Latest Blogs from SBS and Company LLP

    Aug-2016 Interns Digest

    Key Topics Covered:

    • Income Tax Act 1961
    • Project Finance
    • Audit
    • FEMA
    • MCA Updates
    • Indirect Tax Updates
    • Interesting Facts

    This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

    Aug – 2016 (Volume-25)

    Key Topics Covered:

    • International Taxation
    • FEMA
    • Audit
    • Direct Tax
    • Indirect Tax
    • Companies Act, 2013
    • FEMA Updates
    • Indirect Tax Updates

    This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

    Tags: ,

    SERVICE TAX

     

    Notifications:

     

    1. Exempts the service tax on taxable services by way of transportation of goods by vessel: Notification no. 36/2016- ST

     

    The service of transportation of goods by vessel from outside India up to the Custom station of India is made taxable w.e.f 01.06.2016. However, such services are exempted in case the invoice is raised on or before 31.05.2016 provided the import manifest or import report has been issued on or before 31.05.2016 and the service provider or recipient shows the Customs certified copy of said document.

    http://www.cbec.gov.in/resources//htdocs-servicetax/st-notifications/st-notifications-2016/st36-2016.pdf

     

    1. b) Exemption of service from levy of Krishi Kalyan cess: Notification no. 35/2016-ST

     

    The Krishi kalyan cess is levied on all taxable service w.e.f 01.06.2016 along with service tax and Swachh Bharat cess. However, if the service is completed and the invoice is also raised by 31.05.2016, then such service will be exempted from payment of krishi kalyan cess even if payment is received at any time on or after 01.06.2016.

    http://www.cbec.gov.in/resources//htdocs-servicetax/st-notifications/st-notifications-2016/st35-2016.pdf

     

    1. Service Tax Rules, 1994 rules are amended to specify that business entity is liable to pay tax when service is received from Senior advocate: Notification 32, 33 & 34/2016-ST

     

    Legal services of a senior advocate are exempt when provided to any person other than a business entity and to a business entity with a turnover up to ten lakhs in preceding financial year.

     

    Senior advocate services are brought under reverse charge mechanism. In case of representational services of senior advocates, the client (litigant/petitioner/applicant) is required to pay service tax irrespective of the fact whether services of senior advocate are received directly by client or indirectly through other individual or firm of advocates. In case of other services, the direct service receiver whether it is client or an individual are required to pay service tax.

     

    http://www.cbec.gov.in/resources//htdocs-servicetax/st-notifications/st-notifications-2016/st34-2016.pdf


     

     

     

     

     

     

     

     

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    Circulars:

     

    1. Speedy disbursal of pending refund claims of exporters of services – Rule 5 of CENVAT Credit Rules,2004:

     

    Circular 195/05/2016-ST

     

    Circular 187/6/2015-ST dated 10.11.2015 has prescribed a scheme for speedy disposal of export refund claims filed under Rule 5 of CCR, 2004. The said scheme is applicable forrefund claims filed on or before 31.03.2015 and have not been settled before 10.11.2015. Accordingly, the applicant is eligible for provisional payment of 80% of the claim amount. The said circular requires certificate from statutory auditor, chartered accountant as per the format given in Annexure I.

     

    With the current circular, it is now clarified that in case of companies, the said certificate should be signed by the statutory auditor of the Company as appointed under Companies Act and in case of other entities; the certificate can be signed by any Chartered Accountant. In certain cases, refund claims are rejected for the reason that the certificate issued contains certain qualifications/disclaimers. It is now clarified that the claims should not be rejected for the said qualifications/disclaimers.

     

    http://www.cbec.gov.in/resources//htdocs-servicetax/st-circulars/st-circulars-2015/st-circ-187-2015.pdf

     

    1. CBEC directs officers to strictly comply with legal provisions and administrative instructions while exercising their power to provisionally attach properties towards recovery of service tax dues: Circular 196/06/2016-ST

     

    This Circular is issued pursuant to the decision of Kunj Power Projects vs UOI - 2015-TIOL-2728-HC-ALL-STwherein the Allahabad High Court stated that the power relating to provisional attachment of property under Rule 3 of The Service Tax (Provisional Attachment of Property) Rules, 2008 should be exercised by officers with utmost care and caution and by providing a reasonable opportunity to the assesse.

     

    In this regard, CBEC vide this Circular clarified that there are adequate safeguards in the law and same have been highlighted in the Circular dated 1-7-2008. The present situation has resulted only on account of non-compliance with respect to both. Chief Commissioners are requested to issue standing orders with respect to the observations of the Hon'ble Allahabad High Court and to also emphasize that non-compliance with legal provisions or administrative instructions will leave officers with no defence in legal proceedings arising out of such non-compliance.

     

    http://www.cbec.gov.in/resources//htdocs-servicetax/st-circulars/st-circulars-2016/st-circ-196-2016.pdf

     

    CENTRAL EXCISE

     

    The changes pertaining to the jewellery industry are covered under a separate article in this month’s edition in SBS Wiki. We request the interested readers to kindly make a note of the same.

