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    Companies Amendment Act, 2015 [No.21 Of 2015]

    All are aware that on the pretext of ease of doing business in India, some amendments were proposed to the Companies Act, 2013 and the said amendments were approved by the Union Cabinet on 02.12.2014.

    The said Amendment Bill was placed in the Lower house (Lok Sabha) of the Parliament and the same was approved on 17. 12.2014, and the Upper House (Rajya Sabha)approved the said Amendment Bill on 13.05.2015. The Amendment Bill received the assent of theHon’ble President on 25.05.2015, and notified in the Gazette on the 26.05.2015.

    Since, not all the provisions for which amendments have been made in the Amendment Act, have been notified, the Central Government has vide commencement notification Dated:29.05.2015, had notified 29.05.2015, as the appointed date for coming in to force of the Sections 1 to 12, 15 to 23 of the said Amendment Act.

    The Amendments under the Companies (Amendment) Act, 2015, predominantly hover over the aspect of “ease of doing business”. Subsequent to the coming in to force of the Amendment Act, the Central Government has also altered the relevant Rules and has notified the relevant Amendment rules, pursuant to the Amendment Act.

    A couple of amendments in the Amendment Act, are for incorporating some provisions, which were erroneously left out in the respective provisions of the Companies Act, 2013, but included in the Rules framed thereunder the respective section.

    Sl.

    No

    Section(s)

    under the CA,

    2013,amended

    Section No. in

    theAmendment

    Act

    Existing provision in the

    Section/Clause in the CA, 2013

    Amendment relating to

    Remarks/Comments

    1

    Amendment

    to     Section 2

    (68), (71) and

    Section 11

    2 and 4

    Section2(68),      (71)– As                         per the

    definition, a Private Company to have a

    minimum paid-up capital of Rs.1 Lakh

    and Public Company to have minimum

    paid-up capital of Rs.5 lakhs.

    Section 2 (68), (71) - Deletion of the

    requirement as to Minimum Capital i.e.,

    Rs. 1 Lakh for Private Companies and Rs. 5

    Lakhs for Public Companies.

    Now a company can be

    incorporated with paid-up

    capital of Rs.1/-, may be.

    Section 11 – Declaration as to receipt

    of the minimum paid-up capital from

    the subscribers.

    Section 11 – Omitted.

    No    requirement    of filing

    commencement of business

    declaration.

    Sl.

    No

    Section(s)

    under the CA,

    2013,amended

    Section No. in

    theAmendment

    Act

    Existing provision in the

    Section/Clause in the CA, 2013

    Amendment relating to

    Remarks/Comments

    2

    Amendment

    to sections 9,

    12, 22, 46 and

    223.

    3, 5, 6, 7 and

    18

    Section-9-Company to have Common

    Seal.

    Section-12-Company to have its name

    engraved in legible characters on its

    seal;

    Section-22-Execution                                        of                                    Bills of

    Exchange, authorisation to execute

    under the Common Seal.

    Section-46-Issue      of                        Certificates

    (Share/Debenture) to be issued under

    the Common seal of the Company.

    Section -223-nspectors report to be

    authenticated by the Common Seal of

    the Company.

    Amendment as to making commonseal

    optional, and consequential changes for

    authorisation  for execution         of

    documents for companies having no

    Common Seal.   i.e., authorisation shall

    be made by Two Directors or 1 Director

    and 1 CS, if the Company has CS

     

    3

    Insertion      of

    new Section

    76 A

    8

    No section

    Section – 76 A - Punishment for deposits

    acceptedin violation of the provisions of

    the said Act;

    Penalty:

    On Company:

    To refund the deposit with

    interest +Fine not less than

    Rs.1 Cr and upto Rs. 10 Cr.

    On every Officer:

    7 years imprisonment or fine

    not less than Rs. 25 Lakhs and

    upto Rs. 2 crores or with both

    + if proved that punishment if

    the violation is committed

    knowingly, under Section 447.

    Sl.

