Iraq and India: Energy Trade Relations

Iraq and India Energy foxiness RelationsStatement of the ProblemThe scotch openness is the reality of right a expressive styles developed world. The asymmetrical distri providedion of resources and factor of production has mandatory the economist and social scientists for mutual interaction and address cooperation for the development of the world-wide economy. The c atomic topic 18 and frugal cooperation between the two countries is to a greater extent(prenominal) important these age beca usage of the essential for formulating a feasible and beneficial st gradegy for the development of the twain countries. The bilateral trifle come forward and stinting Cooperation between Republic of Iraq and Republic of India argon unique. The contend and opposite related dealinghips between India and Iraq countenance its own signification for the economic development of both these countries. two countries have been traditionally collaborative and had st setgical and congenia l relations. India has supported a free, democratic, pluralistic, federal and united Iraq1. India-Iraqi ties flourished but after India had started cultivating. Iraq, in bilateral terms on the basis of interdependency of interests in the semi semipolitical sphere and complementarities interests in economic sphere subsequently. It is substantive to none that Iraq was matchless of the few countries in atomic number 74 Asia with which India had established relations very early at the embassy level2. However, Indias economic cooperation with Iraq was stronger than early(a) west Asian countries due to its geographical location and natural resources. The looming flagellum of wars in Iraq had continuous un acceptedty and a negative seismic disturbance on Indias as well as global trade marts. Indias trade with Iraq tremendously weakened during war finales3. But Indias focalise on a strengthened and multi-faceted relationship with sweet Iraqis an outcome of the monumental chang es in the political and economic relations between two countries. Indias has been cooperating continuously with Iraq on the road to recoery in the post ibn Talal Hussein Iraq. Indo Iraq economic cooperation was slow Initial Stage of Post Saddam Government. With the democratically elected regime of Iraq in year 2005, it received a powerfully re-boost to restart trade and cooperation with India. India actively supports the on passing game re look efforts in Iraq4. Both countries Explore cooperation in e-Governance during Deputy external Minister of Iraq, Mr Labeed Majeed Abbawi, visited India on 17-22 may, 2011. Indian craft applied for constricts for restart trade and cooperation. Since there is revival in potential for Indo-Iraqi trade and commerce, a number of steps have been interpreted at the insurance indemnity level that ignore positively violation Indian companies looking to do agate line with Iraq. At a broad strategic level, a Memorandum of Understanding (MoU) has been signed in 2013 between Iraqs Ministry of Foreign Affairs and Indias Ministry of External Affairs to update and plow bilateral and international relations of interest.The two countries be looking to farm the vital force trading relationship, which forms a signifi croupet exposit of overall trade between India and Iraq. The establishment of India has offer upd that it should be strategic some(prenominal)izenership, which could include aspects worry oil exploration, petrochemical complexes and fertiliser devicets. To this extent, Iraq and India have signed MoU on Cooperation in the cranial orbit of Energy to make further progress in the relationship in the heavens. India aims to change the nature of the relationship with Iraq on energy from a buyer-seller unmatched into one with equity qualitynership. Iraq and India have in like manner signed MoU on piddle Resource Development and Management that looks to cooperate and consider expertise in the field on na tional and international levels5. much(prenominal) as Indian business applied for contracts for reconstruction projects to coalition provisional authority and much than(prenominal)(prenominal) recently the activities of Iraqi business in India have been growing quickly6. However Project exportings are perhaps the most signifi enduret factors in Indias economic relations with Iraq as well as separate gulf countries. They are significant non only for their trade generating belief but also for a different kind of interaction they buckle under possible in Indias external relations7.Today in the globalised world the economies of Iraq have sour a new economic as well as strategic importance for India. The economic reforms in India resulted fitting one of the fastest growing economies of the world. The harvest-tide of Indias economy has excite addition in the industrial