     

     

     

     

     

     

     

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    Notifications:

     

    1. Exemption to handicrafts of Goldsmiths and Silversmiths wares is withdrawn: Notification No. 29/2016-CE, dated 26.07.2016

     

    Notification 17/2011-CE dated 01.03.2011 provides exemption from central excise duty on manufacture of all kinds of handicrafts. This exemption notification is now amended with the present notification to withdraw exemption for handicrafts of Goldsmiths and Silversmiths wares.

     

    http://www.cbec.gov.in/resources//htdocs-cbec/excise/cx-act/notifications/notfns-2016/cx-tarr2016/ce29-2016.pdf

     

    1. Requirement of dual registration viz as importer and dealer is done away: Notification 30/2016- CE(NT) dated 28.06.2016

     

    A separate registration and filing of separate returns under Central Excise was made mandatory for importers engaged in the business of importing goods from outside India and selling in India. If the same person is also involved in selling goods manufactured in India, he is also required to have separate registration as dealer under Central Excise and file separate return. In order to file separate returns, separate set of records are required to be maintained for both the activities. Now the requirement of dual registration has been done away.

     

    Now sub-rule (2) of Rule 9 of Central Excise Rules, 2002 is amended to give effect that if an assessee is registered as an importer, he is not required to register as dealer. Similarly if an assessee is registered as a dealer, then he is not required to register as importer. This would mean that as assesse engaged in trading of both imported and indigenously manufactured goods is now permitted to maintain single set of records and file single return. http://www.cbec.gov.in/resources//htdocs-cbec/excise/cx-act/notifications/notfns-2016/cx-nt2016/cent30-2016.pdf

     

    1. Bunker fuels are permitted to store in warehouse without payment of duty: Notification 31/2016-CE(NT) dated 04.07.2016

     

    In terms of sub-rule (1) of Rule 20 of Central Excise Rules, 2002, Central Government is given power to notify excisable goods which can be removed from Factory of production to a warehouse or from one warehouse to another warehouse without payment of duty. Through this notification, this facility of storing excisable goods without payment of duty in a warehouse is extended to bunker fuels for use in ships or vessels namely IFO 180 CST and IFO 380 CST. http://www.cbec.gov.in/resources//htdocs-cbec/excise/cx-act/notifications/notfns-2016/cx-nt2016/cent31-2016.pdf

    1. Branded Garment manufacturers are exempt from physical verification of premises for granting registration under Central Excise: Notification No. 32/2016-CE(NT) dated 11.07.2016

     

    This notification is issued to amend Notification 35/2001-CE(NT) dated 11.07.2016. Accordingly, branded garment manufacturers falling under Chapters 61, 62 or 63 (except laminated jute bags falling under headings or tariff item 6305, 6309 00 00 or 6310) of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) bearing a brand name or sold under a brand name and having a retail sale price (RSP) of one thousand rupees and above, are exempt from the requirement of physical verification of their premises for granting registration under Central Excise. http://www.cbec.gov.in/resources//htdocs-cbec/excise/cx-act/notifications/notfns-2016/cx-nt2016/cent32-2016.pdf

     

    Circulars:

     

    1. Manual signatures on digitally signed invoices: Circular 1038/26/2016 - CE

     

    It is clarified in this circular that the manufacturer or service provider who opts to issue invoices authenticated by digital signature may print a copy of the invoice and manually sign it and forward to customers who are unable to get digitally signed invoices. Such invoices should be authenticated by digital as well as manual signatures and is a valid document for taking CENVAT credit. http://www.cbec.gov.in/resources//htdocs-cbec/excise/cx-circulars/cx-circulars-2016/circ1038-2016cx.pdf

     

    1. Recovery of confirmed demands during pendency of stay application: Circular 1035/2016-CE

     

    This Circular issued to rescind the earlier Circular No. 967/1/2013-CX dated 01.01.2013 relating recovery of confirmed dues during pendency of stay applications. It is now clarified that in case of stay applications pending before Commissioner (Appeals) and CESTAT for the appeals filed for the period prior to 06.08.2014, no recovery of amount shall be made during their pendency.

     

    With respect to recovery proceeding in relation to an order of Hon'ble High Court or Tribunal confirming demand of duty, the Circular has directed that the proceedings may be initiated only after a period of sixty days from the date of order of the Hon'ble Tribunal or Hon'ble High Court, as the case may be, where no stay has been granted by Hon'ble High Court or Hon'ble Supreme Court against the order of Hon'ble Tribunal or Hon'ble High Court, respectively. http://www.cbec.gov.in/resources//htdocs-cbec/excise/cx-circulars/cx-circulars-2016/circ1035-2016cx.pdf

     

    1. Clarification of the scope of word ‘site’ in relation to exemption on manufacture of goods at construction site: Circular 1036/23/2016-CX dated 06.07.2016

     

    Notification 12/2012-CE dated 17.03.2012 provides exemption vide entry 186 for goods manufactured at the site of construction for use in construction work at such site. It is clarified by way of explanation in the said notification that the expression "site" means any premises made available for the manufacture of goods by way of a specific mention in the contract or agreement for such construction work, provided that the goods manufactured at such premises are solely used in

     

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    SBS Wiki                                                                                                                                                       www.sbsandco.com/wiki

     

    the said construction work only. The present Circular stated that in case of some field formations, the distance at which goods manufactured and used in the project, has been considered as criteria for examining the eligibility of goods for exemption. The Circular clarified that this is an extraneous criteria not flowing from the language used in the notification, particularly when the expression "site" stands explained in the notification as stated above.