    No

    Section(s)

    under the CA,

    2013,amended

    Section No. in

    theAmendment

    Act

    Existing provision in the

    Section/Clause in the CA, 2013

    Amendment relating to

    Remarks/Comments

    4

    Amendment

    to Section 117

    (3) (g)

    9

    117 (3) (g) – Resolutions passed in

    pursuance of Section 179 (3) are to be

    filed with the Registrar of Companies.

    Amendment to prohibit public

    inspection of Board resolutions filed in

    the Registry.

    Board Resolution cannot to be

    inspected by others.

    Further, the many items as

    prescribed under the relevant

    rules     have   also                been

    considerably Omitted by the

    relevant amendment Rules

    5

    Amendment

    to sub-

    section (1) of

    section 123

    10

    No proviso in the Principal Act

    Amendment to include provisions for

    writing off past                 losses/depreciation

    before declaring dividend for the year

    Erroneously missed out in the

    Principal Act, but was given as

    an amendment to the relevant

    rules made under the section.

    6

    Amendment

    to sub-

    section (6) of

    section 124

    11

    Section 124 (6) - All shares in respect

    of which unpaid or unclaimed

    dividend has been transferred under

    sub-section        (5)                          shall                          also                          be

    transferred by the company in the

    name of Investor Education and

    Protection       Fund                        along with a

    Statement.

    for the words,       brackets and figure

    “unpaid or unclaimed dividend has been

    transferred under sub-section (5) shall

    also be”, the words “dividend has not

    been paid or claimed for seven

    consecutive years or more shall be” shall

    be substituted;

    Amendment so as to rectify the

    requirement of transferring equity

    shares for which unclaimed/unpaid

    dividend has been transferred to the

    Investors Education and                                Protection

    Fund even though subsequent

    dividend(s) has been claimed and paid.

     

    Sl.

    No

    Section(s)

    under the CA,

    2013,amended

    Section No. in

    theAmendment

    Act

    Existing provision in the

    Section/Clause in the CA, 2013

    Amendment relating to

    Remarks/Comments

    7

    Amendment

    to sub-section

    (3) of section

    134 and sub-

    section (12) of

    section 143

    12 and 13

    134 (3)(ca) – New provision – Details

    as to the frauds as reported by the

    Auditor to be included in the Directors

    report.

    143 (12) – reporting of Fraud by the

    Auditor

    Disclosures to be made in the Board's

    Report;

    Alteration to       incorporate                           enabling

    provisions to       prescribe thresholds

    beyond which fraud shall be reported to

    the Central Government. Below the

    threshold, it will be reported by the

    Auditor to the Audit Committee.

    Some relief to the Auditors.

    8

    Amendment

    to clause (iv)

    of sub-section

    (4) of section

    177

    14

    New proviso to Section 177 (4) (iv) –

    giving powers to Audit Committee.

    Inclusion of proviso, empowering Audit

    Committee to give omnibus approvals for

    Related party transactions on annual

    basis, subject to conditions as may be

    prescribed.

     

    9

    Amendment

    to Section 185

    of

    15

    New sub-sections 185 (1) (c) & (d) –

    These subsections were earlier

    included in the rules

    Alteration to provide for exemption for

    loans/ guarantees/securities                                             by                                               a

    Company to its wholly owned

    subsidiaries and guarantees/securities

    given by a company to its subsidiaries for

    the loans availed by it from Banks/FI.

     

     

     

     

     

     

     

    Sl.

    No

    Section(s)

    under the CA,

    2013,amended

    Section No. in

    theAmendment

    Act

    Existing provision in the

    Section/Clause in the CA, 2013

    Amendment relating to

    Remarks/Comments

    10

    Amendment

    to sub-section

    (1) of section

    188

    16

    188 (1) – Requirement of prior

    approval of the members by way of

    special   resolution for transactions

    with the related party.

    188 (3) – Requirement of special

    resolution for transaction by the

    Director      or employee with the

    Company.

    Alteration      for                      replacing                      'special

    resolution' with 'resolution' for approval

    of Related party transactions by non‑

    related shareholders;

    to exempt     relatedparty transactions

    between holding companies and wholly

    owned subsidiaries (WOS) whose

    accounts are consolidated.

