Miscellaneous court

  1. “Securities” excluded from the ambit of GST

The stock market, commodity market, brokers, banks and mutual funds can take a deep breath now that the government has excluded securities from the definition of ‘goods’ in the revised draft Model Goods and Services Tax Law released recently. This is positive development in line with international practices since in most countries, sale and purchase of securities such as shares and bonds have been exempted from the levy of GST.

The definition of ‘goods’ under the current tax regime does not include securities under most of the State VAT legislations and service tax, since transactions in securities are essentially investments. However, the previous draft of the Model GST Bill had included ‘securities’ in the definition of goods raising some legitimate concerns.

In terms of Section 2(49) of the Model GST Bill, ‘goods’ means every kind of movable property other than money and securities. Furthermore, in accordance with the explanation to Section 2(92) of the Model GST Bill, “services” include transactions in money but does not include money and securities. Since the exclusion has been made with respect to both goods and services, if the Model GST Bill is approved in this form, GST will not be levied on transactions in securities.


  1. Benami Transactions (Prohibition) Amendment Act, 2016


In a move to curb the prevalence of Benami Transactions and provide for a more efficient regulatory mechanism, the Benami Transactions (Prohibition) Act, 1988 has been amended by the Benami Transaction (Prohibition) Amendment Act, 2016. With the amendment coming in effect from 01.11.2016, the Act shall now be known as the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act). The Bill was passed by the Parliament in the month of August, 2016. The key amendments in the bill include inter-alia:

  • If found guilty, punishment in a Benami Transaction shall not be less than one year and may extend up to seven years.
  • Punishment for furnishing of false information shall be not less than six months and may extend up to five years.
  • Central Government has been vested with the power to confiscate a benami property without the obligation of providing compensation.
  • Establishment of four authorities for the purposes of inquiry and investigation. These authorities include Initiating Officer, Approving Authority, Administrator, and Adjudicating Authority.
  • Provision for appointment of Adjudicating Authority and its powers.
  • Introducing appellate mechanism by establishment of an Appellate Tribunal to hear appeals against the orders of the Adjudicating Authority and its constitution thereof.
  • Establishment of Special Courts and their respective jurisdiction.


This amendment assumes importance in light of demonetisation that was subsequent to the passing of the bill. It seems that the government had anticipated that there may be an increase in the benami transaction and pushed through the amendment in August itself.


  1. Demonetization: answers to legality


President of India promulgated Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 to provide clarity and finality to the liability of the RBI and the Government of India for the Specific Bank Notes (SBNs) and to provide an opportunity to those persons who were unable to deposit the SBNs within the time provided and also to declare holding, transferring or receiving SBNs as illegal, with provisions for penalty for contravention of any of the provisions of the Ordinance.


  1. Government Publishes Report of Committee Set Up to Regulate Radio Taxi Operators

In order to encourage urban mobility and in the wake of increasing number of radio taxi operators, Ministry of Road Transport and Highways has published a report of the committee set up to draft taxi policy guidelines for creating a suitable regulatory framework to promote shared mobility and liberalise the existing taxi permit systems which will be applicable to taxi operators like Uber and Ola.

The committee has made various recommendations to protect the interests of all the stakeholders, which inter-alia are:

  • Taxis with All India Tourist Permits will be allowed to operate for taxi services as well as for long term hiring from call centres, IT companies etc.
  • Taxis must be fitted with Global Positioning System (“GPS”).
  • Online radio taxi operators should get their App validated from Standardisation Testing and Quality Certification or any other agency authorised by Ministry of Electronic and Information Technology (MEITY) and online radio taxi operators should take measures including a firewall for the security of the personal data of the passengers.
  • Pricing control mechanism shall apply to taxis with less than 4 meter length. Maximum tariff that such radio taxi operators may be permitted to charge shall be upto three times the minimum tariff throughout the day except for 12 am to 5 pm when the radio taxi operators may be permitted to charge upto four times the minimum tariff as a night time charge. This is for the first time that the Government has come up with a report to regulate the unreasonable surge pricing of radio taxi operators.
  • States may place appropriate cap on the duty hours of drivers in the interest of road safety and in consonance with labour laws.

Once implemented, these draft policy guidelines will provide huge relief to app based radio taxi operators who are facing huge resistance and even court cases from various state governments.