     

    http://www.cbec.gov.in/resources//htdocs-cbec/excise/cx-circulars/cx-circulars-2016/circ1036-2016cx.pdf

     

     

    LEGAL UPDATE

     

    SERVICE TAX

     

    1. Service Tax audit by departmental officers is ultra vires the Finance Act 1994 due to absence of enabling power in the Act— Mega Cabs Private Limited vs. UOI, [2016] 70 taxmann.com 51 (Delhi)

     

    Facts:

     

    Assessee, being served upon letter intimating the audit to be conducted of assessee by department officials, challenged that the department officials have no power to ‘audit’ and the subsequent amendments to Section 94 of Finance Act 1994 and Rule 5A of Service Tax rules 1994 so as to enable department officials to proceed with audit as ultra vires the Finance Act 1994.

     

    Held:

     

    The Honourable High Court held that there is no power with service tax authorities to conduct audit. The word 'verify' in section 94(2)(k) empowers verification of records and does not empower 'audit' of records, as audit is an specialized function and cannot be entrusted to any and every officer of department. Moreover, 'records' would mean 'records' required to be kept under rule 5(2);Therefore, rule 5A (2) requiring even furnishing of 'audit reports' exceeds mandate of 'records' Rule 5A (2) requiring submission of records to C&AG is irrational. Therefore, consequent direction of audit of accounts of assessee was also quashed.

     

    1. Prima facie Service Tax Department officials are not authorised to gain access to any premises of an assessee under Rule 5A(1) and the same is ultra vires Section 82— Magma HDI General Insurance Company Ltd vs. UOI, [2016] 71 taxmann.com 264(Calcutta)

     

    Facts:

     

    Rule 5A(1) of the Service Tax Rules, 1994 provides that an officer authorised by the Principal Commissioner or Commissioner in this behalf shall have access to any premises registered under these rules for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue. Vires of this Rule 5A(1) is challenged before the Kolkata High Court on the ground that the same is contrary to Section 82 of the Finance Act, 1994.

     

     

     

     

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    Held:

     

    The Kolkata High Court prima facie upheld the view of the Delhi High Court in the case of Mega Cabs Private Limited vs. UOI, [2016] 70 taxmann.com 51 (Delhi) that Rule 5A(2) relating to conduct of audit by Department officials and submission of records is ultra vires section 72A of the Finance Act, 1994. Taking this into consideration, the Kolkata High Court held that if the authorities cannot make any demand of records as envisaged under Rule 5A(2), gaining of access to any premises under sub-rule (1) may not serve any purpose. However, the court enshrined that the Department officials are free to take recourse to Section 82 (power to search any premises) in order to physically verify any premises.

     

    1. No levy of service tax on composite contract of construction of residential complex along with transfer of undivided share in the land due to absence of machinery provision to determine the service component— Suresh Kumar Bansal v. Union of India, [2016] 70 taxmann.com 55 (Delhi)

     

    Facts:

     

    The petitioner entered into an agreement with a builder to buy flats in a housing project. The builder charged service tax for constructing such complex and preferential location charges. The petitioner contended that the contract entered is a composite contract including transfer of undivided share of land and there is no specific provision to ascertain the service component from the said agreement. Accordingly, levy is challenged on the ground that it lacks machinery provision to ascertain the value of service component.

     

    Held:

     

    The Court held that the service tax is levied on value of service but such value cannot include the value of land and goods. In this case the consideration charged includes value of service, cost of goods and the sale of immovable property namely land.

     

    Rule 2A of the Service Tax (Determination of Value) Rules, 2006 does not provide the method to determine the value of service in case of composite contract which involves sale of land as well. In the present case, there is no mechanism to ascertain the service portion under service tax.

     

    Held that though, Parliament has the power to levy service tax but neither the Act nor the rule provides the mechanism to segregate the service element from the consideration and hence it is outside the levy of service tax.

     

    1. In view of SEZ Act, 2005; SEZ unit and DTA of same company are distinct entities/separate persons for charge of service tax. However, if no consideration is charged separately, then no service tax can be charged— CCE vs. Larson and Toubro Ltd, [2016] 71 taxmann.com 241 (Gujarat)

    Facts:

     

    SEZ unit of the company provided various services to DTA units of the same company. Department treated the SEZ unit and the DTA units as separate persons and demanded service tax. The assessee argued that units of same company constituted a single person and hence no service is involved to attract service tax. Department argued that as per rule 19(7) of SEZ Rules, 2006, enterprise operating both as DTA and SEZ unit shall have two distinct identities, with separate books of accounts. Hence, they are separate persons and service tax is leviable.

     

    Held:

     

    Rule 19(7) of SEZ Rules, 2006 recognises that a same legal entity may have two units one in SEZ and another in DTA. It also mandates maintenance of separate books of accounts. It is because of the special concessions in taxation, including duty drawbacks and other exemptions that the SEZ unit has to maintain scrupulously accounts of all imports and procurements from Domestic Tariff Area. It also has to pay customs duty on goods cleared to Domestic Tariff areas as if such goods were imported into India.

