii) as per the legal position prevalent time and the assessee therefore was not liable to deduct taxat source from the said amount paid to SSA and there was no question of disallowing the said amount byinvoking section 40(a)(i) . [Source: In Channel Guide India Ltd v. ACIT ( Mum.) (Trib.)] Sec43B: Deduction on actual payment – Employees provident fund- Before due date of filing of return- Contribution to employees provident fund, having been made before the date of filing of a return the payment was to be allowed as deduction. [Source: KPMG India P. Ltd. v. Dy. CIT (2012) 17 ITR 569 (Mum.)(Trib.)] Service tax is not part of “Gross Receipts” for purposes of s. 44BB [Source: Lira Goswami vs. ACIT (ITAT Delhi)]

Capital Gain Sec45: Capital gains- Set off loss- Sale to group company-Transaction of “sale” of “pledged” shares at loss to a group company with object to set-off loss against gains is not a “colourable transaction”.(S.2(47) ) The assessee earned capital gains on sale of certain shares. To offset the gains, the assessee sold shares of another company, which were pledged to IDBI, to a group company, at a loss. The AO & CIT(A) treated the transaction of sale to the group company as a “colourable device” & rejected the loss on the ground that as the shares were pledged, they could not have been sold. However, the Tribunal allowed the assessee’s claim. On appeal by the department to the High Court, held that the Revenue’s argument that the transaction was a “colourable device” and a “paper arrangement” is not acceptable because (i) there is no provision whichprevents an assessee from selling loss making shares with a view to offset the loss against other gains and (ii) the transaction with the group company was at the fair value. The fact that the shares were pledged and could not be registered in the purchaser’s name did not establish that transaction was a contrived one. [Source: ACIT v. Biraj Investment Pvt. Ltd (Guj.)( High Court ] Sec45: Capital gains –Transfer-Amalgamation- Tax avoidance scheme-. Scheme of arrangement is not a “tax avoidance scheme”. (S.391-394 Companies Act, 1956) Vodafone Essar Gujarat Ltd (“transferor”) filed a Petition u/s 391 to 394 of the Companies Act, 1956 to transfer its ‘Passive Infrastructure Assets’ to Vodafone Essar Infrastructure Ltd (“transferee”) free of liabilities and encumbrances. The corresponding liabilities were not to be transferred. No consideration was payable by the transferee nor were any shares to be allotted to the members of the transferor. Post de-merger, the transferee was to be made a substantially owned company of a new company to be formed by all or some of the shareholders of the transferee. Thereafter, the transferee was to be amalgamated/ merged into Indus Towers Ltd. The application was opposed by the income-tax department on the ground that since no consideration was involved, the transaction was ultra vires. It was also claimed that the transaction did not fall within the ambit of ss. 391 to 394 but was a simple transfer between two separate entities to evade legitimate taxes which would be payable if the transaction was effected as a simplicitor transfer. It was also claimed that the Scheme was solely for purposes of avoiding tax. The Company

Issue No. 45: September, 2012 Page 9 of 33

Judge came to the conclusion that thetransferee was a paper company and that the sole object of the Scheme was to avoid tax on income in excess of Rs. 3,500 crore and also stamp duty and VAT to the tune to Rs.600 crores. He accordingly refused to sanction the arrangement. On appeal by the Company, Held reversing the Company Judge: (i) The Scheme cannot be said to have no purpose or object and that it is a mere device/subterfuge

with the sole intention to evade taxes. While it is true that the Scheme may result into tax avoidance, it cannot be said that the only object of the Scheme is tax avoidance.

(ii) The Revenue’s argument that the transfer is void for want of consideration is not acceptable because it is not a party to the transaction. Even a consideration of one rupee can be said to be a valid consideration and it is not necessary that consideration is always a monetary consideration. In a reconstruction there is a give and take and mutual/reciprocal promises and obligations, which can be said to be consideration for each other. Even the most trifle benefit can be consideration so as to avoid the impact of section 25 of the Contract Act.

[Source: Vodafone Essar Gujarat Ltd v. Dept of Income-tax (Guj.)HighCourt)] Sec49: Capital gains-Previous owner -Cost of acquisition- The property acquired by assessee under will of her father in the year 1988 and mother in the year 2000, which property was originally acquired by assessee’s grand father in 1942,the period of holding shall be from 1st April 1981, in respect of entire property and benefit of indexation will be available from that date.(S.242A), 48) [Source: CIT v. Janhavi S. Desai (Ms)(2012) 75 DTR 1 (Bom.)(High Court)} Sec54B: Capital gains-Land used for agricultural purposes-Exemption-Land purchased in the name of his son and daughter –in-law assessee is not entitled to exemption. The word “assessee” used in Income –tax Act needs to be given a legal interpretation and not a liberal interpretation and consequently an assessee would not be entitled to get exemption under section 54B for land purchased by him in name of his son and daughter in law. [Source: Kalyav.CIT (2012) 208 Taxman 436 (Raj.) (High Court)] Sec55A: Capital gains- Reference to valuation Officer-Report received after completion of assessment- Reference does not became invalid action taken by the tax authorities on the basis of such a valuation will be open for challenge.(S.45 ) The assessee opted to take fair market value of land as on 1-4-1981 on the basis of registered valuation report. The Assessing Officer referred the matter to DVO. Since report was not received with in time stipulated for completing assessment proceedings, the Assessing Officer accepted the valuation shown by the assessee. The assessee received the notice from DVO for valuing the property. The assessee challenged the said notice by way of wit petition on the ground that the said notice by the Valuation officer was invalid once the assessment under section 143 (3) was completed. The Court while dismissing the writ petition held that reference to DVO does not become in valid on completion of assessment proceedings before receipt of valuation report. Such valuation report received after completion of

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assessment proceedings, would become part of record and if any action is taken by departmental authorities on basis of such valuation report , same will be open to challenge by assessee . (A.Y. 2007-08) [Source: ACC LTD v. DVO( 2012) 208 Taxman 397 (Delhi) (High Court)]

Double Taxation Avoidance Agreement Sec90: Double taxation relief- Loss on sale of shares-Set of-DTAA –India-Assessing Officer cannot thrust the provisions of the Double taxation avoidance agreement on an assessee, who has chosen to be governed by the Income-tax Act. Assessee is entitled to set off loss under “Profits and gains of business or profession” against “Income from other sources”. (S.71, Art. 7) [SourcePrudential Assurance Co. Ltd. v. ADIT (2012) 18 ITR 186 (Mum.)(Trib.)]

