Key Takeaways about the TCS on LRS Applicability

Key Takeaways About the  TCS On Liberalized Remittance scheme (LSR) Applicability 

www.carajput.com; LRS

www.carajput.com; LRS

Information about the concept of Liberalized Remittance scheme as per RBI Regulation is described below:

  • AD’s Liberalized Remittance/ Transfer Scheme may openly allow Remittance/ Transfer s of up to USD 2,50,000 (April-March) per Financial Year to resident individuals for any approved current or capital account transaction or a combination of both.
  • The Liberalized Remittance/ Transfer Scheme is not applicable to corporations, partnership businesses, HUFs, trusts, etc.
  • Remittance/ Transfer s under the Scheme may be accumulated in respect of members of the family required to comply with its terms and conditions by individual members of the family.
  • Fortunately, for capital account activities such as opening a bank account/investment/purchase of property, clubbing is not allowed by other family members if They are not the co-owners / co-partners in foreign bank accounts/investment/property.
www.carajput.com; RBI guidelines

www.carajput.com; RBI guidelines

Activities that are prohibited in compliance with rule 3 of the foreign exchange management act, 1999:

  1. Remittance/ Transfer from winnings of lotteries.
  2. Remittance/ Transfer of revenue or some other pleasure from racing/riding etc.
  3. Remittance/ Transfer for lottery ticket purchases prohibited/proscribed magazines, football games, sweepstakes, etc.
  4. Payment of the export commission for equity investment in joint ventures / wholly owned subsidiaries of Indian companies abroad.
  5. Remittance/ Transfer of dividends from any company to whom a dividend balancing provision applies.
  6. Payment of commissions for exports under the Rupee State Credit Route, with the exception of commissions of up to 10% of the invoice value of tea and tobacco exports.
  7. Payment for telephones connected to ‘Call Back Systems.’
  8. Remittance/ Transfer of interest income on funds deposited in the Non-Resident Special Rupee (Account)  Scheme.

Activities that require prior approval by the central government (see Schedule II Rule 4)

  1. Cultural trips
  2. Advertisement in global print media by the State Government and its Public Sector Undertakings for objectives other than development of tourism, foreign investment, and international bidding (exceeding USD 10,000)
  3. Remittance/ Transfer of freight chartered by a PSU vessel
  4. Import payment by Govt. Department or PSU on the basis of c.i.f. (i.e. not based on f.o.b. and f.a.s.)
  5. Multi-modal transport operators that transfer Remittance/ Transfer s to their agents In abroad
  6. Remittance/ Transfer of transponder hiring charges by (a) TV networks (b) Internet Service Providers
  7. Remittance/ Transfer of charges for the detention of containers in excess of the rate stated by the Director-General of Shipping
  8. Technical partnership deal Remittance/ Transfer s where royalty payments exceed 5% on local revenues and 8% on exports and lumpsum payments exceed USD 2 million
  9. Remittance/ Transfer for P & I Club membership
  10. Remittance/ Transfer by a person of prize money/sponsorship for sports activities in abroad other than International / National / State Level sports bodies of prize money/sponsorship of sports operation overseas, if the sum concerned reaches USD 100,000.

In addition, a resident cannot give a foreign currency as a gift to another resident for the credit of a foreign currency account kept abroad by the latter under the LRS.

The scheme should not be used to make remittances/transfers for any prohibited or immoral activities such as margin lending, lotteries, etc.

Prohibition on the drawing of foreign exchange —- Prohibition on the drawing of foreign exchange by any person for the following purposes:

  1. The transaction specified in Schedule I;
  2. Travel to Bhutan and/or Nepal;
  3. The transaction with a person who is resident in Nepal or Bhutan.

Such that the prohibition referred to in clause (c) may be excluded by the RBI, pursuant to such terms and conditions as may be considered appropriate by special or general order.

  • All such transactions not otherwise permitted under FEMA and those of a margin or margin call Remittance/ Transfer form to overseas exchanges / overseas counterparties are not permitted under the Liberalized Remittance/ Transfer scheme.
  • Allowable Current account transactions: The cap of USD 2.50,000 per Financial Year (FY) under the Scheme also contains/subsumes Remittance/ Transfer s for current account transactions (i.e. private visits; gifts/donations; work from abroad; emigration; preservation of close relatives abroad; business trips; medical care in abroad; studies abroad) available to the resident individual in India foreign exchange not more than USD 250,000 by getting prior approval from RBI.
  • Private visits
  • Gift / donation
  • Moving abroad for jobs/employment
  • Emigration
  • Maintenance of  close relatives in Abroad
  • Business trip
  • Medical care in abroad
  • Resources for students to complete their studies abroad.

