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    Introduction: 

    SA530 deals with Audit sampling. It came into effect from 1st April 2009. It deals with the Auditor’s use of statistical and non-statistical Sampling when designing and selecting the audit sample and evaluating results from the sample. 

    The application of audit procedures to less than 100% of items within a population of audit relevance such that all sampling units have a chance of selection in order to provide the Auditor with a reasonable basis on which to draw conclusions about the entire population. 

    The objective of the Auditor, when using audit sampling, is to provide a reasonable basis for the Auditor to draw conclusions about the population from which the sample is selected.

    Introduction:

     

    Till the levy of service tax on restaurant service (w.e.f. 01.05.2011) by the central government, the entire transaction of food supply at a restaurant was subjected to VAT only by the state governments. However, with Central Government’s decision to tax certain portion of the total bill (presently 40% of total bill) as service portion involved in supply of food or beverages, there has been overlapping of service tax and VAT levied on total bill value.

     

    In this article, an attempt is made to understand the series of events which has led to the charge of service tax and VAT on the supply of food in a restaurant/hotel.

     

    Background:

     

    Initial attempts to levy Sales Tax on Services involving food supply – Prior to Article 366(29A):

     

    An attempt to levy sales tax on food supply has been first made by Punjab Government which has been challenged by Associated Hotels of India Ltd. In the case of State of Punjab vs. Associated Hotels of India Ltd, 1972 AIR 1131, the hotelier served meals at stated hours to those who stay at the hotel and a consolidated bill was given to him. There was no break up of amounts pertaining to sale of food and service in such bill.

     

    Here, sales tax was proposed on certain portion of accommodation charges treating it as consideration for supply of food. The issue has gone to the High Court, wherein the High Court after relying on various judgments has concluded that there is no sale involved in such transaction since the parties had never intended to purchase and sale of goods. The revenue has approached the Supreme Court against the High Court order.

     

    The Supreme Court held that the transaction is essentially of service in the performance of which or as a part of the amenities incidental to that, the hotelier served meals at stated hours. Thus, held that the revenue was not entitled to split up the transaction into two parts as one of service and the other of sale of food stuffs so as to bring the later part under the ambit of sales tax.

     

    However, the state governments have been levying sales tax on food supply in restaurants on the basis that the Associated Hotels of India case (supra) was applicable only for composite transactions (to supply of food or drink by a hotelier to a person lodged in the hotel) and that tax was leviable on the direct, isolated sale of foodstuffs by a restaurant.

     

    Later, the Supreme Court in the case of Northern India Caterers (India) Ltd. Vs. Lt. Governor of Delhi (A.I.R. 1978 S.C.1591) has held that service of meals whether in a hotel or restaurant does not constitute a sale of food for the purpose of levy of sales tax but must be regarded as the rendering of a

     

     

     

     

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    SBS Interns' Digest                                                                                                                          www.sbsandco.com/digest

     

    service in the satisfaction of a human need or ministering to the bodily want of human beings. It would not make any difference whether the visitor to the restaurant is charged for the meal as a whole or according to each dish separately. Accordingly the supreme court has quashed the levy of sales tax on sale of food.

     

    Step taken by central government to enable state governments to tax food supply sales in hotels/ restaurants- Insertion of 366(29A):

     

    Consequent to these judgements of Supreme Court, the Central Government, with an intention to enable the State Governments to levy tax on transactions involving supply of food, has amended vide THE CONSTITUTION (Forty-sixth Amendment) Act, 1982, the definition of ‘Sale’ as appearing in Article 366(29) to include these transactions as deemed sales.

     

    Clause 29A reads as follows- "tax on the sale or purchase of goods" includes-

     

    • a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration

     

    Note that there is no levy of service tax at the time of insertion of clause 29A, as levy of tax on services first began in 1994.

     

    Post insertion of clause (29A) of Article 366 of the Constitution:

     

    Post insertion of clause 29A of article 366, most state governments amended their respective state sales tax act to include the deemed sales as part of definition of the term ‘sale’ enabling them to levy sales tax on the same.

     

    Now, the question has arisen as to whether sales tax has to be levied on entire consideration received for restaurant service involving supply of food or on part of consideration after excluding value of service component in the transaction.

     

    In the case of K. Damodarasamy Naidu vs. State of Tamil Nadu & Others in February 1990, the levy of sales tax on entire consideration was challenged by the assesses contending that when the transaction has both supply of goods and service portion, it is illegal to tax on the consideration without proper guideline to separate the value for service portion.

     

    However, the Supreme Court ruled that with the insertion of clause (29A) of Article 366 of Constitution, the parliament has given an inclusive definition of 'tax on the sale or purchase of goods' intended to undo the effect of the Supreme Court decisions and it will now be permissible for the State Legislature to levy sales tax where there is supply of goods, being food or any other article for human consumption or any drink, even though it is by way of or as part of any supply or in any other manner whatsoever.

     

    In view of this specific expansion of the meaning by the constitutional amendment, the court do not see how any objection can be raised that the supply of foods which were a part of service and which were originally found to be not taxable under the Sales Tax Act by the Supreme Court, cannot even now be taxed by proper legislative enactment.

     

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    VAT vs. Service Tax on Food Supply in a Restaurant/Hotel

     

     

    SBS Interns' Digest                                                                                                                          www.sbsandco.com/digest

     

    Thus, the Supreme Court ruled that no distinction is to be made between the supply part and the service part in the supply of food and drinks in a hotel. Also, the argument of assesses that attempt to levy sales tax on entire transaction including service without proper rules to separate service portion from the total value of transaction, has been quashed by the Supreme court, taking stand that, with amendment in definition of ‘sale’ thereby inserting ‘deemed sales’ in the definition, the States have got the authority to tax entire transaction including service portion.

     

    Since then, the trade has been accustomed to pay sales tax (or VAT) on the entire consideration, coming to the general conclusion that transactions involving supply of food or beverages are prima facie ‘sales’ thus subject to Sales tax on entire value.

     

    Subsequently, appeals have been filed for the case (K. DamodarasamyNaidu vs. State of Tamil Nadu & Others AIR 1999 SC 3909) wherein with respect to supplies at restaurants it was held vide para 9 as follows;

     

    “The provisions of Sub-clause (f) of Clause (29A) of Article 366 need to be analysed. Sub-clause (f) permits the States to impose a tax on the supply of food and drink. The supply can be by way of a service or as part of a service or it can be in any other manner whatsoever. The supply or service can be for cash or deferred payment or other valuable consideration. The words of Sub-clause (i) have found place in the Sales Tax Acts of most States and, as we have seen, they have been used in the said Tamil Nadu Act. The tax, therefore, is on the supply of food or drink and it is not of relevance that the supply is by way of a service or as part of a service. In our view, therefore, the price that the customer pays for the supply of food in a restaurant cannot be split up as suggested by learned Counsel. The supply of food by the restaurant owner to the customer, though it may be a part of the service that he renders by providing good furniture, furnishing and fixtures, linen, crockery and cutlery, music, a dance floor and a floor show, is what is the subject of the levy.” (Para 9)

     

    Thus the Supreme Court had interpreted the language of Article 366(29A)(f) and held that supply of food in a restaurant is by way of a service and States can impose tax on the entire transaction value of restaurant sales.

     

    With respect to food supplies in residential hotel accommodations where the supply of food is as part of hotel accommodation service, it was vehemently pleaded by petitioners that residential hotels may provide only lodging or lodging and boarding involving breakfast alone, breakfast, lunch and dinner or breakfast and one meal. Tax could not be levied on these composite transactions involving boarding and lodging unless the State make Rules which set down formulae for determining that component of the composite charge which was exigible to the tax on food and drink.