     

    In view of statutory scheme noticed in Finance Act, 1994 and SEZ Act, 2005, it was heldthat the contention of the assesse company that unit in SEZ and other units of same legal entity are not two distinct legal persons on the basis of principle of mutuality cannot be accepted. Accordingly held that SEZ unit and other units of same legal entity are treated as separate persons for charge of service tax. However, it was held that service tax cannot be collected in the said case, as no consideration was charged by SEZ unit for services to DTA units.

     

    CENTRAL EXCISE

     

    1. For the purpose of reversal of CENVAT Credit relating to trading activity for the period prior to 01.04.2011, the CESTAT earlier observations that full sales value of trading business shall be considered for reversal instead of formula which was introduced from 01.04.2011 to encourage trading industry were set aside by High Court. Case remanded to decide the matter afresh— Mercedes Benz India (P) Ltd vs.CCE, [2016] Taxmann.com 332(Bombay)

     

    Facts:

     

    The appellant is engaged in the business of manufacture of motor vehicles and parts thereof through their dealer network. Appellant is also engaged in the business of importing completely built-up units from their parent company and selling them through their same dealer network. Appellant availed CENVAT Credit of common input services relating to manufacturing activity and import activity for the period from September 2004 to March 2011. Formula method has been prescribed w.e.f. 01.04.2011 which provides that trading turnover being higher of gross margin or ten per cent of the cost of goods sold. According to Department, the formula method cannot be applied for the period prior to 01.04.2011. Accordingly the amount should be reversed on simple pro-rata formula of trading turnover divided by total turnover. The view of Department is upheld by CESTAT and is appealed to High Court in the present case.

     

     

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    Held:

     

    Held that the Appeal should not be entertained for the reason that CESTAT order does not discuss some of the questions raised and with respect to other questions, factual findings are required. Coming to the issue of applicability of formula relating to reversal of CENVAT Credit for the period prior to 01.04.2011, it was held that the CESTAT must firstly refer to the substantive Rule operative prior to 01.04.2011 and then arrive at a conclusion in relation to the Explanation introduced with sub-clauses from01.04.2011. The CESTAT failed in justifying that the Parliament intended to encourage trading of goods rather than manufacturing of the same. The decision of CESTAT set aside and remanded for fresh hearing.

     

    1. Supply of bought out ‘O’ ring and ‘U’ cap seals along with manufactured pneumatic cylinders and valves would not amount to manufacture and hence not excisable— M/s Electropneumatics & Hydraulics India Pvt Ltd vs. CCE, 2016-TIOL-1882-CESTAT-Mum

     

    Facts:

     

    The Appellant is engaged in manufacturing of pneumatic cylinders and valves. Seal kits are also supplied along with the manufactured goods. Seal kits were a combination of ‘O’ ring and ‘U’ cap seals etc which are bought out by the Appellant and supplied along with the manufactured goods as spares. No excise duty is paid on these items for reason that no manufacturing activity is involved. Revenue rejected their plea on the reasoning that the activity of packeting such bought items in fixed number in plastic bags as seal kits is to make them marketable and thus amounts to manufacture. The said view is also upheld by first appellate authority also.

     

    Held:

     

    The CESTAT held that ‘O’ ring and ‘U’ cap seals are already marketable when supplied by their manufacturer to the Appellant. Subsequent packeting of pre-determined quantity of the said spares in a plastic bag has not made the products marketable. In the absence of any note in Chapter that packeting of pre-determined quantity would amount to manufacture, this activity cannot be considered as manufacturing activity. Accordingly, the demand is set aside.

    Tags:

    AUGUST ‘16

     

    1. Holding of FCA by Insurance Companies and Start Ups

     

    RBI vide Notification No. FEMA 10 (R)/ (1)/2016-RB dated June 01, 2016has amended FEM (Foreign Currency Accounts by a person resident in India) (Amendment) Regulations, 2016, whereby RBI has permitted Insurance Companies and StartUp Companies to open and hold Foreign Currency Accounts with banks outside India.

     

    For more details plese refer the notification

     

    1. DIPP Consolidated FDI Policy of 2016

     

    DIPP has issued Consolidated FDI Policy Circular of 2016, vide its file no. D/o IPP F. No. 5(1)/2016-FC-1, dated 07/06/2016 to consolidate and update the extant FDI regulations.

     

    For details plese refer the circular

     

    1. External Commercial Borrowings (ECB) – Approval Route cases:

     

    RBI vide A.P. (DIR Series) Circular No. 80 dated June 30, 2016has amended the guidelines for processing the matters pertaining to ECB under approval route. It is stated that with a view to rationalizing and expediting the process of giving approval, it has been decided that ECB proposals received in the Reserve Bank above a certain threshold limit (refixed from time to time) be placed before the Empowered Committee. The Reserve Bank will take a final decision in the cases taking into account the recommendation of the Empowered Committee. All other aspects of the ECB policy shall remain unchanged.