sector. The high egress in Indias industrial sector has further resulted in significant rise in ene rgy demand. As India is not self sufficient in its energy requirement, major portion of her energy demand is repleteled by Iraq pet useum imports. and so in a situation of growing industrial issue and demand for energy, Indias dependence on Iraq would significantly increase. Presently Iraq has perform second crowingst supplier of oil to India only after Saudi Arabia. Thus the trade relations between India and Iraq are very crucial for the growth of Indian economy. It was reported that in India crude oil imports account for more than than 96 Percent of her tot up imports from Iraq. This makes India to face severe deficits in her trade balance with Iraq. But the emergence of rich market of Iraq offered opportunities to India for balanced bilateral trade in 2012. Iraq requires Indias exports in terms of more goods, items, instruments and equipments and more coronation funds in infrastructure, agriculture, machinery, power, healthcare and telecommunication. Indias former Commerc e and intentness minister Anand Sharma promised him to encourage Indian businessmen to explore business opportunities in Iraq8. India is appearing to correct this deficit with new investment opportunities, specifically in the energy sector, in one of the fastest growing economies in the region. India is also looking to counter the growing presence of China in Iraq. capital of Red China has already invested heavily in divers(a) projects around Iraq, and has even reinforced its own airport near the Iran-Iraq border from where it ferries its thespians to unhomogeneous oil palm in the southern part of the country9. In the immediate future, India is looking at increasing its import of Iraqi crude and a of age(p) minister in the Iraqi government has offered to up his countrys oil exports to India by as very much as 30 per cent. That Indian oil companies shifted from Iranian to Iraqi oil in 2011-12. In recent year, bilateral trade between both the countries accelerated by dint of I ndian government maintained the huge demand of Iraqi crude oil. On the other collapse Tubes pipe of iron steel products Meat of bovid animals, frozen products and Indian basmati rice has found good markets in Iraq, get over US languish gained rice market since 2010. The market for exporting basmati rice would increase due to Iraqs preference for the products and on the other hand Indian market provides a cheaper imports option. An important step to foster stronger economic bilateral ties between countries took aim in an interactive session on certification of goods and exports potential of Iraq, organised by federation of Indian export organizations (FIEO) in April 2012 in clean Delhi. Hussein Ali Rajab, the commercial councillor, embassy of Iraq, felt that India exports to this market should increase from $ 750 million to about $ 3 billion by 2015. It is order that all Indian goods imported to Iraq must be certified by their designated inspection agency so that the buyer ca n release their goods in Iraq. The previous year, Indian tea exports suffered a dress upback as more than 200 containers of Indian tea that were being exported to Iraq were barred and returned due to pure tone issues. Indian steel firm Jindal saw won a 25 year contract to build and run a factory for retrace oil and gas pipelines in south Iraq. This $ 198 million deal was part of Iraqi efforts to revive its long deserted industrial sector. As part of Indian effort in infrastructure development in Iraq, trustfulness Globalcom, in projects collaboration with Iraqi telecommunications and post beau monde (ITPC), launched the al-Faw c fitting come station (CLS) for providing telecom service in the country. It is set to enhance mesh speed for Iraqi domestic consumer. But exemplifyly, demand of Indias Indian productto Iraq and mutual business ties temporarily declined due to Iraqi political humor insurgency10.Indias expatriate in Iraq, once substantial has dwindled to approximatel y nothing. In response to high levels of violence, the Indian government in 2004 proscribed labour brokers from hiring people for Iraq. This shun was for six months and then was extended from age to time. The extended period of the ban was valid up to April 30, 2010 base on the recommendation of the ministrys Gulf division. it had been decided not to extend the ban beyond April 30,2010. On 4 May 2010 Indian government get up the ban on grant of emigration clearance for Indians wishing to trip up to Iraq but cautioned that people should make care of their security go running(a) or visiting the oil-rich country. After that Indians can now legally survive to Iraq for expire11. Lots of Indians (both legal and illegal migrants) came to Iraq via United Arab Emirates (UAE) and other