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KANTH AND ASSOCIATESAttorneys and International Legal Consultants

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NEWS ALERTS

TAX

Protocol Amending DTAA between UK, Ireland & India

Tax Information Exchange Agreement between India and Macao notified

ITAT to launch e-courts in four cities

As per the Press Release dated 09.11.2012, the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India, has signed a Protocol to amend the Convention between Government of the United Kingdom of Great Britain, Northern Ireland and the Government of Republic of India for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains signed at New Delhi

thon 25 January, 1993.

The Government of the Republic of India and the Government of the Macao Special Administrative Region of the People's Republic of China signed an agreement for the exchange of information with

rdrespect to taxes at Macao on the 3 January, 2012 which th

shall come into force on the 16 day of April, 2012, being the date of receipt of later of the notifications of completion of the procedures as required by the respective laws for the entry into force of the said Agreement.

Thus, the Central Government in view of the aforesaid and in exercise of powers conferred by section 90 of the Income-tax Act, 1961, vide notification dated 10.10.2012, has notified that all the provisions of the Agreement between the Government of the Republic of India and the Government of the Macao Special Administrative Region of the People's Republic of China shall be given effect to in the Union of India with effect

thfrom the 16 day of April, 2012, that is, the date of entry into force of the said Agreement. The said Agreement shall facilitate the exchange of information with respect to taxes between the two countries.

The Income Tax Appellate Tribunal (ITAT) will launch e-courts in four cities in India from December 10, 2012 to facilitate hearing of cases via video-conferencing. ITAT, a quasi-judicial body, has set up webcast facilities at Delhi, Mumbai, Nagpur and Ahmedabad. According to

CONTENTS

Corporate, Capital Market & Foreign Trade

Judgments

— Article 3

— News AlertsTax 1

1223

Real EstateImmigration

Digitalization: A New Phase in Indian TelevisionBy Ms. Snigdha Sharma, Associate, K&A

ITAT, the said e-courts will follow the procedures that are laid out for the bench for hearing appeals in an open court. There is no difference in procedures except that the bench and bar are at different places connected electronically. Further, the e-courts will help in clearing backlog of cases since such facilities are expected to speed up the process of deciding the appeals. Additionally, from next month onwards, the notice for hearing will clearly mention whether it will take place in an e-court or regular court.

The Reserve Bank of India (RBI) has asked Non-Banking Financial Companies (NBFCs) to replace post-dated cheques issued to them by customers with new standardized cheques with improved security features. NBFCs accept post-dated cheques from their customers for future monthly installment or EMI payments. For the purpose of standardization and enhanced security features, the banks have been told by the RBI vide its circular dated 06.11.2012 to migrate to the 'CTS 2010′ standard by December 31, 2012.

“CTS-2010 standard” is a set of benchmarks towards achieving standardization of cheques issued by banks across the country. These include provision of mandatory minimum security features on cheque forms like quality of paper, watermark, bank's logo in invisible ink, void pantograph, etc., and standardization of field placements on cheques.

The RBI has further asked NBFCs to confirm to the regional office of the bank that a plan has been put in place for implementing the CTS 2010 standard within

CORPORATE, CAPITAL MARKET & FOREIGN TRADE

Non CTS cheques to Bounce from 01.01.2013


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the prescribed timeline. The aforesaid instructions have been issued in terms of section 45 JA and 45K of the Reserve Bank of India Act, 1934.

The Reserve Bank of India (RBI), vide its notification dated 20.11.2012, has revised the definition of 'Infrastructure lending', which would make sectors and sub-sectors eligible for infrastructure lending by banks and financial institutions with immediate effect.

The exposure of banks to projects under sub-sectors which were included under the RBI's previous definition of infrastructure as per the circular of November 30, 2007, but not included under the revised definition, will continue to get the benefits under 'infrastructure lending' till the completion of the projects. However, any fresh lending to those sub-sectors from the date of this circular i.e. 20.11.2012 will not qualify as 'infrastructure lending'.

The Government of India had notified a master list of infrastructure sectors/sub-sectors in March 27, 2012 to avoid multiplicity of definitions among various regulators which gives rise to confusion and difficulties. The sectors and sub-sectors that come under revised infrastructure lending are Transport, Energy, Water and sanitation, Communication, Social & Commercial infrastructure.

Transport sector included Roads and bridges, ports inland waterways, airport, railway track, tunnels, viaducts, bridges, including supporting terminal infrastructure such as loading/unloading terminals, stations and buildings, urban public transport (except rolling stock in case of urban road transport).