     

    The important point to notice here is that the Learned Counsel for the States had not put forward any argument that entire value of composite charge would be subject to VAT. It was only argued that no rules were necessary for assessment as the officers would undertake assessments depending upon the facts of each individual case. But the Supreme Court ordered the State Governments for Rules to be prescribed for separation of the value of services from food supply in composite charge made by residential hotels with the reasoning that it is impossible to carry out assessments of several thousands of assessees by considering facts of each case and further it would lead to arbitrariness.

     

     

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    VAT vs. Service Tax on Food Supply in a Restaurant/Hotel

     

     

    SBS Interns' Digest                                                                                                                          www.sbsandco.com/digest

     

    Thus Supreme Court had made a clear distinction between supply of food at restaurants and that supplied by residential hotels. After 46th amendment, it appears to have laid out or at least agreed to the principle that State Governments can levy Sales Tax on the entire transaction value in case of restaurants though services are also involved in such supply in view of the clear provisions of Article 366(29A)(f) i.e. a tax on the supply, by way of or as part of any service or in any other manner whatsoever. Wherever separate discernable services (which can be provided independently also without food supply) are involved along with food supply like lodging/accommodation services, Sales Tax is restricted to the value of food supply involved in such transaction.

     

    Levy of service tax on Restaurant services w.e.f. 01.05.2011:

     

    For around a decade after the judgement given by Supreme court in case of K. Damodarasamy Naidu vs. State of Tamil Nadu & Others AIR 1999 SC 3909, the trade was of opinion that the issue of taxing on food supply in restaurant service and sales tax was paid on entire consideration. It is for this reason that the decision of central government to levy service tax on service portion involved in food supply came as a jolt to the trade.

     

    The Central government brought restaurant service (with certain conditions), under the ambit of service tax levy vide sub clause (zzzzv) of clause 105 of Section 65 of the Finance Act, 1994, which reads as follows:

     

    “Services provided or to be provided to any person, by a restaurant, by whatever name called, having the facility of air-conditioning in any part of the establishment, at any time during the financial year, which has licence to serve alcoholic beverages, in relation to serving of food or beverage, including alcoholic beverages or both, in its premises.”

     

    and

     

    on hotel accommodation vide sub clause (zzzzw) of clause 105 of Section 65 of the Finance Act, 1994, which reads as follows:

     

    “Services provided or to be provided to any person, by a hotel, inn, guest house, club or camp-site, by whatever name called, for providing of accommodation for a continuous period of less than three months”

     

    Central Government, through amendment of Service Tax (Determination of Value) Rules, 2006 in 2012, stated that value of service portion in case of restaurant service shall be 40% of total amount charged and in case of outdoor catering to be 60% of total consideration.

     

    Taking stand that serving of food or beverage including alcoholic beverages represents only sale of goods which squarely falls under Entry 54 of List II (State List) of the 7th schedule to the Constitution of India and therefore within the exclusive competence of the State Legislature, the trade challenged in courts as to the legislative competence of the Parliament to impose a tax on sale of goods which is absolutely the domain of the state legislation.

     

     

     

     

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    VAT vs. Service Tax on Food Supply in a Restaurant/Hotel

     

     

    SBS Interns' Digest                                                                                                                          www.sbsandco.com/digest

     

    Thus, the constitutional validity of Service tax on restaurant services has been a subject matter of consideration before several High Courts. Kerala High Court and Maharashtra High court took divergent views on this issue placing reliance on different cases.

     

    In the case of Kerala Classified Hotels and Resorts Association vs. UOI, 2013-TIOL-533-HC-Kerala-ST, initially, the single Judge held that the matters covered in the sub clauses (zzzv) and (zzzw) of Section 65(105) were enumerated in Entries 54 and 62 of the State List , whereby the State government has the exclusive right to tax on the same and hence, the Parliament did not have the legislative competence to levy tax thereon. Thus, the Kerala High Court held that levy of service tax on restaurant services is unconstitutional.

     

    Later on, In the case of Indian Hotels & Restaurant Association vs. UOI, 2014-TIOL-498-HC-MUM-ST, the Mumbai High Court refused to place any reliance in the single member bench decision of Kerala High Court in the case of Kerala Classified Hotels and Resorts Association and thereby upheld the levy of Service tax on the services rendered by restaurants under clause (zzzzv) of section 65(105) of the Finance Act, 1994. The court placed reliance on the case of Tamil Nadu KalyanaMandapam Owners’ Association vs. Union of India & Others, 2004, wherein it was held that Article 366(29A)(f) only permits the State to impose a tax on supply of food and drinks by whatever mode it may be made which does not conceptually include the supply to services within sale or purchase of goods.

     

    The revenue, thus, after Mumbai High Court’s judgement upholding levy of Service tax on restaurant service, went into appeal against the decision of the single Judge in case of Kerala Classified Hotels and Resorts Association vs. UOI, 2013. However, the Division bench upheld the decision of the single Judge and confirmed that levy of Service tax on supply of food and beverages in an air-conditioned restaurant and on accommodation in hotels, inns etc. under sub-clauses (zzzzv) and (zzzzw) of Section 65(105) respectively is unconstitutional. The Court held that even the service part involved in the supply of food and beverages is deemed as a sale to enable the States to impose tax thereon. Hence, having characterised constitutionally the subject matter of supply of food in a restaurant, including the service part of it, as a sale, the Parliament cannot characterise the same transaction as a service for imposition and levy of Service tax.

     

    As of now, there is no clarity as to constitutional validity of levy of Service tax on Restaurant services and Hotel accommodation services. However, the revenue authorities have been collecting service tax on these services and also, restaurant services now fall under major revenue generating category (service). Thus, the Supreme Court has to put an end to this ambiguity for the benefit of industry.

     

    Conclusion:

     

    In the view of the paper writer, the reason for which courts are rejecting constitutional validity of levy of service tax on service portion of transactions involving food supply is, for all the years till 2011, Sales Tax was collected, stating that the transaction is entirely sale. Now, if the courts upheld the levy of service tax on restaurant services, it has the meaning that the Government has been collecting sales tax on entire value including service portion, which is ultra vires the constitution. Article 265 of Constitution of India reads "No tax shall be levied or collected except by the authority of law.”

     

     

     

     

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    VAT vs. Service Tax on Food Supply in a Restaurant/Hotel

     

     

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    Thus, the only concrete solution for the Indian government to address this issue is introduction of GST, wherein all goods and services are taxed on the same line and both state and central governments have power to collect tax on the same.

     

    Also, though the issue is before several High Courts, the Central Revenue is still reaping the service tax collection on restaurant services and State Revenue is charging VAT on entire bill value including service tax ( which is yet another litigated issue), which ultimately has to be borne by consumers.

     

     

     

    “If a plan doesn’t work change the plan but never the goal.”

    Sec 44AA – Maintenance of books of accounts:

     

    Applicability:

     

    This section applies to all the persons i.e. individual, HUF, Company, Partnership firm, AOP/BOI, Local authority, Co-operative society, Trust, AJP.

     

    Importance:

     

    • For assessee’s: Maintaining books of accounts enables to assess income appropriately

     

    • For Tax authorities: Helpful to check whether assessee has complied with all the provisions of the Income-tax Act,1961 (“Act”) & had not evaded the tax.

     

    Classification of income for maintenance of books of accounts:

     

    Provisions relating to the maintenance of Books of accounts can be classified into three categories:

     

    • Provisions for person engaged in Specified profession

     

    • Provisions for person engaged in Non-Specified profession
    • Provisions for person engaged in Business

     

    Provisions for person engaged in Specified profession:

     

    Every person carrying on the following profession are said to be Specified profession:

     

    • Legal

     

    • Medical
    • Engineering
    • Architectural profession
    • Profession of Accountancy
    • Technical consultancy
    • Interior decorators
    • Authorized representative
    • Film artist & others as specified by the board….