    Relaxed to ordinary resolution.

     

    11

    Amendment

    to sub-section

    (6) of section

    212

    17

    212 (6) – Releasing of accused on bail.

    Many sections were covered

    Alteration    to remove the repetition of

    sections, which attract punishment for

    fraud under Section 447

     

    12

    Amendment

    to Sub-Section

    (1) of Section

    248

    19

    248 (1)-Power of Registrar to remove

    the name of the Company from the

    Register of Companies

    Alteration as to removal of Clause (b) of

    Subsection (1) of Section 248- As to

    receipt of minimum subscription and

    filing of commencement of business with

    ROC.

     

    13

    Amendment

    to sub-section

    (4) of section

    419

    20

    419 (4)-Powers of the president of the

    NCLT to constitute benches for

    disposal of cases as to rehabilitation,

    restructuring, reviving or winding up

    of companies

    Alteration as to deletion of the word

    Winding-up, so as to enable the, taking‑

    up cases relating to winding-up by 2‑

    member Bench instead of a 3-member or

    a larger Bench.

     

    Sl.

    No

    Section(s)

    under the CA,

    2013,amended

    Section No. in

    theAmendment

    Act

    Existing provision in the

    Section/Clause in the CA, 2013

    Amendment relating to

    Remarks/Comments

    14

    Amendments

    to       sections

    435 and 436

    21 and 22

    435 (1) – establishment of special

    courts for trial of offences.

    436 (1) – Offences trailable by Special

    Courts

    Earlier no limit was mentioned in the

    respective    sections,                         now,                         the

    amendment provides for Special Courts

    to    try     only        offences        carrying

    imprisonment of two years or more.

    And all other offences shall be tried, as

    the case may be, by a Metropolitan

    Magistrate or a Judicial Magistrate of the

    First Class having jurisdiction to try any

    offence under this Act or under any

    previous company law.

     

    15

    Amendment

    to Section 462

    23

    462 – Power of Central Government

    to exempt certain class of companies

    from provisions of the Act.

    Amendment to Sub-Section (2) of

    Section 462, as to the manner of placing

    the    notifications issued         by the CG

    pursuant to Section sub-section (1). The

    content of Sub-section has been altered

    and divided in to new Sub-Section (3) &

    (4).

     

     

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

    Tags:
    Exemptions To Private Limited Companies

    All are aware that the Companies Act, 2013, came in to effect from 12.09.2013, and most of the working provisions came in to force with effect from 01.04.2014.

    In comparison with the Companies Act, 1956, though the number of sections have reduced in the Companies Act, 2013, it is mostly due to clubbing of various sections in to single section and most of the operating provisions being moved to Rules.

    After the commencement of the Act, it is evident that many representations were received by the Ministry, from the Trade as to difficulties in implementation of certain provisions with specific reference to Private Companies. This was clearly evident from the draft notification by the Ministry wherein certain exemptions were proposed to be given to Private Companies. The said Draft notification was placed in the MCA Website on 24.06.2014, seeking comments from General Public, till 01.07.2014.

    There was no trace of the said proposed exemptions as per the Draft notification Dt:24.06.2014, after receiving of the public comments.

    On 05.06.2015, the Central Government has issued Four Notifications all Dt: 05.06.2015, vide which the Central Government has provided certain exemptions/modifications and adaptations as to certain provisions of the Companies Act, 2013 which are applicable to:

    è Government Companies

    è Nidhi Companies (Nidhis)

    è Private Company

    è Section 8 Companies (Companies not for profit)

    In this article, an effort is being made to look in to the exemptions, modifications and adaptations to the provisions of the Companies Act, 2013, to Private Limited Companies

     

    Sl.

    No

    Chapter/Section number/Sub-section(s) in the Companies

    Act, 2013 and Description of the Section, under which the

    changes were proposed.

    Exceptions/Modifications/Adaptations, as the case

    may be, as per the Notification

    Remarks

    1

    Chapter 1, sub-clause (viii) of Clause 76 of Section2

    (Related Party definition)

     

     

    Exception:-

    (A) a holding, subsidiary or an associate company of

    Private company; or

    (B) a subsidiary of a holding company to which it is

    also a subsidiary; is /are not a Related Party to such

    Private Company for the purpose of Section 188.

