Row over the Jawaharlal Nehru Solar Mission

The Jawaharlal Nehru Solar Mission (JNSM) has been criticised by the United States and the European Union for its policy which requires use of local content for the project. The mission will be executed by the Ministry of New and Renewable Energy, to promote the use of solar energy.

Though local content is used as a part of several investment policies, it is not in accordance with the General Agreement on Tariffs and Trade(GATT) and the Agreement on Trade Related Investment Measures (TRIMs) as it does not keep the foreign investors on the same footing as the home investors. Local content requirement is mostly placed by a nation to boost its domestic industry.

The JNSM requires solar mission investors to use Indian manufactured solar modules and source 30% of the inputs from within the country. Such a requirement may have trade-distorting effect and can attract provisions of two key agreements within the structure of the WTO. It is likely to violate Article 2.1 of TRIMs as it falls within the category of a trade related investment measure that extends more favourable treatment to domestic products in comparison to imports by stipulating preferred use of products of domestic origin from any domestic source. (Infringement of National Treatment Principle)

Furthermore, appears to be contradictory with Article III: 4 of GATT (National Treatment) as it creates a 'disincentive' against purchase of imported products.

It can be argued that since the solar power generated by the project will be bought by NTPC, a public sector company; it will fall within the purview of government procurement and since India is not a member of the Government Procurement Agreement, it may not be bound by the multilateral agreement which sets the rules for purchases made by government agencies. However, any purchase by NTPC will not be limited to governmental purposes and will involve commercial resale or use in production of goods for commercial sale, thereby attracting the provision of national treatment, pursuant to Article III:8 (a) of GATT.

During the Uruguay Round of negotiations relating to TRIMs, India was one of the few developing countries which had taken a decision to abolish the local content requirements even before the conclusion of the Uruguay Round. Hence, India may find it tricky to prolong its policy of local content in the Solar Mission should her trading partners contradict and decide to raise a dispute at the WTO.

Nuclear Safety Regulatory Authority Bill

The government has introduced the Nuclear Safety Regulatory Authority (NSRA) Bill. It seeks to create two regulatory bodies as part of measures to strengthen safety at the country’s atomic power plants. It provides for the “establishment of the Council of Nuclear Safety to oversee and review the policies with respect to radiation safety, nuclear safety and other matters,” as mentioned in the objects and reasons cited in the Bill. This council will constitute an appellate authority with a Supreme Court judge or a high court chief justice as chairperson and two eminent scientists to consider appeals against orders of NSRA. The proposed regulator will have the authority to stop construction work and order an operating nuclear plant to shut down operations in case of any disaster. The structure and functions of the Nuclear Safety Regulatory Authority (NSRA) proposed in the NSRA Bill are mostly based on the recommendations of the Raja Ramanna committee appointed by the Prime Minister in 1996.

As per the Bill, all offences under the Act will be cognisable under the Code of Criminal Procedure, 1898, but no action will be taken in respect of any person for any offence under the Act except on the basis of a written complaint made. The law could also regulate the manufacture, custody, transport, transfer, sale, export, import, use or disposal of any radioactive substance.

The proposed legislation, which will further be scrutinized by a parliamentary standing committee before it comes up for discussion and passage in Parliament. The much-awaited Nuclear Safety Regulatory Authority (NSRA) Bill may be submitted to Parliament along with the recommendations of the Parliamentary Committee for Science and Technology in the current session of the House. The evolution of the nuclear regulatory body in India took too long.

A part of sub-section 20(2)(h) which empowers the NSRA to "specify hours of work, minimum leave and periodical medical examinations" to radiation workers is grossly inconsistent with current international norms and practices . This provides an exaggerated sense of risk to workers in the field of atomic energy and in the industrial , medical and research applications of radiation. Amendment of a part of the sub-section shall be helpful as it is not justifiable in the purview of current international practices.Complete text of the Bill

UN resolution on war crimes adopted

Sri Lanka's army defeated the separatist Tamil Tigers in May 2009, putting an end to 26 years of brutal civil war. However, the final phase of that war has been the source of considerable controversy, since both sides were accused of war crimes.

The resolution was tabled by the US asking the government to explain how it will address alleged violations of international humanitarian law and how will Sri Lanka implement the recommendations of an internal inquiry into the war.

Sri Lanka 'war crimes': Main allegations

Civilian deaths

The government was accused of repeatedly shelling safe zones set up to protect civilians. The rebels were accused of holding civilians as human shields and firing on those who tried to flee. Both denied the allegations.

Conduct of war

The report claims the government shelled food distribution lines, government-designated “safe zone” for civilians and near ICRC ships coming to pick up wounded civilians from beaches. The government denied security forces had shelled the safe zone, saying there were a number of rebel suicide blasts in that area. The UN report is also said to condemn the rebels for killing civilians through suicide attacks.

Hospital shelled

The report accuses the government of "systematically" shelling hospitals on the front line. In May 2009, sources in one hospital in rebel-held territory claimed that government forves shelled it, killing dozens of people.

Extra-judicial killings

After the war more allegations emerged. One video obtained by Channel 4 News purported to show the extra-judicial killing of what were thought to be Tamil rebels. Sri Lanka's army spokesman angrily rejected the video as a fabrication.

Civilian ordeal

There were allegations that civilians had lived under constant gunfire, intense shelling and an acute shortage of water, food and medicine. Civilians also confirmed accusations that the rebels were forcibly recruiting children.  The government says that the military inflicted no civilian deaths during the final stages of its victory. International human rights groups, however, say a comprehensive and independent war crimes inquiry is needed.

