Latest Blogs from SBS and Company LLP

    In this edition, we bring to you certain important articles. The article on ‘Alternative Investment Funds – SEBI and FEMA Regulations’ will make you understand the other venues for raising funds to carry the business much efficiently. The article on ‘NFRA – Will they apply to Body Corporate’ is thought provoking and it is important that Ministry of Corporate Affairs release a clarification as to which body corporates the provisions of NFRA rules will apply.

    The article on ‘Differential Treatment Inter- se Creditors’ deals with the recent judgment of Hon’ble NCLAT in the matters of Binani Industries Limited, wherein the Hon’ble NCLAT rejected the resolution plan which discriminated the creditors who are placed similarly. This is an important contribution to the jurisprudence on IBC and it will have significant effect in upcoming resolutions. The journal also deals with key recommendations by Insolvency Committee on Cross Border Insolvency which is to be adopted by India to tackle the issues in cross border insolvency matters.

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    Treatment of Income on Sale of Shares in ESOP Scheme – Perquisite or Capital Gain?

    Legislative Background:

    As per Section 15(1) of Income Tax Act, 1961 (Act) any salary due from employer or former employer to an assessee in the previous year, whether paid or not, is chargeable to tax under the head ‘Income from Salaries’. As per Section 17(1)(iv) of the Act, ‘salary’ includes ‘perquisites’ or ‘profit in lieu of salary or wages’.

    Section 17(2)(vi) of the Act, the term ‘perquisite’ includes the value of specified securities which were granted under ESOP or sweat equity shares allotted or transferred, directly or indirectly, by employer or former employer, free of cost or at concessional rate to the assessee.

    • Introduction:
      • This Standard on Auditing (SA) is effective from 1st April, 2009 and mainly deals with the auditor’s responsibility to consider laws and regulations in an Audit of Financial Statements.
      • It is not applicable to other assurance engagements in which the auditor is specifically engaged to test and report separately on non-compliance with specific laws and regulations.
      • According to this SA, non-compliance means an act of omission or commission by the entity, either intentional or unintentional, which are contrary to the prevailing laws or regulations. 


    General Points on ICDS:

    • ICDS was made applicable from FY 2016-17 (i.e. A.Y 2017-18) as per Notification S.O.892(E) dated 31.03.2015
    • However, It is not for the purpose of maintenance of books of accounts.


    External Commercial Borrowings (ECB) Policy – Liberalisation

    1. Liberal procedures for Oil Marketing Companies (OMCs):

    Under the existing policy, ECB can be raised under Track I and III for working capital purposes from direct and indirect equity holders or from a group company with a minimum average maturity of 5 years. It has been decided, in consultation with the Government of India, to liberalise the provisions and permit public sector OMCs to raise ECB for working capital purposes with minimum average maturity period of 3 or 5 years from all recognized lenders under the automatic route.

    Further, the individual limit of USD 750 million or equivalent and mandatory hedging requirements as per the ECB framework have also been waived for borrowings under this dispensation. However, OMCs should have a Board approved forex mark to market procedure and prudent risk management policy for ECBs referred above.

    The overall ceiling for such ECBs shall be USD 10 billion equivalent and the said facility will come into effect from the date of this Circular.

    For more details, refer Notification No. RBI/2018-2019/54, A.P. (DIR Series) Circular No. 10 dated 3rd October, 2018.

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