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India Needs New Regulations - But Simplification of Compliance is Just as Critical

In earlier posts, I have touched upon the need for Indian laws to be updated to better reflect the current environment and foreseeable changes to it brought about by various forces, primarily technology-led innovation. This is not just because of the need to plug legal loopholes that are exploited to the nation’s detriment but also with the objectives of streamlining compliance and better enforcement.


Recently, the union government did exactly this when it announced a new set of rules to govern the operations of drones in India. A new draft of the Drone Rules, 2021, now out for public consultation, will, when approved and notified, replace the UAS Rules, 2021, which were announced in March 2021. The fact that the government has come out with a new set of rules within 4 months of issuing the earlier version is a welcome sign of change, as it signals recognition of a rapidly-changing environment as well as the importance of timely and appropriate responses.

Changes are aimed at simplification and less regulatory control

The new rules are remarkable for other reasons as well. At about 15 pages in length, the new rules are only a tenth of the earlier rules. The changes are not limited to the form; there are substantive changes too. The new rules seek to do away with a large number of approvals (e.g., Unique Authorization Number, Unique Prototype Identification Number etc.).  Licensing for micro drones for non-commercial use has been done away with. Recognizing the immense potential for drones to revolutionize our society and economy, the government proposes to develop “drone corridors” for cargo delivery. Prior authorization of drone-related R&D organizations is being removed. A drone promotion council is to be set up, in order to create a business-friendly regulatory regime that spurs innovation and use of drones. All this augurs well for the development of a robust drone ecosystem in India.

Implementing the “spirit” of underlying regulations is vital

The change to the drone rules is a welcome step- just as the consolidation of 29 of the country’s labour laws into four Codes during 2019 and 2020 was. But rationalization becomes futile if there is no element of reform- e.g., doing away with requirements that have outlived their utility or need significant changes to remain relevant in the current environment? There were many expectations around the Labour Codes, but in the months that followed, it is fair to say that there was also much disillusionment amongst industry stakeholders because sticky issues, such as the distinction between “employees” and “workers”, payment of overtime, role of facilitator-cum-inspector etc., remained.

Simplifying compliance is necessary to improve “ease of doing business” further

The World Bank’s 2020 “ease of doing business” report ranks India 63rd; we were ranked 130 in 2016. The 2020 report considered three areas: business regulatory reforms (starting a business, paying taxes, resolving insolvency etc.); contracting with the government, and employing workers. 

But there are miles to go before we sleep. To ensure that India’s entrepreneurial energies and creative intelligence are directed to areas that will be critical in the years to come- e.g., space, AI, robotics, electric vehicles, clean energy etc. all need new regulations or revamp of existing legislations and rules. But this alone will not suffice. Implementing the spirit, and not just the letter of the law and rules and the simplification of regulatory compliance are important angles that government must pay attention to. These are going to be key determinants in improving our “ease of doing business”.


Technology is a necessary enabler but it is not sufficient

All regulatory filings- whether for approvals or compliance- should ideally be enabled in digital format. Digital dashboards in the government and other regulatory bodies should facilitate real-time monitoring. Only exceptions or violations should need further actions. To be sure, the government has initiated some steps in this direction- e,g., “faceless” interactions between business and the Income Tax authorities with the intention to reduce human interventions and thus, the possibility of corruption. But if the underlying income tax portal itself is not working properly, as was widely reported soon after it was launched, the desired outcomes will not be achieved.

Moreover, it is not just about having the right technology platforms in place. It is equally critical to bring about a mindset change in the administrative machinery that helps political leadership formulate policy and thereafter, enable implementation and performance monitoring.

Given India’s large domestic market and attractiveness as a base for exports, we as a nation stand on the threshold of a phase of significant economic growth. Many Indian entrepreneurs are establishing businesses overseas; this means that the benefits of jobs, tax revenues and IPR creation all move to other jurisdictions. The longer anachronistic and irrelevant laws remain on our books, and the harder regulatory compliance remains, the more we stand to lose. In a world where global investment flows, trade and supply chains are facing significant change under the influence of numerous forces, it would truly be unfortunate if India loses out largely because of continued difficulties in regulatory compliance.

Image Credits: Photo by Medienstürmer on Unsplash

The longer anachronistic and irrelevant laws remain on our books, and the harder regulatory compliance remains, the more we stand to lose. In a world where global investment flows, trade and supply chains are facing significant change under the influence of numerous forces, it would truly be unfortunate if India loses out largely because of continued difficulties in regulatory compliance.


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Deduction of Tax at Source under Section 194N Restrained

The Kolkata High Court has passed an interim order restraining the deduction of tax at source under section 194N of the Income Tax Act till 30 September 2021 and directed that the matter be scheduled for final hearing after a period of eight weeks. The constitutional validity and legality of section 194N of the Act were challenged, by way of a writ petition, before Kolkata High Court in the case of Amalgamated Plantations Pvt. Ltd. & Anr.[1]

Section 194N – In Brief

The Finance Act, 2019 had inserted Section 194N under the Income-tax Act, 1961 (“the Act”), with effect from 1 September 2019, which mandates the deduction of tax at source at the rate of 2% on cash withdrawals from, inter alia, a banking company, on an amount exceeding INR 1 crore during the relevant tax year. The intention of introducing such provision under the Act was to discourage cash transactions and move towards cashless economy.

The Finance Act, 2020 substituted the above provisions to expand its scope. The revised threshold limit and rate of tax under section 194N of the Act have been summarised as follows:

Aggregate cash withdrawals in a tax year Rate of TDS
ITR of last 3 years filed ITR of last 3 years not filed
Up to INR 20 lakhs NIL NIL
Exceeds INR 20 Lakhs up to INR 1 crore NIL 2%
Exceeds INR 1 crore 2% 5%

The constitutional validity and legality of section 194N of the Act were challenged, by way of a writ petition, before Kolkata High Court in the case of Amalgamated Plantations Pvt. Ltd. & Anr.[1] (“the Petitioner”)

Is Section 194N beyond the legislative competence of the Parliament?

The Petitioner contended that the provisions of section 194N of the Act are beyond the legislative competence of the Parliament.

In this regard, the Petitioner placed reliance on Entry 82 of List I of Schedule VII of the Constitution of India, which empowers the Parliament to enact laws for imposition, collection and levy of tax on ‘income’. It was contended that the Parliament cannot legislate a provision for deduction of tax at source on an amount which is not an ‘income’.

The Petitioner further placed reliance on the decision of the Hon’ble Kerala High Court in the case of Kanan Devan Hills Plantations Company Pvt. Ltd[1] wherein, on a similar issue, the Kerala HC has admitted the writ petition and granted stay on deduction of tax at source under section 194N of the Act.


Interim Order on Section 194N

The Kolkata HC observed that the afore-mentioned order of Kerala HC has not been further challenged and the said interim order is still existing. It also observed that the Kerala HC, on the same issue, has passed series of orders admitting writ petitions and staying deduction of tax under section 194N of the Act.

Considering the above, the Kolkata HC has passed an interim order restraining the deduction of tax at source under section 194N of the Act till 30 September 2021 and directing that the matter be scheduled for final hearing after a period of eight weeks. In the interim, the Court has also directed that the Revenue authorities (“the Respondent”) and the Petitioner can file affidavit-in-opposition & reply thereof, respectively.


FM Comments:

The interim order of the Kolkata HC restraining the deduction of tax at source under section 194N of the Act is indeed a landmark order. The same should go a long way in deciding the constitutional validity and legality of this controversial provision in the law.

However, in the interim, it would be worthwhile to examine whether the benefit of the above order can be availed by other taxpayers at large.

At this juncture, it is also pertinent to highlight the fact that, although the intention of the legislature was to move towards a digital and cashless economy, one cannot lose sight of the fact that cash withdrawals from banks, by no stretch of imagination, can be considered, as ‘income’ earned by the recipient. As such, the collection of tax on such amounts ought to be treated as violative of the basic principles enshrined under our income-tax law.

If the issue is finally decided against the Revenue authorities, it would be an embarrassing setback vis-à-vis the Government’s significant efforts in moving towards a cashless economy.

Collection of tax on an amount that is not an ‘income’ of the recipient was an extreme step taken by the Government and going forward, more pragmatic approach may be expected to achieve the goal of a cashless and digital economy.