Assessment Procedure Sec147: Reassessment- Notice- Recorded reasons- After four years - Reasons for reopening not communicated, notice held to be invalid and quashed. (S.148) [Source: Agarwal Metals and Alloys v. ACIT ( 2012) 346 ITR 64 (Bom.) (High Court)] Sec147: Reassessment-Reasons recorded- Within four years- Tangible material- Basis of order is completely different from the reasons recorded for reopening of assessment which is not permissible, reassessment held to be invalid. If after issuing notice under section 148 officer accepted thecontention of the assessee and holding that income which he has initially formed a reason to believe has not escaped assessment . It is not open to him independently to assessee some other income. If he intended to do so a fresh notice under section 148 is necessary. Accordingly the order of Tribunal is up held and appeal of revenue was dismissed. (A.Y. 1996-97) [Source: CIT v. ICICI Bank Ltd ( 2012) 74 DTR 251 (Bom.)(High Court)] Sec147: Reassessment - Objection-Recorded reasons-Order passed without considering objections held to be invalid.(Sec148) [Source: Babo India Fianance Ltd v. Dy.CIT( 2012) 346 ITR 81 (Bom.)(High Court)]

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Sec147: Reassessment- Failure disclose material facts- After four years- Failure to disclose substantial interest and amount shown as loan from the company to be assessed as deemed dividend . Reassessment held to be justified.(S.2(22)(e), 148) The assessment for the assessment year 2003-04 was completed under section 143(3).During the assessment year 2006-07 the Assessing Officer has come to know that certain advances were required to be treated as deemed dividend under section 2(22) (e) . Upon perusal of accounts of the assessee was seen that the assessee had taken loan . The Assessing Officer recorded the reasons accordingly . The objections raised against the recorded reasons were disposed by the Assessing Officer. The assessee filed the writ petition for challenging the reassessment proceedings . The Court held that the assessee has not disclosed that it had a substantial interest in a company , it was found that it had 22.3 percent shareholding. From the return filed and documents annexed within return , nowhere it could be ascertained that what was holding of the assessee in SDBL. On the facts there was failure on the assessee to disclose the material facts hence the explanation to section 147 is being applicable , reassessment even after four years held to be valid , accordingly the petition was dismissed.(A.Y.2003-04) [Source: Disman Pharmaceuticals and Chemicals Ltd v. Dy.CIT (2012) 346 ITR 228 (Guj.)(High Court)] Tax Deduction at Source Sec194I: Deduction at source- Rent-Co-owners-Each of the co-owners of building had definite share in the premises and individual payment being less than 1,20,000 per annum the assessee cannot be treated to be in default for non-deduction of tax at source[Sec26,201(1),201(1A)] [Source: CIT v. Senior Manager , State Bank of India &Anr ( 2012) 75 DTR 313 (All.)(High Court)] Refunds Sec237: Refunds- Credits for tax deducted at source-CBDT- High Court seeks to end TDS & Refund harassment by Department.(S.199) [Source: Court On Its Own Motion v. CIT (Delhi)( High Court)]

Issue No. 45: September, 2012 Page 12 of 33

Appellate Procedure Sec250: Appeal – Commissioner (Appeals) – Additional evidence –Document not produced the same before Assessing Officer while replying to relevant query assessee is Not entitled to produce the documents before CIT(A)(Rule46A ) [Source: SagarSarhadi v. ITO (2012) 148 TTJ 86 (Mum.) (Trib.)] Sec260A: Appeal –High Court-Tax effect less than 10 lakhs-Pending appeals-Low tax effect Circular has retrospective effect and applies to pending appeals. [Source: CIT v. SureshchandraDurgaprasadKhatod (HUF) (Guj.)( High Court)] Penalty Sec271(1)(c): Penalty- Concealment- Immunity-Explanation 5 immunity available even if tax not paid by due date of filing of return .( S. 132(4) ) [Source: ACIT v. GebilalKanhaialal HUF (SC.)] Sec271(1)(c): Penalty- Concealment-Bonafide-Inadvertent-Human error- Levy of penalty held to be not leviable. The assessee filed the return of income together with audit report . It has claimed an amount of Rs 23 lakhs towards provision for gratuity which was not allowable under section 40A(7). The said claim was allowed by the Assessing Officer. The Assessing Officer thereafter reopened the assessment and disallowed the said claim. The assessee explained that the mistake has occurred due to confusion and the return was prepared by non chartered accountant. The Assessing Officer levied penalty, which was confirmed by Commissioner(Appeals), Tribunal as well as High Court. On appeal to the Supreme Court, the Supreme Court held that,notwithstanding the fact that the assessee is undoubtedly a reputed firm and has great expertise available with it, it is possible that even the assessee could make a “silly” mistake. The fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) indicates that the assessee made the computation error in its return of income. The Court held this being an inadvertent human error. The Court held the levy of penalty is not justified. (A.Y.2000-2001)(C.A.NO 6924 of 2012 dt25-9-2012) [Source: Price Water house Coopers Pvt Ltd v.CIT (SC)]

Circulars & Notifications

Tax Residency Certificate Required Sec90(4) of the Act, as inserted by the Finance Act 2013 w.e.f 1.4.2012 provides that an assessee, not being a resident, to whom an agreement referred to in sub-section (1) of s. 90 applies, shall not be entitled to claim any relief under a Double Taxation Avoidance Agreement unless a certificate, containing such particulars as may be prescribed, of his being a resident in any country outside India or specified territory outside India, as the case may be, is obtained by him from the Government of that country or specified territory. A similar provision has been inserted in sub-section (4) of s. 90A of the Act. Pursuant thereto,

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the CBDT has issued Notification dated 17.09.2012 to insert Rule 21BA which specifies the details which shall be contained in Tax Residency Certificate obtained by a non-resident from a country outside India. Further, for resident assessees Forms 10FA (for making application before Indian Income tax authorities) and 10FB (for issuing Tax Residency Certificate) have been specified. [Source: S.O.2188E, dated 17th Sept’12]

Income Tax (Fourteenth Amendment) Rules, 2012 –Insertion of Rule 112F-Notification No. 42/2012 [F.NO.282/22/2012-IT (INV. V)], Dated 4-10-2012 The class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, shall be the cases- (i) where, as a result of a search under sub-section (1) of section 132 of the Act or a requisition made

under section 132A of the Act, a person is found to be in possession of any money, bullion, jewellery or other valuable articles or things, whether or not he is the actual owner of such money, bullion, jewellery etc.; and

(ii) where, such search is conducted or such requisition is made in the territorial area of an assembly or parliamentary constituency in respect of which a notification has been issued under section 30 read with section 56 of the Representation of the People Act, 1951 (43 of 1951), or where the assets so seized or requisitioned are connected in any manner to the ongoing election in an assembly or parliamentary constituency.

Provided that this rule shall not be applicable to cases where such search under section 132 or such requisition under section 132A has taken place after the hours of poll so notified; Provided further that this rule shall not be applicable to cases where any assessment or reassessment has abated under the second proviso to section 153A and where any assessment or reassessment has abated under section 153C.