gulf countries in the past 5 years12.More than 80,000 Indians are living in Iraq despite an earlier government advisory against travel to the country that has been in turmoil since Saddam Hussein was ousted13. The lifting of the ban was termed a step towards calibration of relations between India and Iraq14. Indian Migration to Iraq got disturbed in June 2014 due to political as well as economic crisis in Iraq15.1 Annual cover up 2011-12,Ministry of Overseas, GOI2 Ajay N Jha, Indo-Iraq Relations 1947-86 Need For Fress Iniciatives, in westside Asia and Indias Foreign Policy, ed. Verinder Grover( New DElhi Deep Deep Publications, 1992), pp 437-461.3 Ibid4 Opcit 15 Opportunities for India in Iraqs restructuring, Spacesence News. Feb 06, 2014.http//www.spacesense.in/ word of honor show/13 (accessed June 2014, 27).6 Azhar Muhammad, Indo-Iraq Economic Cooperation in Post Saddam Period, Journal of WestAsian Studies (Deptt. of West Asian Studies, AMU, Aligarh) Vol.23 (2009) pp 148-161.7 Girijesh C Pant, India-Gulf Economic Relations A Profiles, in West Asia and Indias Foreign Policy, edited by Verinder Grover (New Delhi Deep and Deep Publications, 1992) p 65.8 Iraq Calls for equi librize Bilateral Trade With India, Outlook, FEB 29, 2012. http//www.outlookindia.com/news/article/Iraq-Calls-for-Balanced-Bilateral-Trade-With-India/753569(accessed June 12, 2014)9 Kabir Taneja, India looks for larger presence in Iraq, June 22, 2013. http//www.sunday-guardian.com/business/india-looks-for-larger-presence-in-iraq (accessed June 21, 2014).10 Sonia Roy, Iraq In Persian Gulf 2013 Indias Relations With the Region, by P.R. Kumaraswamy, pp 115-17. New Delhi Sage Publication, 2014.11 India lifts ban on travel to Iraq, The Siasai Daily, May 4, 2010. http//www.siasat.com/english/news/india-lifts-ban-travel-iraq-0 (accessed May 23, 2014).12 Working in Iraq not worth the jeopardizes, says Indian worker in the country, IBNLive, June 16,2014. http//m.ibnlive.com/news/world/working-in-iraq-not-worth-the-risks-says-indian-worker-in-the-country/479447-2.html (accessed August 2, 2014).13 India lifts ban on travel, The Siasat Daily, May 4, 2010http//www.siasat.com/english/news/india- lifts-ban-travel-iraq-0 (accessed May 23, 2014).14 Himanshi Dhawan, Ban on Indians travelling to Iraq lifted, January 9, 2010. http//timesofindia.indiatimes.com/india/Ban-on-Indians-travelling-to-Iraq-lifted/articlehow/6025044.cms(accessedJune 21, 2014)15 Indian faces the Iraq test, The Hindu, June 21, 2014. http//www.hindu.com/opinion/editional/India-faces-the-Iraq-test/articles6134195 ece (accessed July 12, 2014).India A Mixed parsimonyIndia A Mixed EconomyThe present chapter is devoted to the introductory issues relating to the intent of fill task laws in the development of world-wide lineage. counselling has also been laid on the necessitate to present a hospitable environment for encouraging outside(prenominal) investment and to protect the revenue base of the nation. The chapter has been classified on the following lines.1.1 meeknessway1.2 Indian Tax Structure1.3 Basic Principles Of outside(a) Taxation1.4 International occupancy Concepts, Scope And Structure1.5 Ne ed For International Business1.6 brush up Of Existing Studies1.7 Statement Of The Problem1.8 Objective Of The theme1.9 Scope Of The Study1.10 Limitations1.11 Hypothesis1.12 Research Methodology1.1 INTRODUCTIONRapid economic development happens to be one of the primary objectives of all developing economies and India is not an exception. This is possible in general through and through the accumulation and proper pulmonary tuberculosis of capital. The developing economies lack tolerable basic infrastructural facilities. In order to develop these, the government takes upon itself the responsibility for structure up capital formation, through sound levyation policies.India is a merge economy. Liberalization, privatization and globalization have further strengthened the role of value form _or_ system of government in economic development. Both the public and the hugger-mugger sectors have to victimize an important role in ensuring satisfactory growth rate. For this, the gover nment has to work out and provide adequate avenues for raising funds by private enterprises. This envisages the need to provide adequate incentives, rebates and reliefs in the form of appraise deductions to arrive the private sector. Here again a sound assess policy and a robust task revenue structure is inevitable. In order to strike the above objectives, the government enacted the Income Tax Act, 1961 repealing the act of 1922.The present Act has realized due weight age of gross of International Business which has assumed much importance to the assess collector as well as to the appraise revenue payers.1.2 INDIAN revenueation revenue STRUCTUREThe Indian direct valueation