[1] WPA 10826 of 2021

[2] WP (C) No. 1658 of 2020 dated 13/08/2020

Image Credits: Photo by Mathieu Stern on Unsplash

The Finance Act 2020 had expanded the scope of Section 194N, which earlier mandated the deduction of tax at source for cash withdrawals above a certain limit, by revising the threshold. The section has been challenged as ultra-vires. 


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PhonePe Vs. BharatPe Case: No Exclusivity Over a Part of a Mark, Not Even by Misspelling It

Registration of the (whole) mark does not confer an exclusive right over a part of a registered mark. Similarly, no exclusivity can be claimed over a descriptive mark or a descriptive part of the mark, not even by misspelling it. This was the ruling of the Delhi High Court in a recent Trademark Infringement & Passing Off matter between PhonePe Pvt. Ltd. (Plaintiff) & Ezy Services & Anr. (Defendants). Hon’ble Justice C. Hari Shankar affirmed some of the fundamental principles of the Trademark Law, which have been asserted by various Courts from time to time.
PhonePe’s Perception:

PhonePe in its plea before the Delhi High Court stated that: a consumer of average intelligence and imperfect recollection, on seeing the defendants’ mark BharatPe would immediately associate it with PhonePe.

Well, how often is our intelligence questioned and challenged, even without our knowledge? Considering the deep inroads that technology has made into our lives now, I reckon all of us are reasonably aware of the prominent digital wallets in the market. Knowing that, it is contestable how many of us would have wondered about any association between these two marks purely based on the similarity in their suffix “Pe”.


The plaintiff had filed a suit before the Delhi High Court seeking a permanent injunction and other remedies against the defendants’ use of ‘Pe’ or any deceptive mark identical and/or similar to the plaintiff’s trademark ‘PhonePe’. The plaintiff alleged that the use of the word “BharatPe” itself, infringed the plaintiff’s registered trademark and amounted to passing off.

The plaintiff in its suit claimed that “Pe” is an essential, dominant, and distinguishing feature of the plaintiff’s registered trademarks. Plaintiff further claimed that “Pe” is an invented word, not to be found in the English dictionary and when combined with “Phone”, which is an ordinary dictionary word with a well-known meaning, “Pe” becomes the dominant and essential feature of the plaintiff’s trademark “PhonePe”.

Court’s Findings and Rulings:

The Hon’ble Delhi High Court’s decision in this matter seems to be premised based on following three principles, which have already been established earlier in multiple Judgments by various Courts:

a) The Anti-Dissection Rule:
The Hon’ble High Court observed that the registered mark ought not to be dissected for the purpose of comparison with the conflicting mark. However, the Court acknowledged the exception of “dominant mark” test, under which, if any part of the plaintiff’s mark was found to be dominant, the Court was required to examine whether such dominant part of the plaintiff’s mark was infringed by the defendant’s mark.

The plaintiff contended that “PhonePe” was a combination of the words “Phone” and “Pe”, where “Phone” was a common dictionary word and the suffix “Pe” was not a dictionary word, which made it the dominant feature of the plaintiff’s trademark. Similarly, in the defendant’s trademark, the word “Bharat” was publici juris and “Pe” formed the dominant element of the mark “BharatPe”. However, the Court was not convinced on the argument and did not find “Pe” to be the dominant part, therefore, the marks were not allowed to be dissected for the comparison.

The Court ruled that while applying the above principles to the facts in hand, the following positions emerged i.e. (i) “PhonePe” and “BharatPe” were both composite marks. (ii) the marks could not be dissected into “Phone” and “Pe” in the case of the plaintiff and “Bharat” and “Pe” in the case of the defendants; and (iii) the plaintiff could not claim exclusivity over the word “Pe”, as it was merely a misspelling of the word “Pay”, hence no infringement could be claimed on the basis of part of a registered trademark.

b) Separate Registration of a Part of a Composite Mark:
The Hon’ble Court further observed that since the plaintiff did not have any registration over the suffix “Pe”, therefore, it could not claim any exclusivity on the same. As a result, the question of infringement did not arise because of the alleged similarity between the non-essential, unregistered part of the composite mark.

In the cases of South India Beverages1 and P.K. Overseas Pvt. Ltd.2, the Delhi High Court explained the relation between the anti-dissection principle and the “dominant/essential feature” principle. The division bench relied on a passage from McCarthy on Trademarks and Unfair Competition, earlier cited in the case of Stiefel Laboratories3, which stated that “The rationale for the rule is that the commercial impression of a composite trademark on an ordinary prospective buyer is created by the mark as a whole, not by its component parts. However, it is not a violation of the anti-dissection rule to view the component parts of conflicting composite marks as a preliminary step on the way to an ultimate determination of probable customer reaction to the conflicting composites as a whole”.

c) Non-exclusivity of Descriptive or Generic Marks or Parts of Marks:
The Hon’ble Court observed that a party cannot claim exclusivity over a descriptive or generic mark or a part of the mark that is considered descriptive. The Court went on to observe that the plaintiff could not claim that the mark was non-descriptive merely by misspelling the descriptive word. However, the Court admitted an exception to this principle in situations where the descriptive or generic mark had acquired distinctiveness or secondary meaning.

The Court further observed that had the plaintiff been able to establish that the word “Pe” had acquired distinctiveness and secondary meaning, it might have been able to make out a case of infringement. However, in this case, the plaintiff’s use of the mark “PhonePe” was only since 2016 and even the defendants claimed to have extensive use of their mark “BharatPe”. Therefore, the plaintiff had not been able to make out a prima facie case.

In the case of Marico Limited4, the Court dived deep into the concept of acquired secondary meaning of a descriptive mark and held that while deciding whether a descriptive mark is registrable or not the “Courts should ordinarily lean against holding distinctiveness of a descriptive trademark unless the user of such trademark is over such a long period of time of many-many years that even a descriptive word mark is unmistakably and only relatable to one source i.e. the same has acquired a secondary meaning”.
1 South India Beverages v. General Mills Marketing, AIR 1965 SC 980
2 P.K. Overseas Pvt. Ltd. v. Bhagwati Lecto Vegetarians Exports Pvt. Ltd., 2016 SCC OnLine Del 5420
3 Stiefel Laborataries v. Ajanta Pharma Ltd, 211 (2014) DLT 296
4 Marico Limited v. Agro Tech Foods Limited, 2010 (44) PTC 736 (Del.) (DB)
The Marico case also discussed the nature and character of a misspelt word when used as a trademark and held that “if partly tweaked descriptive words and expressions of English language are claimed to be coined words, the same would result in a grave and absurd situation because a non-tweaked word being a completely descriptive word will in fact be deceptively similar to the tweaked descriptive English language word or expression of which registration is obtained”.


The Hon’ble Court ruled that there was no case for grant of interim injunction against the defendants. The Court observed that except the common word “Pe” (suffix) it cannot be established that the marks “PhonePe” and “BharatPe” are confusingly or deceptively similar. Barring the suffix “Pe” these are two different words altogether with no commonality whatsoever.

The important legal positions that emerge from this decision are:
(i) In accordance with the “anti-dissection” rule, it was held that the composite marks were to be considered in their entirety rather than truncating or dissecting them into individual components/elements.
(ii) The registration of a composite mark cannot confer any exclusive rights over any part of such registered mark unless otherwise, such part is the dominant part of the registered mark.
(iii) No exclusivity can be claimed, over a descriptive mark, or a descriptive part of a mark, not even by misspelling it, unless otherwise the descriptive mark or descriptive part has attained distinctiveness, or it has acquired a secondary meaning.

This case has surely reaffirmed some of the basic principles of trademark laws that prohibit adaptation and exclusive claim over descriptive and generic marks or part of the mark.
Read about the important legal positions that emerge from the PhonePe V. BharatPe decision in this article.