  1. Capital Gain on Penny Stocks cannot be bogus if Paper work is in order

The Income Tax Appellate Tribunal, Kolkata has passed an order in the matter of Surya Prakash Toshniwal v ITO dated January 11, 2017, holding that the Long Term Capital Gains cannot be treated as bogus unexplained income if the paper work is in order as the lower authorities did not bring on record any concrete evidence for disallowing the long term capital gain of the Assessee.

The Revenue Department had alleged that the Assessee’s categorization of long term capital gains from buying and selling of shares was instead bogus and is to be covered under income from undisclosed sources. The Assessee in turn produced the contract notes for the purchase and sale of the shares in support of his claim that the income earned by him is not to be considered as income from other sources/ business income.


  1. Electronic Negotiable Warehouse Receipts via Repositories


The Warehousing Development and Regulatory Authority (WDRA) was set up in 2007 with an objective to develop scientific warehousing techniques in India. Recently, WDRA has granted licenses to CDSL, and NCDEX to set up repositories. Repository is a company which is granted a Certificate of Registration under the ‘Guidelines on Repositories and Creation and Management of Electronic Negotiable Warehouse Receipts. Core functions of Repositories includes inter alia,

  • Enabling safe and accurate creation, storage, maintenance and cancellation of electronic Negotiable Warehouse Receipts (e-NWR);
  • Enabling the transfer, pledge or removal of the pledge, e-auction of e-NWR;
  • Enabling the delivery of goods in part or full, underlying the e-NWR, through the warehousemen etc.

These Guidelines were issued by the warehousing regulator on October 20, 2016 with an objective to devise a system for creation and management of electronic negotiable warehouse receipts through the repositories registered with the regulator in order to enable and regulate the warehousemen to issue, store and transfer the electronic negotiable warehouse receipts via the Repositories.


  1. Finance Act, 2017: major overhaul of Appellate Tribunals & Clarity on SEBI’s Discretionary Powers

Finance Act, 2017 has inter alia provided for the replacement and merger of several existing tribunals. For example, the Act calls for the merger of following Tribunals:-

  • Competition Appellate Tribunal (COMPAT) with NCLAT
  • Airport Economic Regulatory Authority Appellate Tribunal with Telecom Disputes Settlement Appellate Tribunal (TDSAT)
  • Cyber Appellate Tribunal with TDSAT
  • Appellate Tribunal for Foreign Exchange with Appellate Tribunal (under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
  • The National Highways Tribunal with the Airport Appellate Tribunal
  • The Copyright Board with the Intellectual Property Appellate Board
  • The Employees Provident Fund Appellate Tribunal with the Industrial Tribunal
  • The Railway Rates Tribunal with the Railways Claims Tribunal

These mergers have been put in effect by amending the respective enactments enumerated under the Act. While in some circles, it has been appreciated, at some the manner in which such a move has been implemented (through Finance Bill) is being debated.

Finance Act, 2017 has also inserted an explanation that has brought clarity regarding the powers of SEBI in deciding quantum of penalties. As per the explanation, SEBI’s adjudicating officers have been provided with discretionary powers to impose penalty for violations of securities laws. This amendment has put to rest the controversy on which we had commented here and here in detail.


  1. New Set of Guidelines for e-Wallet Entities

The Ministry of Electronics and Information Technology vide circular dated March 08, 2017 has issued the Draft Information Technology (Security of Prepaid Payment Instruments) Rules, 2017. They direct prepaid payment instruments (“PPIs”) to formulate an ‘Information Security Policy’ to ensure security and confidentiality of electronic payments through their systems. In addition, PPIs are required to frame and publish a privacy policy on their website and establish mechanisms for monitoring, handling and reporting of cyber security incidents to CERT-In. This would lead to increased regulation of PPIs that are currently governed by RBI through its policy guidelines for issuance and operation of PPIs.


  1. Draft Fugitive Economic Offenders Bill, 2017


The government vide notification dated May 18, 2017 has issued the draft of “Fugitive Economic Offenders Bill, 2017” and had sought public comments that were to be submitted by 3rd June, 2017.


The Bill seeks to deter economic offenders from evading the process of domestic law by remaining outside the jurisdiction of the Indian Courts. Few of the noteworthy points proposed in the Regulations are:


  • Provisions of the proposed bill, once passed by the Parliament, will override other legislations dealing with economic offences;
  • The burden of proof for establishing that an individual is a fugitive economic offender is on the authorities;
  • Those cases where the total value involved in offences is 100 crore rupees or more, will fall within the purview of this Bill;
  • Special Courts shall be set up under Prevention of Money Laundering Act, 2002, that would have power to declare an individual as a fugitive economic offender


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