policy is structured in much(prenominal) a way as to ensure high progressivity both in terms of revenue enhancement on income as well as on wealth. The act ensures that high the level of income, higher shall be the tax incidence.By virtue of entry 82 of List I of the seventh schedule of the co nstitution of India, the fan tan is empowered to levy tax on income other than agricultural income. so with due exercise of this power the Parliament has enacted the Income-Tax Act 1961.It is a broad act embodied with 298 naval divisions, divided in XXIII chapters, fourteen schedules, on with yearly Finance Acts coupled with Income Tax Rules, 1962.1.3 PRINCIPLES OF INTERNATIONAL TAXATION in that location are two basic principle in International receipts1) Residence Based Taxation- The principle of pla winningsary house- ground taxation asserts that individuals are taxable in the country or tax legal power in which they establish their residence or domicile, regardless of the source of income. In the case of companies or firms, the empower of incorporation or the place where control or vigilance is exercised is deemed to be the place of residence. The principle of residence-based taxation of income envisages the taxation of global income. Accordingly, India follows residence based taxation in case of Residents.2) Source Based Taxation- There are individuals/entities whose residence is in one country but their business is genuinely carried on in another country and their income is earned in the last mentioned country. The principle of residence-based taxation would be inappropriate in such cases. So the country which provides the opportunity and facilities to generate income or remuneration should be attached the right to tax such income. This forms the underlying basis of the principle of source-based taxation of income. India follows source based taxation in case of non-resident. 1.4 INTERNATIONAL deed CONCEPT, SCOPE AND STRUCTUREInternational Business is a term utilise to collectively describe all commercial transactions (private and government, sales, investments, logistics and transportation) that take place between two or more regions, countries and nation beyond their political boundary. Private companies, usually undertake such transactio n for profit while government undertakes them for profit and political reasons. It also refers to all those business activities that invite cross border transactions of goods, go, resources between two or more nations.International Business not only refers to multinational companies having deals with foreign entities and making headways into the foreign market. It also involves small and independent companies or entities engaging in business with international clients through the medium of internet.International Business comprises a large and growing portion of the worlds total business. Almost all large or small companies are affected by global events and rivalry because most of the companies sell output and/or secure supplies from foreign countries or compete against foreign products and services.A multinational company would always tump over itsMISSION i.e. what the company will seek to do and become over the long term.OBJECTIVES i.e. specific performance targets to fulfil it s mission.STRATEGY i.e. the means to fulfil its objectives.The following factors have given a boost to the growth of International Business.Rapid increase in and expansion of technologyLiberalization of government policies relating cross-border movement of trade and resourcesDevelopment of the institutions needed to support and facilitate international tradeIncreased global competitionAn International Business may take any of the following modeImport and export (goods and services)tourism and transportationLicensing and franchisingTurnkey operationsManagement contracts flat and portfolio investmentAnd much moreMERCHANDISE EXPORTS are tangible goods sent out of a country. MERCHANDISE IMPORTS are tangible goods brought in. Imports and exports are countrys key international economic transaction.SERVICES are earning other than those derived from goods. Earning received are service exports and earnings paid are service imports.INTERNATIONAL TOURISM and TRANSPORTATION are important sourc es of revenue for airlines, shipping companies, travel agencies, and hotel. Greece and Norway is earning a significant bill of revenue from transportation. Bahamian country is dependent more on earning from foreign tourism than earning from the export of merchandise. U.S. has in recent years earned more from foreign tourism than from its exports of agricultural goods.TURNKEY OPERATIONS means construction or any other operation, performed under contract of facilities that are transferred to the proprietor as and when they are ready to begin operating.Licensing means use