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    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

    Tags:

    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”) under SEZ Laws


     

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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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    An insight into Annual Performance Report (“APR”) 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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    An insight into Annual Performance Report (“APR”) under SEZ Laws

     

     

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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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    An insight into Annual Performance Report (“APR”) under SEZ Laws

     

     

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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;

     

    An insight into Annual Performance Report (“APR”) under SEZ Laws


     

     

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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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    An insight into Annual Performance Report (“APR”) under SEZ Laws

     

     

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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

    Tags:

    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.

    Tags:

    Foreign Exchange Management Act, 1999 (hereinafter referred to as “FEMA”) which has replaced the erstwhile the Foreign Exchange Regulation Act, 1973 is a big leap in the management of Foreign Exchange Reserves of the Country. The erstwhile regime of approvals has been replaced with automatic approvals and principle of management by exception.

     

    Since the law is of Economic Legislation and any violation/ non-compliance of the law effects the country as a whole, such non-compliances invites hefty penalties and the offender is liable for monetary Penalties. In order to give the opportunity to the offender to rectify the offence, FEMA has provisions to opt for Compounding of Offences.

     

    In this article an attempt is made to dwell upon the concept of Compounding of Offences under FEMA.

     

    Penalties under FEMA

     

    As per Section 13 of FEMA, the following are the penalties for offences under FEMA

     

    1. Where the amount involved in the offence is quantifiable, 3 times of the amount involved

     

    1. Where the amount involved in the offence is not quantifiable, Upto Rs. 2,00,000/-

     

    In case where the offence is continuing one, an additional penalty upto Rs. 5,000/- per day of continuing default/ offence.

     

    In addition to the monetary penalty, the subject property of the offence, can also be confiscated by the Government

     

    What is Compoundable Offence:

     

    A criminal act in which a person agrees not to report the occurrence of a crime or not to prosecute a criminal offender in exchange for money or other consideration.

     

    The purpose of Compounding of offences under FEMA is to minimize the transaction costs, while taking severe view of malafide, wilful and fraudulent transactions.

     

    Compounding of Offences by RBI

     

    As per Section 15 of the FEMA read with Foreign Exchange Management (Compounding Proceedings) Rules, 2000 read with Master Direction No. 4/2015-16, dated January 1, 2016 (updated from time to time), RBI can compound the following nature and types of offences

     

    1. Matters covered under Section 6, 7, 8 & 9 of FEMA

     

    1. Matters covered under FEM (Current Account Transactions) Rules, 2000 except the offences covered under Section 3(a) of FEMA

     

     

    Compounding Authorities of RBI

     

    The following is the authorisation matrix of RBI officers for compounding of Offences

     

    Rank of the Officer

     

    Sum Involved of the Offence (INR)

     

     

    Assistance General Manager

    < 1 Million

     

     

     

    Deputy General Manager

    >=

    1 Million and < 4 Million

     

     

     

    General Manager

    >=

    4 Million and < 10 Million

     

     

    Chief General Manager

    >= 10 Million

     

     

     

     

    Provided that no contravention shall be compounded unless the amount involved in such offence is Quantifiable.

     

    Delegation of powers to Regional Offices of RBI

     

    RBI has delegated the powers of compounding to the officers of Regional Offices, if the nature of offence is covered under the below table:

     

    FEMA Regulation

    Brief Description of Contravention

     

     

    Paragraph 9(1)(A) of Schedule I to FEMA 20/2000-

    Delay in reporting inward remittance received for

    RB dated May 3, 2000

    issue of shares. (ARF)

     

     

    Paragraph 9(1)(B) of Schedule I to FEMA 20/2000-

    Delay in filing form FC-GPR after issue of shares.

    RB dated May 3, 2000

     

    Paragraph 8 of Schedule I to FEMA 20/2000-RB

    Delay  in  issue  of  shares/refund  of  share

    dated May 3, 2000

    application money beyond 180 days, mode of

     

    receipt of funds, etc.

     

     

    Paragraph 5 of Schedule I to FEMA 20/2000-RB

    Violation of pricing guidelines for issue of shares.

    dated May 3, 2000

     

     

     

    Regulation 2(ii) read with Regulation 5(1) of FEMA

    Issue of ineligible instruments such as non-

    20/2000-RB dated May 3, 2000

    convertible debentures, partly paid shares, shares

     

    with optionality clause, etc.