Energy sector includes Electricity generation, electricity transmission, electricity distribution, oil pipelines and oil/gas/liquefied natural gas (LNG) storage facility (including strategic storage of crude oil) and gas pipelines, including city gas distribution network.

Water and sanitation includes, Solid waste management, water supply pipe lines, water treatment plants, sewage collection, treatment and disposal system and irrigation (dams, channels, embankments and the like) and storm water drainage system.

RBI revises definition of infra lending

Communication sector includes, Telecommunication (fixed network) including optic fibre/cable networks which provide broadband / internet and telecommunication towers.

Social and commercial infrastructure includes Educational institutions (capital stock), hospitals (capital stock), including medical colleges, para medical training institutes and diagnostics centres and three-star or higher category classified hotels located outside cities with population of more than one million.

The Delhi Government has hiked the circle rates, the minimum valuation at which properties have to be registered with the Government, mainly to check black money component in property transactions. The rates in Category A colonies have been hiked by 200%, Category B by 50% while in remaining colonies the rates will go up by 22%. As per the rates approved by the Delhi Cabinet, Rs.6.45 Lac per square metre has been fixed as new circle rate for Category A colonies like Greater Kailash, Defence Colony, Gulmohar Park, Panchsheel Enclave, Anandlok, Green Park, Golf Links and Hauz Khas. This means nobody would be allowed to buy land and immovable properties in these colonies for less than Rs.6.45 Lac per square metre. The existing circle rate in Category A colonies is Rs.2.15 Lac. The rates in Category B neighbourhoods like Andrews Ganj, Kalkaji, Munirka Vihar and Nehru Enclave have been increased and have been fixed at Rs.2,04,600/- per square metre as against the current rate of Rs.1,36,400/- per square metre.

Greece has opened Greek Visa Application Centers in eight cities across India, for receiving applications and delivering visas to mainly Indian citizens through VFS Global outsourcing technology services firm. The eight cities are wherein this service has been provided includes Bangalore, Chandigarh, Chennai, Jalandhar, Kochi, Kolkata, Mumbai and Puducherry.

REAL ESTATE

IMMIGRATION

Circle rates in Delhi hiked

Visa Centers for Greece across India




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JUDGMENTS

Delay in filing appeal required to be construed liberally: Gujarat HC

Winding up petition may be rejected for non quantification of debt: Calcutta HC

Winding up power conferred on Court notwithstanding any arbitration agreement: Calcutta HC

The Court held that the expression 'sufficient cause' may be required to be construed liberally, provided adequate and proper reasons exist. Liberal approach is advocated in condoning the delay and not being liberal to sufficiency of the cause where it does not exist. The Court relied upon a judgment of the Hon'ble Supreme Court wherein it was observed, what colour the expression 'sufficient cause' would get in the factual matrix of a given case would largely depend on bona fide nature of the explanation. If the Court finds that there has been no negligence on the part of the applicant and the cause shown for the delay does not lack bonafides, then it may condone the delay. However, if, on the other hand, the explanation given by the applicant is found to be concocted or he is thoroughly negligent in prosecuting his cause, then it would be a legitimate exercise of discretion not to condone the delay.

It was held by the Hon'ble Court that a winding up petition could not be admitted if the quantum of the debt could not be concluded. The Court was of the view that if one party conceals anything, the Court may draw adverse inference and decide the controversy accordingly. However, when none of the parties placed their case properly before the Court, it would be difficult for the Court to come to a right conclusion one way or the other. Thus, the Court opined that in a case where the debt cannot be quantified, a winding up petition could not be held to be maintainable. The Court further held that pre-requisite to admit a winding up petition at the instance of the unsecured creditor would denote, there must be a quantified just debt due to the creditor by the company.

It has been held by the Hon'ble Court that the power of winding up of a company was conferred on the Court and notwithstanding any arbitration agreement between the parties; the arbitrator would have no jurisdiction to pass such order.



Winding up petition to be dismissed if debt itself is disputed: Gujarat HC

Tenancy cannot be created by Courts: Calcutta HC

Cable TV systems can be analogue, hybrid or digital

The Court held that there must be a debt due and the company must be unable to pay it. It is further observed that a debt under section 433 (e) of the Companies Act, 1956 must be a determined or definite sum of money payable immediately. If the debt is a disputed debt and the defence is substantial one, order of winding up should not be passed. The Court also observes that the debt being disputed and there exists a bonafide dispute, a winding up petition cannot be used as tool for recovery.