    For the purpose of Sec.188,

    the Holding, Subsidiary or

    Associate Company of a

    Private Limited Company not

    be considered as a related

    party.

    Sl.

    No

    Chapter/Section number/Sub-section(s) in the Companies

    Act, 2013 and Description of the Section, under which the

    changes were proposed.

    Exceptions/Modifications/Adaptations, as the case

    may be, as per the Notification

    Remarks

    2

    Chapter IV, section 43 (Kinds of Capital) and 47 (Voting

    Rights)

    Exception:-

    Shall not apply

    So,     a   Private         Limited

    Company, now, can have

    Capital other than Two Types

    as given in Section 43, and

    also have voting rights in the

    form other than as given in

    Section 47.

    3

    Chapter IV, sub-clause (i) of clause (a) of sub-section (1) of

    section 62) (Rights Issue) and sub-section (2) of section 62

    (relating to Despatch of Notice of Rights issue)

    Modification:-

    As to inclusion of a proviso aftersub-clause (i) of

    clause (a), for having a lesser period of notice,

    subjection to obtaining of consent from 90 %

    members of a Private Limited Company.

    Enables the Private Company

    to have rights offer with

    lesser period, if approved by

    90 % of the members of the

    Company.

    4

    Chapter IV, clause (b) of sub-section (1) of section 62

    (Issue of Shares to Employees under ESOPS)

    Modification:-

    Shall apply except that instead of Special resolution,

    Ordinary resolution would be enough.

    Reduction in requirement as

    to the nature of resolution,

    from Special to Ordinary

    Resolution.

    5

    Chapter IV, Section 67 (Restrictions on purchase by

    company or giving of loans by it for purchase of its

    shares)

    Modification/Adaptation/Exception:-

    Shall not apply to Private Companies:

    - In whose share Capital no other Body corporate

    has invested any money;

    - Whose borrowings from Banks/FI or other Body

    Corporates is less than (a) Twice its Paid-up capital

    or (b) Rs. 50 Crores, whichever is less; and

    - Has not defaulted in repayment of such

    borrowings, subsisting at the time of making

    transactions under this section.

    Benefit to closely held Private

    c o m pa n i e s with                                  s ma ll

    amounts of borrowings and

    who does not have any

    equity investment from

    other Body Corporates.

    Certain Limits have been

    prescribed,                      thereby,                        any

    private Company not hitting

    any of the said limits, is free

    to purchase its shares or give

    loans for purchase of its

    shares.

    Sl.

    No

    Chapter/Section number/Sub-section(s) in the Companies

    Act, 2013 and Description of the Section, under which the

    changes were proposed.

    Exceptions/Modifications/Adaptations, as the case

    may be, as per the Notification

    Remarks

    6

    Chapter V, Clauses (a) to (e) of sub-section (2) of section

    73 (Acceptance of deposits from its Members)

    Exemption/Adaptation:-

    Shall not apply to private companies which accepts

    from its members monies not exceeding 100 % of

    aggregate of the Paid-up Share Capital and Free

    Reserves and such company shall file the details of

    monies so accepted to the registrar in such manner

    as may be specified.

    Exemption to                         private

    companies which propose to

    accept      mon iesfrom                 its

    members not exceeding 100

    % of aggregate of the Paid‑

    up Share Capital and Free

    Reserves.

    However, the details of

    deposits accepted needs to

    be informed to the Registrar.

    7

    Chapter VII, sections 101 to 107 and section 109 (Notice of

    Meetings, Statement to be annexed to the notice, Quorum

    for meetings, Chairman of meetings, Proxies, Restrictions

    on voting rights, voting by show of hands, and Demand for

    Poll)

    Exemption/Adaptation:

    Shall apply unless:

    - otherwise specified in respective sections or

    - articles of the private company otherwise provide.

     

    8

    Chapter VII, Clause (g) of sub-section (3) of Section 117

    (Filing of Resolutions passed by the Board)

    Exemption:

    Shall not apply.