Permitted transactions of the capital account: The permitted transactions of the capital account by an individual under the LRS are

www.carajput.com; Permissible capital Account

www.carajput.com; Permissible Capital Account

  • New Opening a bank account for foreign currency account abroad.
  • Investment in abroad: purchase and retention of stock in both listed and unlisted foreign companies or debt instruments; purchase in qualified stock of a foreign company for hold the position of director; purchase of stocks of a foreign company for professional services rendered or in exchange of remuneration of the Director; investment in Mutual Funds units; Venture Capital Funds; promissory note, unrated debt securities;
  • Setting up of Wholly Owned Subsidiaries and Joint Ventures (w.e.f. 5th Aug 2013) for the bonafide industry outside India, according to the RBI terms and conditions.
  • Extending loans to non-resident Indians (NRIs) who are relatives, including loans in Indian Rupees as specified in the Companies Act, 2013
  • To encourage capital account Remittance/ Transfer s under the Liberalized Remittance Scheme, banks do not provide any kind of credit facilities to resident individuals.

TCS on an Amount for remittances transactions under LRS Scheme.

TCS on a sum for remittance transactions under the Liberalized Remittance Scheme.: According to the amendment pursuant to section 206C of the Finance Act 2020, an approved dealer who collects a sum for remittances under the Liberalized Remittance Scheme shall be liable for TCS transactions under the Liberalized Remittance Scheme.

  • tax collection at source will be effective 1 October 2020 for all Liberalized Remittance Scheme transactions, including international debit card transactions.
  • Underpayments are within the limits of the tax collection at source applicability-
  • Liberalized Remittance Scheme forwarding transactions via the Bank branch or bank Online.
  • Foreign Currency Demand Draft or cash issuance from a domestic resident account for the purpose of the Liberalized Remittance Scheme.
  • International transactions on Debit Card Transactions (including transactions on international traders or platforms providing Dynamic Currency Conversion-DCC Transactions)
  • Transfers from domestic resident customers to Liberalized Remittance Scheme NGO account (Loan to NRI or Gift to NRI)

Below is the tax collection at source charging grid for Liberalized Remittance Scheme remittances and transactions 

www.carajput.com; LRS

www.carajput.com; LRS

Liberalized Remittance Scheme Purpose/Type of transaction Applicable of Tax collected at source
1. Remittances under Liberalized Remittance Scheme Purpose S0306 –
2. International transactions on Debit Cards (including Dynamic Currency Conversion – DCC transactions) and
3. Other travel including holiday trips and payments for settling international credit card transactions.
5% of the transaction/remittance amount
Liberalized Remittance Scheme Purpose S1107 Studies abroad and S0305 Travel for education, where the source of funds is Education loan 0.5% of the remittance amount above INR 7 lacs during the financial year.
Any Other Liberalized Remittance Scheme purposes 5% of the remittance amount, above INR 7 lacs during the financial year.

Note:- It is to ensure that the account is properly financed to cover the cost of the remittance, the Tax collected at source cost, the remittance charges, the related bank fees as well as other taxes/charges as applicable. In the case of insufficient balances, payments will not be processed.

Changes have been made to the Source Tax Collection (TCS) provision for international remittances made during the Union Budget 2020-21. Please find below the list of the amended provision;

  • The TCS clause will now be effective from 1 October 2020 instead of 1 April 2020.
  • On the basis of the recent clarification, TCS shall refer to sums greater than INR 7 lakh in the financial year and not to the total sum.
  • In situations where the sum is charged for continuing education through a loan from any financial institution, the rate of TCS shall be 0.5 percent above the sum of INR 7 lakh.

 Frequently Asked on TCS on Liberalized Remittance Scheme.

Questions: 1. what is the effective date of introduction of the tax implications?

Answer: Effectiveness of the Tax collected at the source clause on international remittances is updated from 1 April 2020 to 1 October 2020.

