Leisure, Lifestyle & Wellness
Life Exclusive
Solving trade disputes in neighbouring Gulf countries

Being based in Lebanon, the writer was also engaged in resolving disputes in other Gulf nations. The 53rd part of a series describing the unknown triumphs and travails of doing international business

In the summer we had a number of Arab visitors, who came to the office, brought in by a local agent, mostly to obtain reassurance that the goods ordered by them from India will be shipped, and not have any further delays.
To be honest, such requests covered a number of items that were non-engineering in character, but the buyers felt that we should be able to help. Even before these requests came from buyers, whenever I received enquiries for items not covered by the Export Promotion Council (EEPC), I began to pass them to the Embassy so that commerce secretary VP Singh could tackle the issue regarding commission or shipment delays. But when enquiries were received, I began passing them directly to the concerned council. I had already quite a few friends in the Chemical Export Promotion Council, as I had dealt with them, while working for Dunlop in Calcutta, but for other items I passed on for appropriate action by the concerned organisation.
As it is the work was increasing, and the extra hours was not sufficient to cope with the deluge of letters and documents that we were receiving. Since I knew that it would take some time for getting government sanctions, I made appeals to the head office, that we must move to a bigger premises and be in line with STC offices, which had moved from the Embassy building to Piccadeli Building on the Hamra street itself. Besides, we needed an extra hand to handle the volume of work and be more helpful to the buyers when they needed our help.  Newer items like bright steel bars, hand-tools, a number of auto parts besides diesel engine parts were catching up and the volume was increasing.
Our exports to Kuwait had also increased and I had met a lot of our buyers while they stopped over in Beirut en route to Europe or were on a summer holiday in the mountains.  I felt that it would be in order for me to take a trip to Kuwait and submit my report. When I went there for a week, I was able to meet a great number of importers, some of whom I have had the pleasure of being associated much before I had joined the Council. Arabi WLL was our agent for Indian Cable Co and Paper Cable Consortium which procured the single largest cable contract, way back in 1967 and for which I had acted as the secretary, though I was working for the Incab company. Luckily for us, the shipments, the first lot of which I myself made, carrying the cargo of cables from all the manufacturers not only went on time, but subsequent orders as extension of the original contract came, much to the delight of Indian consortium, which was the British domain for a long time. The British manufacturers were totally surprised by this successful bid by Indians.
I decided that Kuwait would be my next target country for study. I obtained the visa and went on a research mission and thanks to the support that I received from the Embassy and the large number of importers, I was able to prepare and submit a report that was well received following which the Council published a handy reference book on Kuwait. As it is Kuwait was involved in tremendous building construction activity and a wide variety of goods and services from India were already in place. The influx of Indian executives as support staff greatly helped the situation, as invariably, they were able to trigger and generate interest and enquiries for Indian products and services.
One morning I received a surprise message from our head office that they wanted me to come to India for a special meeting not only with our own offices, but with other related government departments, the Reserve Bank of India (RBI), etc, because of the urgent need to overcome many problems that had cropped up, relating to delays in shipments, payment of commissions, non clearance of documents due to L/C expiry and consignments sent on good faith, incurring demurrage because the importer did not clear the goods, etc. After a brief visit, I returned back to Beirut, having established even more closer rapport with all the officials concerned, since I left India a couple of years earlier.
While in India, I took up the issue of the need to move to a bigger office space and additional staff to cope up with the increased volume of trade and work, at least in line with the STC office, thankfully they assured me that this would be taken up on a priority basis.
This was the time when GEC of Calcutta had a serious problem with an exporter operating from Mecca, known as Al Bamanie, who had placed orders for a 1,000 fans but because of some delay in actual shipment, had simply not cleared the document and the goods were lying in the port. Bala Menon, the export manager, who was known to me, had taken up the issue with Dr RK Singh, our executive director, for our assistance but apparently there were some problems in meeting Bamanie's claims.

The importer had refused to meet the Embassy officials, and I received instructions to proceed to Jeddah and sort the issue and settle the matter. It was not an easy task; but I managed to get the cargo removed from the docks and have it stored in a bank's godown, and ensured, that the fans were disposed off with the least amount of loss. It is unbelievable, but I had to physically deliver complete fan by fan, in terms of motor, blades, regulator, rod and accessories box, so that we could count up; 999 fans were delivered, and one was found damaged!
After this incident, it was in store for me to visit Jeddah couple of more times to settle disputes.  One thing I must say of buyers, that when they liked you or trusted you, they went out of the way to accommodate you and support you by placing orders and opening Letters of Credit.  The satisfaction derived from this is an unforgettable experience.

 (AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts. From being the advisor to exporters, he took over the mantle of a trader, travelled far and wide, and switched over to setting up garment factories and then worked in the US. He can be contacted at anantha_ramdas@yahoo.com.)