It has been held that the Court cannot create tenancy without the consent of the landlord. In short, tenancy is a contract between the landlord and the tenant. It is further observed that the Court is not competent to direct the parties to enter into contract of tenancy.

ARTICLE

DIGITALIZATION: A NEW PHASE IN INDIAN TELEVISION

By Ms. Snigdha Sharma, Associate, K&A

a) Analogue Cable TV System

Cable television came into existence in India in 1983 when Doordarshan started its services through cable in rural areas of Rajasthan. The cable TV segment in India, although fragmented, has shown tremendous growth. The exponential growth of the number of TV channels combined with the inherent limitations of the analogue cable TV system has given rise to a number of problems in the sector. Telecom Regulatory Authority (TRAI)'s earlier recommendations dated 14th September 2005 on “Digitalization of Cable Television” had identified the need for a national plan for digitization.

In case of analog cable TV system, the TV channels are sent in analog and unencrypted form. The analog cable TV system can carry up to 80-100 TV channels. In this system the consumers do not have an option to choose channels/services of their choice and pay accordingly, rather they have to pay for the entire bouquet of channels offered by the cable operator. The


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stakeholders in the analogue cable TV system are broadcasters, MSOs, LCOs and the consumers.

In many parts of India, a hybrid model is employed. In this model, some channels are carried in analogue form and the remaining capacity is used to carry digitally modulated channels. In the hybrid model, the capacity of the system increases so that around 30-50 analogue channels (Free to Air channels) and 250-400 digital channels (pay/local channels) can be carried. The advantage of the hybrid model is that the viewers have a better choice as more channels can be made available to them. The biggest disadvantage is that the system lacks addressability i.e. the subscriber base is still not auditable/verifiable.

In this model, all the channels, whether FTA or Pay, are delivered in the addressable-digital form only. This is akin to the DTH model. Not only is content carried in digital form, all content, whether pay or FTA, is also encrypted. The subscriber necessarily requires a Set Top Box (“STB”), duly authorized by the service provider (MSO), to view the TV channels. This model further enhances the channel carrying capacity of the system over the hybrid model. In this model, all FTA channels are also carried in digital format making room for more channels.

In the year 2002, the Cable Act 1995 was amended to create a system where the customers can select and pay for channels of their choice without being forced to pay for package of unwanted channels. Section 4A of the Cable Act, 1995, was introduced on December 31, 2002, enabling the government to notify particular areas where from a prescribed date the pay-channels were to be available only through a STB through CAS.

Mandatory CAS for cable TV services in India started in September 2003, in Chennai, but got derailed in the other three metros on account of various reasons. At that time, there was no tariff regulatory framework for cable TV services. In December 2003, the Delhi High Court upheld the introduction of CAS saying it was in the interest of vast multitude of customers and in January

b) Hybrid Cable TV System

c) Digital Addressable Cable TV System

Launching and Phasing out of Conditional Access System (“CAS”)

2004, the Telecom Regulatory Authority of India (“TRAI”) was made the broadcast and cable regulator by the government.

In July 2006, the Delhi High Court directed the government and TRAI to place self-contained code of tariff/interconnect and quality of service regulations to enable implementation of CAS. This was notified by TRAI in August, 2006. This process envisaged a smooth implementation of CAS starting from the end of December 2006, in partial parts of the three metros as per the government directives as TRAI had divided each metro into 4 to 6 zones. Due to lack of political will, this too was shelved after implementations in the first zone resulting in part of the metros enjoying choice while the rest of it remaining in analog mode.

After detailed consultations with all the stakeholders, the TRAI, in August 2010, recommended to the government for complete Digitization with Addressability (“DAS”) by December 2013, in a phased manner. The government has accepted the recommendations and issued an ordinance in October 2011, and a notification in November 2011, for complete digitization with addressability in a phased manner to be completed by December 2014.

DAS is a fully digital addressable system whereas CAS is not. In CAS notified area, the free-to-air (FTA) channels are carried over the network in analog form while the pay channels are carried in encrypted and digitally modulated form for which a STB is required. While in DAS all the channels (pay as well as FTA) carried over the network are encrypted and digitally modulated and a STB is required for receiving both FTA and pay channels.