    Accordingly the resolutions

    passed by the Board of

    Directors of the Company

    pursuant to Section 179 (3)

    read with Rule 8 of the

    Companies (Meetings of

    Board and its Powers) Rules,

    2014, as amended from time

    to time, are not required to

    be filed with ROC

    Sl.

    No

    Chapter/Section number/Sub-section(s) in the Companies

    Act, 2013 and Description of the Section, under which the

    changes were proposed.

    Exceptions/Modifications/Adaptations, as the case

    may be, as per the Notification

    Remarks

    9

    Chapter X, Clause (g) of sub-section (3) of section 141

    (Appointment of a person as a Auditor, who is already an

    auditor of more than 20 Companies)

    Exception/Modification:

    Shall not apply in respect of appointment of

    auditors by private companies.

    In calculating 20 companies,

    the    following         shall             be

    excluded:

     

     

     

    - One Person Companies;

    - Dormant Companies;

    - Small Companies; and

    - Private Companies having

    paid-up Share capital less

    than Rs.100 Crores.

    10

    Chapter XI, section 160 (Right of person other than the

    retiring director to stand for directorship)

    Exception:

    Shall not apply

    Relief as to deposit of Rs.1

    Lakh by the member making

    the     proposal           as           to

    candidature of a particular

    person for directorship.

    11

    Chapter XI, section 162 (Appointment of Directors to be

    voted individually)

    Exception:

    Shall not apply

    Accordingly,   for a                       Private

    Company, a motion for

    appointment of two or more

    persons as directors of the

    company can be moved by a

    single resolution.

    12

    Chapter XII, Section 180 (Restrictions on the Powers of the

    Board)

    Exception:

    Shall not apply

    The provisions of Section

    180 are not applicable to

    Private Companies,                               and

    accordingly,      in                          case                          of

    borrowingsin excess of paid‑

    up capital and free reserves,

    approval of members is not

    required and no approval is

    required for mortgaging the

    properties of the Company

    Sl.

    No

    Chapter/Section number/Sub-section(s) in the Companies

    Act, 2013 and Description of the Section, under which the

    changes were proposed.

    Exceptions/Modifications/Adaptations, as the case

    may be, as per the Notification

    Remarks

    13

    Chapter XII, Sub-Section (2) of Section 184 (Disclosure of

    Interest in a particular part and participating in the Board

    meeting)

    Modification/Exception:-

    Shall apply with the exception that the interested

    director may participate in such meeting after

    disclosure of interest.

    Keeping in view of the

    practical     difficulties,                   the

    earlier harsh restriction that

    the said interested Director

    shall not participate in the

    Board meeting has been

    relaxed, and now allowing

    him to      participate in the

    meeting,       after     he                     has

    disclosed his interest to the

    Board

    14

    Chapter XII, section 185 (Loans to Directors)

    Modification/Adaptation/Exception:-

    Shall not apply to Private Companies:

    - In whose share Capital no other Body corporate

    has invested any money;

    - Whose borrowings from Banks/FI or other Body

    Corporates is less than (a) Twice its Paid-up capital

    or (b) Rs. 50 Crores, whichever is less; and

    - Has not defaulted in repayment of such

    borrowings, subsisting at the time of making

    transactions under this section.

    Benefit to closely held Private

    companies   with                         small

    amounts of borrowings and

    who does not have any equity

    investment from other Body

    Corporates.

    Sl.

    No

    Chapter/Section number/Sub-section(s) in the Companies

    Act, 2013 and Description of the Section, under which the

    changes were proposed.

    Exceptions/Modifications/Adaptations, as the case

    may be, as per the Notification

    Remarks

    15

    Chapter XII, section 188 (Related Party Transactions)

    Exception:

    Shall not apply.

    Total     relief    to             Private

    Companies.

    16

    Chapter XIII, section 196, sub-section (4) and sub-section

    (5)     (Appointment of MD, WTD or MGR), approval of

    Member, filing of Form etc.,.)

    Exception:

    Shall not apply.

    Exemption from obtaining of

    Members approval for the

    appointment, and filing of

    return on appointment with

    ROC.