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CBDT notifies thresholds for determining ‘Significant Economic Presence’ in India

The concept of SEP was introduced under Income-tax Act, 1961 (“the Act”) vide Finance Act, 2018, by way of insertion of Explanation 2A to section 9 of the Act, to expand the scope of the term ‘Business Connection’ and includes:
(a) transaction in respect of any goods, services or property carried out by a non-resident with any person in India including provision of download of data or software in India, if the aggregate of payments arising from such transaction or transactions during the previous year exceeds such amount as may be prescribed; or (b) systematic and continuous soliciting of business activities or engaging in interaction with such number of users in India, as may be prescribed. It was further provided that the transactions or activities shall constitute significant economic presence in India, whether: (i) the agreement for such transactions or activities is entered in India; or (ii) the non-resident has a residence or place of business in India; or (iii) the non-resident renders services in India. The above-mentioned Explanation was inserted primarily for establishing Business Connection in India for Multinational entities carrying out business operations through digital means, without having any physical presence in India. However, its enforceability was deferred time and again as the discussion on this issue was ongoing under G20 – OECD BEPS project.
Read about the implications of the CBDT notification that has prescribed the ‘revenue’ and ‘users’ threshold for the purpose of determining SEP.


Image Credits: Photo by Markus Winkler from Pexels


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BigBasket Vs. Daily Basket Saga

Perils of using generic/descriptive terms as a “Trademark”

On February 21, 2021, when Ramesh Vel, the founder of a Coimbatore based startup “Daily Basket” tweeted about BigBasket’s alleged bullying through a cease & desist notice, no one ever thought that it would become such a big issue. Even before the news could spread, Daily Basket was prompt enough to create a page to put forth their perspective and even posted a copy of the notice. They did not stop at this but went on to launch an online campaign #BoycottBigBasket.

This prompt and aggressive move surely garnered sympathies as well as support for Daily Basket and BigBasket was at the receiving end as it was perceived as a bully in the entire episode. Though it may not have caused any impact on BigBasket’s revenue, the Company cannot deny that the episode did put a dent in its brand reputation.

The Notice:

The cease & desist notice dated Feb 17, 2021, was sent to the startup Letsdaily India Private Limited, asking them to refrain from using the mark “Daily Basket” and any other name or a mark containing the term “Basket” and also sought Rupees Two Lakhs towards the cost of the legal notice.

Who owns/claims what?

Before analyzing the matter, let us understand the claims and ownerships over the subject marks.

Looking at the trademark database, BigBasket seems to have registered several variants of its brand “BigBasket” in various classes i.e. 29, 30, 31 & 35 (food & related goods and online marketplace). However, the record does not show or mention any use or registration of the term “Basket” by BigBasket independently.

Daily Basket claims to have started its business around August 2020 but there is no record of any trademark application/registration by them.

The term “Basket”:

Currently, there are two “Basket” marks that seem to have been registered in India; one being in Class 35 where the application is dated 2014 (appl. no. 2779571) and the other one in Class 31 where the application is dated 2017 (Appl. no. 3470365).

The mark “Daily Basket”:

With regard to the mark “Daily Basket”, currently there are 3 marks in the records of Trademark Registry in Class 35. The first “Daily Basket” mark (appl no. 1807585), which was filed way back in 2009, could not proceed to registration and the same stands abandoned.

The other “Daily Basket” mark (appl. no. 3042971), which stands “registered”, was filed in the year 2015. The third “Daily Basket” mark, which was filed in the year 2017, (app. no. 3491637) was refused registration due to various reasons including the presence of conflicting marks in the same class.

Interestingly, during the prosecution of the last two marks, the examiner did not cite “BigBasket” as a conflicting mark even though BigBasket’s trademarks were on record or registered during that period and in the same class – related to the same or similar services.

Other similar marks with prefix/suffix “Basket”:

There are over a dozen trademarks with suffix/prefix “basket” including, Oven Basket, Nature’s Basket, Ocean Basket, Fresh Basket, Health Basket etc. which appear to be in existence (registered or filed or used) on the Trademark Registry’s record as early as 1999 which is way prior to BigBasket’s coming into existence i.e., 2012.

Similarly, there are another over a dozen marks with prefix/suffix “basket” including Fbasket, EBasket, 4Basket, NutBasket, Medbasket, TekBasket, MilkBasket, Badi Basket, Aqua Basket, Pure Basket, Spin Basket, Eco Basket etc. which were registered post BigBasket’s trademark registration and most of them are in use and in relation to the goods/ services in Class 29, 30, 31 and 35.

BigBasket’s Claim – fair or unfair?

As per the cease & desist notice, BigBasket’s primary objection was over Daily Basket’s use of the term “Basket”. A simple comparison between the two marks (as shown in it clear that there exists no similarity between the two logos. Therefore, the main issue in the subject matter was over the term “Basket”.

Without dwelling deep into the Trademark Law, which has already been done in many of the previously authored articles, it is abundantly clear that a term like “Basket” (in class 35) would be considered a descriptive mark hence non-registrable (we need not get into the nitty-gritty of how the other two “Basket” marks were registered).

Further, even though BigBasket has been threatening and opposing registration of various other marks with Prefix/Suffix “Basket”, the fact that it did not even attempt to register the mark “Basket” itself makes the strength of the contention fairly obvious.

What goes against BigBasket?

A plain reading of the cease & desist notice explains the seriousness of the matter. It is beyond anyone’s understanding how and on what ground one would claim exclusive ownership over the term “Basket” especially when a) you don’t have any registration over it; b) there are several already registered marks (similar) some of them being prior to even their commencement of business, and c) the mark being a descriptive one.

Perhaps, no one can deny the fact that BigBasket’s claims were far-fetched and demands overly ambitious. It is quite possible that they would not have been apprised with the basic principles of trademark law or rather the whole approach was very casual in nature.

It happens in many cases where the trademarks applications are opposed and users are threatened with legal notices even when there is no strong case. This is because, in India, it is not a common practice to fight back or take legal action for groundless threats.

What are the lessons learnt?

Getting involved in personal capacity must be avoided when a matter can be and should be handled by experts who know the ins and outs of the legal implications. In the instant case, the founder of Daily Basket got involved personally and used digital and social media to level allegations. The fact that BigBasket chose to respond in a clarification mode also did not go down well and the whole matter got murkier.

Had this been handled by their lawyers instead (considering the substance in the notice), it would have simply been concluded without any clamour and commotion. Involvement of founders or CEOs is advisable and welcome only in closed-door negotiations or dispute resolutions but definitely not in public forums.

Is it wise to adopt a generic mark?

Adoption and registration of generic and descriptive marks always have consequences, both in the short term as well as the long term. In the short term, it is an uphill task to get these marks registered, whereas in the long term one must keep contesting the use/registration of similar marks by third parties.

There is always a fraction of people who would advise you to adopt a generic/descriptive mark which makes the marketing team’s job much easier, but everyone does not get lucky and neither does everyone has deep pockets. The “” case is a good example where the matter went till US Supreme Court before the mark was registered and even then, they did not get the right to refrain others from using similar marks.

Similarly, in the recent Judgment of PhonePe Vs. BharatPe, the Hon’ble Delhi High Court asserted that no exclusivity can be claimed over a descriptive mark, or a descriptive part of the mark unless the descriptive mark or descriptive part has attained distinctiveness, i.e. it has acquired a secondary meaning.

The content of this Article does not necessarily reflect the views / position of Fox Mandal but remain solely those of the authors.



Know all about the validity of the claims made by both BigBasket and Dailybasket from a trademark registration perspective.


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Intellectual Property Appellate Board (IPAB) Amongst Other Tribunals Abolished Through an Ordinance

In a bid to streamline the functioning of tribunals and avoid delay in the dispensation of justice, the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 has been promulgated by the President of India through a gazette notification dated April 04, 2021. A bill to the same effect had been passed in the Lok Sabha in February and was pending in the Rajya Sabha, however, the ordinance was brought in despite assurances that the bill would be sent to a standing committee for a review in light of opposition.

The ordinance is seen as another step in the process of rationalisation of tribunals that began in 2015 . Through the Finance Act, 2017, seven tribunals had been abolished or merged based on functional similarity, however, the Act underwent various legal challenges for being passed as a Money Bill in violation of Articles 107, 110 and 117 of the Constitution Of India and being against the basic tenet of independence of judiciary.

The Finance Act, 2017 had empowered the central government to notify rules on qualifications of members, terms and conditions of their service, and composition of search-cum-selection committees for 19 tribunals (such as Customs, Excise, and Service Tax Appellate Tribunal). The ordinance amends the 2017 Act to include provisions related to the composition of search-cum-selection committees, and term of office of members in the Act itself as directed by the Supreme Court in the Rojer Matthew Case . However, the ordinance limits the term of members to 4 years disregarding the Supreme Court’s decision in the IPAB Case 3, which stipulated a minimum term of 5 years.