Question:2. What all transactions will be affected by this Tax collected at source requirement?

Answer: All remittances in excess of INR 7 lakh in the financial year under the LRS will be liable for 5 percent of TCS, except where the remittance is for education paid out through a loan from any financial institution. The rate would then be decreased from 5% to 0.5%. The exclusion from TCS for remittances abroad under LRS for sums just under INR 7 lakh in the financial year would not apply if the sum is charged for the purchase of the overseas tour program kit.

Questions: 3. Can GST be applied to the 5% TCS collected?

Answer: No GST would refer to the tax collected by the TCS. However, GST will refer to the conversion & remittance service fee of the currency.

Questions: 4. what are the various reasons for which the tax collection applies?

Answer: The tax would apply to all remittances from India that come under the Liberalized Remittance Scheme (LRS) of RBI.

Questions: 5. what are the various Purpose for purposes permitted under LRS?

Answer: The following are the purposes permitted under LRS.

  • Private visits to any country (excluding Nepal and Bhutan)
  • Donation or charity;
  • Study abroad
  • Moving overseas to work
  • Emigration:
  • Maintenance of loyal family members abroad
  • Travel for business, or attending a conference or advanced training, or meeting expenses for meeting medical expenses, or checking abroad, or accompanying a patient going abroad for medical treatment/check-up;
  • Expenditures for medical care overseas
  • Any other current account transaction not protected in FEMA 1999.

Questions: 6. what are the various permissible capital account transactions by an individual for purposes permitted under LRS?

Answer: The permissible capital account transactions by an individual under LRS are:

  • Investments abroad – acquisition and holding of shares in both listed and unlisted foreign companies or debt instruments; 5 acquisition in qualified shares of a foreign company for the role of the director; acquisition of shares of a foreign company for professional services rendered or in lieu of remuneration of the director; investment in units of mutual funds, venture capital funds;
  • Establishment of wholly-owned subsidiaries and joint ventures (with effect from 05 August 2013) outside India for bonafide company subject to the terms and conditions set out in Notification No FEMA.263 / RB-2013 of 5 March 2013;
  • to extend loans, namely loans in Indian Rupees, to non-resident Indians (NRIs) who are relatives.
  • the opening of foreign currency accounts with a bank abroad;
  • purchase of foreign property;

Questions: 7. What’s Dynamic Currency Conversion (DCC)?

Answer: Many international traders offer the ‘Dynamic Currency Conversion’ facility – which enables customers to make purchase payments directly in their home currency (i.e. Indian Rupees for cards issued in India). This service is provided by selected international merchants or websites. The final transaction amount (as determined by the merchant / DCC service provider) must be checked by you before the payment is made. Depending on the sum given by the merchant, Citi will charge you the final amount (Indian Rupees). The conversion procedure, the exchange rate and any markup applied in such cases shall be decided, as the case may be, by the applicable merchant or DCC service provider.

If we do not opt for DCC, you will be billed in local currency by the merchant. If the local currency is not USD, then the transaction is translated first from the local currency to $ then from $ to INR.

Regards

Rajput Jain & Associates

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

FEMA Compliance for FDI in Equity share in India

FCGPR – FEMA Compliance for FDI in Equity share in India

OVERVIEW

FDI Stands for Foreign Direct Investment (FDI) Reserve Bank of India has made regulations and issued certain notifications in relation to the receipt of Foreign Direct Investment (FDI) in India.

RBI has allowed the receipt of Foreign Direct Investment (FDI) by the way of the issue of capital instruments in India.

Further, the company receiving Foreign Direct Investment (FDI) has to make reporting of receipt of FDI in form FCGPR.

Form FCGPR is required to be filed in case the company is issuing equity shares, Compulsorily Convertible Preference Shares (CCPS)/ Compulsorily Convertible Debentures (CCD) to a person resident outside India.

What is FCGPR?

FCGPR stands for the Foreign Collaboration general permission route. RBI has specified Form FCGPR for making reporting of Foreign Direct Investment (FDI).

Whenever a Company issues equity shares, Compulsorily Convertible Preference Shares (CCPS)/ Compulsorily Convertible Debentures (CCD) in consideration of money received from a person resident outside India by way of Foreign Direct Investment (FDI), then the company needs to file FORM FCGPR using FIRMS Portal.