     

     

    Paragraph 2 or 3 of Schedule I to FEMA 20/2000-

    Issue of shares without approval of RBI or FIPB

    RB dated May 3, 2000

    respectively, wherever required.

     

     

    Regulation 10A (b)(i) read with paragraph 10 of

    Delay in submission of form FC-TRS on transfer of

    Schedule I to FEMA 20/2000-RB dated May 3,

    shares from Resident to Non- Resident.

    2000

     

    Regulation 10B (2) read with paragraph 10 of

    Delay in submission of form FC-TRS on transfer of

    Schedule I to FEMA 20/2000-RB dated May 3,

    shares from Non-Resident to Resident.

    2000

     

    Regulation 4 of FEMA 20/2000-RB dated May 3,

    Taking on record transfer of shares by investee

    2000

    company, in the absence of certified from FC-TRS.

     

     

     

     

    The powers to compound the contraventions above have been delegated to all Regional Offices (except Kochi and Panaji) and FED, CO Cell, New Delhi respectively without any limit on the amount of contravention. Kochi and Panaji Regional offices can compound the contraventions for amount of contravention below Rupees Ten Million. The contraventions of Rupees Ten Million or more under the jurisdiction of Panaji and Kochi Regional Offices and all other contraventions of FEMA will continue to be compounded at Cell for Effective Implementation of FEMA (CEFA), Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai, as hitherto.

     

    The compounding proceeding may be initiated in any of the following manner:

     

    1. Based on the Memo issued by the Authorised Dealer (Bank)

     

    1. Based on the Memo issued by the RBI
    2. suo motoby the applicant itself

     

    The application need to be made in prescribed format along with prescribed fee of Rs. 5,000/- to the respective Compounding Authority.

     

    The compounding application need to be disposed off by the Compounding Authority within 180 days of its receipt. If the applicant desires the RBI gives the opportunity of being heard.

     

    No subsequent compounding application can be made for next three years from the date of disposal of previous application, related to same offence.

     

    Authors Comments

     

    The real benefit of compounding is that it gets rid of being chased/adjudicated by the regulatory authorities, gives peace of mind, reduction of monetary penalties etc.Also the offence stands cured from the date of its inception, as if no offence is taken place.

     

    The amount paid under compounding proceedings is treated as Feesand is allowable business expenditure u/s 37 of Income Tax Act, 1961, whereas the amount paid under regular adjudication proceedings is treated as Penalty and is ineligible business expenditure.

    Tags:

    Certain infrastructural construction services provided by any person to Government, local authority and Governmental authorities are being exempted from service tax under entry 12 of Notification 25/2012-ST dated 20.06.2012. The said entry is reproduced as under;

     

    “12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

     

    • a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

     

    • a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

     

    • a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;

     

    • canal, dam or other irrigation works;

     

    • pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

     

    • a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act”

     

    (Note: With effect from 01.04.2015, the entries (a), (c), (f) are omitted and by entry 12A exemption is restored with respect to these entries but only for contracts entered into prior to 01.04.2015)

     

    The exemption under the above reproduced entry is applicable if the services are provided to Government or Local authority or Governmental authority. The term ‘Governmental authority’ for the purpose of this exemption is given under clause (s) of Part II (Definitions) of the Notification 25/2012-ST dated 20.06.2012. The same is reproduced as under;

     

    “Governmental authority" means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution

     

    In view of the above reproduced definition, the following conditions are required to be cumulatively satisfied in order to consider a particular authority as “governmental authority"—

     

     

     

    6 | P a g e


    SBS Wiki                                                                                                                                               www.sbsandco.com/wiki

     

    ØItshallbe a board, or an authority or any other body established by Government Øwith90% or more participation by way of equity or control by Government and Øsetupby an Act of the Parliament or a State Legislature

    Øtocarryout any function entrusted to a municipality under article 243W of the Constitution.

     

    Thus the above definition of ‘Governmental authority’ has restricted scope and does not include various bodies/authorities like government companies, boards, authorities that are established and owned by Government by means of a gazette notifications and are not separately setup by an Act of Parliament and State Legislature.