The ordinance primarily dissolves existing appellate bodies under 9 statutes including the Intellectual Property Appellate Board (“IPAB” or the “Appellate Board”) and transfers their functioning to the concerned High Courts, Commercial Courts/Commercial Division of High Courts, Registrars, Central Government etc.

The amendments introduced by the ordinance across various IP statutes have been detailed below:

Trade Marks Act, 1999

  • The IPAB which was set up under Section 83 of the Trade Marks Act, 1999 to hear appeals against the Trademarks Registrar’s decisions under the Act has been abolished.
  • The ordinance also transfers the powers of the Board to the High Court and transfers the pending cases before IPAB to the respective High Courts under whose jurisdiction the Appeal would have been ordinarily filed.
  • To dismantle the Board, the ordinance has deleted provisions related to the IPAB including the establishment (Section 83) and composition of the Tribunal (Section 84), Qualification (Section 85), Term of Office (Section 86), Salaries (Section 88), Resignation and Removal (Section 89), Procedure and Powers (Section 92) Condition on interim order (Section 95) Chairman’s power to transfer cases from one branch to another from the Act.
  • To transfer the power and function of the Board to the High Court, the ordinance has lifted the bar on the jurisdiction of the court by deleting Section 93 from the Act. It further deletes the definition of Appellate Board, Bench, Chairman, Judicial Member, Member, tribunal, and Vice-Chairman from Section 2 (1) of the Act.
  • The ordinance amends the definition of “prescribed” from “prescribed by rules made under this Act” to “(i) in relation to proceedings before a High Court, prescribed by rules made by the High Court; and (ii) in other cases, prescribed by rules made under this Act.”
  • The ordinance substitutes the term “Tribunal” with “the Registrar or the High Court” and “Appellate Board” with “High Court” wherever they occur in the Act.
  • The ordinance has also carried out amendments identical to the above in the Geographical Indications of Goods (Registration and Protection) Act, 1999 to dismantle the IPAB and transfer the powers and functions to the High Court.

Copyright Act, 1957

  • Appellate Board established under the Copyright Act, 1957, which was empowered, among other things, to hear appeals against the orders of the Registrar of Copyrights has been dismantled and replaced with Commercial Courts, a division of High Courts. To do so, the ordinance has deleted provisions related to the Appellate Board including its definition under Section 2 (aa) of the Act.
  • It defines “Commercial Courts” under Section 2 (fa) of the Act as “Commercial Court, for the purposes of any State, means a Commercial Court constituted under section 3, or the Commercial Division of a High Court constituted under section 4 of the Commercial Courts Act, 2015”. The newly added definition gives “Commercial Courts” the same meaning as it has under Section 4 of the Commercial Courts Act, 2015.
  • It has replaced the term Appellate Board with “Commercial Courts” wherever they occur in the Act, except for Section 50 of the Act in which the term “Appellate Board” has been replaced with “High Court”.
  • The power of the Appellate Board to hear appeals against the orders of the Registrar of Copyrights will now be vested with a Single Judge of the High Court. The Single Judge has also been empowered to refer the case to a larger bench if the Judge deems fit.
  • Since the amendment mandates that any proceeding before the High Court or the Commercial Division of the High Court including proceeding under section 31D of the Act for fixation of royalties shall be as per the rules prescribed by the High Court which in this case shall be Commercial Courts Act, 2015.
  • Since section 14 of the Commercial Courts Act mandates expeditious disposal of appeals, we can expect better management of the backlog of Copyright related commercial disputes in the near future.

Cinematograph Act, 1952

  • The ordinance has abolished the Appellate Tribunal formed under the Cinematograph Act, 1952 by deleting Section 2(h) of the Act.
  • It replaces the term ‘Appellate Tribunal’ under Section 7C of the Act with ‘High Court’. Hence, the power of the Tribunal which was empowered to hear appeals against decisions of the Censor Board has been transferred to the concerned High Court. As a result, such appeals shall now be filed directly before the concerned High Court.

Protection of Plant Varieties and Farmers’ Rights Act, 2001

  • The Plant Varieties Protection Appellate Tribunal formed under Section 54 of the Protection of Plant Varieties and Farmers’ Rights Act, 2001 has been dismantled.
  • The ordinance has removed the provisions related to the Tribunal including the definition of Chairman, Member, Judicial Member, establishment (Section 54), composition (Section 55), the procedure of the Tribunal.
  • The term “Tribunal” has been substituted with “High Court” wherever they appear in the Act.
  • As a result, the power of the Tribunal which was empowered to hear appeals against decisions of the Registrar of Plant Varieties Registry and Protection of Plant Varieties and Farmers’ Rights Authority has been transferred to the concerned High Court.
  • Now all such appeals shall be filed directly before the concerned High Court, and any pending cases shall be transferred to the concerned High Court.

Patents Act, 1970

  • The Appellate Board formed under Section 116 of the Patents Act, 1970 which was vested with the power to hear appeals under Section 117A of the Act against orders of the Controller General of Patents, Designs and Trade Marks (“CGPDTM”) or the Central government has been abolished.
  • Much like the above amendments, the ordinance omits provisions related to the Appellate Board such as establishment (Section 116) and composition of the Board (Section 117), Procedure and Powers (Section 117B and 117D).
  • To transfer the power and function of the Board to the High Court, the ordinance has lifted the bar on the jurisdiction of the court by deleting Section 117C from the Act.
  • Prior to the amendment both the High Court and Appellate Board were supposed to function simultaneously, however, now Appellate Board has been omitted from all of those places. Further, wherever only the Appellate Board appeared, it has been substituted with the High Court.

Apart from the amendments to the statutes specified above, a transitional provision has been made to compensate outgoing tribunal members for the premature termination of term and reversion of officers on deputation to parent cadre, Ministry or Department. In addition, any appeal, application or proceeding pending before the Tribunal, Appellate Tribunal or other authorities, other than those pending before the Authority for Advance Rulings under the Income-tax Act, 1961, shall stand transferred to the Court before which it would lie as per the ordinance, and the Court may proceed to deal with such cases from the stage at which it stood before such transfer, or from any earlier stage, or de novo, as the Court may deem fit. Moreover, the balance of all monies received by the abolished authorities and not spent by it as well as properties owned by it shall stand transferred to the Central Government.


Few may consider it as a notable change in IP dispute resoltion, others including the Group of Industry Associations on Intellectual Property have opined their dissatisfaction regarding the move. Nevertheless, since the Appellate Boards were formed to fast-track the backlog of cases, and they failed to meet the desired objective, it appears to be a prudent move by the Government. It should be however kept in mind that since the Indian Judiciary is infamous for backlog of cases, mere abolishment of the Appellate Tribunal will be futile unless the special commercial courts/benches are equipped to handle these cases. The substitution of the Appellate Board with the High Courts and Commercial Courts in relation to Copyright disputes also means the cost of instituting the proceedings before the respective judicial bodies will be decided in accordance with the Code of Civil Procedure, 1908 and the Commercial Courts Act, 2015.

The abolition of the Appellate Board poses another problem with respect to the royalty rates that are due to be revisited by the end of this year. The ordinance may have further complicated the entire procedure under Section 31D of the Copyright Act. This means any procedure prescribed under the Copyright Rules, 2013 in relation to the above proceeding gets nullified and we can expect the Central Government to exercise its power under Section 21A of the Commercial Courts Act, 2015 to frame rules akin to Rule 31 of the Copyright Rules, 2013.

The content of this Article does not necessarily reflect the views / position of Fox Mandal but remain solely those of the authors.

“Read about the changes introduced through the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021.”

Image Credits: Photo by freestocks on Unsplash


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SC: Consideration Paid for Purchase of Computer Software, Not Royalty, No Obligation on Buyers to Deduct Tax at Source


The Hon’ble Supreme Court of India (SC) has at long last, put to rest the two-decade old controversy in relation to taxability of the consideration paid for purchase of computer software from a non-resident distributor/ manufacturer. The controversy revolved around whether the consideration paid for purchase of the computer software would constitute ‘Royalty’ as per the provisions of section 9(1)(vi) of the Act, read with relevant Double Taxation Avoidance Agreement (‘DTAA’). There were divergent views of some High Courts as well as of the Authority for Advance Rulings on this issue, which, thankfully, has now been settled by the Hon’ble SC, against the Revenue and in favour of the taxpayers.

