- CBDT puts on hold circular on taxation of indirect transfer of shares
Bilateral & International Relations
- India becomes Associate member of CERN
- Industry seeks foreign partners for trade pact
Science & Technology
- NASA approves mission to explore iron-rich asteroid 16 Psyche
Key Facts for Prelims
- Mission 41k
- Second Raisina Dialogue
CBDT puts on hold circular on taxation of indirect transfer of shares
The central board of direct taxes (CBDT) has decided to put on hold its recent circular on taxation of indirect transfers in order to provide a respite to foreign portfolio investors (FPIs), venture capital and private equity investors.
What’s the issue?
- In December 2016, the tax department issued a clarification on the scope of indirect transfer provisions that sought to even apply these provisions to FPIs. This would have taxed any profits made by funds with underlying assets (including equities) in India.
- This would have subjected FPIs, especially those with India-focused funds, to greater scrutiny by the income-tax (I-T) department and led to double taxation in many cases.
- It was estimated that 181 publicly traded funds whose India exposure is more than half of total assets could be affected by this move. These funds managed $39 billion of assets.
- This had forced many foreign investors to make representations to the finance ministry asking the latter to reconsider the circular. They had pointed out that applying these provisions on offshore investors investing in these foreign funds or FPIs would lead to double taxation as they already pay securities transaction tax and tax on capital gains from selling of shares.
- Indirect transfer provisions deal with taxation of transactions wherein even though the transfer of shares took place overseas, the underlying assets were in India.
- Indirect transfer provisions were introduced in the I-T act in 2012 with retrospective effect, as the government sought to bring Vodafone Group Plc.’s $11 billion acquisition of Hutchison Essar Ltd in 2007 (by acquiring a Cayman subsidiary owned by Hutchison International) and other such transactions under the tax net in India.
- To remove the sting from the retrospective amendment to the tax laws by the previous government, the government had subsequently clarified that only those indirect transfer transactions wherein more than 50% of the underlying assets are in India will be subject to a levy of capital gains tax in India. But the clarifications also extended the tax to funds, including those outside India.
Bilateral & International Relations
India becomes Associate member of CERN
India formally became an associate member of CERN (European Organization for Nuclear Research) with the government completing the internal approval procedures for the agreement it signed in November 2016.
- In recognition of most significant contributions, in 2003, India was awarded the Observer status of CERN.
- In September 2016, CERN Council had adopted a resolution upgrading India’s position as associate member from earlier ‘observer’ status (since 2004).
- An Agreement was signed in November 2016 to admit India to CERN as an Associate member. But India had to “notify CERN of its final approval for the Agreement to enter into force” and become an Associate member.
How this membership benefits India?
- Now, India can take part in meetings of the CERN Council and its committees (Scientific Policy Committee and Finance Committee). However, India will not have voting rights on decisions of the council.
- It will enhance participation of young scientists and engineers from India in various CERN projects and bring back knowledge for deployment in the domestic programmes.
- It will open up new avenues for Indian scientists to engage with their counterparts in front line research in physics and engineering.
- Also, Indian scientists will become eligible for staff appointments. It will help to boost India’s science credentials and give access to high end scientific technology.
- It will also make Indian scientists eligible for staff appointments in CERN. Besides, Indian industries will be entitled to bid for CERN contracts.
- Thus, it will open up opportunities for industrial collaboration in areas of advanced technology.
- CERN is the world’s largest nuclear and particle physics laboratory.
- CERN is based in Geneva on the French-Swiss border.
- Presently CERN has 22 member states, four associate member states, and the observer status is given to four states and three International Organizations.
- CERN operates the Large Hadron Collider (LHC) which is the world’s largest and most powerful particle accelerator.
Functions of CERN:
- It helps scientists and engineers probing fundamental structure of Universe using the most sophisticated scientific instruments and advanced computing systems.
- It provides the necessary infrastructure needed for high-energy physics research including particle accelerators.
India and CERN:
- India has been actively involved in CERN’s activities for over 50 years.