Time Limit for filing FORM FCGPR

www.carajput.com; time limit for FORM FC-GPR

www.carajput.com; time limit for FORM FC-GPR

Form FCGPR needs to be filed within 30days of allotment of shares / Compulsorily Convertible Preference Shares (CCPS)/ Compulsorily Convertible Debentures (CCD).

Applicable Regulation 

Inward remittance of Foreign Direct Investment (FDI) by a person resident outside India is regulated by Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017

Document Required for filing FORM FCGPR

The following documents shall be required for filing Form FCGPR:
1 Board Resolution for Allotment of Shares / Compulsorily Convertible Preference Shares (CCPS)/ Compulsorily Convertible Debentures (CCD)

2 Memorandum of Association of the company in case the shares are allotted for the subscription to the Memorandum of Association (MOA)

3 Foreign Inward remittance Certificate (FIRC) from AD Bank

4 KYC from AD Bank

5 Valuation certificate regarding the value of shares from the Chartered Accountant

6 CS Certificate in the prescribed format

7 Declaration by Authorised representative of the Company

8 Debit Authorisation for debiting charges from the Bank

9 Declaration regarding issue price by the directors of the Company

10 Reason for delay in submission, if any

Routes of Foreign Direct Investment(FDI)

FDI can be received by way of the following routes:

1 Automatic Route: where no approval is required for getting inward remittance from a person resident outside India.

2 Government Approval Route: There are certain sectors in which government approval is required for receiving inward remittance from a person resident outside India.

Prohibited Sector for Foreign Direct Investment(FDI)

A person resident outside India cannot make any Foreign Direct investment in any of the following sectors:

1 Lottery Business. It includes the Government / private lottery or online lotteries

2 Gambling and betting including casinos

3 Chit Fund (except for investment made by NRI’s and OCI’s on a Non – repatriation basis)

4 Nidhi Company

5 Trading in Transferable Development Rights (TDR’s)

6 Real Estate business or construction of Farmhouses

7 Manufacturing of Cigars, cheroots, cigarillos and cigarettes, tobacco or of tobacco substitutes.

Note: The prohibition is on the manufacturing of the products mentioned and foreign investment in other activities relating to these products including wholesale cash and carry, retail trading, etc. will be governed by the sectoral restrictions laid down in Regulation 16 of FEMA 20(R).

8 Activities/sectors not open to private sectors investment i.e Atomic energy and Railway operations

9 Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

Process for filing FORM FCGPR

The following process shall be followed for reporting of Foreign Direct Investment (FDI) in India:

Step 1: Registration for Entity User on Firms Portal

The company has first of needs to get the registration of Entity user on the FIRM’s Portal in case the reporting of FDI is being made the first time for the Company.

In the case of subsequent reporting, the company does not need to make any registration for entity users.

Documents to be attached: Authority letter in signed Format, PAN of Entity, and PAN of Authorised Representative of the company.

After registering an entity user, the concerned authority will check and verify the details and documents filed and after being satisfied, a Password will be sent to the registered email ID which needs to change.

www.carajput.com; Entity User Registration

www.carajput.com; Entity User Registration

Step 2: Creation of Entity Master

After registration of entity user, there needs to create an entity master by logging into the FIRM’s Portal using the User ID and Password as created in the entity user process.

The Company needs to fill all the details as required in the entity master form in the FIRM’s Portal and then click on “Submit”.

Step 3 Registration for Business User on Firms Portal

After the creation of Entity Master, the company needs to apply for business user registration.

One important point to be noted is that here in the business user form the company needs to select the IFSC Code of the AD Bank from the Drop Down. So, the company should confirm the IFSC Code to be chosen in the form in advance from the Concerned Bank.

Documents to be attached: Authority letter in signed Format, PAN of Entity, and PAN of Authorised Representative of the company.

www.carajput.com; Business User Registration

www.carajput.com; Business User Registration

Step 4 Reporting of FDI Received

The Last step is to make the reporting of remittance received from a person resident outside India. The company needs to fill all the required details and attach the relevant documents as mentioned above while making reporting in this form and then submit the Form.

www.carajput.com; RBI

www.carajput.com; RBI

 

www.carajput.com; RBI

www.carajput.com; RBI

www.carajput.com; RBI

www.carajput.com; RBI

After filing Form FCGPR, the AD Bank or both AD Bank and RBI as the case may be will check the form and in case any discrepancy is found in the Form, then they will reject the Form giving the appropriate reasoning or otherwise they will approve the Form.