In the case of Engineering Analysis Centre of Excellence Private Limited1 and others (Appellants), the Hon’ble SC has held that the consideration paid for purchase of an off-the- shelf software from a non-resident seller does not tantamount to ‘Royalty’ as per Article 12 of the DTAA and hence there is no obligation on the Indian buyer to deduct tax at source under section 195 of the Income-tax Act, 1961 (‘the Act’), as the distribution agreements/ End-User Licence Agreements (EULAs) do not create any interest or right in such distributors/ end-users which would tantamount to the use of or right to use any copyright.


The Appellants had imported/ acquired shrink wrapped computer software from non-residents distributor/ manufacturers. While making payment to those non-residents, the Appellants did not deduct tax at source under section 195 of the Act, on the premise that such amounts do not constitute ‘Royalty’; hence are not taxable in India as per the relevant DTAA and accordingly, there could not be any obligation on them to deduct tax at source under section 195 of the Act.


The key question before the Hon’ble SC was whether there would be any obligation on a resident buyer, acquiring computer software from a non-resident distributor/ manufacturer, to deduct tax at source, under section 195 of the Act, by classifying the consideration paid as ‘Royalty’ under section 9(1)(vi) of the Act, read with Article 12 of the relevant DTAA.

There were various appeals/ questions raised before the Hon’ble SC, which were grouped into four categories:

a) Computer software purchased directly by resident end-users from non-resident suppliers or manufacturers.
b) Resident distributors or resellers purchasing computer software from non-resident suppliers or manufacturers and then reselling the same to resident Indian end-users.
c) Non-resident distributors reselling the computer software to resident Indian distributors or end-users.
d) Computer software embedded into hardware and sold as an integrated unit/equipment by non-resident suppliers to resident Indian distributors or end-users.


The Appellant’s contentions have been summarized below:

  •  Computer software that is imported for onward sale constitutes ‘Goods’.
  • Definition of Royalty as per DTAA did not extend to a derivative product of the copyright. For example, a book or a music CD or software products.
  • Retrospective amendment to section 9(1)(vi) by Finance Act 2012 could not be applied to assessment years under consideration, as the law cannot compel one to do the impossible.
  • Provisions of DTAA would prevail over the provisions of the Act to the extent they are more beneficial to the deductor of tax under section 195 of the Act.
  • Distinguishment can be made between the sale of a copyrighted article v/s. the sale of copyright itself. As per section 14(b) of the Copyright Act, 1957 Act (“CA Act”), ‘Computer Program’ and a ‘copy of Computer Program’ are two distinct subject matters. In the instant case, no copyright was transferred, as the end-user only received a limited license to use the product by itself with no right to reproduce, sub-licence, lease, make copies, etc.
  • It was also contended that explanation 4 to section 9(1)(vi) of the Act would apply only to section 9(1)(vi)(b) of the Act and would not expand the definition of Royalty as contained in explanation 2 to section 9(1)(vi) of the Act. Further, reference was made to Circular No. 10/2002 issued by Central Board of Direct Taxes (CBDT), wherein, ‘remittance for royalties’ and ‘supply for computer software’ were addressed as separate distinct payments, the former attracting the ‘royalty’ provision and the latter taxable as business profits.
  • Based on the doctrine of first sale/ principle of exhaustion, it was argued that the foreign supplier’s distribution rights would not extend to sale of copies of the work to other persons beyond the first sale.


The Revenue’s contentions have been summarized below:

  • The primary contention of the Revenue was that what was transferred in the transaction between the parties was copyright and accordingly the payment would constitute Royalty and Indian user/ importer would be required to deduct tax at source.
  • It was argued that explanation 2(v) to section 9(1)(vi) of the Act applies to payments to a non-resident by way of royalty for the use of or the right to use any copyright. Reliance was placed on the language of explanation 2(v) and it was stressed that the words “in respect of” have to be given a wide meaning.
  • The Revenue further contended that since adaptation of software could be made, albeit for installation and use on a particular computer, copyright was parted with by the original owner.
  • It was further pointed out that the Indian Government has expressed its reservations on the OECD Commentary dealing with the parting of copyright and royalty.
  • It was argued that in some of the EULAs, it was clearly stated that what was licensed to the distributor/end-user by the non-resident would not amount to a sale, thereby making it clear that what was transferred was not goods.
  • It was further argued that explanation 4 of section 9(1)(vi) of the Act existed with retrospective effect from 1976 and accordingly the Appellants ought to have deducted the tax at source even prior to the year 2012.
  • The Revenue placed reliance on the ruling of PILCOM v. CIT, West Bengal- VII, 2020 SCC Online SC 426 [“PILCOM”]2, which dealt with section 194E of the Act, for the proposition that tax has to be deducted at source irrespective of whether tax is otherwise payable by the non-resident assessee.
  • With respect to the doctrine of first sale/principle of exhaustion, it was argued that it would have no application since it is not statutorily recognised in section 14(b)(ii) of the CA Act. Accordingly, it was contended that when distributors of copyrighted software ‘license’ or ‘sell’ such computer software to end-users, there would be a parting of a right or interest in copyright; in as much as, such “license” or sale would be hit by section 14(b)(ii) of the CA Act.


  • Provisions of CA Act

The Hon’ble SC placed reliance on the provisions of the CA Act and observed as under:

The expression ‘copyright’ means the “exclusive right” to do or authorise the doing of certain acts “in respect of a work”. In the case of a computer program, section 14(b) read with section 14(a) of the CA Act prescribes certain acts as to how the exclusive rights with the owner of the copyright may be parted with. Thus, the nature of rights prescribed under section 14(a) and section 14(b) of the CA Act would be referred to as “copyright”, which would include the right to reproduce the work in any material form, issue copies of the work to the public, perform the work in public, or make translations or adaptations of the work.

Section 16 of the CA Act states that no person shall be entitled to copyright otherwise than under the provisions of the CA Act or any other law for the time being in force. Accordingly, it is held that the expression ‘copyright’ has to be understood only as is stated in section 14 of the CA Act.

On perusal of the distribution agreements, the Hon’ble SC observed that what is granted to the distributor is only a non-exclusive, non-transferable licence to resell computer software and it was expressly stipulated that no copyright and no right to reproduce the computer program, in any manner, is transferred either to the distributor or to the ultimate end user.

It further observed that the ‘license’ that is granted under EULA, conferring no proprietary interest on the licensee, is not a licence that transfers an interest in all or any of the rights contained in sections 14(a) and 14(b) of the CA Act. The SC held that there must be a transfer by way of license or otherwise, of all or any rights mentioned in section 14(b) read with section 14(a) of the CA Act.

  • Sale of Goods

The SC further observed that what is ‘licenced’ by the non-resident supplier/ distributor is in fact a sale of a physical object, which contains an embedded computer program and thereby held the same as “sale of goods” by placing reliance on the ruling of Hon’ble SC in the case of Tata Consultancy Services v. State of A.P., 2005 (1) SCC 308.3

  • Royalty in the DTAA vs the Act

It was observed that DTAA provides an exhaustive definition of ‘Royalty’ as it uses the expression “means” whereas the definition of ‘Royalty’ contained in the Act is wider in nature. Accordingly, Article 12 of the DTAA defining the term ‘Royalty’ would be relevant to determine taxability under DTAA, as it is more beneficial to the assessee as compared to section 9(1)(vi) of the Act.

It was further observed that explanation 4 to section 9(1)(vi) of the Act (retrospectively introduced vide Finance Act, 2012) is not clarificatory of the position as of 1 June 1976, but it expands the existing position and hence it does not clarify the legal position as it always stood.

The SC relied on two legal maxims, lex non-cogit ad impossibilia, i.e., the law does not demand the impossible and impotentia excusat legem, i.e., when there is a disability that makes it impossible to obey the law and further relied on various judicial precedents and held that any ‘person’ cannot be expected to do the impossible and accordingly the expanded definition of Royalty inserted by explanation 4 to section 9(1)(vi) of the Act cannot apply retrospectively, as such explanation was not actually and factually in the statute.