- Indian physicists, engineers and technicians have made substantial contributions to various projects of CERN.
- In 1991, India and CERN had signed a Cooperation Agreement, setting priorities for scientific cooperation. Since then India and CERN have signed several other protocols.
- Indian scientists had active in construction of the LHC in the areas of design, development and supply of hardware accelerator components, software development and deployment in the machine.
- They also had played significant role in the CMS (Compact Muon Experiment), one of the two large experiments that led to discovery of God particle.
Industry seeks foreign partners for trade pact
India’s top industry bodies are attempting to build a coalition with counterparts in other nations with similar interests to give a fillip to the country’s proposal for a Trade Facilitation in Services (TFS) Agreement at the World Trade Organisation (WTO)-level.
- The proposed TFS pact, among other things, aims to make it easier for professionals and skilled workers to move across borders for short-term work, as well as ensure portability of their social security contributions.
- India is making the case for this pact in line with the Trade Facilitation Agreement (TFA) in goods, signed by WTO in 2014.
- It aims at expediting movement, release and clearance of goods as well as co-operation on customs compliance issues.
- Pitching for a trade facilitation agreement in services in WTO, India had floated a concept note in September 2016 saying the pact will reduce transaction costs by doing away with unnecessary regulatory and administrative burden on trade in services.
- India had proposed simplification of procedures and clarity in work permits and visas for smooth movement of professionals.
- It said the TFS Agreement will address the key issues that are pertinent to facilitating trade in services, such as transparency, streamlining procedures, and eliminating bottlenecks.
Science & Technology
NASA approves mission to explore iron-rich asteroid 16 Psyche
The National Aeronautics and Space Administration (NASA) has approved a mission to explore 16 Psyche, an iron-rich asteroid.
- As part of the mission, NASA craft will be launched in 2023, and will arrive at Psyche in 2030.
- Psyche asteroid has diameter in excess of 125 miles and is almost entirely composed of iron and nickel.
- Scientists believe Psyche to be a protoplanet i.e. its entire body consisting of what one day could be the core of a new planet.
- The spacecraft will be running tests on 16 Psyche to learn more about the history and composition of the celestial body.
- The mineral contents on the asteroids are worth over 100-thousand times the value of the entire world economy.
- The information gathered will undoubtedly useful to astronomers to learn more about the formation and early life of planets.
- The study of Psyche may also reveal more information about the centre of our planet, which cannot be studied directly due to the virtual impossibility of sending a probe deep underground.
- Astronomers also believe Psyche to contain water, making it a possible candidate for a stellar fuel station, as water can be used to sustain life and synthesize rocket fuel.
Key Facts for Prelims
- In a bid to revamp the Indian railways, Ministry of Railways recently unveiled Mission 41k, a plan that would save Rs 41,000 crore over 10 years through an integrated energy management system.
- In this initiative, railways will electrify 24,000 km of rail tracks over the next five years by doubling the annual rate of electrification from 2,000 km to 4,000 km in the next two years.
- This target will be achieved by taking a slew of measures which include moving 90% of traffic to electric traction over diesel. Presently, this is at 50 %of the total rail traffic. The Railways ministry plans to achieve this target by doubling the current pace of electrification.
- The railways also aim to procure more and more electricity at cheaper rates through open market instead of sourcing it through DISCOMs and thereby hopes to save as much as 25% on its energy expenses. New technologies are also being explored to bring down electric consumption.
Second Raisina Dialogue
- The second flagship conference on Geopolitics and Geo-economics Raisina Dialogue has begun in New Delhi.
- This year’s theme: “The New Normal: Multilateralism in a multipolar world”.
- The conference is organised by Ministry of External Affairs and Observer Research Foundation.
- The name of conference comes from Raisina Hill which is the elevation in New Delhi where presidential palace of India, Rashtrapati Bhavan is located.
- The first edition of the conference was held in March 2016 with the theme “Asia: Regional and Global Connectivity”. It is organized on the lines of the Shangri-La Dialogue held in Singapore.