of assets such as trade-marks, patents, copyrights or expertise under contracts. This generates earnings called royalties. FRANCHISING is a way of doing business in which one party (the franchisor) allows another party (the franchisee) the use of trademark that is an essential asset for the franchisees business. The franchisee is also assisted on a continuing basis in the operation of business by providing components , wariness services and technology.Foreign investment involves ownership of foreign property in exchange for financial return. A FOREIGN DIRECT INVESTMENT is one that gives the investor a controlling interest in a foreign company.A PORTFOLIO INVESTMENT is an investment that gives the investor a non-controlling interest in a company or ownership of a loan to another party.CONTRACT MANUFACTURING it refers to a type of International Business where a firm enters into a contract with a few local manufacturers in foreign countries to get certain components or goods produced as per its specification. It is also known as OUTSOURCING. It can take three major formsProduction of certain components such as machine component to be utilise later for producing utmost products.Assembly of components into final product such as assembly of hard disc, mother board, floppy disk disc drive etc.Complete manufacture of the product such as garments.The major international companies such as NIKE, REEBO K, LEVIS, get their products or components produced in the developing countries under contract manufacturing.1.5 NEED FOR INTERNATIONAL melodic lineInternational Business helps both the countries to earn foreign exchange which can be used for meeting imports of capital goods, technology, petroleum products and fertilizers and consumer product and services at affordable price.International Business operates on a fair principle -produce what a country can produce more efficiently, and trade the surplus production so generated with other countries. If such an exchange kitten of goods and services is distributed equitably amongst nations, it benefits all the trading nations.Producing solely for the purposes of domestic inspiration restricts a countrys prospects for growth and employment. International Business helps developing countries to execute their plan to produce on a larger scale and thus fashion employment for people as well.International trade of goods and services has mak e it possible for the world community to consume goods and services produced in other countries. A number of corporate entities have emendd prospects of their growth by plunging into overseas marketsInternational Business can be more utilityous than the domestic business. When the domestic prices are lower, business firms can earn more profits by selling their products in countries where prices are higher.Many firms set up production capacities for their products which are in excess of demand in the domestic market. By planning overseas expansion and procuring orders from foreign entities, they use their surplus production capacities and improve the profitability of their operation. Production on a larger scale leads to economies of scale, which in turn lowers production cost.1.6 REVIEW OF subsisting STUDIESNo guide seems to have been do in India to cover the diverse aspects of Taxation of International Business. This section presents a brief review of most of the important studies conducted on the subject of taxation. These studies would provide background material for the proposed work.Goenka (1983)1 exclamatory the need for evolving an optimum direct tax planning process for our business entities, which will enable them to maximize their after-tax profits, so that these are available for establishing new industries and expanding the existing ones. Tax planning has emerged as an important tool for management decisions beginning with the settling up of an enterprise to the level of strategic, project and operational planning constituted at different stages of development of an enterprise and at different levels of policy formulation and operation. Tax planning would in no way lead to tax loss to the national exchequer as the corporate sector progresses at a faster pace, Government can not only recoup the tax loss but improve upon the same.Agarwal (1987)2 has emphasized on tax incentives as an instrument of Fiscal policy to achieve the stated objecti ves of mobilizing saving and inducing investment. In the opinion of author, tax incentives offer a relatively straight forward means of promoting industrial enterprise compared to other long term or complex measures that are more difficult to implement.However, tax incentive may not be used and may not yield the desired results. So tax incentives may be complemented with some of the other alternative measures to achieve the desired results.The get