India has voted against Sri Lanka at the United Nations Human Rights Council, in Geneva today. The top human rights body adopted a resolution calling on Sri Lanka to properly investigate alleged war crimes during its 26-year conflict with the Tamil Tigers.

The US delegation's statement on the resolution on Sri Lanka:

"The United States is pleased to introduce draft resolution L.2, on Promoting Reconciliation and Accountability in Sri Lanka for consideration and approval by this Council.  This resolution enjoys the broad support of 40 co-sponsors.  A copy of the text, including slight revisions, is being circulated in the room today.

It is almost three years since the end of Sri Lanka's long and painful conflict.  For the past three years, my government has worked bilaterally, and with like-minded countries, to engage officials at the highest levels of the Sri Lankan government on the steps that are necessary to build a peaceful future for the Sri Lankan people.  For those three years Sri Lanka has had the time and space to develop its own roadmap for lasting national reconciliation and accountability.  Most recently, we have encouraged Sri Lanka to address actions taken on both sides of the conflict through its domestic Lessons Learned and Reconciliation Commission Process.  We looked forward to the Commission's report, and understood that Sri Lanka would develop its own action plan to implement the LLRC recommendations.

We have also worked bilaterally, and with like-minded countries, to encourage Sri Lanka to take advantage of the resources of the Office of the High Commissioner for Human Rights.  And we have encouraged Sri Lanka to engage with the Council, and to benefit from the broad range of experiences of Member States that have dealt successfully with their own post-conflict situations.

Mme President and Distinguished delegates, an enduring peace will be unsustainable without meaningful steps to foster national reconciliation and accountability.

Given the lack of action to implement the recommendations of the Sri Lankan government's own LLRC, and the need for additional steps to address accountability issues not covered in the LLRC report, it is appropriate that the UNHRC consider and adopt this moderate and balanced resolution.  It is a resolution that encourages Sri Lanka to implement the recommendations of it own LLRC and to make concerted efforts at achieving the kind of meaningful accountability upon which lasting reconciliation efforts can be built.

In addition, this Resolution urges Sri Lanka to work with the Office of the High Commissioner for Human Rights, and draw from helpful expertise the Office can offer.

These proposals are reasonable, constructive, and carefully tailored to the needs of the situation.  At our informal session on March 8, none of the many delegations present offered proposals for specific textual modifications.

To close, I wish to emphasize that this resolution is intended to help the people of Sri Lanka achieve a lasting and equitable peace that is marked by equality, dignity, justice and self-respect.

Thank you.”

Retrospective Changes in Tax Law

In the recent Vodafone Judgement, Vodafone had argued that the government had no jurisdiction over a transaction between two foreign companies occurring on a foreign territory. However, there was a strong moral counter-argument. The business that changed hands was entirely based in India. The government got an opportunity to reflect on the requirement of a new legislation. Hence it wants to retrospectively change the rules. The finance minister, Pranab Mukherjee, proposed retrospective changes to India's tax rules during his budget on March 16, prompting speculation that Vodafone's $2.2 billion tax case could be reopened.

The Supreme Court ruled on January 20 that the country's tax department has no jurisdiction over Vodafone's 2007 deal to buy Hutchison Whampoa's Indian mobile business for $11 billion. It was argued that the Indian tax office has no right to tax the transaction between two foreign entities. Government authorities had said the deal was liable to be taxed since most of the assets were based in India.

While reversing the interpretation given by the Supreme Court in the Vodafone case, the Budget proposal broadens the scope of State's power to tax all past income arising as a result of existence of actual economic nexus, irrespective of the place of residence of the entity deriving the income.

It makes it clear that India has taxation right on income derived on offshore transactions where the value is attributable to the underlying asset in India, and that this taxation right is not lost due to the structure or mode through which such gain is realised.

Retrospective amendment in tax legislation is legally permissible, as held by the Supreme Court in several cases. The SC has further held that Validating Acts are not necessarily arbitrary and are often enacted to retrospectively remove infirmities that might have led to invalidation of provisions imposing the levy.

Double non taxation is considered as much of an evil as double taxation. Besides, in equity too, there is no justification for the government favouring large taxpayers indulging in dubious tax planning, in so doing passing on the tax burden to ordinary taxpayers.

General Anti-Avoidance Rules

‘General Anti-Avoidance Rules’ has been introduced under Domestic Tax Laws. It has the same meaning as “anti avoidance rules based on general principles in law” except that it is codified and included in the legislation. According to its provisions, the Commissioner empowered to declare an arrangement as an impermissible avoidance arrangement (IAA) if:

•The whole, a step or a part of the arrangement has been entered with the objective of obtaining tax benefit, and

•The arrangement:

‒Creates rights and obligations not normally created in arm’s length transactions, or

‒Results in direct or indirect misuse or abuse of the provisions of the code, or

‒Lacks commercial substance in whole or part, or

‒Is not bonafide

The onus of proving that the purpose of a transaction is not to avoid taxes is on the assessee. The presumption applies even if the main / overall purpose of the arrangement is not to obtain a tax benefit and only if a step / part of the arrangement is to obtain a benefit.

It is believed that Income-tax officers have been handed discretionary powers that are far-reaching. This will seriously complicate tax administration and has the potential to increase corruption manifold.

In South Africa, GAAR was introduced in 2006, and is apparently the inspiration behind Indian provisions. In Netherlands and Canada, with similar provisions, the burden of proof lies on the tax authorities. In Australia the application determined on the basis of 8 test or factors.