     

    In view of this legal anomaly, the definition has been amended by Notification 2/2014-ST dated 30.01.2014 with a view to include within its ambit, the entities which are established by Government but are not necessarily setup by an Act of Parliament or State legislature. The amended definition is reproduced as under;

     

    "governmental authority" means an authority or a board or any other body;

     

    • set up by an Act of Parliament or a State Legislature; or (ii) established by Government,

     

    with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution;

     

    In the recent Finance Budget, 2016, it is proposed vide clause 156 to introduce a new section 101 in Finance Act, 1994 to refund service tax if any paid based on the previous restrictive definition of ‘Governmental authority’ for the canal or irrigation works undertaken prior to 30.01.2014; The TRU Circular F.No.334/8/2016-TRU dated 29/02/2016, which was issued to clarify the proposed budget changes, has made the following observation;

     

    “K. Service Tax exemption to canal, dam or other irrigation works with retrospective effect:

     

    1. Definition of Governmental authority was amended with effect from 30.01.2014 so as to exempt services provided by way of construction, erection, maintenance, or alteration etc. of canal, dam or other irrigation works provided to entities set up by Government but not necessarily by an Act of Parliament or a State Legislature. However, services provided prior to 30.01.2014 to such bodies remained taxable.The benefit of exemption is proposed to be extended to the said services provided during the period from the 1st July, 2012 to 29.01.2014.”

     

    Thus the scope and intent of the above amendment in the definition of ‘Governmental authority’ is with a view to allow exemption benefit to those entities established by Government but not so by way of an Act of Parliament or State legislature.

     

    Recently, the Patna High Court in the case of ShapoorjiPaloonji and Company Limited vs. CCE, 2016-TIOL-556-HC-Patna-ST had the occasion to interpret the scope and ambit of the above amended definition of ‘Governmental authority’.The facts of this case are that the petitioner company was appointed by IIT,

     

     

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    Construction services to Governmental Authority

     

    SBS Wiki                                                                                                                                               www.sbsandco.com/wiki

     

    Patna to construct their academic building. It was undisputed that IIT, Patna was setup by an Act of Parliament i.e. Indian Institute of Technologies Act, 1961. The petitioner company had initially collected service tax and paid. However, C&AG after conduct of their audit pointed that the petitioner company need not pay service tax for construction undertaken to the IIT. The petitioner applied for refund and the same was rejected.

     

    The petitioner claimed refund on the interpretation that in order to come within the ambit of ‘Governmental authority’, it is sufficient that the same is set up by an Act of Parliament or State Legislature. The condition as to 90% or more participation by way of equity or control and to carry out any function entrusted to a municipality under 243W of the Constitution are not applicable for those entities that are set up by an Act of Parliament or State Legislature. The said conditions are applicable only for the second clause of the definition i.e. authority or body established by Central Government.

     

    The Patna High Court heard the parties and came to the conclusion that no service tax is required to be paid by the petitioner for the reason that IIT falls within the ambit of ‘Governmental authority’. The relevant para is reproduced as under;

     

    “The Governmental authority as defined in the notification dated 30th January, 2014, means an authority or board or any other body set up by an Act of Parliament or State Legislature. The provisions contained in sub-clause(i) and sub-clause(ii) of clause 2(s) are independent dis-conjunctive provisions and the expression “90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution” is related to sub-clause (ii) of clause 2(s) alone. The clause (i) is followed by “;” and the word “or”. Therefore each of the sub-clauses is independent provision.” (para 11)

     

    In view of the above observation of Patna High Court, Governmental authority would include any authority or body set up by an act of Parliament or State Legislature. It also includes any authority or body established by Government with 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution.

     

    Based on the interpretation of Patna High Court, any authority or body established under an act of Parliament or State legislature would come within the ambit of ‘Governmental authority’. This would be so even if Government is not holding 90% or more equity or controlling interest and such institutions are not entrusted with functions covered under Article 243W.These include institutions like LIC, IRDA, SEBI, ICAI etc. Thus any construction services of the nature specified under entry 12 to these entities would be entitled to exemption;

     

    Before parting, as discussed above, by taking into cognizance the reasons/purpose behind the amendment to the definition of ‘Governmental authority’ coupled with clarification given by TRU on the scope of the amendment, the Revenue is not open to such wide interpretation of the term ‘Governmental authority’ as upheld by Patna High Court. Nevertheless the view of Patna High Court has opened the Pandora’s Box with respect to service tax applicability on the infrastructural construction works undertaken.

    Tags:

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