  • PILCOM Ruling

It was observed that the PICLOM ruling was in respect of section194E of the Act which deals with a different set of TDS provisions, without any reference to chargeability to tax under the Act. As already held in GE Technology4, deduction of tax under section 195 can be made only if the non-resident assessee is liable to pay tax under the provisions of the Act and accordingly it had no application to the present facts of the case.

  • Doctrine of First Sale/ Principle of Exhaustion

The SC relied on various judicial precedents to explain the concept of the doctrine of first sale/ principal of exhaustion, which enables free trade in material objects on which copies of protected works have been fixed and put into circulation, with the right holder’s consent. The said principle was introduced in the CA Act, vide amendment made in the year 1999.

Based on the above principle, it is held that the distribution rights subsist with the owner of the copyright, to the extent such copies are not already in circulation. Thus, it is the exclusive right of the owner to sell or to give on commercial rental or offer for sale or for commercial rental, ‘any copy of computer program’. The distributor who resells the computer program to the end-user cannot fall within its scope.

  • Interpretation of treaties and OECD Commentary

India has reserved its right under the OECD Commentary with respect to taxation of royalties and fees for technical services. However, in this regard, the SC has noted that, after India took such positions, no bilateral amendment was made by India and the other Contracting States to change the definition of royalties. Accordingly, the OECD commentary would only have persuasive value with respect to the interpretation of the term ‘Royalties.

  • CBDT Circular No. 10/2202 dated 9 October 2002

The SC further referred to the above-mentioned Circular, wherein the Revenue itself has made a distinction between royalties and remittance for the supply of computer software (which is treated as business profits and taxability depends upon the existence of permanent establishment in India).

  • Ruling

In light of the aforementioned reasoning, the Hon’ble SC held that the consideration paid for the purchase of an ‘off-the-shelf’ software from a non-resident seller did not amount to ‘Royalty’ as per Article 12 of DTAA, as the distribution agreements/ EULAs did not create any interest or right in such distributors/ end-users, which tantamounted to the use of or right to use any copyright. Since the amount was not chargeable to tax in India, there was no obligation on the Indian resident buyer to deduct tax at source under section 195 of the Act.


The taxation of royalty has always been a vexed issue in the Indian context. There have been conflicting rulings on the issue relating to the characterization of payments towards the purchase of computer software. This is indeed a welcome ruling, which has finally put to rest a long litigation.

However, it is pertinent to note that the Finance Act, 2020 has introduced the provisions of ‘equalisation levy’ leviable on a non-resident e-commerce operator from e-commerce supply of services. These transactions are exempted from Income-tax under section 10(50) of the Act.

Further, vide, Finance Bill 2021, it has been clarified that exemption under section 10(50) will not apply to royalty or fees for technical services, that are taxable under the Act read with the DTAA. Hence, as a corollary, it may be deduced that, based on this SC ruling, if a non-resident takes shelter under the DTAA, for payments that are made to it for purchase of computer software, the non-resident could still be liable to pay equalisation levy on the satisfaction of certain prescribed conditions. It is therefore advised that going forward, such issues are analysed carefully and separately, before arriving at any conclusion on the effective taxability that arises. Additionally, in cases where the payments are being made to parties residing in non-DTAA countries, suitable arguments would require to be made, on a case-to-case basis using this decision as a persuasive tool.

1 Civil Appeal Nos 8733 – 8734 of 2018
2 [2020] 271 Taxman 200 (SC)
3 [2004] 271 ITR 401
4 [2010] 327 ITR 456
This article expounds a recent decision regarding tax liability on the purchase of computer software from a non-resident distributor/ manufacturer.


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Trademark Bullying: A Legal Means to Illegal Ends

The law of Trademark Protection was developed to grant exclusive proprietary right to Trademark owners, the monopoly of the Trademark owners over their trademarks and safeguard the collective goodwill. In a nutshell, Trademark Protection originated to restrain the sale of counterfeit products under an existing reputed brand name, but what happens when the same owners who are protected go above and beyond their legal capacity to protect their mark? The exact term for such an act is “Trademark bullying”.
Off late it has become a persistent problem with big companies, whereby they try to strong-arm small enterprises for business gains. Proprietors having high stakes go out of their way to protect their marks, even though the target entities do not use marks that are remotely similar to theirs. When a proprietor becomes an aggressive protector of his Trademark, lines between actual infringement and absurd contestations blur. To understand whether the same is bullying or an actual trademark infringement we will have to understand what constitutes bullying and the subtle difference between infringement and trademark bullying.

Definition & Ingredients

Definition of Trademark Bullying
The United States Patent and Trademark Office (USPTO) has defined trademark bullying as “the act where the trademark owner that uses its trademark rights to harass and intimidate another business beyond what the law might be reasonably interpreted to allow.”1 The practice of a proprietor being overprotective of their mark and enforcing trademark rights beyond the required limit and scope of trademark law is called Trademark Bullying. 2 For instance when a powerful company or a big MNC like Amazon or Apple, that has immense funds, files a suit against local or smaller companies for infringement. Legal proceedings have a humongous cost attached to them and cannot be afforded by everyone. A small company that does not have adequate finances to fight a legal battle tends to budge under the influence of these powerful companies and give up on using their mark along with the products and services used under the mark, which they are legally entitled to. However, these threats are more than often groundless and baseless.

The course of action for entities that suspect infringement should be to verify whether the rival mark is actually similar to the proprietors’ mark. The next step would be to understand the trade circle, the market area and the similarity in the goods and services and further understand whether there is actual infringement or dilution. Similarly, one needs to determine whether there is a likelihood of confusion that might arise when a man with average intelligence looks at the rival marks. After the conclusion of the said due diligence, the proprietors would be in a position to understand whether they need to proceed with a legal action.

Who is a Trademark Bully and What Constitutes Trademark Bullying?
Various elements are to be considered before concluding whether it is a good faith trademark enforcement or bullying. A bully is someone who crosses the outer limit of “likelihood of confusion” en route to its trademark enforcement by prosecuting proprietors that are using an allegedly similar mark for non-competitive goods and services. In the case of deceptively similar marks and competitive goods and services, any act of aggressive enforcement will fall within the ambit of good faith litigation, and it holds true even if the mark is relatively weak but the market segment is competitive. Likewise, when owners of dissimilar marks enforce their rights against marks in the use of non-competitive goods, it is trademark bullying. But what happens when the owner of deceptively similar marks tries to enforce their rights against non-competitive goods and services? The owners in such scenarios seek to rely on the related goods or complementary goods doctrine, which tries to establish a link between two non-competitive goods. Since such links are difficult to establish, the enforcers usually rely on unfounded claims of “famous and well-known trademark”.

Modus Operandi of Bullying and the Effect on Small Entities Big companies have been observed to follow a similar pattern when they try to eradicate their competition out of the markets. They send out a common cease and desist notice which contains threats in legal language alleging trademark infringement and dilution. They also mention that they have been successful in prosecuting other enterprises using similar trademarks and then initiate either opposition proceedings or rectification proceedings against the small enterprise.3

The effect on the small enterprises that do not have any economical or legal support is they sit for a settlement wherein they are asked to withdraw their marks and the same is accepted by the small enterprises. The small enterprises tend to incur a huge financial cost of rebranding, removal of products from the markets, and loss of reputation because of the suit.

Comparative Analysis of Judicial Approach to Trademark Bullying in India and the US

The Approach by US Courts
While in India the cases which surround the issue of trademark bullying are still fewer, the instances are much higher in the United States. Here are a few cases that helped the courts of the United States to look at the situation of trademark bullying from a different perspective.

In Monster v. Vermonster, the manufacturer of a renowned energy drink “MONSTER”, Hansen Beverage Co., sent a cease-and-desist notice to Rock Art Brewery for using “Vermonster” to market its brewed beer. Rock Act Brewery was a small company that sold its beer in a few states in the United States of America. Hansen asserted a likelihood of confusion over the term Vermonster for beer and Monster for an energy drink.