    From the above, it can be seen that contents of the Draft notification Dt:24.06.2014, majorly form part of the exemption notification. The exemption notification brings a sigh of relief for many of the Private Companies.

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

    Tags:
    Change In Service Tax Rate - Section 67A Vs Rule 4 of Point of Taxation Rules

    Introduction:

    Finance Bill, 2015 has proposed to increase the service tax rate to 14% by amending Section 66B. The said bill has received President’s assent on 14/05/2015. The increased rate is going to be effective from 01.06.2015. As there is a change in rate of tax, the applicability of new service tax rate assumes significant importance. Further, there are conflicting provisions in the law creating much ambiguity on this issue.

    Point of Taxation Rules, 2011:

    Point of Taxation Rules, 2011 are brought into effect from April 2011 onwards to determine the point of taxation (POT) i.e. point of time when a service is deemed to have completed. This point of taxation when introduced has twofold objectives. One is that the applicable rate of service tax is one prevailing on date of POT. The other one is that service tax is payable immediately by 5th/6th of a month subsequent to the calendar month in which POT occurs.

    Rule 5B of the Service Tax Rules, 1994 provides that rate of tax shall be the rate prevailing at the time when the services are deemed to have been provided under the rules made in this regard.Consequently, Rule 4 of the Point of Taxation Rules, 2011 provides for determination of POT when there is a change in service tax rate.

    The other rule of Service Tax Rules, 1994 that refers to Point of Taxation Rules, 2011 is Rule 6. This rule provides that service tax shall be paid by 5th or 6th of the month immediately following the month in which services are provided or deemed to be provided as per the rules framed in this regard. As Rule 6 still exists, it can be concluded without any doubt that Point of Taxation Rules, 2011 are still relevant for determining the due date for payment of service tax.

    Coming to Rule 4 of the Point of Taxation Rules, 2011, it provides that applicability of service tax rate depending on timing of invoice and payment for the taxable service and they completely ignore the date on which service is provided. It provides as follows;

    1. Where services provided prior to change in service tax rate, new rate is applicable if invoice is issued or payment is received after the change in service tax rate. Otherwise old rate is applicable.
    2. Where services are provided after the change in service tax rate, old rate is applicable if invoice is issued or payment is received before the change in service tax rate. Otherwise new rate is applicable.

    This rule has received much attention from the service sector and every one is aware that these rules are required to be referred to for changes in service tax rate. However, with effect from 18.05.2012, a new Section 67A is introduced in Finance Act, 1994 which also provides for determination of service tax rate. Further, with effect from same date, Rule 5B of the Service Tax Rules, 1994 which provides for determination of service tax rate with reference to the point of taxation rules is deleted. All these amendments cast doubt on relevance of the Rule 4 of the Point of Taxation Rules, 2011 after 18.05.2012. Let us have a look at the scope of Section 67A.

    Scope of Section 67A:

    Section 67A provides that—‘The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided.’

    Thus in terms of this Section, the applicable rate of service tax shall be the one prevailing at the time when a taxable service is provided or agreed to be provided. This section is standalone and is not leaving anything to delegated legislation. No reference is given to any rules framed by Central Government.

    The phrase ‘provided or agreed to be provided’ is also existing current levy section i.e. Section 66B as well as in the erstwhile Section 65 (105) of the Finance Act, 1994. The phrase ‘to be provided’ is added in levy section after the words ‘provided’ during the Finance Budget, 2005. It has been then clarified that the objective of the amendment is to link payment of service tax on the advances received for the services to be provided in future.

    On a harmonious construction of Section 67A in line with charging Section 66B, similar interpretation can be adopted for the phrase ‘provided or agreed to be provided’ appearing in Section 67A.Thus it can be rationally concluded that in terms of Section 67A, the rate of service tax shall be the rate in force at the time when service is provided. Similarly, in a case where advance is received for a taxable service to be provided in future, it is the rate in force on the date on which the advance amount is received.

