New tax code provisions may hurt capital markets

By Freddy Daruwala and Prachi Loona, Juris Corp
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The Direct Taxes Code Bill, 2009, was released on 12 August.

The code has modified several established precepts of tax jurisprudence, especially in relation to cross-border taxation. While a significant reduction in deductions or exemptions is sought to be offset by a corresponding reduction in the rates of taxation, disparities remain, since the benefits are not equally offset across industries and sectors. Capital markets – particularly the interests of foreign investors and corporations – is one area that is affected by the code.

Freddy Daruwala
Counsel
Juris Corp

In line with recent legislative trends, the code is a skeleton intended to be fleshed out later by rules, regulations and notifications that confer substantial discretionary powers on the executive, rather than being the expression of guiding principles. (This is a reminder of the way that, during the recent electoral analysis and discussions in the Indian media, certain ministries were facetiously referred to as ATM (“any time money”) ministries, due to their ability to act as cash cows.)

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Freddy Daruwala is an of counsel and Prachi Loona is an associate at Juris Corp. Juris Corp is a full-service law firm based in Mumbai. The firm specializes in banking and finance, joint ventures, foreign investments into India, private equity, direct tax, bankruptcy and restructuring, cross-border M&A, insurance, energy and infrastructure, dispute resolution and international arbitration.

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