     

    1. Settlement System under Asian Clearing Union (ACU):

     

    RBI vide A.P. (DIR Series) Circular No. 81 dated June 30, 2016has invited the attention of AD Category-I, giving participants in ACU mechanism the option to settle their transactions either in ‘ACU Dollar’ or in ‘ACU Euro’. The 'ACU Dollar' and 'ACU Euro' is equivalent in value to one US Dollar and one Euro, respectively.

    As the payment channel for processing ‘ACU Euro’ transactions is under review, it has become necessary to temporarily suspend operations in ‘ACU Euro’ with effect from July 01, 2016. Accordingly, all eligible current account transactions including trade transactions in ‘Euro’ are permitted to be settled outside the ACU mechanism until further notice.

     

     

    1. Discontinuation of Reporting of Bank Guarantee on behalf of service importers

     

    RBI vide A.P. (DIR Series) Circular No. 01 dated July 07, 2016has invited the attention of AD Category-I, on ‘Other Remittance Facilities’ in terms of which, AD Category-I banks were permitted to issue guarantees in favour of a non-resident service provider on behalf of their resident customers importing services, subject to the conditions laid therein. AD Category-I banks were also advised to report to the Chief General Manager-in- Charge, Foreign Exchange Department, Foreign Investments Division (EPD), Reserve Bank of India, Central Office, Mumbai-400001 details about invocation of bank guarantee for service imports.

     

    On a review of the reporting requirements and to reduce the burden of compliance, AD Category I banks are advised to discontinue submission of such reports with immediate effect. They may, however, maintain records of such invocations and furnish the required details to RBI whenever sought.

    Tags:

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

     

    No.

    2013, amended

    Amendment Bill

     

     

     

     

     

     

     

     

     

     

    45

    Section  152

    46

    Amendment of sub-section (3) and (4) of section 152 of the

    Welcome amendment, allowing to

     

     

    Appointment

    of

     

    Act to provide any other identification number, as may be

    have a prescribed Identification

     

     

    Directors

     

     

    prescribed,  to  be  recognised  as  Director  Identification

    number as DIN, and a separate DIN

     

     

     

     

     

    Number, and a person may hold such identification number in

    need not be obtained.

     

     

     

     

     

    place of DIN.

     

     

     

     

     

     

     

     

     

    46

    Section 153 –

     

    47

    Insertion of a proviso to section 153 of the Act, enabling the

    Welcome amendment, allowing to

     

     

    Application for

     

     

    Central Government to recognise any other identification

    have a prescribed Identification

     

     

    Allotment of DIN

     

    number to be treated as DIN, and any person possessing such

    number as DIN, thereby removing

     

     

     

     

     

    Identification Number need not obtain a DIN under the

    the requirement for applying a

     

     

     

     

     

    section.

    separate DIN.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    47

    Section 160 –

     

    48

     

    Welcome amendment, exempting

     

     

    Right of Persons Other

     

    Insertion of a proviso to sub-section (1) of Section 160 of the

    the requirement of deposit of

     

     

    than Retiring

    Directors

     

    Act of the Act,exempting the requirement as to deposit of

    money in respect of independent

     

     

    to Stand for Directorship

     

    Rs.1,00,000/-,  in  connection  with  appointment  of

    directors or directors nominated

     

     

     

     

     

    independent directors or directors nominated by nomination

    by nomination and remuneration

     

     

     

     

     

    and remuneration committee.

    committee.

     

     

     

     

     

     

     

     

     

     

     

    Vide exemption notification Dt:05.06.2015, the provisions of

     

     

     

     

     

     

    Section 160 are not applicable to Private Companies.

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

    No.

    2013, amended

     

    Amendment Bill

     

     

     

     

     

     

     

     

     

     

    48

    S e c t i o n

    1 6 1

    -

    49

    Amendment of sub-section (2) of Section 161 of the Act,

    Amendment to remove

     

    A p p o i n t m e n t

    o f

     

    restricting an existing Director in the Company, from being

    ambiguity.

     

    Additional

    Director,

     

    appointed as an Alternate director for other Director.

     

     

    Alternate Director and

     

     

     

     

    Nominee Director

     

     

    Amendment of Sub-section (4) of Section 161 of the Act, to

    Welcome  Amendment,  and

     

     

     

     

     

    delete the word “In case of a Public Company”, thereby

    ease of operations.

     

     

     

     

     

    allowing the Board of all companies to fill casual vacancy and

     

     

     

     

     

     

    obtain approval for the said appointment, in the immediate

     

     

     

     

     

     

    next annual generalmeeting.

     

     

     

     

     

     

     

     

    49

    S e c t i o n

    1 6 4

    50

    Insertion of a proviso to sub-section (2) of section 164 of the

    W e l c o m e  a m e n d m e n t

     

    Disqualifications

    for

     

    Act  to  provide  for  non-applicability  of  disqualification

    providing relief to the directors

     

    appointment of Director

     

    provisions, for period of 6 months from the date of

    who get appointed as Director

     

     

     

     

     

    appointment, to a director, who is appointed, as a director in a

    in  Company under defaulting

     

     

     

     

     

    company, which is in default of non-filing of financial

    status.

     

     

     

     

     

    statements or annual return or failure to repay the deposit.