     

    Every person carrying on the above specified profession shall keep and maintain the books of accounts and other documents except if gross receipts in the profession doesn’t exceed Rs 1,50,000/- in any of the three years immediately preceding the previous year or in case of newly setup profession gross receipts doesn’t likely to exceed Rs 1,50,000/-

     

     

     

     

     

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    Provisions for person engaged in Non-Specified profession:

     

    These persons need to maintain books of accounts if:

     

    ?Incomefrom profession exceeds one lakh twenty thousand rupees or Gross receipts exceeds ten lakh rupees in any one of the three years immediately preceding the previous year

     

    ?Incaseof profession which is newly set up, Income from profession is likely to exceed one lakh twenty thousand rupees or Gross receipts is likely to exceeds ten lakh rupees during such previous year

     

    What constitutes Books of Accounts in case of Specified Professions?

     

    Rule 6F, of the Act defines books of accounts only for professionals which are as follows:

     

    ?CashBook

     

    ?Journal(If Mercantile system is followed)

    ?Ledgers

    ?Carboncopies of bills (Exception if the amount doesn’t exceed Rs 25/-)

    ?Originalbills in respect of expenditures incurred (Exception if the amount doesn’t exceed Rs 50/- and payment vouchers in respect of the same has been prepared & signed by authorized person)

     

    Note: If Cash books contains the adequate info regarding the expenditure incurred then there is no need for preparation of payment vouchers too.

     

    In case of personcarrying medical profession the following additional books should also be maintained:

     

    ?Adailycase register in Form No. 3C

     

    ?AStockstatement containing opening and closing stock values used in the profession

     

    Place where books of accounts to be maintained:

     

    In case of profession carried in a single place

     

    ?ataplace where the profession is carried on

     

    In case of profession carried in multiple places

     

    ?ataprinciple place where the profession is carried or ?ateachplace where the profession is carried

     

    Period for which Books should be maintained

     

    ?Thesebooks of accounts should be kept and maintained for a period of six years from the end of the relevant assessment year.

    ?Incaseof assessment as per Sec 147 of the Act, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment shall continue to be so kept and maintained till the completion of the assessment.

     

     

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    Sec 44AA & 44AB of Income tax act,1961

     

     

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    Provisions for person engaged in Business

     

    In case of persons engaged in business they shall maintain books of accounts if:

     

    ?Incomefrom business exceeds one lakh twenty thousand rupees or Turnover or Total sales or Gross receipts exceeds ten lakh rupees in any one of the three years immediately preceding the previous year or

     

    ?Incaseof business which is newly set up, Income from business is likely to exceed one lakh twenty thousand rupees or Turnover or Total sales is likely to exceeds ten lakh rupees during such previous year or

     

    ?Incasewhere profits and gains are deemed to be the profits and gains of the assessee under section 44AE or 44BB or 44BBB & the assessee has claimed his income to be lower than the profits and gains so deemed to be profits and gain of his business or

     

    ?Incasewhere profits and gains are deemed to be the profits and gains of the assessee under section 44AD & the assessee has claimed such income to be lower than the profits and gains so deemed to be profits and gain of his business and his income exceeds the maximum amount which is not chargeable to Income-tax during such previous year

     

    Penalty for failure to maintain books:

     

    As per Section 271A of the Act, 1961 if a person fails to maintain or retain books of accounts and other documents then the Assessing officer or the commissioner shall charge a sum by way of penalty of Twenty-five thousand rupees.

     

    Sec 44AB – Audit of books of accounts:

     

    Applicability:

     

    This section applies to all the persons i.e. individual, HUF, Company, Partnership firm, AOP/BOI, Local authority, Co-operative society, Trust, AJP based on the below conditions:

     

     

     

     

    Other conditions

    Nature of activity

    Basis

    Criteria

    (Maximum amount

     

     

     

    not chargeable tax)

     

     

     

     

    Business

    Total sales/Turnover/

    Exceeds 1 crore

    Not applicable

     

    Gross receipts

     

     

     

     

     

     

    Profession

    Gross receipts

    Exceed 25 lakhs

    Not applicable

     

     

     

     

    Business (Sec 44AE/

    Income

    Lower than specified

    Not applicable

    44BB/44BBB

     

    limit

     

     

     

     

     

     

    Business (Sec 44AD)

    Income

    Lower than 8%

    Applicable

     

     

     

     

     

     

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    Sec 44AA & 44AB of Income tax act,1961

     

     

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    Tax audit report:

     

    Every person to whom tax audit is applicable should get his accounts audited by an accountant before the prescribed due date i.e. 30th September in case of Companies & persons liable for Tax audit under Sec 44AB, 30th Nov in case of persons who is required to furnish a report referred to in section 92E.

     

    Such accountant should give the Audit report and other particulars in the forms prescribed.

     

    The form in which tax audit report should be submitted is classified as follows

     

    • Form 3CA: In case of person who is required to get his accounts audited under any other law

     

    • Form 3CB: In case of persons who are not required to submit 3CA

     

    The other particulars are required in Form 3CD

     

    Who can be an accountant (Sec 288 of Act,1961):

     

    A Chartered Accountant defined as per Chartered Accountants Act, 1949 holding valid certificate of practice and except:

     

    In case of Companies:

     

    • A body corporate other than LLP registered under LLP Act, 2008

     

    • An officer or employee of the company
    • A person who is a partner or who is in the employment, of an officer or employee of the company

     

    • A person who, or his relative or partner
      • Is holding any security/interest in the company or its subsidiary or of its holding or associate company or subsidiary of such holding company

     

    Provided that the relative may hold security or interest in the assessee of the face value not exceeding one lakh rupees

     

    • Is indebted to the company or its subsidiary or is holding or associate company or subsidiary of such holding company, in excess of five lakh rupees

     

    • Has given guarantee or provide any security in connection with the indebtness of any third person to the company or its subsidiary or its holding or its associate or subsidiary of such holding company for value in excess of one lakh rupees

     

    • A person who has direct or indirect business relationship with the company or its subsidiary or is holding or associate or subsidiary of such holding or associate company

     

    • A person who is in the employment as director or whose relative is a director or Key managerial person

     

    • Person who has been convicted for offence by court and a period of 10 years has not been elapsed from such date of conviction

     

    • Any person whose subsidiary or associate company or any other form of entity, is engaged as on the date of appointment in consulting and specialized services

     

    • Person holding appointment as auditor for more than 20 companies

     

     

     

     

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    Sec 44AA & 44AB of Income tax act,1961

     

     

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    In case of persons other than Companies:

     

    • The assessee himself or in case of the assessee, being a firm or association of persons or Hindu undivided family, any partner of the firm, or member of the association or the family
    • Relative of the assessee or the firm
    • Employee or officer of the assessee
    • An individual who is a partner, or who is in the employment, of an officer or employee of the assessee

     

    • Person having business relationship directly or indirectly with the assessee
    • Person who has been convicted for offence by court and a period of 10 years has not been elapsed from such date of conviction

     

    • An individual who, or his relative or partner:
      • Is holding any security of, or interest in, the assessee

    Provided that the relative may hold security or interest in the assessee of the face value not exceeding one lakh rupees;

     

    • Is indebted to the assessee

    Provided that the relative may be indebted to the assessee for an amount not exceeding one lakh rupees;

     

    • Has given a guarantee or provided any security in connection with the indebtedness of any third person to the assessee

     

    Provided that the relative may give guarantee or provide any security in connection with the indebtedness of any third person to the assessee for an amount not exceeding one lakh rupees.

     

    Requirement of audit under any other law:

     

    If a person is required to get his accounts audited under any other law, then audit under this section is said to be complied with if:

     

    • Such person gets his accounts audited and

     

    • Such audit has been completed before the due date (i.e. due date for Tax audit) and
    • Furnishes the audit report required under the other law before the due date and
    • Furnishes the audit report in Form 3CA additionally

     

    Penalty for failure to comply with Sec 44AB:

     

    As per Sec 271B, if any person fails to comply with the provisions of the Section 44AB then penalty will be levied by the Assessing officer which will be minimum of the following amounts:

     

    • 5% of the Total sales or Gross receipt or Turnover as the case may be or

     

    • Rs 1,50,000/-

     

     

    “Talents take you to higher position, but good character helps you to maintain the higher position.”