Notification No. 37/2012 [f.no. 142/18/2012-SO(TPL)] dated 12-9-2012 – Insertion of Rule 31ACB & Form No. 26A prescribing the format in which CA’s Certificate should be obtained Any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident— (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii)has paid the tax due on the income declared by him in such return of income,

and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:

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INDIRECT TAX

Central Excise Case Laws

Clandestine Removal Proof of Clandestine removal- Assessee manufacturing large number of final products- in such case, it is difficult to maintain proper accounts of variety of goods both in packed condition and in bulk, and errors can occur in accounting, involving both excesses and shortages, which may not be attributable to clandestine removal- in that view, admission of authorized signatory on day of stock taking that there was a difference between accounted stock and physical stock, could not be proof enough to conclude that accounted stock was correct- it was fit case only for penalty for not maintaining accounts properly- Rules 11 and 25 of Central Excise Rules, 2002. [Source: Castrol India Ltd. v Commissioner of Central excise, Chennai, 2012 (283) ELT 399 (Tri-Chennai)] Refund of CENVAT Credit CENVAT Credit of inputs used in manufacture of final product cleared for export under bond or letter of undertaking- Held- it is admissible after jurisdictional authority ascertains quantity of inputs and credit availed- Refund cannot be granted on proportionate basis, on ration of export turnover to total turnover- Rule 5 of Cenvat Credit Rules, 2004- Notification No. 5/2006-CE (NT)- Section 11B of Central Excise Act, 1944. [Source: Lupin Ltd. v Commr. of C. Ex. & S. T., LTU, Mumbai, 2012 (283) ELT 394 (Tri-Mumbai)] Cenvat Credit of Service Tax Input service- Credit of Service Tax taken on the amount of insurance paid denied on the ground of being not used in relation to manufacture of final product- Insurance premium relatable to business activity and obligatory under law- Credit admissible on service tax paid for the insurance taken- Rules 2 and 14 of Cenvat Credit Rules, 2004. [Source: Surani Ceramics Ltd. v Commissioner of Central Excise, Rajkot, 2012 (283) ELT 388 (Tri-Ahmd.)] CENVAT Credit of Inputs Shown as Written Off Inputs not cleared from the factory- Merely because the same were written off in the books of account and the value shown as nil, by itself, cannot be considered to amounting to removable of the inputs from the factory premises in the absence of any evidence to that effect- Appellant have taken a categorical stand that inputs were still in their possession- Revenue has not rebutted the above submission of the appellant and no or finding that inputs cleared from factory- Credit not to be denied. [Source: Ray Ban Sun Optics India Ltd. v Commission of Central Excise, Jaipur, 2012 (283) ELT 276 (Tri-Del)]

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Valuation Physician Samples Valuation (Central Excise)- Physician samples manufactured for free distribution- Valuation of such physician samples is required to be made on the basis of pro rata value of regular pack of comparable goods in terms of provisions of Rule 4 of Central Excise (Valuation) Rules, 1988. [Source: Allianz Bio Sciences Pvt. Ltd. v Commer. Of C. Ex., Puducherry, 2012 (283) ELT 284 (Tri-Chennai).]

Service Tax Case Law

Cenvat Credit of Input Service Tax Cenvat Credit- Input Service tax Credit- Utilization of credit for business process outsourcing services exempted from tax vide Notification No. 8/2003-ST- Export of impugned services- HELD: as per Rule 5 of Cenvat Credit Rules, 2004 assessee entitled to input credit- Similar view taken in Dell International services India Pvt. Ltd. [2010 (17) STR 540 (Tribunal)] [Source: Zenta Pvt. Ltd. v Commissioner of Central Excise, Mumbai-V, 2012 (27) STR 519 (Tri-Mumbai)] Installation of Solar Water Heater System Erection, Commissioning or Installation services- Installation of solar water heater system- Clearance through dealers also and collection of installation charges from customers by dealers- HELD; Assessee liable to tax even though installation charges not collected separately by assessee- Impugned activity falling under of ‘Erection, Commissioning or Installation services’ [Source: Synergic India Pvt. Ltd. v Commissioner of Service Tax, Pune-III, 2012 (27) STR 519 (Tri-Mumbai)]

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Cenvat Credit of Accessories Cenvat Credit- Input- Tool/First aid kits sold alsong with two wheelers and their cost included in same- Rule 138(4)(b) of Central Motor Vehicle Rules, 1989 making it incumbent on driver of every vehicle to carry the tool kit- In that view, tool and first aid kit are necessary accessories of motor vehicle and used in relation to manufacture thereof- Assessee was entitled to credit of duty paid on them as they were input. [Source: Hero Motocorp Ltd. v Commissioner of Central Excise, Delhi-III, 2012 (27) STR 473 (Tri-Del.)]

Notification Service Tax Return Vide Notification No. 47/2012-ST, the Central Government has made an amendment in the provision of the Service Tax Rules, 1994 which governs manner of filing of Service Tax Return.(Form ST-3) and made a provision that the Form ‘ST-3’ required to be submitted by the 25th day of October, 2012 shall cover the period between 1st April to 30th June, 2012 only. [Source: Notification No. 47/2012-ST, Dated:-28th September, 2012]

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COMPANY LAW UPDATES

Circular/ Notification/ Guidance Condition on conversion of Ordinary Society into Producer Company, Part IX-A of the Companies Act, 1956 The question of acceptance of documents by the Registrar of Companies for conversion of a Co-operative Society( not registered as Multi State Society) into a Producer Company has been examined by the Ministry. Consequent upon the receipt of such an application seeking conversionof a Co-operative Society into a a Producer Company, the ROC’s will seek from the local Cooperative Department of the concerned State a No Objection Certificate to its being converted into Producer Company under Part IX-A of the Companies Act, 1956.Further, the ROC’s need to satisfy themselves that the applicant society has indeed extended its activities outside the State where it is registered as a Cooperative Society under the local/ State level law governing Cooperative Societies which are not inter-State Cooperative Societies. [Source: General Circular No.29/2012 dated 10th September, 2012] Companies (Central Government’s) General Rules and Forms (Sixth Amendment) Rules, 2012 In exercise of the powers conferred by sub section (1) of Section 642 of the Companies Act, 1956, the Central Government has amended Companies (Central Government’s) General Rules and Forms, 1956 and the new rules to be called Companies (Central Government’s) General Rules and Forms (Sixth Amendment) Rules, 2012, and to come into effect from 30th September, 2012 [Source: Notification No.G.S.R._(E)dated 21st September, 2012] Extension of time for filing 23AC & 23ACA (non XBRL) The Ministry has extended the time for filing eform 23AC &23ACA(non XBRL) as per revised Schedule VI without any additional fees/penalty in the following manner:

i. Company holding AGM or whose due date for holding AGM is on or before 20/09/2012, the time limit will be 03/11/2012 or due date of filing, whichever is later.

ii. Company holding AGM or whose due date for holding AGM is on or before 21/09/2012, the time limit will be 22/11/2012 or due date of filing, whichever is later