In case the form got rejected, then the company needs to file the Form again after removing all the discrepancies.

Consequences of late filing of FORM FCGPR

If the Company makes reporting of Foreign Direct Investment (FDI) after the period of 30 days of allotment of shares / CCPS / CCDs, then the Form will first be checked by the DA Bank and then AD Bank will send the form further to the Respective regional Reserve Bank of India.

Further, the Reserve Bank of India will either charge late submission Fees (LSF) or ask the Company to go for compounding for approval of Form FCGPR.

How Rajput Jain & Associates can Assist 

We offer all kinds of Consultancy, Compliances, and Registration Services in relation to Foreign Direct Investment (FDI) in India. We have impaneled various experts to provide the expert advisory, Registration, and Compliances services for Foreign Direct Investment (FDI) in India.

The services that we offer include in Foreign Direct Investment (FDI) in India are:

  • FEMA Compliances related to Foreign Direct Investment (FDI)
  • Reporting to RBI in relation to Foreign Direct Investment (FDI)
  • Drafting of documents for reporting to RBI
  • Valuation of shares
  • Advising various routes for remitting the money in India
  • ROC Compliances in relation to Foreign Direct Investment (FDI)
  • Liaisoning with AD Bank and RBI in relation to compliances and FDI matters

Frequently Ask Question(FAQ)

Q 1 Where we can make reporting of Foreign Direct Investment (FDI)?

Ans Reporting of Foreign Direct Investment (FDI) can be made online using FIRMS Portal.

Q 2 What is the Time limit for allotment of shares for FDI received in India?

AnsThe shares need to be allotted within 60 days of receipt of Foreign Direct Investment (FDI) in India.

Q 3 Do we require to file form FCGPR for issuance of Preference shares or debentures?

Ans Form FCGPR is required to be filed if the Preference shares or debentures issued are fully and compulsorily convertible in shares, otherwise, it would be treated as ECB.

Q 4 Do we require to file form FCGPR for partly paid equity shares?

Ans Yes, Form FCGPR is also required to be filed for issuance of partly paid shares.

CS Akshay Gupta is a diligent and innovative qualified Company Secretary, striving in matters related to Corporate Law. Akshay takes a deep interest in corporate, NBFC and FDI matters and his specialization includes corporate Compliance, FEMA Compliances, and NBFC Registration. As a Company Secretary, Akshay is passionate about matters relating to corporate funding, NBFC, and its compliances.

Don’t Worry! Our experts are here to help you. Get in Touch with our team for easy filing of SMF Form FCGPR.

Write to RAJPUT JAIN & ASSOCIATES  or call us on 9555555480

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

Complete understanding of setting up a Branch Office in India

Complete understanding of setting up a Branch Office in India 

Complete understanding of Global Companies Preferences and Needs for open up operation setting up a Division or branch in India. a foreign company for setting up an office in India

  • Branch office in India
  • The liaison office in India or
  • Setting up a Private limited company in India or
  • Project office by a foreign company.
www.carajput.com;Foreign Company

www.carajput.com; Foreign Company

There are few requirements for a foreign corporation to open its branch in India. A subsidiary should be established for different reasons and the establishment of a head office in India’s requirements and needs.

The Reasons for set up Branch Office in India

For the following reasons, international firms, including US corporations, are allowed to set up branch offices in India:

  • Import and Export of supply of goods
  • Provision for Professional or advisory facilities
  • Start the research work which includes the parent company is already doing.
  • for enlarge the Promoting technical or financial collaborations between Indian businesses and a foreign parent or group of companies worldwide.
  • To provide the services to the parent company in India and to act as purchasing/selling representatives in India.
  • for initiate information technology services, and software development in India.
  • for the starting technological assistance to parent/group business provided goods.
  • open up Shipping / Foreign Airline operation
  • Global Banks opening

A Branch office is not allowed to conduct production operations of its own but is authorized to subcontract them to an Indian company. Branch offices founded with RBI approval may remit branch income outside India, net of relevant Indian taxes, and subject to RBI guidelines subjected to the condition of RBI grants permission to set up branch offices.