     

    - Bill Gates

    APR OF A MANUFACTURING SEZ UNIT

     

    Meaning

     

    APR refers to an annual performance report to be prepared by an SEZ unit post commencement of production by it. The preparation of APR has to be done independently by each SEZ unit located in SEZ

    i

    area. An APR,which has to be duly certified by an independent Chartered Accountant[],has to be filed with the Development Commissioner of the subject unit, who shall place the same before the Approval Committee for consideration [ii]. The Approval Committee does annual review of the performance of every unit and the compliance with the conditions of approval on the basis of the APR.

     

    Due date of filing / submission of the APR

     

    The APR has to be submitted by a SEZ unit within 90 days from the end of the Financial Year (“FY”) in which commercial production of the unit has been initiated and every year thereafter. The form for the same, i.e., Form-I (format enclosed as Annexure – A), has been prescribed by the Rules issued under the SEZ Act.

     

    Purpose of APR

     

    The basic purpose of the APR is to identify the annual performance of the SEZ unit using the net foreign exchange earnings in a specified period by the SEZ unit.

     

    Net foreign exchange earnings

     

    The Net Foreign Exchange Earnings (“NFE”) earned by a SEZ unit has to be computed using the following formula:

     

    Net Foreign Exchange Earnings = Inflow of foreign exchange (A) – Outflow of foreign exchange (B)

     

     

    (For detailed aspects of the formula refer Annexure – B)

     

    Units which would fall within the purview of monitoring

     

    The units which would fall within the purview of monitoring (by the Approval Committee) are as follows [iii]:

     

     

     

    i

    []Refer Rule 54 read with Annexure-I of the Special Economic Zone Rules, 2006 [ii]Refer Rule 22 of the Special Economic Zone Rules, 2006

     

    [iii]Refer Rule 54 read with Annexure-I of the Special Economic Zone Rules, 2006

     

     

     

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    • In case a unit has completed less than 5 years from the date of commencement of production, it will be monitored for the number of completed years;
    • Annual monitoring in the case of old units which have completed more than 5 years will be undertaken only for such years which fall in the subsequent block of 5 years.

     

    It is pertinent to note that units which have not completed one year of operation from the date of commencement of production will not be monitored;

     

    An insight into Annual Performance

     

     

    Criteria for annual monitoring


    iv


    Report


     

    • Units with negative NFE in the 1st and 2nd year shall be placed under the Watch List to watch their performance

     

    • If a unit continues to have a negative NFE by the end of 3rd year, a Show Cause Notice will be issued.

     

    • If the negative performance continues till the end of 5th year, the Development Commissioner shall initiate penal action under the provisions of Foreign Trade (Development and Regulation) Act, 1992 and the rules made thereunder.

     

    Penal provisions

     

    • As stated above, if the negative performance continues till the end of 5th year, the Development Commissioner shall initiate penal action under the provisions of Foreign Trade (Development and Regulation) Act, 1992 and the rules made thereunder.

     

    • Any SEZ unit, while undertaking the Bond-Cum-Legal Undertaking (“BLUT”) (format prescribed in Form-H of the Rules) undertakes that in case of any default in filing the APR within the prescribed time limit or in case of wrong submission, the permission granted for the prescribed operations may be withdrawn and / or the permission for further imports and sales in the Domestic Tariff Area (“DTA”) may be stopped.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    [iv]Refer Rule 25 and 54 read with Annexure-I of the Special Economic Zone Rules, 2006

     

     

     

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    APR of a Software Technology Parks of India (“STPI”) unit

     

    India has earned itself a reputation of an IT superpower. Software Technology Parks of India has played a seminal role in accomplishing this status. Today, STPIs across over the country are synonymous with excellent Infrastructure and Statutory support aimed at furthering growth of Information Technology in the country.

     

    Software Technology Parks of India (STPI), is a society set up by the Ministry of Communications and Information Technology, Government of India in 1991, with the objective of encouraging, promoting and boosting the Software Exports from India.

     

    STPI maintains internal engineering resources to provide consulting, training and implementation services. Services cover Network Design, System Integration, Installation, Operations and maintenance of application networks and facilities in varied areas.

     

    The objectives of the Software Technology Parks of India are:

     

    • To promote the development and export of software and software services including Information Technology (“IT”) enabled services/ Bio- IT
    • To provide statutory and other promotional services to the exporters by implementing STPs / Electronics and Hardware Technology Parks (“EHTP”) Schemes and other such schemes which may be formulated and entrusted by the Government from time to time.

     

    • To provide data communication services including value added services to IT / IT enabled Services (“ITES”) related industries

     

    • To promote micro, small and medium entrepreneurs by creating conducive environment for entrepreneurship in the field of IT/ITES

     

    APR and due date of filing / submission of the APR

     

    APR has to be submitted by a STPI unit by 30thJune following the close of FY. The form for the same, is available on http://www.hyd.stpi.in/downloads/download.html.It is to bring to specific attention that each designated STPI has its own website and the user is always advised to download the STPI form from concerned STPI designated website

     

    APR FOR IT/ITES SEZ UNIT

     

    The SEZ Unit which is into IT/ITES sector need to use the APR designated under STPI scheme and submit the duly certified form to the designed STPI for compliance under SEZ Laws

     

     

     

     

     

     

     

     

     

     

     

     

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    [Annexure – A]

     

    FORM – I

     

    ANNUAL PERFORMANCE REPORT FOR UNITS [Refer rule 22]

     

    Period.........

     

    PERIOD OF REPORTING: ANNUAL (APRIL-MARCH)

     

    1. Name of the Unit –

     

    1. Item of manufacture/service activity.

     

    1. EXPORT (INFLOW) (Rs. in lakhs)

     

    1. FOB value of exports for the Year (indicate items of exports)

     

    1. Cumulative value of exports for the five year period

     

    1. Countries of exports

     

    1. IMPORT (OUTFLOW) (Rs. in lakhs)

     

    1. Raw materials and other inputs utilized

     

    1. Opening balance of imported raw materials, consumables, components, packing materials etc.

     

    1. CIF value of raw materials, consumables, components, packing materials etc. imported during the year

     

    1. Cumulative value of raw materials, consumables, components, packing materials etc.

     

    1. Value of imported raw materials, consumables, components, packing materials etc. or finished goods/ services received from other units in SEZs/EOUs/EHTPs/ STPs during the year

     

    1. Total (c+d)

     

    1. Value of imported raw materials, consumables, components, packing materials etc. or finished goods/ services transferred to other units in SEZs/EOUs/STP during the year

     

    1. Closing balance of imported raw materials, consumables, components, packing materials etc.

     

    1. Value of imported raw materials, consumables, components, packing materials etc. actually consumed during the year {(e)-[f+g]}

     

    1. Capital goods

     

    • Year-wise CIF value of capital goods imports and spares till end of the year under report

     

    • Value of imported Capital goods and spares received from other units in SEZ/EOU/EHTP/STP during the year

     

    • Total (i) + (ii)

     

    • Value of imported Capital goods, and spares transferred to other units in SEZ/EOU/EHTP/STP during the year

     

    • Total value of imported capital goods and spares during the year (iii)-(iv)

     

    • Proportionate amortized value of imported capital goods taken for NFE calculations as per

    rule——of Special Economic Zones Rules, 2006

     

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    5.Other outflow of Foreign Exchange (Royalty, technical know-how fee, repatriation of Dividend/Profits, Payment of Sales Commission, Interest on overseas borrowings, etc.) during the year

     

    1. Total outflow [4.A.(h)+4.B.(vi)+5]

     

    1. Net Foreign Exchange Earnings for the year [3(a)-6]

     

    1. Net Foreign Exchange Earning position at the end of previous year

     