[Source: General Circular No.30/2012 dated 28th September, 2012] Extension of time for filing 23B by statutory auditor for the accounting year 2012-13 The Ministry has extended the time for filing eform 23B without any additional fees till 23/12/2012or due date of filing, whichever is later. [Source: General Circular No.31/2012 dated 28th September, 2012]

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RBI UPDATES CircularOverseas Investment by Indian Parties in Pakistan It has now been decided that the overseas direct investment by Indian Parties in Pakistan shall henceforth be consideredunder the approval route.Investment in Pakistan was earlier not permitted [Source:RBI/2012-13/198 A. P. (DIR Series) Circular No. 25 dated 7th September, 2012]

ECB Policy - Repayment of Rupee loans and/or fresh Rupee capital expenditure - USD 10 billion scheme As per the extant guidelines, the maximum permissible ECB that can be availed of by an individual company under the scheme is limited to 50 per cent of the average annual export earnings realized during the past three financial years. On a review, it has been decided: to enhance the maximum permissible limit of ECB that can be availed of to 75 per cent of the average foreign exchange earnings realized during the immediate past three financial years or 50 per cent of the highest foreign exchange earnings realized in any of the immediate past three financial years, whichever is higher; in case of Special Purpose Vehicles (SPVs), which have completed at least one year of existence from the date of incorporation and do not have sufficient track record/past performance for three financial years, the maximum permissible ECB that can be availed of will be limited to 50 per cent of the annual export earnings realized during the past financial year; and (c) The maximum ECB that can be availed by an individual company or group, as a whole, under this scheme will be restricted to USD 3 billion. [Source:RBI/2012-13/200 A. P. (DIR Series) Circular No. 26 dated 11th September, 2012] External Commercial Borrowings (ECB) Policy – Bridge Finance for infrastructure sector 1.As per the extant guidelines, Indian companies in the infrastructure sector, have been allowed to import capital goods by availing of short term credit (including buyers’ / suppliers’ credit) in the nature of 'bridge finance', under the approval route, subject to the following conditions:- (i) the bridge finance shall be replaced with a long term ECB; (ii) the long term ECB shall comply with all the extant ECB norms; and (iii) prior approval shall be sought from the Reserve Bank for replacing the bridge finance with a long term ECB.

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2. On a review, it has been decided to allow refinancing of such bridge finance (if in the nature of buyers’/suppliers’ credit) availed of, with an ECB under the automatic route subject to the following conditions:- (i) the buyers’/suppliers’ credit is refinanced through an ECB before the maximum permissible period of trade credit; (ii) the AD evidences the import of capital goods by verifying the Bill of Entry; (iii) the buyers’/suppliers’ credit availed of is compliant with the extant guidelines on trade credit and the goods imported conform to the DGFT policy on imports; and (iv) the proposed ECB is compliant with all the other extant guidelines relating to availment of ECB. 3. The borrowers are required to approach the Reserve Bank under the approval route only at the time of availing of bridge finance which will be examined subject to conditions mentioned in para 1(i) and (ii). 4. The designated AD - Category I bank shall monitor the end-use of funds and banks in India will not be permitted to provide any form of guarantees for the ECB. All other conditions of ECB, such as eligible borrower, recognized lender, all- in-cost, average maturity, end-use, maximum permissible ECB per financial year under the automatic route, prepayment, refinancing of existing ECB and reporting arrangements remains unchanged and need to be complied with. [Source:RBI/2012-13/201 A. P. (DIR Series) Circular No. 27 dated 11th September, 2012] Overseas Direct Investments by Indian Party – Rationalisation An Indian party, which has set up / acquired a Joint Venture (JV) or Wholly Owned Subsidiary (WOS) overseas shall submit to the designated Authorised Dealer every year, an Annual Performance Report (APR) in Form ODI Part III in respect of each JV or WOS outside India and other reports or documents as may be specified by the Reserve Bank from time to time, on or before the 30th of June each year. The APR, so required to be submitted, has to be based on the latest audited annual accounts of the JV / WOS, unless specifically exempted by the Reserve Bank. [Source:RBI/2012-13/203 A. P. (DIR Series) Circular No. 29 dated 12th September, 2012]

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Establishment of Liaison Office (LO) / Branch Office (BO) / Project Office (PO) in India by Foreign Entities - Clarification It is clarified that permission to establish offices, in India by foreign Non-Government Organisations/Non-Profit Organisations/Foreign Government Bodies/Departments, by whatever name called, are under the Government Route and accordingly, such entities are required to apply to the Reserve Bank for prior permission to establish an office in India, whether Project Office or otherwise. [Source:RBI/2012-13/ 211A. P. (DIR Series) Circular No. 31 dated 17th September, 2012] Foreign investment in Single–Brand Product Retail Trading/ Multi-Brand Retail Trading / Civil Aviation Sector / Broadcasting Sector /Power Exchanges - Amendment to the Foreign Direct Investment Scheme The extant Foreign Direct Investment policy has since been reviewed and it has now been decided as follows: a) FDI up to 100 per cent is now permitted in Single–Brand Product Retail Trading by only one non-resident entity, whether owner of the brand or otherwise, under the Government route subject to the terms and conditions as stipulated in Press Note No. 4 (2012 Series) dated September 20, 2012 issued by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India b) FDI up to 51 per cent is now permitted in Multi-Brand Retail Trading under the Government route, subject to terms and conditions as stipulated in Press Note No. 5 (2012 Series) dated September 20, 2012 issued by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India c) Foreign airlines are permitted FDI up to 49% in the capital of Indian companies in Civil Aviation Sector, operating scheduled and non-scheduled air transport, under the automatic/Government route subject to the terms and conditions as stipulated in Press Note No. 6 (2012 Series) dated September 20, 2012 issued by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India. d) FDI limits in companies engaged in providing Broadcasting Carriage Services under the automatic/Government route have also been reviewed and the same would be subject to the terms and conditions as stipulated in Press Note No. 7 (2012 Series) dated September 20, 2012 issued by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India. e) FDI up to 49% is permitted in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010, under the Government route, subject to the terms and conditions as stipulated in Press Note No. 8 (2012 Series) dated September 20, 2012 issued by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India [Source:RBI/2012-13/217 A. P. (DIR Series) Circular No. 32 dated 21st September, 2012]

Establishment of Liaison Offices (LO) /Branch Offices (BO) / Project Offices (PO) in India by Foreign Entities - Reporting requirement It has now been decided that in addition to the reporting prescribed in terms of the earlier circulars, all the new entities setting up LO/BO/PO shall also:

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i) submit a report containing required information within five working days of the LO/BO/PO becoming functional to the Director General of Police (DGP) of the state concerned in which LO/BO/PO has established its office; ii) a copy of the report shall also be filed with the DGP concerned on annual basis along with a copy of the Annual Activity Certificate/Annual report required to be submitted by LO/BO/PO concerned, as the case may be. iii) A copy of report thus filed as above shall also be filed with AD by LO/BO/PO concerned. The existing LO/BO/PO shall henceforth report the information as per Annex along with the copy of Annual Activity Certificate/Annual report to DGP of state concerned and also file a copy of the same with AD bank. [Source: RBI/2012-13/222 A. P. (DIR Series) Circular No. 35 dated 25th September, 2012] FDI in India –Allotment of Shares to person resident outside India underMemorandum of Association (MoA) of an Indian Company –Pricing Guidelines It has been decided that in cases, where non-residents (including NRIs) make investment in an Indian company in compliance with the provisions of the Companies Act, 1956, by way of subscription to Memorandum of Association, such investments may be made at face value subject to their eligibility to invest under the FDI scheme. [Source:RBI/2012-13/223 A. P. (DIR Series) Circular No. 36 dated 26th September, 2012]

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CORPORATE FINANCE

Latest News Private Equity Blackstone invests $44M in S.H. Kelkar& Co Wayzata Investment Partners invested $21 million in the company in September 2010 through its Wayzata II Indian Ocean Fund. Private equity major Blackstone Group has said that it is investing Rs 243 crore ($44 million) in S.H. Kelkar& Co. Pvt Ltd, a manufacturer of fragrances and flavours. [Source: Vccircle, September 3, 2012] Kaizen invests in Altus Learning; Closes debut fund JetuLalvani, executive director at Kaizen, will join the board of Altus. Kaizen Private Equity LLC, India’s first education-focused PE fund, has picked up an undisclosed stake by investing Rs 25 crore ($4.5 million) in Altus Learning Private Limited. [Source: Deal curry , September 5, 2012 ] Red Fort Capital invests $36M in Prestige Estates’ residential project The real estate investment firm is scouting for another $500 million. Real estate-focused private equity firm Red Fort Capital has invested Rs 200 crore (~$36 million) in a residential project of Bangalore-based public listed real estate player, Prestige Estates [Source: Reuters, September 6, 2012] CLSA Capital invests $15M in Earth Water Group CLSA Capital will pick up close to 20% stake, which would imply an approximate valuation of $75 million. CLSA Capital Partners has invested $15 million in New Delhi-based Earth Water Group (EWG), a player in the water and wastewater management industry. [Source: Vccircle, September 10, 2012] ASK Property fund invests $14M in SushilMantri's residential project The fund will also infuse another $18M in the Bangalore realty market. ASK Property Investment Advisors, the real estate private equity arm of ASK Group, has invested Rs 77 crore in Bangalore-based real estate developer SushilMantri’s semi-luxury residential project [Source: Reuters, September 12, 2012] Allahabad MFI Sonata Finance raises $6.35M from Creation Investments, others Chicago-based Creation Investments made its first investment in India in 2010 by picking up stake in Eko India Financial Services. Allahabad-based micro finance institution Sonata Finance Pvt Ltd has closed its Series D equity raising of Rs 35 crore or $6.35 million, led by Chicago-based Creation Investments.

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[Source: Deal Curry, September 14, 2012] JP Morgan invests close to $18.18M in Amrapali Developers This is the first investment from JPM’s new Indian realty dedicated fund. International financial services firm JP Morgan, which has been scouting to raise capital for its India-dedicated real estate fund, has marked its first investment from that fund, according to sources close to the development. [Source: Vccircle, September 17, 2012] ASK invests close to $18.2M in Shriram Properties’ Bangalore project Second investment by the fund in Bangalore’s realty market.ASK Property Investment Advisors (ASK PIA), the real estate private equity arm of the ASK Group, made the fourth investment from its second real estate fund as it put in close to Rs 100 crore [Source: Vccircle, September 17, 2012] IDFC Alternatives invests $29M in Parag Dairy; MotilalOswal PE makes partial exit MotilalOswal PE makes partial exit at 3x; IDFC Alternatives’ first consumer-facing deal and the largest PE deal in dairy sector. In the largest ever deal in Indian dairy space, IDFC Private Equity Fund III has invested Rs 155 crore ($29 million) in Pune-based Parag Milk Foods Pvt Ltd. [Source: Times of India, September 18, 2012] Ujjivanraises $8.7M led by IFC, sees churn among shareholders IFC becomes the fourth largest stakeholder with the latest deal as two investors exit the firm in parallel transactions. Bangalore-based Ujjivan Financial Services Pvt Ltd, a microfinance institution focused on India’s urban poor, has raised Rs 45 crore ($8.3 million) equity capital from IFC, a member of the World Bank Group. [Source: Reuters, September 18, 2012] IDFCAlternatives sells 4% in Gujarat Pipavav for $18.7M The investor will make approximately 2x on its investment, according to VCCircle estimates. Two private equity funds managed by IDFC Alternatives have sold over 4 per cent stake in Gujarat Pipavav Port Ltd for $18.7 million (Rs 100.5 crore) on Thursday. [Source: Vccircle, September 27, 2012] Mergers & Acquisitions Tech Mahindra buys Hutchison's BPO biz for $87.1M The all-cash transaction strengthens Tech Mahindra’s telecom domain expertise. VineetNayyar-led IT services provider Tech Mahindra Ltd has acquired 100 per cent stake in Hutchison Global Services Pvt Ltd (HGS) for $87.1 million, in an all-cash transaction [Source: The Hindu Business Line, September 4, 2012]

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Bilcare sells US, UK biz to United Drug for $61M Pune-based Bilcare has retained its GCS Asia biz; company to leverage United Drug’s capabilities and resources in the US and Europe. Pharmaceuticals packaging solutions provider Bilcare Ltd has sold its global clinical supplies (GCS) businesses in the US and the UK to United Drug plc for $61 million. However, Bilcare has retained its GCS business in Asia andwill work together with United Drug to use their complementary resources to meet the needs of their global customers across the US, Europe and Asia, according to a BSE filing.This sale will enable Bilcare GCS Asia to focus its resources and better meet customer expectations of world-class services. It will also leverage United Drug’s capabilities and resources in the US and Europe. [Source: Economic Times, September 4, 2012]