Specifications and conditions of an establishing  Branch office in India

www.carajput.com;procedure to establish a foreign entity

www.carajput.com; procedure to establish a foreign entity

  • Indian branch office name will be the same as the parent business name.
  • The Branch Office has no control, it is just an extension of an Existing company foreign world market.
  • All branch office costs are borne by the Principal /head office because it has Indian activities revenue does not have revenue.
  • Over the immediately intervening five years in the homeworld, the international parent corporation planning to open a branch office in India would have a successful track record.
  • The company must have The Net Worth, i.e., amount of paid-up capital and free deposits, less intangible assets as specified in the latest Audited Balance Sheet or Financial Report accredited by a Certified Public Accountant or other Registered Financial Practitioner of that name shall not be less than or equivalent to USD 100,000.

A branch office is ideal for international firms looking to set up a temporary office in India and not involved or intending to make long-term plans for Indian operations; except for the above-listed finance, shipping and airlines, etc.

Necessary document required to establish a branch office in India

www.carajput.com; Branch Office

www.carajput.com; Branch Office

Presently, the application for the branch office and BRANCH office is sent through the AD according to the Reserve Bank of India conditions. The approved dealer implies obtaining banking licenses for a different entity.

To start a branch office in India the following filings are required:

  • Certification of Incorporation – Translated & duly notarized and properly authenticated.
  • The Latest audited Balance sheet and annual accounts of the parent company duly Translated notarized for the past 3 years and properly authenticated.
  • The expected funding level for operations in India.
  • Details Relating to address of the proposed local office, the number of persons likely to be employed, the number of Foreigners among such employees, and address of the head of the local office, if decided
  • Details of Activity carried out in Home Country by the applicant organization in brief about the product and services of the company in Brief.
  • Bankers Certificate
  • Name, Address, email ID, and telephone number of the authorized person in Home
  • Letter from the principal officer of the Parent company to RBI.
  • Letter of authority from the parent company in favor of Local Representative.
  • Letter of authority/ Resolution from the parent company for setting up BRANCH office in
  • Comfort letter from the parent company intending to support the operation in India.
  • Two copies of the English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent company duly attested by the Indian embassy or notary public in the country of registration.
  • Details of Bankers of the Organization the Country of Origin along with the bank account number
  • Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India
  • Form FNC 1 (Three copies)
  • Latest Proof of identity of all the Directors – Properly Certified by Banker in Home Country and duly authenticated
  • Latest Proof of address all of the Directors – Properly Certified by Banker in Home Country and duly authenticated
  • Details of the Individuals / Company holding more 10% of Equity
  • Structure of the Organization and its Shareholding pattern
  • Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company Resolution for Opening up Bank Account with the Banker
  • Duly Signed Bank Account Opening Form for Indian Bank
  • Note: We can assist in getting all these documents, wherever required prepared and advice on the various issue relating to this. Please feel free for clarification, if any required in this regard.

The RBI accepts the application for BRANCH office licenses but the Approved Dealers (AD) route the applications for BRANCH office as per the recent changes. Despite that, the timeframe for creating the BRANCH office has significantly expanded. Even the paperwork needed for the same has significantly increased.

Other criteria for Incorporation of Branch Office

That RBI-licensed branch office shall be licensed with the Ministry of Corporate Affairs, it is a branch office registration as a foreign business establishment in India. On such registration, the business registrar allocates a CIN i.e. Corporate Identification Code. The following forms must be filled out with the Companies Registrar:

  • Form 44
  • Charter, laws or document and articles of agreement or other act constituting or establishing the creation of a company(In the manner provided for in Rule 16, General Rules and Functions of the Companies (Central Government), 1956)
  • Unless the records alluded to above are not in English instead of the original edition of the papers.
  • Information Director(s)-Persons
  • Information Director(s)-Public bodies
  • Reserve Bank of India letter of approval
  • Information Secretary(s)
  • Resolution of control of attorney or board in lieu of designated representative(s)

Procedural criteria for post-incorporation

The below few more criteria for a branch office are also required after Incorporation:

  • PAN of company.
  • TAN (Tax-deductible Number) -Shop and Establishment certificate details
  • certificate of GST Registering if  Branch provides services in India or provide  facilities in India