     

     

     

     

     

     

    Substitution of a new proviso in place of the existing proviso

     

     

     

     

     

     

    to provide that the clauses (d), (e) and (g) of sub-section (3) of

     

     

     

     

     

     

    section 164 of the Act, shall continue to apply even if appeal

     

     

     

     

     

     

    or petition is filed.

     

     

     

     

     

     

     

     

    50

    Section 165 –

     

     

    51

    Insertion of an Explanation to sub-section (1) of Section 165

    Welcome amendment.

     

    Number of Directorships

     

    of the Act, to exclude the directorship in dormant companies

     

     

     

     

     

     

    from the limit of directorships of 20 Companies.

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

     

    No.

    2013, amended

    Amendment Bill

     

     

     

     

     

     

     

     

     

    51

    Section 167 –

    52

    Insertion of a proviso to Clause (a) of sub-section (1) of section

    Amendment to remove

     

     

    Vacation  of  office  of

     

    167 of the Act, to provide that in case a director incurs any of

    ambiguity.

     

     

    Director

     

    disqualifications under section 164 (2), he shall vacate office

     

     

     

     

     

    incompanies other than the company which is in default.

     

     

     

     

     

    Substitution of the proviso to Clause (f) of sub-section (1) of

    W e l c o m e  a m e n d m e n t ,

     

     

     

     

    section 167 of the Act to provide the time frame/criteria from

    providing relief in cases where

     

     

     

     

    which vacation of office of director shall take place, in case of

    appeal  is  made  against  the

     

     

     

     

    orders referred to in clauses (e) and (f)

    order.

     

     

     

     

     

     

     

    52

    Section 168 –

    53

    Amendment of proviso to Sub-section (1) of Section 168 of

    Welcome amendment, thereby

     

     

    Resignation of Director

     

    the  Act,  thereby making  the  requirement  of  filing  of

    making  the  filing  of  form

     

     

     

     

    Resignation letter by the Director with the Registrar of

    optional on the part of the

     

     

     

     

    Companies, optional.

    Resigning Director.

     

     

     

     

     

     

     

    53

    Section – 173 – Meetings

    54

    Insertion of a proviso to sub-section (2) of Section 173 of the

    Welcome amendment, thereby

     

     

    of the Board

     

    Act to allow participation of directors on certain items at

    enabling  the  directors  who

     

     

     

     

    Board meetings through video conferencing or other audio

    cannot be present physically to

     

     

     

     

    visual means if there is requisite quorum is present at the

    participate in the meeting and

     

     

     

     

    meeting through physical presence of directors.

    be part of the decision making.

     

     

     

     

     

     

     

    54

    Section 177–

    55

    Amendment to Sub-section (1) of Section 177 of the Act, to

    Welcome  Amendment  to

     

     

    Audit Committee

     

    replace the words “Every Listed Company” with words “Every

    remove ambiguity and ease of

     

     

     

     

    Listed Public Company”, thereby making the applicability of

    operations.

     

     

     

     

    the Section only to listed public companies and other

     

     

     

     

     

    companies as prescribed under the rules.

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

     

    No.

    2013, amended

    Amendment Bill

     

     

     

     

     

     

     

     

     

     

     

     

    Insertion of new provisos in clause (iv) of sub-section (4) of

     

     

     

     

     

    Section 177 of the Act, relating to authorities/powers to the

     

     

     

     

     

    Audit committees, such as (i) ratification of transactions

     

     

     

     

     

    entered in to by the Directors with the company, neither

     

     

     

     

     

    without approval of the Audit Committee and involving

     

     

     

     

     

    amount not exceeding Rs.1 Crore rupees, not the said

     

     

     

     

     

    transaction is ratified by the Audit Committee, within 3

     

     

     

     

     

    months of transaction, (ii) consequences of non-ratification

     

     

     

     

     

    and  (iii)  exemption  from  obtaining  approval  of  audit

     

     

     

     

     

    committee for to related party transactions between holding

     

     

     

     

     

    compan yand its wholly owned subsidiary, other than those

     

     

     

     

     

    covered under Section 188

     

     

     

     

     

     

     

     

    55

    Section 178 -

    56

    Amendment to Sub-section (1) of Section 178 of the Act, to

    Welcome  Amendment  to

     

    replace the words “Every Listed Company” with words “Every

    remove ambiguity and ease of

     

     

    Nomination and

     

     

    Remuneration

     

    Listed Public Company”, thereby making the applicability of

    operations.

     

     

    Committee and

     

    the Section only to listed public companies and other

     

     

     

    Stakeholders

     

    companies as prescribed under the rules.

     

     

     

    Relationship Committee

     

     

     

     

     

     

     

    Amendment of Sub-section (2) of Section 178 of the Act, that

    Welcome Amendment for ease

     

     

     

     

    instead of the Committee carrying out evaluation of every

    of operations.

     

     

     

     

    director’s  performance,  the  Committee  will  specify

     

     

     

     

     

    methodology for effective evaluation of performance of

     

     

     

     

     

    Board and committees and individual directors, and the said

     

     

     

     

     

    performance evaluation to be carried out either by the Board,

     

     

     

     

     

    Nomination  and  Remuneration  Committee  or  an

     

     

     

     

     

    Independent external agency.

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

     

    No.