Mahindra Ugine sells 49% of steel biz to Japan’s Mitsui, Sanyo for $39M The deal values the steel biz at Rs 444 cr, more than twice the value of public listed Mahindra Ugine. Mahindra Ugine Steel Company Ltd (Musco) has completed the sale of 49 per cent stake in its steel business to two Japanese firms Mitsui & Co. Ltd and Sanyo Special Steel Co. Ltd for Rs 218 ($39 million), as per a BSE filing. [Source: Vccircle, September 6, 2012] Godrej Industries to divest its entire 43% stake in food & beverage JV to Hershey Hershey had acquired 51% in the JV, which provided an exit to IL&FS PE, for Rs 238 cr in 2007. Godrej Industries Limited has entered into a share purchase agreement to divest its entire 43 per cent stake in Godrej Hershey Limited to its foreign partner The Hershey Company for an undisclosed amount, it disclosed to the stock exchanges. The transaction, expected to close by the end of this month, will make the JV firm a wholly-owned subsidiary of US-based Hershey, the largest North American confectionery maker. An individual shareholder is also exiting by selling his 6 per cent stake in the transaction. [Source: Times of India, September 8, 2012] ONGC Videsh picks stake in Caspian Sea oil & gas block, pipeline for $1B The acquisition marks an entry of OVL in oil-rich Azerbaijan and expands its exposure in the Balkans along with its existing operations in Kazakhstan. State-run Oil and Natural Gas Corporation of India Ltd's subsidiary, ONGC Videsh Ltd (OVL), will acquire 2.72 per cent participating interest in Hess Corporation's three oil and gas fields in the Azerbaijan sector of the Capsian Sea, ACG, along with 2.36 per cent interest in the Baku-Tbilisi-Ceyhan (BTC) pipeline for $1 billion (Rs 5,500 crore), the company informed stock exchanges. [Source: Reuters, September 10, 2012] NIIT Technologies acquires Sabre's Philippines Development Centre The Manila centre, which has a capacity of 200 with a scope for expansion, will be used by NIIT Technologies to service Sabre as well as other customers. IT solutions company NIIT Technologies has

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acquired US-based Sabre Holdings’ Philippines Development Center. Sabre is a solution provider in the travel industry and a client of NIIT Technologies. No details about the amount of the acquisition have been disclosed. [Source: Business Standard, September 11, 2012] Earth Water Group to acquire Wipro’s water purification and treatment biz On Monday, CLSA Private Equity Management Ltd invested $15 million (Rs 83 crore) in Earth Water Group for 20% stake. New Delhi-based Earth Water Group (EWG) is acquiring soaps-to-software major Wipro's water purification and treatment business. The deal size is likely to be between Rs 45- Rs 50 crore and a formal announcement is due in a fortnight, as per an ET report. The acquisition is happening at the time when CLSA Private Equity Management Ltd invested $15 million (Rs 83 crore) in Earth Water Group for a 20 per cent stake on Monday. As part of the deal, Sanjeev Krishnan, director of CLSA, joined the board of Earth Water Group. [Source: Economic Times; September 12, 2012] Tata Motors sells majority stake in Norwegian cleantech engineering firm to Electrovaya Co-founded by an entrepreneur of Indian origin, Electrovaya designs, develops and manufactures proprietary batteries. Canadian stock exchange-listed Electrovaya Inc. has acquired 71.6 per cent stake in Norwegian cleantech engineering firm MiljobilGrenland A.S. (MBG), raising its holding to 78.1 per cent. The stake was purchased from Tata Motors European Technical Centre plc, a subsidiary of Tata Motors Ltd, which had acquired the majority stake in MBG for $1.9 million in October 2008. Set up in 1997, MBG manufactures battery and energy storage parts for electric cars and other applications. It has developed lithium-ion battery systems for the automotive industry and is working on new applications, to be used in electrically powered ferries and other marine transportations. The firm has invested around $30 million in li-ion battery technologies for a range of electric vehicles and other transportation applications. [Source: Reuters, September 12, 2012] Future Ventures buys Pantaloon’s salon & wellness chain Star &Sitara Star &Sitara is projected to generate revenues of Rs 19 crore in the current fiscal. Future Ventures India Ltd has acquired the salon and wellness centre business from Pantaloon Retail India Ltd that operates the business under the brand Star &Sitara. The public-listed investment-cum-operational company, modelled after Warren Buffet’s Berkshire Hathaway, recently struck another deal where its FMCG arm announced plans to acquire the convenience store chain under the Future Group flagship Pantaloon Retail. According to a stock market disclosure, Future Ventures is acquiring 100 per cent stake in a firm called Star &Sitara Wellness Pvt Ltd for Rs 1 lakh and is going to pump in another Rs 17.99 crore in the company. [Source: Moneycontrol, September 13, 2012]

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MFI IntelleCash buys 60% stake in Arohan In what can be seen as the first consolidation move in the Rs 20,000 crore-plus micro finance industry, IntelleCash Microfinance Network Company (P) Limited, an arm of the Intellecap group of companies, has bought 60 per cent stakes in the Kolkata-headquartered MFI Arohan Financial Services. The unique series of back-to-back transactions in IntelleCash and Arohan amounted to over Rs 52 crore and was facilitated by AavishkaarGoodwell II, a fund that invests in entrepreneurial microfinance and financial inclusion businesses in India. The MFI entity will continue to be called Arohan and the headquarters will remain in Kolkata. However, ManojNambiar, managing director and CEO of IntelleCash, will join the board of Arohan and will take over as the new managing director. [Source: vccircle, September 13, 2012] HindujaGlobal’s US subsidiary to buy Deloitte’s healthcare BPO biz Fourth such acquisition by Hinduja Global Solutions in the last two years.BPO firm Hinduja Global Solutions Ltd’s US subsidiary Hinduja Global Solutions Inc. has signed an asset purchase agreement with Deloitte Consulting LLP and Deloitte Consulting Extended Business Services LLC to purchase their healthcare revenue cycle outsourcing business EBOS (Extended Business Office Solutions) in an all-cash transaction, according to a BSE filing. HGS Inc. plans to close the transaction in early October but the deal value has not been disclosed. The EBOS business comprises accounts receivable processing services and insurance eligibility verification services. It caters to several US hospitals and post this transaction, HGS Inc. will have access to its customer base. The transaction is expected to result into incremental revenue of $11 million, according to the filing. [Source: Indiainfoline, September 14, 2012] Tech Mahindra buys 51% stake in Comviva Tech Mahindra, on Monday announced the acquisition of 51 per cent stake in mobile value-added services (VAS) provider Comviva Technologies, a Bharti Group company, for Rs 260 crore. The acquisition is expected to shore Tech Mahindra’s top line.With the new brand identity, Mahindra Comviva, the mobility business of Tech Mahindra and Mahindra Satyam combined is expected to clock revenues of Rs 1,000 crore by March 2013. At present, Tech Mahindra and Mahindra Satyam get around Rs 500 crore of revenues from their telecom mobility business, which includes providing software and billing systems. Comviva gets annual revenue of Rs 400 crore. The operating margins of the company are in mid-teens. “By March 2013, the combined mobility practice of the group, which will include revenue of Tech Mahindra, Mahindra Satyam and Comviva, along with CanvasM (another group company), should be around Rs 1,000 crore,” C P Gurnani, managing director, Tech Mahindra, said. The deal will be earnings per share-accretive from the first year. [Source: Indiape, September 18, 2012]