    1. Cumulative Net Foreign Exchange Earnings for the five year period [7+8]

     

    Note: For details of calculation of NFE, please refer to rule………

     

    Part- II

     

    1. DTA SALES Value (Rs. in lakhs)

     

    1. Sale of finished goods/services

     

    1. Sales of rejects
    2. Sale of by-product
    3. Sale of Waste/Scrap/Remnant
    4. Total

     

    1. Capital structure of the enterprise

     

    • Authorised capital

     

    • Paid up capital

     

    B. Overseas investments:—

    FDI

     

    NRI

    a)

    Approved

     

     

     

     

     

     

     

     

     

    b)

    Actual Inflow during the year

     

     

     

    c)

    Cumulative actual investment for 5 years

     

     

     

     

     

     

     

    1. Employment Male/ Female

     

    1. Investment in the Zone: (Rs. in lakhs)

     

    1. Building

     

    1. Plant and Machinery

    (i) Indigenous (ii)Import CIF value (iii)Total (i) + (ii)

     

     

     

     

     

     

     

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    1. OTHER INFORMATION

     

    (1) External commercial borrowing,

     

    External commercial borrowing pending at the end of last year,

     

    1. Less than three years Amount
    2. More than three years

     

    (2) Cases pending for foreign exchange realization, if any

     

    Date of export

     

    Name of importer

    Address

    Amount

     

     

     

     

    (SIGNATURE)

     

    with Seal of Co.

     

    Note : The information given in the formats for APRs should be authenticated by the authorized signatory of the unit and certified by a Chartered Accountant.

     

    [Annexure – B]

     

    Rule 53 - Net Foreign Exchange Earnings

     

    The Unit shall achieve Positive Net Foreign Exchange to be calculated cumulatively for a period of five years from the commencement of production according to the following formula, namely:—

     

    Positive Net Foreign Exchange = A - B >> 0

     

    Where:—

     

    • Is Free on Board value of exports, including exports to Nepal and Bhutan against freely convertible currency, by the Unit and the value of following supplies of their products, namely:—

     

    1. Supply of goods against Advance Licence or Duty Free Replenishment Certificate under the Duty Exemption or Remission Scheme or Diamond Imprest Licence under the Foreign Trade Policy;
    2. Supply of capital goods to holders of licence under the Export Promotion Capital Goods Scheme under the Foreign Trade Policy;

     

    1. Supply of goods to projects financed by multilateral or bilateral agencies or funds as notified by the Department of Economic Affairs, Ministry of Finance under International Competitive Bidding in accordance with the procedures of those agencies or funds, where the legal agreements provide for tender evaluation without including the customs duty;

     

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    1. Supply of capital goods, including those in unassembled or disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of production and spares to the extent of ten per cent. of the free on rail value to fertilizer plants;
    2. Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty;

     

    1. Supply of goods to the power projects and refineries not covered in (e) above;
    2. Supply to projects funded by United Nations Agencies;
    3. Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding;

     

    1. Supply made to bonded warehouses set up under the Foreign Trade Policy or under section 65 of the Customs Act and free trade and warehousing zones, where payment is received in foreign exchange;
    2. Supply against special entitlements of duty free import of goods under the Foreign Trade Policy;
    3. Export of services by services units including services rendered within Special Economic Zone or services rendered in the Domestic Tariff Area and paid for in free foreign exchange or such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by the Reserve Bank of India;

     

    1. Supply of Information Technology Agreement items and notified zero duty telecom or electronic items, namely, Color Display Tubes for monitors and Deflection components for colour monitors or any other items as may be notified by the Central Government;

     

    1. Supply to other units and Developers in the same or other Special Economic Zone or Export Oriented Unit or Electronic Hardware Technology Park or Software Technology Park Unit or Bio-technology Park Unit provided that such goods and services are permissible for import or procurement by such Units and Developers;

     

    1. Supply of goods to Domestic Tariff Area against payment in foreign exchange from the Exchange Earners Foreign Currency account of the Domestic Tariff Area buyer or Free Foreign Exchange received from overseas;

     

    1. Supply of goods against free foreign exchange by a Free Trade and Warehousing Zone Unit.

     

    Explanation: For the purposes of this sub-rule, the supplies under clause (m) shall be against procurement certificate, as applicable and the supplies under clauses (d) to (h) and (j) shall be as per the terms and conditions of the respective duty exemption notified by the Central Government, in the Ministry of Finance; and

     

    B: Consist of sum of the following: -

     

    1. Sum total of the Cost Insurance and Freight value of all imported inputs used for authorized operations during the relevant period and the Cost Insurance and Freight value of all imported capital goods including goods purchased on high seas basis even though paid for in Indian Rupees and the value of all payments made in foreign exchange by way of export commission, royalty, fees, dividends, interest on external commercial borrowings during the first five-year period or any other charges;

     

    1. Value of goods obtained from other Unit or Export Oriented Unit or Electronic Hardware Technology Park or Software Technology Park Unit or Bio-technology Park Unit or from bonded warehouses or procured from international exhibitions held in India or precious metals procured from nominated agencies;

     

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    1. The Cost Insurance Freight value of the goods and services, including pro-rata Cost Insurance Freight of capital goods, imported duty free or leased from a leasing company or received free of cost and/or on loan basis or on transfer for the period they remain with Unit.

     

    Explanation: For the purposes of this sub-rule “Inputs” mean raw materials, intermediates, components, consumables, parts and packing materials;

     

    1. For annual calculation of Net Foreign Exchange, value of imported capital goods and lump sum payment of foreign technical know-how fee shall be amortized at the rate of ten per cent every year from the first year to tenth year.

     

     

     

     

    “The highest education is that which does not merely give us information but makes your life in harmony with all existence.”

    -Rabindranath Tagore

    The provisions of the Companies Act, 2013, came in to force with effect from 12.09.2013, and out of the 470 sections, 282 sections are in force, mostly effectivefrom 01.04.2014. The rest of the sections are still to be notified.

     

    With in a period of 15 months of the commencement, on the pretext of ease of doing business in India, and to overcome some practical difficulties as to implementation of the provisions,some amendments were proposed to the Companies Act, 2013, and accordingly, the Companies Amendment Act, 2015, came in to force, and 29.05.2015 was the appointed date for coming in to force of the Sections 1 to 12, 15 to 23, and 14.12.2015, as the commencement date for Section 13 and 14 of the said Amendment Act.

     

    Even after the above amendment, there were lot of provisions which required amendments/relaxations, and accordingly the Ministry had come with 4 notifications Dt:05.06.2015, giving exemptions/relaxation from the applicability of various provisions of the Act to Government Companies, Private Companies, Section 8 Companies and Nidhi Companies.

     

    To sort out any further difficulties, the Ministry had constituted a Corporate Law Committee, to obtain opinion from the various sections in the industry and recommend amendments to the Act. The Committee submitted its report on 01.02.2016.

     

    Based on the recommendation of the Corporate Laws Committee, the Ministry had come up with an Amendment Bill with nearly 86 amendments , and the said bill was introduced in the Loksabha on 16.03.2016. The bill was referred to the parliamentary standing committee on 12.04.2016. The committee is to submit its report with in a period of 3 months.

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

     

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

     

    2013, amended/Altered

     

     

     

     

    No.

    Amendment bill

     

     

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Amendment to Section 2

     

    (6)-Associate Company- Inclusion of an explanation to the

    Amendment/inclusion

    to

     

     

     

    (6), (28), (30), (41), (46),

     

     

     

    1.

    2

    definitions of associate company, to include the basis of

    remove ambiguity.

     

     

     

     

    (49), (51), (57), (71), (76),

     

     

     

     

    control for joint venture.

     

     

     

     

     

     

    (85), (87), (91)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (6)-Associate Company- Inclusion of an explanation to the

    Amendment/inclusion

    to

     

     

     

     

     

    definitions of associate company, to include the basis of

    remove ambiguity.

