Home >> News & Views >> Rajesh Vellakkat, Partner, shares his personal expectations from Budget 2017 specifically in the context of Cybersecurity and IP Taxation.
02 Feb 2017

Rajesh Vellakkat, Partner, shares his personal expectations from Budget 2017 specifically in the context of Cybersecurity and IP Taxation.

Expectations are riding high with Budget 2017 being just hours away from being announced by Finance Minister Arun Jaitley. Here are initiatives that can help to strengthen India’s cyber security infrastructure and IP taxation:

1. Government’s Investment in Cyber security infrastructure. This I recommend for the following reason : In order to destroy the faith in this digital ecosystem, I foresee a possibility of concerted efforts by unscrupulous elements (both internal and foreign) to demonstrate vulnerabilities and security weaknesses of digital payment, storage and communication. Hence, appropriate investment, in institution building to supervise, monitor ,strengthen, regulate digital infrastructure and cyber security should be an immediate priority. Recent hacking of  some of the bank ATM data shows the vulnerabilities and the challenges that it creates.

2. Provide free public access to Internet, server space,  and  provide other digital infrastructure a public utility service for citizens: Government should fund and create and maintain it. Solely depending  private multinationals alone for this is dangerous and thus state investment is a must.

3. Government should provide free of charge digital payment options. Every citizen should have an option to make the digital payments with out incurring a charge.

4. Mandating  that all financial/ payment data servers mandatorily in India and making appropriate legal regulations for the same.

5. Data use management regulations: There is a genuine fear among citizens that private data of citizens contained in or posted in many social media, web browsers, ecommerce platforms, mobile and other  electronic equipments are getting transferred  freely to foreign countries and these electronic and digital intermediaries and enablers are using the same for their commercial benefit. An effective legal frame work and regulation to be introduced for digital and electronic intermediaries on use, export of customer/ citizen  data and especially relating to commercial use of it should be introduced.

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6. Regarding IP taxation:  A clarification relating to capital gains tax relating to assignment of multinational brands having India registration and presence is desirable. I suggest this as recently Delhi High Court in Cub Pty Ltd. Vs. Union of India,  interpreting Section 9(1) (i) of the Income Tax Act, 1961, concluded that for taxation of capital gains resulting from assignment of intangible assets such as trademarks, brand logos and other IP, the situs of the owner of that asset should be considered. The judgment states that such gains should be taxed only at the place of the situs of the owner. This judgment will  eventually end up in 1) all Indian brand ownership getting vested with companies located in tax havens and that will cause loss to exchequer. 2) In cases of assignment of global brands, despite having large presence in India, Indian government will not get any tax revenue.

7. On law enforcement and justice delivery : This is one area where digitization is lagging behind. More budgetary support for e-courts project is required. All court records, filings are still in paper format. Use of computers, and electronic data storage is absolutely poor in police stations as well. Integrating IT infrastructure of the police and  of the courts will expedite the process. Government should invest in this area on priority.

(The author Rajesh Vellakkat is Partner, Fox Mandal & Associates. Views are personal)

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