Annual enforcement practices a Branch Office needs

www.carajput.com; Branch Office

www.carajput.com; Branch Office

Every branch office is required each year to do the following activities:

  • To be maintaining complete record Files
  • To audited Financial Report
  • To be Filling with RBI Annual Operation Certificate
  • To be Completion of the regular report and balance sheet for business registrar
  • to timely inform about some shift in the world Business constitution of RBI & ROC
  • to timely information about any change of Foreign Company Directors to RBI & ROC
  • to timely information about all change or shift to RBI & ROC at the BRANCH office
  • No additional place of business may be established until RBI intimation and approval.

Regarding company management standards in India see also Annual Corporate Filings in India.

How to close a Branch office actives in India

www.carajput.com; Branch Office

www.carajput.com; Branch Office

A branch office license is usually issued for three years. If a business decides to close the branch office set up in India at any time, it must file with the RBI via its Registered Dealer the required documentation. Liaison offices cannot able closed without Properly compliance made with ROC,

The specification for the termination usually contains the followings:

DOCUMENTS REQUIRED FOR CLOSING OF LIAISON OFFICE: – For processing the Closing of Liaison Office, it shall file the necessary documents with the  AD, and the application for the closure shall be forwarded by the Authorized Dealer. following documents are required

  •   Copy of the Reserve Bank’s permission/ approval from the sectoral regulator(s) for establishing the BO / LO.
  •   Auditor’s certificate-
  1. i) indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets;
  2. ii) confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Office have been either fully met or adequately provided for; and iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.
  • NOC / Tax Clearance Certification for the remittances from the Income-Tax department.
  • Confirmation from the applicant/parent corporation that no civil proceedings are pending at any court in India and that there is no procedural barrier to the remittance.
  • A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 1956, in case of winding up of the Office in India.
  •  Any other document/s, specified by the Reserve Bank while granting approval.
  • Copy of the authorization/approval by the Sectoral Regulator(s) of the Reserve Bank to create the BO / LO.

Note: We can assist in getting all these documents, wherever required prepared and advice on a various issues relating to this. Please feel free for clarification, if any required in this regard.

The branch must be on “Stand Alone basis” in India 

Stand-alone branch offices are segregated and restricted to the Special Economic Zone ( SEZ) only, and no commercial activity/transaction is allowed beyond India’s SEZs, which involve branches/subsidiary offices of the parent company.

For a business to create a branch/unit in SEZs to conduct manufacturing and service activities under prescribed conditions, no approval is needed from RBI.

Liaison Office /Representatives office 

www.carajput.com; Branch Office

www.carajput.com; Branch Office

With the approval of the Indian government, a liaison office could be created or started. The Liaison Office’s function is limited to knowledge collection, export/import promotion, and promoting technical/financial partnerships.

The Liaison Office can not do any commercial operation explicitly or implicitly for business operations in India. For  processing the Liaison Office application of Stand Partners, the following fresh documents are required:

  • Duly signed & stamped detailed covering application ;
  • Financial projections of the proposed liaison office duly certified from its auditors ;
  • Signed & stamped new form FNC in quadruplicate ;
  • Fresh notarised & apostle Certificate of Incorporation of the applicant company along with Memorandum & Articles of Association ;
  • Signed & stamped Audited Financials of last 3 year from the auditors of the company duly signed from directors of the applicant company;
  • Fresh notarised & apostle POA along with duly signed & stamped board resolution of the applicant company
  • Signed & stamped letter of authority in our favor;
  • Signed & stamped details of activities carried on by the applicant company and to be carried on by the proposed liaison office ;
  • Signed & stamped details of Companies banker along with a report from the respective bank  about its tenure of operation of account & relations with the applicant company ;
  • Signed & stamped details of the state;
  • Signed & stamped details of directors of the applicant company;
  • A letter of comfort is not required in case if the applicant company provides audited financials of last year;

Should you require any further clarification/explanation in this regard, please feel free to revert.

Project Office in India 

www.carajput.com; Branch Office

www.carajput.com; Branch Office

Foreign companies intending to carry out unique projects in India will create temporary project/site offices in India to carry out activities relevant to that project only. The Indian Government has now given foreign companies normal permission to create project offices subject to defined conditions.