    However, there is another school of thought on this issue as theRule 4 of the Point of Taxation Rules, 2011 continued to exist even after insertion of Section 67A, the phrase ‘provided or agreed to be provided’ shall be interpreted in align with the Rule 4 of the Point of Taxation Rules, 2011.

    Conflict between Section 67A and Point of Taxation Rules, 2011:

    Going plain understanding of the language employed by Section 67A and Rule 4 of the Point of Taxation Rules, 2011, there is a clear conflict between the provisions as discussed above. This can be further appreciated by the following examples.

    1. X Ltd has provided consultancy services which got completed by May 15th 2015. Invoice issued on 5th June 2015 and payment received on 30th June 2015. The new rate of service tax is applicable from 01.06.2015 onwards. What is the applicable rate of service tax?

    As per POT: Services are completed before the change in service tax rate. Invoice is issued and payment is received after the change in service tax rate i.e. in June month. In terms of Rule 4, new rate of service tax i.e. 14% is applicable. As point of taxation in this case falls under June Month, the due date for payment of service tax is on or before 6th July, 2015.

    As per Section 67A: In terms of Section 67A, rate prevailing at the time of provision of service is relevant. Service got completed by May 15th 2015. The rate prevailing on this date i.e. 12% is applicable. However, the due date for payment of service tax is still driven by Point of Taxation Rules, 2011 only.

     

    1. X Ltd has provided consultancy services in June 2015 for an advance received in the month of May 2015 itself. X Ltd paid service tax on this amount by 6th of June, 2015 at 12.36%. 14% rate of service tax is applicable from 01st June. X Ltd is considering invoice issue on 30th June, 2015. What is the applicable rate of service tax on this service?

    As per POT: Rate of service tax has increased to 14% before provision of taxable service. As payment alone is received before the change in rate of service tax, invoice is issued on 30thJune, the rate of tax applicable in this case is 14%. POT is June. Therefore service tax is payable by 6th of July, 2015.

    As per Section 67A: As advance money is received in the month of May itself, the services are agreed to be provided in the month of May itself. The rate prevailing at the time of receipt of advance is relevant i.e. 12.36%. However, the due date for payment of service tax is still driven by Point of Taxation Rules, 2011 only.

    Conclusion:

    Before parting, based on the above discussion it is clear that in view of the above referred conflicting provisions, ambiguity exists about the applicability of the new service tax rate. Therefore it is high time for the CBEC to clarify on this issue with proper illustrations. Otherwise this will lead to litigation.

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

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    Procedure For Response To Arrear Of Demand By Taxpayer And Action Of The Assessing Officer

    The CBDT Vide Instruction No. 4 of 2014 prescribed Standard Operating Procedure (SOP) for Verification 2 and Correction of Demand available or uploaded by AO in CPC Demand Portal. Online facility has been provided to taxpayers to provided online responses to such demands.

    Action to be performed by the taxpayer:

    • Logon to e-filing website. Go to E-file menu and click on “Response to Outstanding Tax Demand”;
    • Click on “Submit” link under Response Column for the respective Assessment Year to submit the response;
    • Tax Payer has to select one of the three options from radio button i.e Demand is Correct Or Demand is Partly Correct Or Disagree with the demand;
    • If taxpayer selects demand is correct, any refund due will be adjusted against outstanding demand along with the interest. If no refund is due, taxpayer has to pay the outstanding demand;
    • If taxpayer selects demand is partially correct, then the amount which is correct and which is not correct has to be entered;
    • If taxpayer selects demand is incorrect he should mandatorily give one or more reasons; (See Annexure I).

    Wherever the taxpayer finds it difficult to access to Income Tax Department Website, he or she may make necessary application to the Assessing Officer along with the prescribed details.( See Annexure I)

    Action by the Assessing Officer: Demand due to mismatch of TDS:

    If taxpayer’s reply or departmental records show that the demand is on account of TDS mismatch the AO has to follow the below stated steps:

    Ø TDS credits are available in the system: AO should reduce the demand by passing rectification order

    U/S 154 on the system after taking into account the TDS credits available on the system.If the

    demand is prior to 01/04/2010, the demand has to be reduced directly on CPC-FAS system after

    rectification U/S 154.