    2013, amended

    Amendment Bill

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Insertion of Proviso to Clause (c)of Sub-section (4) of Section

    D i s c l o s u re

    re q u i re m e nt

     

     

     

     

    178, to provide that the policy framed by the Nomination and

    included.

     

     

     

     

     

    Remuneration  Committee,  relating  to   criteria  for

     

     

     

     

     

     

    determining  qualifications,  positive  attributes  and

     

     

     

     

     

     

    independence of a director and recommend to the Board a

     

     

     

     

     

     

    policy, relating to the remuneration for the directors, key

     

     

     

     

     

     

    managerial personnel and other employees, shall be placed

     

     

     

     

     

     

    on the website of the Company, if any, and the salient features

     

     

     

     

     

     

    policy and changes therein, if any, along with the web address

     

     

     

     

     

     

    of the policy, if any, shall be disclosed in the Board's report.

     

     

     

     

     

     

    Amendment of proviso to Sub-section (8) of Section 178 for

    Amendment to remove error in

     

     

     

     

    substituting the words “inability to resolve or consider any

    wording

     

     

     

     

     

    grievance" in place of "non-consideration of resolution of any

     

     

     

     

     

     

    grievance".

     

     

     

     

     

     

     

     

     

     

    56

    Section 180 -

    57

    Amendment to item (c) of sub-section (1) of Section 180 of

    Amendment

    to  maintain

     

     

    Restrictions on Powers of

     

    the Act, to substitute for the words "paid-up share capital,

    uniformity

     

     

     

    Board.

     

    free reserves and securities premium", in place of "paid-up

     

     

     

     

     

     

    share capital and free reserves", i.e., to include securities

     

     

     

     

     

     

    premium, thereby making the requirement of obtaining

     

     

     

     

     

     

    consent from the members of the company, only for the

     

     

     

     

     

     

    cases, where the proposed borrowings, will be in excess of its

     

     

     

     

     

     

    paid-up share capital, free reserves and securities premium.

     

     

     

     

     

     

    Note: This section is does not apply to a Private Company, by

     

     

     

     

     

     

    virtue of the exemption notification Dt:05.06.2015.

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

     

    No.

    2013, amended

    Amendment Bill

     

     

     

     

     

     

     

     

     

     

     

    57

    Section 184 –

    58

    Amendment to Sub-section (4) of Section 184 of the Act, to

    Since there is no minimum fine

     

     

    Disclosure of Interest by

     

    remove the minimum fine of Rs.50,000/-, for contravention

    slab, the penalty levied can be

     

     

    Director

     

    by the Director of the provisions i.e., failure to disclose his

    upto Rs.1 Lakh.

     

     

     

     

     

     

    interest in general and/or in particular with reference to a

     

     

     

     

     

     

     

    contract

     

     

     

     

     

     

     

    Amendment to Clause (b) of sub-section(5) of Section 184 of

    Amendment to remove

     

     

     

     

     

    the Act, to provide for non-applicability of the provisions of

    ambiguity

     

     

     

     

     

     

    this section, relating to the transactions between Companies

     

     

     

     

     

     

     

    and body Corporates, where any of the directors of the one

     

     

     

     

     

     

     

    company or body corporate or two or more of them together

     

     

     

     

     

     

     

    holds or hold not more than two per cent. of the paid-up

     

     

     

     

     

     

     

    share capital in the other company or the body corporate,

     

     

     

     

     

     

     

    which was inadvertently left out.

     

     

     

     

     

     

     

     

     

     

     

    58

    Section 185 -

    59

    Amendment to substitute the existing Section 185 of the Act,

    V E R Y  M U C H

    R E Q U I R E D

     

     

    Loan to Directors, etc

     

    with a new section with following provisions:

    A M E N D M E N T

    W e l c o m e

     

     

     

     

     

    substitution  /Amendment  to

     

     

     

     

    èSub-section (1): To prohibit giving loans, advances, etc.,

    provide  for  relief  to  group

     

     

     

     

    to directors of the company or its holding company or any

    companies/Companies

    with

     

     

     

     

    partner of such director or any firm in which such director

    common directors to provide

     

     

     

     

    or relative is a partner.

    l o a n s /g u a ra n t e e s

    a f t e r

     

     

     

     

    èSub-section (2): It allows a company to give loan or

    compliance of the provisions.

     

     

     

     

     

     

     

     

     

     

     

    guarantee or provide security to any person in whom any

     

     

     

     

     

     

     

    of the director is interested subject to passing of special

     

     

     

     

     

     

     

    resolution by the company and utilisation of loans by the

     

     

     

     

     

     

     

    borrowing company for its principal business activities.

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

     

    No.

    2013, amended

    Amendment Bill

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    It provides for an explanation for term any person in whom

     

     

     

     

     

     

    any of the director is interested.

     

     

     

     

     

     

    èSub-section (3): Provides for certain situations to which

     

     

     

     

     

     

    the provisions of Sub-section (1) & (2)are not applicable.