Economy & Nation Exclusive
GAAR provisions not to hit leasing transactions

According to the draft guidelines on the General Anti-Avoidance Rules (GAAR), leasing transactions will not be hit by its provisions and only circular leasing

The draft guidelines on General Anti-Avoidance Tax Rules (GAAR) were released on Thursday, 28 June 2012. The guidelines are only draft guidelines and have been put out for receiving wide-ranging feedback and for discussion purposes only. The guidelines are framed by a committee constituted by the Central Board of Direct Taxes (CBDT) constituted under the chairmanship of the Director General of the Income Tax (International Taxation) for formulating the guidelines for proper implementation of GAAR. The guidelines are available at

Example six of the draft guidelines quoted below:

"Facts:  A choice made by a company between leasing an asset and purchasing the same asset.  The company would claim deduction for leasing rentals rather than depreciation if it had their own asset. Would the lease rent payment be disallowed as expense under GAAR?

Interpretation: GAAR provisions, would not, prima facie, apply to a decision of leasing (as against purchase of an asset). However, if it is a case of circular leasing, i.e. the taxpayer leases out an asset and through various sub-leases, takes it back on lease, thus creating a tax benefit without any change in economic substance, the revenue department would examine the matter for invoking GAAR provisions."
As written in the title of this note-nothing can be more specific than this. A normal leasing transaction, whether operating lease or financial lease, whether have economic substance or not, whether entered into for obtaining tax benefits or not-would not attract the provisions of GAAR u/s 101 of Income Tax Act. Only "sale and lease back" can be examined and questioned by the revenue authorities.
It was felt by the committee that-terms like, "misuse or abuse", "bona fide purpose" and "lacks commercial substance" may be explained by illustrations. The illustrations stated are, of course only an indicative list and not an exhaustive list.

The given example of leasing-can be treated as equivalent to keeping a leasing transaction (except a "sale and lease back" or a circular leasing)-under the negative list to which GAAR provisions will not apply.

So, the questions on allowability of depreciation to lessee in case of financial lease, allowability of depreciation to the lessor in case of operating lease, allowability of lease rental as expense, economic substance of leasing of assets by a holding company to its subsidiary company, etc, would continue to be governed by the existing provisions of the IT Act and the previously decided cases on similar transactions.
It is a well accepted fact (also accepted by the lawmakers as is illustrated by putting an example on leasing) that so far the tax effect of a lease transaction is concerned, any person who buys the asset will get the same capital allowance.

Further, talking about operating lease and financial lease-the substance of an operating lease is leasing and not financing, and this is established by the accounting standard on lease accounting. And hence, it has to be admitted that an operating lease is not merely a financial arrangement. Irrespective of whom the lessor is, given the depreciation structure, there will be a tax shelter available to the lessor in case of operating lease. If this was to be viewed as a tax avoidance transaction, every lease transaction will become a tax avoidance transaction. Rather every purchase of asset will also become a tax avoidance transaction, as the capital allowance will be available in that case as well.

The given example in the draft guidelines goes well with the true spirit of law and is welcomed by all.

(The writer can be contacted at nidhijain@vinodkothari.com)



Dayananda Kamath k

5 years ago

this is the starting point for currprion. when a law has already been passed by parliament it has be to be applied to all equally. why somebody else will deside who is or what type of transactions are to be exempted.it gives rise to lobbying.and in the present state of government based on the clout opf lobbyiest the law will be amended in such a way that the principle or purpose of the law will be defeated and a law which is beneficial to the vested interest will be implimented. and only an equally powerful other party challenges in court, which may take anytime from 5 to 10 years to settle these people will make their money. and the govt will hold only and adverse judgement which can not serve any pupose at that time. this is the conspiracy hatched so far in this country to create black money. and super rich. and our parlimentarians to show that they are powerful bring in a law which is retrospective effect and make everybody guilty. so that continue to milk the situation to the hilt.

Cairn sells 3.5% in India unit for over Rs2,000 crore

The Edinburgh-based parent had assured the Indian government that it would retain about 22% stake in its Indian arm, but in less than a year, the company has decided to sell off all its shareholding in Cairn India


New Delhi: British major Cairn Energy, which had last year sold majority stake in its Indian unit to mining group Vedanta, today sold 3.5% for over Rs2,000 crore in an open market deal, reports PTI.

It had 21.8% stake in Cairn India before today’s deal.

Cairn Energy sold 6.67 crore shares, or 3.5% of the Indian company’s equity, for about $360 million (over Rs2,000 crore), the company said in a press statement here.

The Edinburgh-based firm had in the run up to seeking government approvals for selling 40% of its stake in Cairn India to Vedanta claimed that it will retain about 22% interest in the company to give it “the strength and flexibility to explore new opportunities for delivering transformational growth”.

But in less than a year from receiving all approvals, the company has decided to sell off all its shareholding in Cairn India and exit the country.

“At the general meeting of the company held on 17 May 2012, shareholders authorised the board to dispose of all or part of Cairn’s residual interest in Cairn India,” the statement said.

Cairn Energy said it “has reached an agreement with Citi to complete an on-market sale of a total of 66,758,864 shares in Cairn India, representing approximately a 3.5% shareholding in Cairn India”.

Following the sale, Cairn Energy retains an about 18.3% shareholding in Cairn India.


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