In the present cable TV system, which is generally prevalent, service seekers (consumers) as well as service providers (Broadcasters, MSOs and LCOs) are at a disadvantage. The consumer has a limited choice of channels and he is also compelled to pay for channels which are not of his choice. The limitations of analogue cable TV transmission have given rise to non-transparent business transactions based on negotiated

Difference between DAS (Digital Addressable System) and CAS (Conditional Access System)

Views of various stakeholders with respect to Implementation of DAS


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non-verifiable subscriber bases, differential pricing for the same content and incidence of carriage and placement fee on account of demand-supply mismatch arising out of capacity constraints and the advert isement-centr ic market strategy of broadcasters. These factors have resulted in a lack of collaboration amongst various stakeholders and as business models come into conflict, litigation has become more common.

Digitization will solve the problem of capacity constraint and will enable incorporation of value added services (viz. Pay per View, Time Shifted Video, Personal Video Recorder, Near Video on Demand, Radio services, Broadband etc.) in the offerings to the customer, which would enhance the range of choice for the customer and improve the financial viability of operations for the service provider. It will also effectively address the issue of piracy.

Digital addressable businesses would attract investment from the market which would eventually lead to an organized growth of the sector. Apart from TV channels, other important services such as broadband, value added services and interactive services would get a big boost. Internet and Broadband access is widely recognized as a catalyst for economic and social development.

• Huge capital investments in up-gradation of

cable network.

• The subscriber would need investments for STBs or Digital Receivers. These are required to decode the digital signals and reconvert them into analogue mode, which are compatible with the standard television sets. Alternatively expensive digital TV sets would have to be bought which have these capabilities inbuilt – at present these digital TV sets are not made in the country.

• The transition from analogue to Digital networks is a long process. The operators have to simulcast (simultaneous transmission of analogue and digital signals) channels in the analogue and digital modes.

Challenges to the Digital Addressable System

Impediments in the implementation of the Digital Addressable System

Digitization Status in Metros

The Ministry of Information and Broadcasting has th stdecided to modify the 30 June deadline to 31 October

2012 for a complete switch over to digital delivery of television channels in the four metros of Delhi, Mumbai, Chennai and Kolkata. The installation of the Set Top boxes (STBs) in each cable viewing household is a precondition for digitalization. The seeding of the STBs in a cable viewing households was not satisfactory so a new deadline was set.

One of the major impediments in the implementation of the Digital Addressable system in all the four Metros are the acute shortage of the Set-Top Boxes and also the delay in the installation process of the STBs.

Delhi has achieved the deadline in respect of installation of Set Top Box (STB), thus ensuring smooth transmission to Digital Addressable System (DAS) in Delhi

The Chennai Metro Cable TV Operators Association had claimed that it was facing difficulties in procuring the requisite set-top boxes (STBs) for implementing a Digital Access System (DAS) in Chennai and had therefore filed a petition to seek a complete stay on the implementation of DAS in Chennai till the necessary infrastructure was available. The Association requested the Court to forbid the Centre from rolling out 100 per cent DAS in Chennai till more STBs were made available by multiple system operators (MSOs) and therefore it asked for an extension in the deadline for implementation of DAS. The Madras High Court has granted an interim injunction to Chennai Metro Cable TV Operators Association and extending the Cable TV Digitization deadline in Chennai three times i.e. from

th30 October'2012.

Unlike Madras High Court, the Bombay High Court rejected a similar petition filed by Bhawani Rajesh Cable and Digitech, seeking a four month extension on the cable TV digitization deadline on the ground that only 60,000 STBs so far has been imported and another 20,000 are in the process of being imported and that it will take time to install these STBs in individual households. However, the court dismissed the petition on the ground that the government had

Delhi -

Chennai -

Bombay -

provided sufficient time to them to comply with this deadline.

In Kolkata, the Government is opposing the rollout of digitization right now and wants to delay it on the similar ground that the set-top boxes are not at hand and therefore the analog systems should be allowed to continue.

Advocates of digitization see it as revolutionary change that was long overdue in Indian television. They argue

Kolkata -

Conclusion


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A-9, Nizamuddin East, New Delhi-110013, IndiaPhone No: (+91) (11) 24359593 / 4 / 7; Fax: (+91) (11) 41825223Email- [email protected]

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that the shift to DAS – however expensive,– is not only essential but inevitable because what constitutes “television” today is very different from what it was when Doordarshan, the government-sponsored network, was the only broadcasting service in India till the 1990s. However only time will tell if the shift to the new digital addressable system will be a revolutionary transformation in Indian television as its proponents claim, or a mirage that critics argue the cable industry will be chasing in futility for years to come.

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