     

     

     

     

     

     

     

    control for joint venture.

     

     

     

     

     

     

     

     

    (30)-Debentures- Inclusion of proviso to the debentures

    Exemption  proposed  to

    be

     

     

     

     

     

    definition,  so  as  not  to  term  certain  instruments  as

    given to some companies

     

     

     

     

     

     

    debentures, i.e., instruments under CH-III-D of the RBI act,

     

     

     

     

     

     

     

     

    and other instruments as may be prescribed by the CG in

     

     

     

     

     

     

     

     

    consultation with RBI.

     

     

     

     

     

     

     

     

    (41)- Financial Year- inclusion of the word associate company

    Amendment/inclusion

    to

     

     

     

     

     

    in the proviso to the financial year definition to make an

    remove ambiguity.

     

     

     

     

     

     

     

    application to the Tribunal to follow different financial year,

     

     

     

     

     

     

     

     

    than of the other associate company/holding/subsidiary

     

     

     

     

     

     

     

     

    company, for the sake of consolidation of a/cs

     

     

     

     

     

     

     

     

    (46)- Holding Company - inclusion of a proviso stating that for

    Amendment/inclusion

    to

     

     

     

     

     

    this clause, “Company” includes any Body Corporate.

    remove ambiguity.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (47) – The definition interested director omitted

     

     

     

     

     

     

     

     

    (51)-KMP- inclusion of clause expanding the scope of officers

    Expanding  the

    scope

    of

     

     

     

     

     

    under the definition of key managerial personnel, (Officers

    applicability,  for

    ease

    of

     

     

     

     

     

    under full time employment, not more than 1 level below the

    operations and also to fix up

     

     

     

     

     

    directors, and designated as KMP by the Board.)

    responsibilities.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

     

    2013, amended/Altered

     

     

     

    No.

    Amendment bill

     

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (57)-Networth-inclusion to the definition of net worth, so as

    Amendment/inclusion

    to

     

     

     

     

     

    to include the debit and credit balances of P&L account.

    remove ambiguity.

     

     

     

     

     

     

    (71) – Public Company - punctuation correction to the

    Amendment/inclusion

    to

     

     

     

     

     

    definition of Public Company.

    remove ambiguity.

     

     

     

     

     

     

    (76)-related party – expanding the scope of related party

    Expanding

    the

    scope

    of

     

     

     

     

     

    under the head “body corporate”, an investing company or

    applicability

     

     

     

     

     

     

     

     

     

    the venturer of the company.

     

     

     

     

     

     

     

     

     

     

    (85)-Small Company- The maximum prescribed limit of paid-

    Expanding

    the

    scope

    of

     

     

     

     

     

    up capital stands increased from Rs. 5 crores to Rs.10 Crores.

    applicability. Cushion to Govt to

     

     

     

     

     

     

    prescribe the limit upto Rs. 10

     

     

     

     

     

    Change in the wordings as to the P&L account requirement.

    crores.

     

     

     

     

     

     

     

     

     

    i.e., “last P&L account” to “P&L of immediately preceding FY”

     

     

     

     

     

     

     

     

     

     

    The turnover to be prescribed by the govt, is proposed to be

    Amendment/inclusion

    to

     

     

     

     

     

    increased from 20 crores to 100 crores.

    remove ambiguity. Expanding

     

     

     

     

     

     

    the  scope

    of

    applicability.

     

     

     

     

     

     

    Cushion to Govt to prescribe

     

     

     

     

     

     

    the turnover limit upto Rs. 100

     

     

     

     

     

     

    crores.

     

     

     

     

     

     

     

     

     

    (87)- subsidiary company- amendment to alter the holding of

    Amendment

    as

     

    to  basis

    of

     

     

     

     

     

    more than 51 % in the “voting power” rather than “total share

    s u b s i d i a r y,

    f r o m  a s

    a

     

     

     

     

     

    capital”.

    percentage of share capital to

     

     

     

     

     

     

    “voting power”

     

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

    2013, amended/Altered

     

     

    No.

    Amendment bill

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    To omit the proviso to the definition. Proviso not notified till

     

     

     

     

     

     

    now.

     

     

     

     

     

     

    To omit explanation (d) regarding “Layer”.

     

     

     

     

     

     

    (91)-turnover- a new definition substituting the existing

    Amendment/inclusion  to

     

     

     

     

     

    definition.

    remove ambiguity of the earlier

     

     

     

     

     

     

    turnover definition.

     

     

     

     

     

     

     

     

     

    2.

    Amendment to section 3.

    3

    A new Section 3(A) is proposed in connection with, if the

    New provision to fix liability on

     

     

     

     

     

    minimum number of members are reduced in a Public

    the members of for the debts by

     

     

     

     

     

    Company/Private Company to what is prescribed under the

    non-complying companies.

     

     

     

     

     

    Act i.e., 7 & 2 respectively, and the company carries on the

     

     

     

     

     

     

    business for a period of more than 6 months, then for the

     

     

     

     

     

     

    debts for the said period, the said members shall be severally

     

     

     

     

     

     

    liable and they may be sued severally.

     

     

     

     

     

     

     

     

     

     

    3.

    Amendment to Section 4

    4

    Amendment of Section 4(1)(c) to allow companies an

    Welcome amendment.

     

     

     

    (Memorandum)

     

    unrestricted object clause, to engage in any lawful act or

     

     

     

     

     

     

    activity, rather than fixed objects.

     

     

     

     

     

     

    Amendment to Section 4(5) as to the validity of the name

    The same is not welcome, as

     

     

     

     

     

    from 60 days to 20 days, from the date of allotment

    the period is too short.

     

     

     

     

     

    Insertion of new sub-sections (6A) and (6B) regarding the

    Will  result  in  creation  of

     

     

     

     

     

    model Memorandum of Association.

    u n i f o r m i t y  i n  t h e

     

     

     

     

     

     

    documentation.

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

     

    2013, amended/Altered

     

     

     

    No.

    Amendment bill

     

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    4.

    Amendment to Section 7-

    5

    Amendment to Section 7(1)(c) in connection with the

    Will result in simplification of

     

     

     

    Incorporation of Company

    requirement for incorporation of a company. To replace the

    the incorporation process.

     

     

     

     

     

     

     

     

     

     

     

    obtaining of affidavit from subscribers and directors and to

     

     

     

     

     

     

     

    replace the same with declarations from them with reference

     

     

     

     

     

     

     

    to incorporation of company.

     

     

     

     

     

     

     

     

     

     

     

    5.

    Section 12-

    6

    Amendment of Section 12 (1) as to requirement of having

    W e l c o m e  a m e n d m e n t

     

     

     

    Registered office

    Registered  office  by  a  company  within  30  days  of

    increasing the time lines for

     

     

     

     

     

     

     

     

     

    incorporation from the present 15 days.

    intimation to ROC.

     

     

     

     

     

     

    Amendment of Section 12 (4) as to increase of time frame

     

     

     

     

     

     

     

    within which the change in registered office to be intimated to

     

     

     

     

     

     

     

    ROC, increased from 15 days to 30 days.

     

     

     

     

     

     

     

     

     

     

     

     

    6.

    Section 21-Authentication

    7

    Amendment to include even an employee of the company to

    W i l l  r e s u l t  i n  e a s e

    o f

     

     

     

    of documents

    authenticate the documents for and on behalf of the Board, in

    operations.

     

     

     

     

     

     

     

     

     

     

     

     

    addition to KMP and other officer.

     

     

     

     

     

     

     

     

     

     

     

     

    7.

    Section – 26 – Matters to

    8

    Omission of sub-clauses (a) & (b) of Section 26(1), and

    Probably  simplification

    of

     

     

     

    be disclosed in prospectus

     

    inclusion of new clause in its place, in connection with the

    information/Data.