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Bajaj Electricals sells 50% stake in power tools venture to Black & Decker for $6.6M US-based Black & Decker operates in three segments including power tools & accessories, lawn & garden tools and product service. Bajaj Electricals Ltd has sold its entire 50 per cent stake in Mumbai-based Bajaj Ventures Ltd for Rs 36 crore ($6.6 million) to Black and Decker India Pvt Ltd, the Indian arm of the US-based Black & Decker, according to a BSE filing. The firm sold its 15 million shares at Rs 23.96 each. Set up in 1993, Bajaj Ventures Ltd, formerly known as Black and Decker Bajaj Pvt Ltd, manufactures and markets power tools, industrial machinery household appliances and related accessories. [Source: frrole.com, September 18, 2012] PrajInds picks additional 9.8% stake in water treatment firm Neela Systems for $2.3M Praj is backed by RakeshJhunjhunwala, VinodKhosla and Norwegian sovereign wealth fund among others. Praj Industries Ltd has acquired additional 9.8 per cent stake in its Mumbai-based subsidiary Neela Systems Ltd for Rs 12.49 crore ($2.3 million), according to a company disclosure. Post-transaction, Praj Industries will be holding 60 percent. [Source: Vccircle, September 20, 2012] Future Ventures buys Big Apple convenience store chain for $11.3M Kishore Biyani is consolidating the convenience store format business splicing out of Pantaloon to house under Future Ventures. Investment and business management company Future Ventures India Ltd has struck a deal to buy the convenience store chain Big Apple, which is part of Express Retail Services Pvt Ltd, for Rs 61.35 crore ($11.3 million). This is the second back-to-back transaction after the public-listed firm disclosed that it was buying the convenience store chain under Pantaloon Retail (which is under the banner of KB’s FairPrice) through an arm Future Consumer. Big Apple retails food and groceries in Delhi-NCR. The 65-store chain, operational for around six years, is expected to generate revenues of Rs 120 crore during 2012-13. Express Retail Services is a debt-free company. [Source: Economic Times, September 20, 2012] Dalmia Continental sells 27% stake to Italy’s Nicola Pantaleo Dalmia Continental, which sell olive oil under Leonardo brand, today said it has sold 27% stake in the company to Italian firm Nicola Pantaleo.Thecompany did not disclose the size of the deal.Its an strategic alliance. They have been supplying olive oil to us from 2003. Dalmia have partnered with Pantaleo for stability of supply and guarantee of best prices. Dalmia Continental Pvt Ltd (DCPL) announced the “conclusion of a joint venture agreement with the Italian company Nicola Pantaleo, S.P.A (Pantaleo). [Source: The Hindu Business Line; September 26, 2012]

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Nova Specialty Surgery acquires Kanpur-based Excel Hospitals This is the third acquisition of a hospital by PE-backed Nova Medical as a group this year. Nova Specialty Surgery has acquired a majority stake in Excel Hospitals Pvt Ltd, which runs a hospital in Kanpur, for an undisclosed amount. Nova Specialty is a subsidiary of Bangalore-based Nova Medical Centers [Source: Economic Times, September 26, 2012] SingTel, Softbank buy 82% in One97 Mobility Fund-backed TheMobileGamer One97 Mobility Fund expects to make a fresh investment in the coming week while one of its portfolio companies is set to raise money from a ‘marquee investor’. One97 Mobility Fund has clocked its second exit by selling its stake in Singapore-based mobile social gaming platform TheMobileGamer (TMG). The deal involves stake sale by existing shareholders of TMG and a fresh issue of shares [Source: Reuters, September 26, 2012] Arvind acquires Debenhams, Next and Nautica's India licences for $10.3M Looks to expand in Eastern and Middle Africa and Middle East with brands Arrow, Flying Machine and Elle.Arvind Lifestyle Brands, a subsidiary of public listed textile and apparel retail firm Arvind Ltd, has acquired the business operations of British fashion retailers Debenhams and Next and American lifestyle brand Nautica in India from Planet Retail. [Source: Business Standard, September 27, 2012] Chemtura to buy Avantha Group firm Solaris ChemTech’s bromine assets For GautamThapar-led Avantha Group, which has often figured among the acquirers across sectors in the recent past, it is a rare exit from an existing business line. NYSE-listed speciality chemicals and home care products maker Chemtura Corporation has struck a deal to acquire the core bromine assets of Avantha Group’s privately held firm Solaris ChemTechfor an undisclosed sum. [Source: Hindu Business Line, September 27, 2012] ICAP Shipping buys Gurgaon-based CTI Shipbrokers for $2.5M Over a period of time, CTI has diversified from tanker chartering to dry/bulk chartering and then to sale and purchase of vessels. ICAP Shipping has acquired Gurgaon-based CTI Shipbrokers (India) PvtLtd for $2.5 million (Rs 13.5 crore) from its promoter JaideepKapoor and Tradex Chartering & Trading Pvt Ltd. [Source: Vccircle, September 27, 2012] Chennai-based EdServ acquires Alta Vista’s businesses The content assets acquired will be marketed in the Middle East via mobile platforms as part of EdServ’s overseas operations. Chennai-based education support services company EdServSoftsystems Ltd has acquired the businesses and the content of Alta Vista, UAE, for an undisclosed amount, according to a BSE filing. [Source: Reuters, September 28, 2012]

Issue No. 45: September, 2012 Page 29 of 33

Venture Capital Angel-backed ShopClues secured $4M in Series A early this year, eyes profits by Q4 2013 ShopClues went live in Jan 2012 and works on a zero-inventory marketplace model where sellers can come and display their product catalogues. Gurgaon-based startup Clues Network Pvt Ltd, which runs the horizontal e-commerce marketplace ShopClues, has disclosed raising $4 million in Series A round of funding from an undisclosed investor. This is the second round of funding for the startup, which had raised angel funding to the tune of $2 million from a few US-based investors in August 2011. The Series A round was closed in January 2012. [Source: Vccircle, September 4, 2012] Vyome Biosciences raises $3.3M in Series A round led by IndoUS Venture Partners Existing investor Navam Capital had put in Rs 4.5 crore in Vyome in November 2010. Vyome Biosciences Pvt Ltd, a biopharmaceutical company with focus on dermatology and skin care products, has closed its Series A financing round of Rs 18.50 crore ($3.3 million) led by IndoUS Venture Partners (IUVP) while Aarin Capital and existing investor Navam Capital came in as co-investors. Vyome will deploy the funds for clinical development of its lead anti-dandruff products and accelerating the pre-clinical development of its anti-acne products. [Source: Reuters, September 12, 2012] Google’s RajanAnandan invests in Lankan travel startup Trekurious In April 2011, Gurgaon-based travel portal yatra.com had raised Rs 200 crore from blue chip investors. Sri Lanka-based travel portal Trekurious.com has secured first round of funding from Blue Ocean Ventures, promoted by Google India MD RajanAnandan, and the Lankan Angel Network. Founded by RukmankanSivaloganathan and DilendraWimalasekere, Trekurious.com provides travellers a unique experience of dining with sports stars and celebrities. Its service is currently available only in Sri Lanka but the portal is now looking to expand to other parts of Asia, including India. Some of the packages of the company, launched on the sidelines of the T20 World 2012, were hosted by noted Sri Lankan cricketers MahelaJayawardene, Kumar Sangakkara, and MuttiahMuralidaran. [Source: frrole.com, September 17, 2012]