Even though the marks were completely dissimilar and unique in their own way, Rock Art was asked to comply with the notice, however, the proprietors of Rock Art stood against the bullying and issued a public statement and started advertising as well as marketing their product. They also took to social media which persuaded Hansen to back down and come to a settlement.4

After this particular case the U.S. Commerce department in coordination with the USPTO came up with a report which addressed the wrongful harassment of small entities by big companies.5

In Apple v. Prepear, Apple being a leading producer and seller of electronic products tried to manipulate a small entity – Prepear, a recipe sharing application, into letting go of their mark. At the outset, the logo of Prepear and Apple are pretty distinctive with Prepear having a drawing of a pear outlined in green against a white background and leaf facing downward and the logo of Apple being a half-eaten apple with the leaf facing upward. Further, the goods and services provided were also dissimilar.

Prepear took to social media to fight against the bullying and shared how Apple had managed to do the same with other entities who has created a fruit logo. Prepear also stated that they had to let go of various employees because they could not afford their pay alongside defending the costly suit. Although this case has not been decided yet, it is clear that both the logos are dissimilar, and the goods and service offered are also distinctive therefore there should be no cause of confusion for any man with average intelligence. Nonetheless, the factors that are to be taken into consideration while deciding whether there is a plausible infringement or bullying are fairly obvious.

Indian Jurisdiction
Indian legislators had forethought the possibility of such misuse and provided a viable resolution under section 142 of the Trademark’s Act, 1999 which outlines the law against groundless legal threat.

The provision states that when a person through circulars, advertisement, or otherwise threatens another person with an action or proceeding for infringement of a registered or alleged to be registered trademark, the aggrieved person may bring a suit against such person and obtain a declaration to the extent that such threats are unjustified.

The available legal remedy for such threats is that an injunction may be issued in favour of the aggrieved party to restrain the other person from the continuance of such threats and also to recover damages. This remedy is available for only those whose trademarks are registered.

One of the first case that may be identified as bullying in India is Milmet Oftho Industries and Ors v. Allergan Inc [(2004)12 SCC 624], wherein the Indian Pharmaceutical company Allergan sold a drug named ‘Ocuflux’. The Appellant, an international pharmaceutical company sold a drug with a similar name in different countries and therefore sought a passing off suit against Allergan. The Supreme Court held that “if multinational companies do not have any intention of coming to India or introducing their products in India, they should not be allowed to throttle Indian Companies if the Indian Company has been genuinely using their mark in India and developed the product and was the first in the market”.

Another notable case is Jones Investment Co v. Vishnupriya Hosiery Mills [2015-4-L.W.30], where the Appellant was an American company which had been using the trademark ‘Jones New York’ internationally for manufacturing and producing clothing, hosiery and footwear. The respondent on the other hand was a small textile firm based in Erode, a city in Tamil Nadu. The Respondent had filed an application for their mark ‘Jones’ in relation to the textile products, which was opposed by the Appellant and the Registrar of Trademark had dismissed the same which gave rise to an Appeal.

The Appellants contended that they had transborder reputation and that the respondents did not have enough sales of their products and therefore, would not be able to compete with the Appellant. However, the IPAB took a similar stand which was taken by the Supreme Court in the previous cited case and stated that “a multinational company cannot claim infringement of trademark by a local Indian company purely based on international presence, unless they can expressly establish that their presence extends to India or precedes that of the Indian company.”

In a similar case of Bata India Limited Vs Vitaflex Mauch GmbH (CS(OS) No. 1112/2006), wherein the plaintiff instituted a case against the defendant for restraining them from making baseless groundless threats of legal proceeding. The main question that the court had to deal with was whether the legal notice sent by the defendant amounted to a legal threat and if the plaintiff was entitled to injunction and damages. The Delhi High Court held that the legal notice amounted to threat and the same was unjustifiable, therefore, the defendants were ordered to restrain themselves from issuing any further baseless threats.

The recent spat between BigBasket and DailyBasket is the latest example of prevalence of Trademark Bullying in India. BigBasket slapped DailyBasket with a cease-and-desist notice directing DailyBasket to (1) Stop business operation under the trademark “Daily Basket” and the domain name ,and transfer the same to Big Basket; (2) discontinue the mobile application; (3) discontinue use of similar domain or trademark with the term “Basket” as a dominant feature of the domain name or the trademark; and lastly, (4) Pay INR 2,00,000.00/- as legal fees. This would be a fit case of bad faith enforcement, since the term “Basket” can be easily regarded as a term common to trade, and hence any proprietor in the trade of consumer goods is free to use it.

Although India had already made a provision for such threats, the act does not clarify what amounts to groundless and baseless threat. However, the above judgments decided by the Court and IPAB are clear on a few elements including whether the marks are actually similar and cause confusion, whether the international companies have an intention to bring their product into the country, first to use over first to file, etc. which have been taken into consideration when assuming if the same is to be considered as bullying or infringement. The Indian judiciary has not second guessed in slamming MNC’s and other powerful companies when it was clear that the local businesses were being wrongly and illegally affected by the infructuous cease and desist notice being sent to them.

The Road Ahead
Every legal notice of cease-and-desist would not amount to trademark bullying. The dynamics of each case are different, making the court re-think every scenario and look-out for the issue of trademark bullying or to check whether the plaintiff is seeking an injunction to avoid the actual consequence of an infringement. The primary purpose of the provision under the trademark act was to make sure that small entities and local businesses do not lose out on what they are legally entitled to own. However, there are ways in which the issue could be further curbed i.e. by providing resources to small entities including legal aid camps, creating awareness, law firms taking initiative and handling more pro bono cases etc. Small entities off late have sought some respite by resorting to social media wherein their plight is understood by a community of like-minded people who support through backlash at bigger companies which harms their reputation and goodwill gained over the years. While the laws in US on standard of proof for claims of trademark dilution shows a way to restrain trademark bullying on superficial claims of famous and well-known trademarks, the laws in India are still not clear on how far a litigant may go on such unfounded claims before being termed as a bully.
This article tries to explain what constitutes bullying and the subtle difference between infringement and trademark bullying.

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Unlocking the Potential of Space Technologies for Nation-building

On 28 February 2021, ISRO successfully launched 19 satellites using the PSLV-C51 launch vehicle. The payload included the 637 Kg Amazonia 1, Brazil’s first indigenous earth observation satellite, as well as 18 Indian satellites (including some built by students and faculty from three Indian engineering colleges). ISRO’s robust and world-class capabilities in designing, building and launching satellites have been demonstrated on multiple occasions in the course of the past five decades. The growing interest shown by India’s private sector (including start-ups), to build satellites is certainly something to be proud of.
India is already a member of an elite club of countries with significant capabilities in the arena of space technologies (“spacetech”). While we are making steady progress, space needs to be looked at in the broader context of the important role that will play in enabling and accelerating the future economic growth and social development of countries like India.

Mobile telephony unleashed a worldwide revolution two decades ago. By quickly becoming a part of it, India benefited hugely; indeed, we continue to see how a hand-held device can become everything from a bank to a source of news to a shop and so much more. If India can pragmatically direct even more of its resources to spacetech, enormous benefits can be realized in the decades ahead. This is something that has started to happen in recent years by way of enabling policy changes.

For many years, ISRO’s satellites have been providing us with tangible benefits in three areas:
  • Giving farmers better and more timely information about weather conditions;
  • Alerting vulnerable populations to impending natural disasters and assist rescue and relief operations;
  • Enabling TV-based classes for rural students.

But the world is changing in several ways, and harnessing space technologies can ensure that we as a nation are able to adapt more effectively. One set of direct benefits accruing from spacetech relates to people living on earth, on the other hand, exploration of outer space through manned and unmanned missions can lead to greater knowledge about other planets and their suitability to support life as we know it. This of course may offer only long-term benefits.

Harnessing space technologies can deliver a range of benefits

Here’s a look at diverse areas where space technologies can play an important role in the coming years.

It is quite clear that water will become an increasingly scarce resource because of climate change as well as continued irresponsible behaviour by human beings around the world. Managing groundwater resources will become even more critical in the years ahead. This is something that satellite-based remote sensing technologies can enable. Such information can also help farmers in selecting crops that are better suited to their areas so that they are less impacted by the vagaries of nature.