     

     

     

     

     

     

    contents of the prospectus with respect to information and

     

     

     

     

     

     

     

    reports on financial information. Post the amendment, the

     

     

     

     

     

     

     

    information shall be in such manner, as specified by SEBI in

     

     

     

     

     

     

     

    consultation with Central Government.

     

     

     

     

     

     

     

    Further,  amendment  also  provides  that  till  the  new

     

     

     

     

     

     

     

    requirements are specified by SEBI, the existing requirements

     

     

     

     

     

     

     

    as per SEBI act, shall apply.

     

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

     

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

    2013, amended/Altered

     

     

     

    No.

    Amendment bill

     

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    8.

    Section 35- Civil Liability

    9

     

    New Clause- Insertion to include a sub-clause to hold experts

    Burden on professionals to be

     

     

     

    liable for their statements made by them forming part of the

    more  cautious  while  giving

     

     

     

    for  mis-statement  in

     

     

     

     

     

     

    prospectus, and to provide immunity to Directors from

    statements  /certifications  in

     

     

     

    prospectus.

     

     

     

     

     

     

    liability, as the directors had relied on the statements made

    prospectus.

     

     

     

     

     

    by the experts, and do not result in misstatement by director

     

     

     

     

     

     

    himself.

     

     

     

     

     

     

     

     

     

     

     

     

    9.

    Section  42  –  Private

    10

     

    Replacement with new section

     

     

     

     

     

     

     

     

     

    Placement

     

     

     

     

     

     

     

     

     

    Offer letter to be issued to selected persons, not exceeding 50

     

     

     

     

     

     

     

    Compliance will become very

     

     

     

     

     

    or such high number as may be prescribed, in a financial year,

    complicated.

     

     

     

     

     

    whose names are to be recorded by the Board.

     

     

     

     

     

     

    Private placement offer does not carry renunciation right.

     

     

     

     

     

     

    Offer to more than the prescribed number will amount to

     

     

     

     

     

     

    public offer and compliance of section 23 is to be done.

     

     

     

     

     

     

    Amounts to be received through Cheque/DD or other normal

     

     

     

     

     

     

    Banking channels.

     

     

     

     

     

     

    Allotment to be done within 60 days from the receipt of

     

     

     

     

     

     

    money, and filing to be completed with in 15 days of allotment

     

     

     

     

     

     

    and only after that monies can be used.

     

     

     

     

     

     

    If return not filed with ROC with 15 days, then the Company,

     

     

     

     

     

     

    the promoters, Directors shall be liable for penalty of

     

     

     

     

     

     

    Rs.2,000/- for each day, during which the default continues

     

     

     

     

     

     

    but not exceeding Rs.25,00,000/-, for each default.

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

    2013, amended/Altered

     

     

    No.

    Amendment bill

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    If, allotment not in compliance with the provisions, then the

     

     

     

     

     

     

     

     

    Company, the promoters, Directors shall be liable for penalty

     

     

     

     

     

     

     

     

    of equalling to amounts raised or Rs.2 Crores which ever is

     

     

     

     

     

     

     

     

    lower. Company to refund the amounts with in 30 days of the

     

     

     

     

     

     

     

     

    order imposing the penalty.

     

     

     

     

     

     

     

     

    Any offer not made in compliance with the provisions of the

     

     

     

     

     

     

     

     

    Section shall be deemed to be public offer and all the

     

     

     

     

     

     

     

     

    provisions of SCRA & SEBI Act, shall be applicable.

     

     

     

     

     

     

     

     

     

     

     

     

    10.

    Section  -  47  –  Voting

    11

    Amendment  as  to  inclusion  of  section  188(1),  in  the

    Amendment/inclusion to

     

     

     

    Rights

     

    restriction of voting rights, in addition to the existing Section

    remove ambiguity.

     

     

     

     

     

    43 and Section 50.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    11.

    Section  - 53 – Issue of

    12

    Amendment of a grammatical error.

     

     

     

     

     

     

    Shares at Discount

     

    Insertion of a new Sub-section 2(A) permitting issue of shares at a

    Welcome amendment.

     

     

     

     

     

     

     

     

     

     

    discount to creditors pursuant to settlement/restructuring scheme

     

     

     

     

     

     

     

     

    under directions/regulations specified by RBI under RBI Act or the

     

     

     

     

     

     

     

     

    Banking regulation Act.

     

     

     

     

     

     

     

     

     

     

     

     

    12.

    Section – 54 – Issue of

    13

    Deletion of Section 54 (1) (c), the requirement being  the

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

     

     

     

    Sweat Equity Shares

    company  could  issue  sweat  equity  shares  only  after

    relaxing

    the period, thereby

     

     

     

     

     

     

     

     

     

    completion of 1 year from the date the company was eligible

    allowing

    the

    companies  to

     

     

     

     

     

    to commence business

    issue  sweat

    equity  shares,

     

     

     

     

     

     

    without

    any

    limitation  of

     

     

     

     

     

     

    period.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

    2013, amended/Altered

     

     

    No.

    Amendment bill

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    13.

    Section – 62 – Further

    14

    Section 62(1) (c), is proposed to be amended to include the

    Welcome amendment.

     

     

     

    issue of Share Capital

     

    compliance of the Chapter III i.e., Section 42 and such other

     

     

     

     

     

     

    conditions as may be prescribed.

     

     

     

     

     

     

    Insertion as to the mode of dispatch ofRights issue offer letter.

     

     

     

     

     

     

    “Courier or any other mode having proof of delivery”, is

     

     

     

     

     

     

    proposed to be included.

     

     

     

     

     

     

     

     

     

     

    14.

    Section 73 - Deposits

    15

    Amendment to increase the amounts to be deposited in the

    Welcome amendment in the

     

     

     

     

     

     

     

     

     

    deposit repayment reserve account, from 15 % to 20 % of the

    interest of the depositors.

     

     

     

     

     

    deposits  maturing  during  the  following  financial  year.

     

     

     

     

     

     

    Amount to be deposited on or before 30 of April each year.

     

     

     

     

     

     

    Omission as to requirement of deposit insurance.

     

     

     

     

     

     

    Amendment of one of the condition to accept deposits, as to

     

     

     

     

     

     

    stricter certification from the company side that it has not

     

     

     

     

     

     

    committed any default in repayment of deposits and where

     

     

     

     

     

     

    defaults have taken place, the company has made good the

     

     

     

     

     

     

    default, and a period of 5 years has lapsed since the date of

     

     

     

     

     

     

    making good the default.

     

     

     

     

     

     

     

     

     

     

    15

    Section 74- Repayment of

     

    Amendment as to the term of repayment of deposits

    Relief to some companies, who

     

     

     

    Deposits accepted before

    16

    accepted under the old act, from 1 year to 3 years of the

    had obtained deposits under

     

     

     

    commencement  of  the

     

    commencement of the new act or on or before expiry of the

    the old act.

     

     

     

    Act

     

    period for which the deposits were accepted, whichever is

     

     

     

     

     

     

     

     

     

     

     

     

    earlier.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

    2013, amended/Altered

     

     

    No.

    Amendment bill

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    16.

    S e c t i o n

    7 6  A

    -

    17

    Amendment as to the increase of the minimum fine on the

    Welcome amendment in the

     

     

     

    Punishment

     

     

     

     

    company for non-compliance of the deposit rules either at

    interest of the depositors.

     

     

     

    for contravention

     

     

    the time of taking the deposit or its repayment, then the

     

     

     

     

    of section 73 or

     

     

    minimum fine shall be Rs. 1 Crore or two times of the deposit

     

     

     

     

    section 76.

     

     

     

     

    accepted, whichever is lower, and the maximum fee Rs.10

     

     

     

     

     

     

     

     

     

    Crores.

     

     

     

     

     

     

     

     

     

     

     

     

     

    17.

    Section 77

    Duty

    to

    18

    Insertion of a new proviso after the existing 3rd proviso to

    Welcome amendment.