     

     

     

     

     

     

    èSub-section (4): Penalties for non-compliance. (penalties

     

     

     

     

     

     

    remain the same as in the old Section)

     

     

     

     

     

     

     

     

     

     

    59

    Section 186 -

    60

    Omission of Sub-section(1) of Section 186 of the Act, relating

     

     

     

     

    Loan and Investment by

     

    to the  restriction on layers of investment companies i.e.,2

     

     

     

     

    Company

     

    Layers. Thereby investment can be done through more than

     

     

     

     

     

     

    two layers of investment companies.

    Welcome  Amendment

    to

     

     

     

     

     

     

     

     

    Insertion of an explanation to Sub-section (2), that for the

    provide ease of operations.

     

     

     

     

     

    purpose of the sub-section,  the word "person"does not

     

     

     

     

     

     

    include any individual who is in the employment of the

     

     

     

     

     

     

    company.

     

     

     

     

     

     

    Amendment to substitute the existing sub-section (3) of

    Welcome  Amendment

    to

     

     

     

     

    Section 186 of the Act, with a new sub-section, to include

    provide ease of operations.

     

     

     

     

     

    aggregate  of  loan  and  investments  so  far  made  and

     

     

     

     

     

     

    guarantees, securities so far provided to all other bodies

     

     

     

     

     

     

    corporate along with the investment, loan, guarantee or

     

     

     

     

     

     

    security proposed to be made or given by the Board for the

     

     

     

     

     

     

    purpose of calculating the limits of loans and investments.

     

     

     

     

     

     

    Requirement  of  prior  Special  resolution  for

     

     

     

     

     

     

    investment/loans/securities beyond the limits.

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

     

    No.

    2013, amended

    Amendment Bill

     

     

     

     

     

     

     

     

     

     

     

     

    Inclusion of a proviso to sub-section (3), to exempt the

    Welcome Amendment to

     

     

     

     

    requirement of passing a special resolution at general

    provide ease of operations.

     

     

     

     

    meeting, in cases where a loan or guarantee is given or where

     

     

     

     

     

    a security has been provided by a company to its wholly

     

     

     

     

     

    owned subsidiary companyor a joint venture company, or

     

     

     

     

     

    acquisition is made by a holding company of the securities of

     

     

     

     

     

    its wholly owned subsidiary company.   A further proviso

     

     

     

     

     

    provides for the disclosure of the said details in the Financial

     

     

     

     

     

    statement of the Company

     

     

     

     

     

    Amendment to substitute the existing sub-section (11) of

     

     

     

     

     

    Section 186 of the Actto rephrase the provisions.

     

     

     

     

     

    Amendment of Clause (a) of the explanation provided to the

    Amendment to provide for

     

     

     

     

    section,  relating  to  “investment  company”,  to  include

    clarity.

     

     

     

     

    clarification to the existing explanation to provide for

     

     

     

     

     

    criteria/cases, as to when the company will be deemed to be a

     

     

     

     

     

    company principally engaged in the business of acquisition of

     

     

     

     

     

    shares, debentures or other securities.

     

     

     

     

     

     

     

     

    60

    Section 188 –

    61

    Insertion of a new proviso (3rd one) after the existing second

    Welcome Amendment to

     

     

    R e l a t e d  P a r t y

     

    proviso to sub-section (1) of Section 188, to provide that the

    provide ease of operations.

     

     

    Transactions

     

    provisions of 2nd proviso to Section 188(1) shall not apply to a

     

     

     

     

     

    company in which 90 % or more members in numbers are

     

     

     

     

     

    relatives of promoters or related parties.

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/Penalty

     

    No.

    2013, amended

    Amendment Bill

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Amendment of Sub-section (3) of Section 188 of the Act, to

    Amendment

    to  provide

    for

     

     

     

     

     

    provide that any transaction entered into by a director or any

    clarity.

     

     

     

     

     

     

     

    other employee, without obtaining the consent of the Board

     

     

     

     

     

     

     

     

    or approval by are solution in the general meeting under sub-

     

     

     

     

     

     

     

     

    section (1) and if it is not ratified by the Board or, as the case

     

     

     

     

     

     

     

     

    may be, by the shareholders at a meeting within three

     

     

     

     

     

     

     

     

    months shall be voidable at the option of the Board or

     

     

     

     

     

     

     

     

    shareholders, as the case may be

     

     

     

     

     

     

     

     

     

     

     

     

     

    61

    S e c t i o n

    1 9 4  -

    62

    Amendment to Omit Section 194 of the Act relating to

    Amendment

    proposed  to

    be

     

     

    Prohibition on Forward

     

    prohibition on forward dealings in securities of company by

    made, since the same is covered

     

     

    Dealings in

    Securities

     

    director or key managerial personnel

    under other enactment, and the

     

     

    of Company by Director

     

     

    Companies Act, cannot have a

     

     

    or  key  Managerial

     

     

    control over the same.

     

     

     

    Personnel

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    62

    Section 195 -

     

    63

    Amendment to Omit Section 195 of the Act which provides

    Amendment

    proposed  to

    be

     

     

    Prohibition

    on  Insider

     

    for prohibition on Insider Trading of Securities.

    made, since the same is covered

     

     

    Trading of Securities

     

     

    under other enactment, and the

     

     

     

     

     

     

    Companies Act, cannot have a

     

     

     

     

     

     

    control over the same.

     

     

     

     

     

     

     

     

     

     

     

     

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