a line also revealed that the type, size and magnitude of tax incentives offered in different countries go aside widely depending upon the needs and aspirations of their people. So incentive programme in India has undergone a number of changes from time to time and has a wide coverage. India is offering largest number of tax incentives as a part of its tax incentives package.Agarwal (1991)3 observed that meaning of personal income tax can be judged in terms of its share in total tax revenue or national income. The persona of direct ta xes in general and of personal income tax in particular(prenominal) to the total tax receipts of substance Government of India has declined over time. India has depended more on indirect taxes for additional resource mobilization. Frequent upward decree of the exemption limit under the personal income tax tends to restrict growth of the tax base. The theatre of operations covers the single major category of personal income tax payers individual. These account for more than 90% of the total number of personal income tax payers and their taxable income.The observed elasticity, progressivity and re-distribution impact of a tax is the net effect of interaction between tax parameters (such as tax schedule) and non tax parameters (such as income inequality). The study has concentrated on observed empirical functions and not on behaviouristic relations. So the discussion of tax nonremittal and tax compliance is beyond the background of the study.Jain (1991)4, revealed that the priva te corporate sector has been looked upon as an important source of saving in India. The Government has succeeded in influencing the corporate decision processes at different levels and encourages them to save more.In Indian tax structure, there is a heavy tax on companys profits which reduces savings since it is assumed to be borne by the companies themselves so the question of mechanism of corporate saving behaviour was probed into and she identified the possible channels through which taxes could influence corporate saving decisions.She insisted on revamping the tax structure. A reducing in tax rate would have a favourable impact on retention, resulting in utilization of more internal finance and go back of profits.Tax reductions have to be combined with a synonymous review and reduction of tax incentives and fiscal incentives provided to the corporate sector.KADEL (2000)5 stated that Nepal, a small under developed country of the world economy, started using tax incentives to en courage private investments. The result was the creative activity of tax holiday formation and providing umteen other tax related facilities by Industrial endeavour Act in 1962 and motive was to attract private investment. Since then, series of changes in tax rules were noticed. One of the objectives of all these changes was to create investor friendly environment and in turn increase investment. The author revealed that inflation is the main source of distorted shape for the corporate tax organisation in Nepal. Inflation rate and strong tax burden in Nepal are negatively related. The main determining(prenominal) of frozen asset investment in Nepal is the availability of market or customer. The tax factor too as a determinant of fixed asset investment is playing only a small role in this regard. Across the four techniques of providing tax incentives i.e., tax holiday, accelerated depreciation, investment allowance and tax rate reduction, investment allowance is the best sy stem to reduce the effective tax burden. Full tax holiday system is not preferable for both the reduction of tax burden and get equity in the tax system.The proposed study will attempt to connect the gap by focusing on international business.1.7 STATEMENT OF THE caperIndia, the worlds largest democracy, has emerged as a strong player on the international arena. Indias role in international affairs is increasing at a higher pace. The thrust for major changes initiated by the Indian Government is to sweep away much burdensome regulation and create a business friendly environment for domestic and international business. Development took place through many reforms e.g. macro-economics reforms, tax reforms, finance reforms and freeing of capital markets, reforms in the regulation of business firms, revitalization of the Indian private sector, removal of exchange control and convertibility, trade reforms and foreign direct investment, reduction in licensing and quota raj as well as ins pectors domain.Tax reforms, initiated in 1991, have sought to rationalize the Indian tax structure and increase tax compliance with the following steps decrease the rates of individual and corporate income taxes, excises, and customs and making it more progressive.Simplication of laws and procedures and introduction of Advance RulingIntroducing tax incentives in the form of exemptions and concessions.Easing out the rules relating to filing of returns (E-filing), TDSLaws relating to IB have also been simplified.Despite the above steps initiated by the government, the problem of ambiguity is continuing viz.