     

     

     

    Register Charges

     

    Section 77 (1), providing non-applicability of the section for

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    some charges, as may be prescribed in consultation with RBI.

     

     

     

     

     

     

     

     

     

     

     

     

    18.

    S e c t i o n

    7 8

    19

    Amendment of the section in line with Section 77, to include

    No comment

     

     

     

    A p p l i c a t i o n  f o r

     

    the period of filing of 30 days.

     

     

     

     

    registration of Charge

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    19.

    S e c t i o n

    8 2

    20

    Amendment to provide time lines for filing of satisfaction of

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

     

     

     

    Satisfaction of Charge

    Charge by the Company or Charge holder with in a period of

    because,  now,  we  need  to

     

     

     

     

     

     

     

     

     

     

     

     

    300 days of satisfaction of the charge, and upon payment of

    approach for condonation if

     

     

     

     

     

     

     

     

    additional fees, as may be prescribed.

    delayed more than 30 days.

     

     

     

     

     

     

     

     

     

    20.

    Section 89 – Beneficial

    21

    Insertion of a new Sub-section (10), to section 89 which

    Welcome amendment defining

     

     

     

    interest

     

     

     

    defines the term “beneficial interest” for the purposes of

    the term, thereby making it

     

     

     

     

     

     

     

     

    Section 89 and Section 90.

    more clear.

     

     

     

     

     

     

     

     

     

     

     

    21.

    S e c t i o n

    9 0

     

    The existing Section 90 to be substituted with a new section

    Welcome amendment in order to

     

     

     

    I n v e s t i g a t i o n

    o f

    22

    and in a much more detailed way detailing who has to give

    have a control as to who are the

     

     

     

    beneficial ownership of

     

    notice of having beneficial ownership and who is not

    real owners of the company, and

     

     

     

    shares in certain cases.

     

    required,  maintenance of register and other incidental

    who are acting/representing them

     

     

     

     

     

     

     

     

    matters, and the heading of the Section  to be renamed as

    in disguise and the reason for the

     

     

     

     

     

     

     

     

    “Register of significant beneficial owners in a company”.

    same.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

     

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

    2013, amended/Altered

     

     

     

    No.

    Amendment bill

     

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    22.

    Section  92  –  Annual

    23

     

    Omission of provisions relating to

    Welcome amendment, since, it

     

     

     

    Return

     

     

     

     

    will  reduce

    the  time  of

     

     

     

     

     

     

    (i) information as to indebtedness of the company.

    p r e p a r i n g

    d u p l i c a t e

     

     

     

     

     

    (ii) Names, address and other details of the FII.

    documents.

     

     

     

     

     

     

     

     

     

     

     

     

     

    CG to prescribe Abridged form of Annual Return to OPC and

     

     

     

     

     

     

     

    small company.

     

     

     

     

     

     

     

    Annual Return need not be part of the Board Report, but the

     

     

     

     

     

     

     

    same shall be placed in the website of the company, if any, and

     

     

     

     

     

     

     

    a web-link to be provided in the Board’s Report.

     

     

     

     

     

     

     

     

     

     

     

     

     

    23.

    Section 93 – Filing of

    24

     

    The section is proposed to be omitted, and accordingly, the

    Welcome change. Because the

     

     

     

    return with ROC in case

     

     

    requirement of filing MGT-10, by a listed company, whenever,

    company any how files return

     

     

     

    of change in promoters

     

    there is  increase or decrease of 2 % or more in the

    to Stock Exchanges.

     

     

     

    stake

     

    shareholding position of promoters and top ten shareholders

     

     

     

     

     

     

    of the company in each case, will no longer be required.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    24.

    Section 94

    25

     

    Omission of the requirement that prior intimation/service of

    Welcome amendment in the

     

     

     

     

     

    the Special resolution to keep the registers or copies of return

    interest of company operations

     

     

     

     

     

    is to be given.

    and ease of doing business.

     

     

     

     

     

    Insertion of a proviso that Government may prescribe that

     

     

     

     

     

     

     

    certain registers, index, return shall not be available for

     

     

     

     

     

     

     

    inspection or copies of the same can be obtained.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/penalty

     

     

    2013, amended/Altered

     

     

    No.

    Amendment bill

     

     

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    25.

    Section  96

    –  Annual

    26

    Insertion of proviso enabling unlisted companies to hold their

    Welcome amendment.

     

     

     

    General Meeting

     

    AGM any place in India, subject to consent in writing or

     

     

     

     

     

     

     

     

    through electronic mode from all the members in advance.

     

     

     

     

     

     

     

     

     

     

    26.

    Section 100 – Calling of

    27

    Pursuant  to  rule  18  of  Companies  (Management  and

    Welcome amendment in view

     

     

     

    Extra-Ordinary General

     

    Administration Rules), 2014, EGM of a company can be held

    of  the  practical  difficulties

     

     

     

    Meetings

     

     

     

    only India.

    faced by the companies.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    The proposed amendment provides that EGM of a Company

     

     

     

     

     

     

     

     

    other than a WOS of a company incorporated out side India,

     

     

     

     

     

     

     

     

    shall be held in India i.e., EGM of WOS of a company

     

     

     

     

     

     

     

     

    incorporated out side India, can take place outside India.

     

     

     

     

     

     

     

     

     

     

    27.

    Section 101 – Notice of

    28

    Insertion of a proviso relating to hold of AGM & EGM at

    Removal of ambiguity as in the

     

     

     

    meeting

     

     

     

    shorter  Notice  after  obtaining  consent  from  95  %

    principal  act,  there  was  no

     

     

     

     

     

     

     

    shareholders, entitled to vote at the meeting in case of

    mention as to AGM or EGM, but

     

     

     

     

     

     

     

    company having capital and in case of no share capital then

    only as GM

     

     

     

     

     

     

     

    with the consent of the members holding not less than 95 % of

     

     

     

     

     

     

     

     

    the voting power.

     

     

     

     

     

     

     

     

     

     

     

    28.

    Section  110-

    Postal

    29

    Insertion of a Proviso to Section 110 (1) to conduct the

    Welcome amendment.  It will

     

     

     

    Ballot

     

     

     

    meeting in the form of a general meeting and not by postal

    reduce  the  expenditure  and

     

     

     

     

     

     

     

    ballot, and pass the resolutions through electronic voting.

    waste of stationery.

     

     

     

     

     

     

     

     

     

     

    29.

    S e c t i o n

    1 1 7  –

    30

    Amendment (reduction) of the minimum penalty for non

    Welcome amendment.

     

     

     

    R e s o l u t i o n s

    a n d

     

    filing of resolutions with ROC:

     

     

     

     

    agreements to be filed

     

    On the company: from Rs.5 Lakhs to Rs.1 Lakh

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Every Officer: From Rs.1 Lakh to Rs.50,000/-.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Sl.

    Section(s) under the CA,

    Clause No. in the

    Proposed amendment relating to

    Remarks/Comments/penalty

     

    2013, amended/Altered

    No.

    Amendment bill

    /Inserted

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    The requirement of filing of various resolutions that are

    Reduction in filings.

     

     

     

     

    required to be done have been omitted, except for voluntary

     

     

     

     

     

    winding up petition and resolutions passed under Section

     

     

     

     

     

    179(3) (which any how is not applicable to private companies

     

     

     

     

     

    pursuant to the exemption notification Dt:05.06.2015)

     

     

     

     

     

    Insertion of a proviso that the clause shall not be apply to a

     

     

     

     

     

    resolution passed by Banking company for grant of loans or

     

     

     

     

     

    providing security, in its ordinary course of business.

     

     

     

     

     

     

     

     

    Note:

     

    1 Lakh = 100,000; 10 Lakhs = 1 Million; 1 Crore = 10 Millin; 10 Crore = 100 Million; 100 Crore = 1 Billion

     

    Since there are many amendments proposed , due to paucity of space, we will bring up other amendements in the subsequent bulletins.

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