    1Circular No.8/2015 dt. 14/05/2015 2www.i ncometaxefili ng.gov.i n

    TDS credits are not available in 26AS:The reduction can be done only in the cases of Individuals and HU F. The amount of reduction should not exceed Rs. 1, 00,000/- for that Assessing Year.Besides

    • AO should pass order U/S 154 manually after obtaining the TDS certificate from the assessee;
    • In case the outstanding demand is more than Rs. 25,000/- for that AY the AO should obtain an indemnity bond (irrespective of the quantum of demand being reduced);
    • In case of reduction of demand exceeds Rs. 50,000/- for that AY by rectification order passed manually above besides the indemnity bond approval of Range Head should be taken before reducing demand.

    If taxpayer has already paid the tax demand:

    • Challan Identification Number (CIN) is available on the system: The AO should reduce the demand by posting the challan or passing rectification order U/S 154 on the system. If the demand is prior to 01/04/2010 the demand has to be reduced directly on the CPC-FAS system.
    • IF CIN is not available or payment is made prior to the period of introduction of CIN: The reduction can be made only in case of Individuals and HUF provided outstanding demand does not exceed Rs. 1,00,000/- for that AY. Besides
    • AO should obtain evidence of payment in the form of counter foil or bank certificate. In case where the taxpayer is senior citizen and tax payer is not able to obtain bank certificate (as the place of payment of tax is different from the current place of taxpayer), the AO should obtain the certificate from the bank directly.
    • In case the outstanding demand is more than Rs. 25,000/- for that AY the AO should obtain an indemnity bond (irrespective of the quantum of demand being reduced);
    • In case of reduction of demand exceeds Rs. 50,000/- for that AY by rectification order passed manually above besides the indemnity bond approval of Range Head should be taken before reducing demand.

    If the payment relates to mismatch of advance tax or self-assessment tax order U/S 154 needs to be passed.

    Annexure I:

    Reason Selected

    Additional details required

    Demand Paid and Challan has CIN

    BSR Code,      Date of Payment, Serial Number of Challan,

    Amount etc..

    Demand Paid and Challan has no CIN

    Date of Payment, Amount, Copy of Challan (Upload copy of

    challan)

    Demand already reduced by

    rectification or Revision

    Date of order, Demand after rectification, revision, Details of

    AO who has rectified or revised (Upload the copy of the order)

    Demand already reduced by Appellate

    Order but appeal effect to be given

    Date of Order, Appellate order passed by, Reference Number of

    Order

    Appeal has been filed (Stay Petition

    has been filed)

    Date of filing of appeal, Details of CIT, Stay Petition filed..

    Appeal has been filed (Stay has been

    granted)

    Date of filing appeal, Appeal pending with, Stay granted

    (Upload the copy of stay order)

    Appeal has been filed (Instalments

    granted)

    Date of filing appeal, Details of CIT with whom appeal is

    pending, Instalment granted by (Upload the copy thereof)

    Rectification or Revised return filed

    at CPC

    E-Acknowledgment No, Challan Copy, TDS Certificate, Letter

    requesting rectification , Indemnity Bond (Upload these)

    Rectification filed with AO

    Date of application, other information etc

    Other Reasons

    Any comments of taxpayer.

    After the taxpayer submits the response the success screen would be displayed along with the transaction ID.

    The taxpayer can click on “View” link under response column to view the response submitted.

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

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    Schedule-II to Companies Act, 2013

    All are aware that the Companies Act, 2013, came in to fore, as an updated mixed bag of regulations, to cater the business needs of the changing economic environment thereby providing sustainable growth and better corporate governance. The Act has roped in many new concepts, thereby making the enactment to be at par with International Standards, and also to be in co-relation with the Accounting Standards.

    In this context, the provisions relating to depreciation have been listed in Schedule II to the Companies Act, 2013, thereby replacing the provisions of the Schedule XIV to the Companies Act, 1956. The provisions of Schedule II have been applicable from the FY 2014 – 2015.

    Through this Article an effort is being made to list out the changes/provisions, so as to enable the co-professionals and Corporates, to understand better for easy implementation.

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