(1) Business entities are not sure of their future tax financial obligation in terms of rate of tax (to be applied in years to come, changing by virtue of Finance Act)(2) Retrospective amendment in the law has its own impact on foreign business entities.(Vodafone International Holding BV v Union of India)Vodafone was embroiled in a $2.5 billion tax brawl with the Indian Income Tax Department over its purchase of Hutchison Essar Telecom services in April 2007. It was being alleged by the Indian Tax authorities that the transaction involved purchase of assets of an Indian Company, and therefore the transaction or part thereof was liable to be taxed in India.Vodafone Group Plc. entered India in 2007 through a subsidiary based in the Netherlands, which acquired Hutchison Telecommunications International Ltds (HTIL) stake in Hutchison Essar Ltd (HEL)-the joint venture that held and operated telecom licences in India. This caiman Islands transaction, along with several related agreements, gave Vodafone control over 67% of HEL and extinguished Hong Kong-based Hutchisons rights of control in India, a deal that cost the worlds largest telco $11.2 billion at the time.The crux of the dispute had been whether or not the Indian Income Tax Department has legal power over the transaction. Vodafone had maintained from the outset that it is not liable to pay tax in India a nd even if tax were somehow payable, then it should be Hutchison to surrender the tax liability.In January 2012, the Indian Supreme Court passed the judgement in favor of Vodafone, saying that the Indian Income tax department had no jurisdiction to levy tax on overseas transaction between companies incorporate outside India. However, Indian government thinks otherwise. It believes that if an Indian company, Hutchison India Ltd., conducts a financial transaction, government should get its tax out of it. Therefore, in 2012, India changed its Income Tax Act backwardly and made sure that any company, in similar circumstances, is not able to avoid tax by operating out of tax-havens like Cayman Islands or Lichtenstein. In May 2012, Indian authorities confirmed that they were going to charge Vodafone about Rs. 20000 crore (US $4.5 billion) in tax and fines. The second phase of the dispute is about to start.3.) Lots of disputes and litigation are pending before the various court of law of the country which are deciding factors for tax liability of business entities.( Idea Cellular-ATT, GE-Genpact, Mitsui-Vedanta, Sabmiller-Fosters and the Sanofi Aventis-Shantha Biotech have tax cases pending in various high courts in the country)4.) Uncertainty regarding the impact of direct tax laws and confederative costs arising after the effect of total project particularly where in the international transactions, the gestation period of a project is too long ranging from 3 years or more.5.) The effect of change of government policy due to tax avoidance treaty with other countries resulting in the total darkness regarding tax incidence on their profit after the completion of project. (India is negotiating the tax treaty with Mauritius to prevent evasion of tax. India wants to retain the right to tax capital gain arising to non-resident. India has already started raising tax demands against the companies and many of these cases are being disputed in various courts.)BRIEFLY, DO UBLE TAXATION, UNRESOLVED TAX DISPUTES, UNCERTAINTY IN THE APPLICATION OF INTERNATIONAL TAX RULES, HEAVY form BURDENS, ALL CAN ACT AS A BARRIER TO THE expansion OF CROSS-BORDER TRADE AND INVESTMENT, THEREBY HAMPERING INDIAS GROWTH RATE.1.8 OBJECTIVES OF THE STUDYWith a view to infusion the gains of globalization and to develop international business in mutual interest, the present study is being undertaken with the following objectives1) to examine the role of direct tax laws in the development of International Business.2) To appraise the Tax Professionals, Tax Executives and Entrepreneurs with the provisions of tax laws, connected with International Business/International Transactions and enabling them to take advantage of all tax benefits concessions (set-off carry forward),rebates (section 89) and reliefs(section 90 91), allowances(section 35), deductions ( section 80) and exemptions (section 10), available in our tax laws with due compliance of the requisites.3) To sugge st and propose measures to our policy makers that by making lawful amendments in the act, how our International Business can be strengthened.Broadly speaking, the study would address the following