Issue No. 45: September, 2012 Page 30 of 33

IT firm Appnomic Systems raises $5M from Norwest Venture Partners The company had raised $2.5 million in Series B, led by Norwest Venture Partners. Bangalore-headquartered Appnomic Systems Pvt Ltd, a global provider of software and SaaS solutions for predictive, application-centric and autonomic management of IT infrastructure, has raised $5 million in Series C round of funding from Norwest Venture Partners. The funds will be primarily used for expanding the company’s market operations in the US and enhancing its products and services. [Source: Vccircle, September 18, 2012] Info Edge invests $2.3M more in Zomato, ups stake to 48.5% Zomato would be back on the road finalising a much larger round of funding in the next 3-6 months’ time. Info Edge (India) Ltd, which runs the recruitment site Naukri.com and other classifieds like matrimonial siteJeevansathi.com and real estate portal 99acres.com, has invested Rs 12.86 crore ($2.3 million) more in Zomato Media Pvt Ltd that runs Zomato.com, a site providing restaurant reviews, ratings and advertisements. [Source: Vccircle, September 20, 2012] Bangalore-headquartered Datagresraises $2M Series A funding from Nexus Venture Partners The company will open an office in Singapore within a month as part of its expansion plans. Bangalore-based new data management platform Datagres Technologies has secured $2 million (~Rs 10.6 cr) in Series A funding from Nexus Venture Partners (NVP). The company will use the funds to expand its footprint in the US and Asian markets. As part of the agreement, SandeepSinghal of Nexus Venture Partners will join the Datagres board. [Source: Vccircle, September 24, 2012] Blume Ventures invests in IIT Bombay incubated startup Covacsis The software company has got some well known clients including Sun Pharma, Ipca Labs, Cipla, Godrej Industries, Tata Chemicals within a short span of time. Early-stage VC fund Blume Ventures announced another investment in Bombay-based Covacsis, a software company founded in 2009 and incubated at IIT Bombay’s Society for Innovation and Entrepreneurship (SINE). The startup has raised around Rs 2.5 crore from Blume Ventures, India Venture Partners and an undisclosed foreign VC fund. The Business Standard first reported the investment. Covacsis stands for Collaborative Value Creation by Strategic & Innovative Solution and it enables tracking of machinery and productivity in real time. The real time information assessment and dissemination helps merchants to save money and improve overall efficiency. [Source: frrole.com, September 24, 2012] Three-month-old OTA Travelmob raises $1M seed funding from Jungle Ventures, others Singapore-based Travelmob is a social marketplace aiming to link travellers with people who offer vacation rentals for short stay. Three-month-old travel marketplace Travelmob has raised $1 million in

Issue No. 45: September, 2012 Page 31 of 33

seed funding from Singapore-based Jungle Ventures and some private investors. Set up in July this year, Singapore-based Travelmob is a social marketplace aiming to link travellers (called guests) with people (called hosts) who offer vacation rentals for short stay. Travelmob’s objective is to become a one-stop shop for global travellers who want to experience local living, in contrast to luxurious hotels. The focus is essentially on the Asia-Pacific region and the listing at Travelmob is free for hosts while guests can book those places online and share their experience on the portal after their trips. [Source: Vccircle, September 24, 2012] Capillary Technologies raises $15.5M in Series A round from Sequoia Capital, Norwest & Qualcomm Ventures The company’s flagship product is inTouch, a Cloud-based CRM solution aimed at large enterprises. Cloud-based CRM startup Capillary Technologies PvtLtdhas raised $15.5 million in Series A round of venture funding from Sequoia Capital and Norwest Venture Partners (NVP)while existing investor Qualcomm Ventures also took part in the round. As part of the deal, ShaileshLakhani of Sequoia Capital and Mohan Kumar of NVP have joined Capillary’s board of directors. The company will use the funding to extend its offerings to retail-akin industries such as healthcare and hospitality, further penetrate the billion-dollar small retailer market in India and enhance its product portfolio to meet the requirements of a broad range of retailers worldwide. [Source: Vccircle, September 25, 2012] Avani Bio Energy raises Rs 1.3Cr from Acumen Fund Fourth investment by Acumen Fund since January 2012; since 2001, it has globally invested over $75 million in 69 companies. Acumen Fund, a venture capital fund managed by Acumen Fund Advisory Services India Pvt Ltd, has invested Rs 1.3 crore ($250K) inAvani Bio Energy Pvt Ltd, a company developing pine needle gasification power projects for remote communities in northern India. With this investment, Avani Bio Energy will be able to create 20 operational plants within five years, providing electricity for more than 58,000 people and enabling hundreds of households to move from kerosene to pine charcoal. The removal of surplus pine needles will also reduce forest fires in an area populated by 7,500 farming families. [Source: Reuters, September 26, 2012] IAN invests in e-com search and analytics service provider Unbxd As part of the investment, IAN member ManavGarg will join the board of the company. Indian Angel Network has invested an undisclosed amount in Unbxd, an in-site search provider. IAN investors ManavGarg and Sharad Sharma led the investment round in the startup and as part of the investment,Garg will join the board of the company. While the actual investment happened in April, it has been disclosed now. The company has used the investment for expanding its team (from 5 to 11 as of now) and will also use it to scale up the product and expanding its reach to e-commerce players across the globe. The SaaS offering of Unbxd search on the Cloud is also under development and the beta version is planned for launch in November this year. [Source: Vccircle, September 26, 2012]

Issue No. 45: September, 2012 Page 32 of 33

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

Paritosh Dwivedi Associate Vice President –Corporate Finance & Consultancy. He is a qualified MBA (Finance) from ICFAI Business School, Pune & M.Com and B.Com from Kanpur University. Over 6 years experience in Corporate Finance including Valuation, Private Equity, M&A, Equity Research. He has worked with companies like Value Prolific Investments, VA Tech. He joined the team in October 2012and is presently functioning as an Associate Vice President in the Corporate Finance & Consultancy Division.

Issue No. 45: September, 2012 Page 33 of 33

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: rnm@rnm.in BRANCH OFFICE: Mr. Rathna Kumar 813 Oxford Towers, 139 Airport Road, Bangalore-560 008 E-mail: bangalore@rnm.in AFFILIATE OFFICES: Mumbai Mr. AshishBairagra, F11, 3rd Floor, ManekMahal, 90 Veer Nariman Road, Church Gate, Mumbai-400 020 Tel. +91 22 6117 4949

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