Traffic jams are an undeniable reality of most urban centres. With satellites at the right locations, it is possible to gather real-time information about traffic build-ups and alert on-ground police and other authorities to take timely action to minimize the magnitude of the jam. Similar eyes-in-the-sky can also be used to monitor forests, wildlife movements, prevent poaching and other illegal activities. Fishermen can be provided with better communication facilities when they are at sea. Government properties can be monitored so that encroachments can be prevented. Spacetech can also aid e-governance activities.

In a post-COVID19 world, as remote working and hybrid working models become mainstream, robust and reliable nation-wide digital connectivity becomes even more critical. Education too will be delivered through hybrid models, as will some elements of healthcare. However, large sections of India’s rural population do not yet have access to reliable and high-speed internet access due to various reasons including difficult terrain for laying fibre optic cables, inhospitable weather conditions for large parts of the year etc. This effectively denies many of our fellow-citizens access to various essential services. Spacetech has the potential to provide better connectivity.

If India is to encourage investments in new clusters to move away from large urban centres, those areas need high-speed connectivity. This is especially important for factories that wish to embrace Manufacturing 4.0, which relies on IoT (Internet of Things) technologies. Providing land banks and physical transport infrastructure, though necessary, will not be sufficient in the next decade.

While we in India are still in the early stages of testing 5G technologies, some countries have already started experiments in 6G. Although the world is several years away from agreeing on 6G standards and specifications, in November 2020, China launched what it calls the “world’s first 6G satellite” to demonstrate the use of terahertz frequency waves. If successful, this technology can enable data-transmission speeds that are many times higher than 5G can deliver.

Collaboration on space-related areas can play an important role in India’s foreign policy. The launch of Amazonia-1 is the culmination of years of collaboration between Indian and Brazilian space scientists and technologists.

As other countries start building and deploying space-based defence systems, India cannot afford to ignore its security interests. Spacetech can help identify threats and create more effective deterrents against hostile intentions.

Outer space is another frontier we must explore

While colonizing space to overcome the earth’s real estate limitations is a few decades away, we cannot ignore the growing competition in outer space exploration. Countries such as the US, Russia, China etc. have already made significant progress by sending probes to many planets. India too has made significant progress with its Chandrayaan 2 mission. While the lunar lander did not land as expected, the orbiter continues to provide valuable data to our space scientists. The Chandrayaan 3 mission is already in the works, as is Gaganyaan, India’s manned mission to the moon.

Several enablers are needed to efficiently realize the benefits of spacetech innovation

It is one thing to identify priorities and appreciate the need to move decisively; creating the right ecosystem to move forward productively, quickly and at scale is another matter altogether. Allocating financial resources is of course an important aspect. But it is just as critical to ensure that the different stakeholders- the government, industry (private and public sector) and academia work collaboratively and cohesively.

The government of India has put in place some important policies and legislations in this context. These include a Satellite Communication policy, Remote Sensing policy and the Space Activities Bill. While the intent to open up participation in different areas of the space sector to private players, the laws seek to maintain government control to prevent national interests from being compromised. However, there are still references to the Indian Telegraph Act (1885) and National Frequency Allocation (2018) that make the process of approvals and clearances cumbersome.

The draft Space Activities Bill, 2017 envisages mechanisms for regulating space activities, authorize and grant licences for commercial space activities, register space objects and liabilities relating thereto etc. India needs such umbrella legislation in keeping with the fact that we are a signatory to the international space treaty.

The government has established the Indian National Space, Promotion & Authorization Centre (IN-SPACe) under the aegis of the Department of Space to enable and support the participation of India’s private sector in the arena of space technologies. To build launch vehicles, provide launch services, build satellites and provide space-based services, the government, in 2019, set up New Space India Limited (NSIL). The role of the latter is to encourage industry participation in India’s space programmes. Yesterday’s successful launch was the first commercial mission undertaken by NSIL. But there needs to be more clarity around the regulatory powers of IN-SPACe.

The UN Committee on Peaceful Uses of Outer Space (UNCOPUOS) has established a framework to ensure that individual entities (private or government) do not misuse space. Along with the International Telecommunication Union, this attempts to govern important aspects of activities in space, such as registration of objects launched into outer space, radiofrequency coordination, assignment and registration of satellite network frequencies, and compliance with the guidelines on space debris mitigation. Compliance is critical to ensure that the launch of a flurry of small satellites in the coming years does not put military or other satellites at risk.

Early steps have been taken. It is time that the government looks at bringing in necessary regulations and fine-tune existing ones to ensure that the intention of public-private partnership in this important field is encouraged, enabled and empowered.
This article talks about the important role of ‘SpaceTech’ in enabling and accelerating the future economic growth and social development of countries like India.

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Income-tax Residency Circular - Circular No 2 of 2021

For Financial Year 2019-2020 – Circular 11 of 2020

Considering the exceptional circumstances caused by pandemic, Central Board of Direct Taxes (‘CBDT’) had issued Circular No 11 of 2020 dated 8th May 2020 to address the genuine hardship faced by stranded Individual during the F.Y. 2019-20. In this Circular, the CBDT had clarified that the forced stay in India due to Covid-19 between 22nd March 2020 to 31st March 2020 or due to quarantine will not be considered for the purpose of determining the residential status of an Individual in India.
For Financial Year 2020-2021 – Circular 2 of 2021 Similarly, based on several representations received by the CBDT for relaxation in determination of residential status for the Previous Year (P.Y) 2020-21, the matter was examined by the Board and a Circular has now been issued with following observations / explanations:
  •  CBDT has observed that as per the domestic tax laws, an individual needs to satisfy a minimum number of days stay in India in order to qualify as an Indian resident. Generally, an individual becomes a resident in India only if he/she has stayed in India for 182 days or more and hence any forced short stay will not result in Indian residency. Further, even in exceptional case if an individual becomes resident, he/she will most likely become “not ordinarily resident” and hence his/her foreign income shall not be taxable unless it is derived from business controlled in or profession set up in India.
  • CBDT has observed that most of the countries have the condition of stay of 182 days or more for determining residency. If a general relaxation of 182 days is provided, there may be possibilities of double non-residency and eventually the individual might end up not paying tax in any country.
  • Similar condition of stay in India, generally 182 days or more, is also present in Double tax Avoidance Agreement (DTAA) under the employment Article, in order to tax income from Salaries, where the said employment is exercised in India. CBDT has highlighted that even if an Individual qualifies as a resident of two countries, he/she can still avail the DTAA benefit by applying “Tie-breaker rule”. In the event of non-applicability of Tie-breaker rule, the individual can apply for Mutual Agreement Procedure benefit to resolve the residency issue.
  • CBDT has also highlighted that even in a case of Double taxation, a resident Indian is also entitled to claim credit of taxes paid in other country, in accordance with Rule 128 of the Income tax Rules, 1962.
  • CBDT has also observed that a similar view has been adopted by the Organisation for Economic Co-operation and Development (OECD) that DTAAs contain the necessary provisions to deal with the cases of dual residency arising due to COVID – 19 cases. Also, globally, there have been very few countries that have provided relief in this regard.

Hence, after detailed examination and explanation as provided above, CBDT has endorsed the view taken by OECD and most other countries that in light of the domestic tax law read with relevant DTAA’s, there does not appear a possibility of double taxation of Income.

Accordingly, if any individual even after considering DTAA relief faces Double taxation issues, then such individuals can apply electronically to the Principal Chief Commissioner of Income tax (PCIT) in Form – NR up to 31st March 2021, which can then be examined by the CBDT on a case-to-case basis.

Our Comments:
This Circular is rather academic in its entire narrative and provides limited relief as it is deals only with respect to a generic kind of residency situations. The Circular does not per se attempt to address specific issues such as non-treaty country situation taxability. Similarly, the taxability of employees who became Indian residents due to their evacuation to home country from no-tax jurisdictions (eg. UAE etc) during the pandemic, thus making their foreign income exposed to tax in India. The Circular is also silent on the risk of exposures vis-à-vis “Permanent Establishment (PE)” or “Place of Effective Management (POEM)” that may be triggered in India due to presence of Key personnel of Multinational Companies (MNC) exercising their duties during the pandemic months, while being forced to be present in India.

It would help if the CBDT were to bring out a more detailed Frequently Asked Questions (FAQ) quickly to deal with the unanswered questions/situations.
This article provides a summary of the Circular addressing the issue of residential status in light of travel restrictions due to COVID.

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