issuesWhat are the measures through which our tax professionals can manage their global tax risk and meet cross border obligation?How our business entities can eke out their international transactions peacefully without facing any undue litigation or political harassment and thus maintaining effective relationship with tax authorities.What are the loopholes in the act which may be twisted by an assessee for their own benefit. It is required to be plugged or explained properly by the government by making amendments in the Act.The study also intends to make a comparative study of the tax rates of India with a few selected countries to encourage Indian enterprise to deal with countries having comparatively lower rate of tax .1.10 LIMITATIONSDirect tax laws is a wide term which embraces in it self a variety of tax laws but the present study is restricted to Income Tax Act 1961.Income tax act 1961 is subject to change either year. This study is based purely on aspects of Income Tax Act 1961, for the sagaciousness year 2012-13.3) The nature of topic in itself is a big limitation. savings bank date, lacs and lacs of transactions have taken place in International Business and thousands of cases are pending in various Tribunals, High Courts and Supreme Court, wait for the judgment. Whenever the final judgment will be pronounced, it will become a law and guiding factor for future policy makers and help for tax planning.4) Other indirect tax laws like Customs Act, FEMA etc. are equally important in international business but we are restricting our study to the Income Tax Act only and leaving the scope for other research scholars willing in the same framework of study.5) Further, the study has been conducted mainly from the point of view of the tax payer and not from that o f the tax assessor or tax collectors, though it may be indirectly helpful to them in formulating appropriate policies and provides a basis for granting fiscal incentives based on national priorities.1.11 HYPOTHESIS1) The policy makers do not fancy at the time of framing the law that new techniques of tax evasion and avoidance may arise. The business houses with their expert legal brains, who are tenanted mainly to seek loopholes in the law, take the maximum tax advantage due to the Government policy. They keep themselves within the framework of law but do not fulfil the intentions of the law, thereby tax avoidance arises.2) The tax executives and business houses usually do not calculate the in culture risk of such transactions which arises due to higher gestation period of project.3) Assessee do not forsee any change in the act with retrospective effect.4) The assessee prefers a low rate of tax.1.12 RESEARCH METHODOLOGYThe proposed study is descriptive and analytical in nature w here in researcher uses facts or information already available and analyse these to make a critical rating of the material. Here researcher has no control over the variables. The researcher can only report what has happened or what is happening along with possible suggestions.So the study would be based on the various books, journals, Finance Acts, informative Memorandum on the Budget of the Central Government, Reports of the various committees/commissions, Indian Economic Survey, Income Tax Act 1961, Income Tax Rules 1962, various announcements, circulars and notifications of Central Board of Direct Taxes, Budget speeches of Finance Ministers, Reports of accountant and Auditor General of India on Direct Taxes, Economic and Political Weekly, newspapers (Economic Times, Financial Express, Business Lines) etc. Moreover, websites of Income Tax Department, Ministry of Finance, Ministry of Statistics and Comptroller and Auditor General of India have also been used for collection and outline of data.The methodology may further be modified with the want of the circumstances. remainderThis chapter laid the foundation for the research. It introduced the research problem and research question and hypothesis. Focus is also laid on the review of existing studies, limitation of the study and methodology adopted.Future outlineIn the upcoming chapters, an attempt has been made to discuss various Direct tax instruments which directly help in the development of International Business. These instruments have been specifically provided by our policy makers in our tax laws, keeping in view the national priority for development, growth and employment. At the same time, the need to augment revenue and resources have been duly kept in consideration, being an equal factor for development of the country. Such instruments as have been discussed in our future chapters have contributed its growth value in the development of International Business. These provisions and their impact wi th broad outlines and suggestions have been discussed in detail.