News Excerpt
In a major relief for New Delhi Television Limited (NDTV), the Supreme Court quashed an income tax reassessment notice issued by revenue authorities against the news broadcasting company.

Pre-Connect
•    The Income Tax department had accused NDTV of “round-tripping” finances in connection with a July 2007 issuance of step-up coupon bonds amounting to $100 million through its U.K. subsidiary.
•    The Supreme Court stood firm to hold that the revenue authorities failed to show that the channel did not make a “full and true” disclosure of its income for the assessment year 2008-09. NDTV disclosed all the primary facts necessary for assessment of its case to the assessing officer.

Analytica
    Round tripping refers to money that leaves the country though various channels and makes its way back into the country often as foreign investment. This mostly involves black money and is allegedly often used for stock price manipulation. Round tripping is often done through a series of transactions that don’t have any substantial commercial purposes, which makes it fall within the trappings of GAAR.
    Round-trip trading generally refers to an unethical market-manipulation behavior.

PEPPER IT WITH
GDR, ADR, Tobin tax, Q-Theory, Qualified Institutional Placement
    Repeated buying and selling of securities can inflate trading volume and balance sheet figures. Round-trip trading should not be confused with a legal, normal, round-trip trade that investors make every day whenever they close a position they have opened.
    It could be invested in offshore funds that in turn invest in Indian assets. The Global Depository Receipts (GDR) and Participatory Notes (P-Notes) are some of the other routes that have been used in the past.
    The capital market regulator’s recent decision to allow Indians to invest in global funds that deploy up to 50 percent of their money in the country may fall foul of income tax laws on round tripping. Tax authorities can term it as ‘textbook round tripping’ under the General Anti-avoidance Rule (GAAR) framework.

Participatory Notes
    Referred to as P-Notes, are financial instruments required by investors or hedge funds to invest in Indian securities without having to register with the Securities and Exchange Board of India (SEBI).
    P-Notes are among the group of investments considered to be Offshore Derivative Investments (ODIs).
    Any dividends or capital gains collected from the securities goes back to the investors. Indian regulators are generally not in support of participatory notes because they fear that hedge funds acting through participatory notes will cause economic volatility in India's exchanges.
GAAR
    GAAR is set of rules under the Income Tax Act (under the proposed Direct Tax Code) which empowers the revenue authorities to deny tax benefits transactions or arrangements which do not have any commercial substance or consideration other than achieving the tax benefit.  
    GAAR usually consists of a set of broad rules which are based on general principles to check the potential avoidance of the tax in general.