S.No. Particulars
A. SET-UP OF PROJECT OFFICE
1. GENERAL PERMISSION
Reserve Bank has granted general permission to foreign companies to establish Project Offices in India,

provided they have secured a contract form an Indian company to execute a project in India, and

(a) the project is funded directly by inward remittance from abroad; or

(b) the project is funded by bilateral or multilateral International Financing Agency; or

(c) the project has been cleared by an appropriate authority, or (d) a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.

2. SPECIFIC PERMISSION
However, if the above criteria are not met, or if the parent entity is established in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, such applications have to be forwarded to the Central Office of the Foreign Exchange Department of the Reserve Bank at Mumbai for approval.
Procedure for Opening Project Office by Foreign Companies in India:

·        The foreign company has to apply in the form FNC 1 to the Reserve Bank of India in order to open a project office in the country

·        The foreign company has to secure a contract for a project from an Indian firm that will be executed in India

·        The project, that the foreign company has secured, has to be approved by the appropriate authority or

·        The project, that the foreign company has secured, has to receive funding directly from abroad in the form of inward remittance or

·        The project that the foreign company has secured has to receive funding from the Agency of International Financing or

·        The Indian firm that has given the contract to the foreign company has been granted by a bank or Financial Public Institution a term loan in the country for the project

 
Documents/Information Required:

·        Duly filled application form by Foreign Company

·        Copy of Memorandum / Charter of incorporation of a foreign company

·        Certificate of Incorporation of a foreign company

·        KYC of a foreign company

·        Name and address of Foreign Company

·        Reference No. and date of letter awarding the contract along with a copy of the contract, if any

·        Particulars of authority awarding the contract

·        Total amount of contract

·        Address of proposed project office

 

Note: It is really necessary to select the right form of company or corporate body for a foreign investor in India that better fits its interests and takes care of the issues of liability and tax planning. Foreign firms seeking to do business in India will pay careful attention to Foreign Investors Entry Strategies & Tax Preparation and corporate structuring to save taxes to the maximum possible degree permitted by laws and international tax treaties.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

A FORIGN COMPANY OPEN A BRANCH OFFICE IN INDIA

www.carajput.com; Foregin Company

www.carajput.com; Foreign Company

REQUIRED CONDITIONS OF A FOREIGN COMPANY OPEN A BRANCH OFFICE IN INDIA,

  • The name of the Indian Branch office shall be the same as the parent company.
  • The Branch office does not have any ownership, it is just an extension of the exiting company in a foreign country.
  • All the expenses of the BRANCH office are met by the head office if it does not have the revenue from Indian
  • The foreign parent company looking to start a Branch office in India shall have a profitable track record during immediately preceding five years in the home country.
  • The Net Worth i.e. total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name shall be not less than or equal to USD 100,000.
  • A branch office is suitable for foreign companies looking to set up a temporary office in India and not interested or not planning to have long term plans for the Indian operations; except banking, shipping and airlines, etc. mentioned above.

PROCEDURES FOR SETTING UP A BRANCH OFFICE IN INDIA BY A FOREIGN COMPANY:

  • Approval from RBI– Permission for setting up branch offices is granted by the Foreign Exchange Department,
  • Reserve Bank of India, Central Office, Mumbai (note – Not by the RBI offices in respective state capitals)
  • Track Record of the company -Reserve Bank of India considers the track record of the applicant company, the activity of the company proposing to set up an office in India as well as the financial position of the company while scrutinizing the application. (note – for setting up a company, there are no criteria for checking the track record or the financial position of the parent company)
  • The applications from such entities in Form FNC (Annex-1) will be considered by Reserve Bank under two routes: The application in the prescribed form (Form FNC)should be submitted to the RBI through the Authorized Dealer bank.
  • Reserve Bank Route— where principal business of the foreign entity falls under sectors where 100 percent
  • Foreign Direct Investment (FDI) is permissible under the automatic route.
  • Government Route— where principal business of the foreign entity falls under the sectors where 100 percent
  • FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non – Government Organizations / Non – Profit Organizations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.
  • Procedure for Approval from RBI:

  1. Currently, as per the RBI Requirement, the application for the branch office and BRANCH office is
  2. submitted through the Authorized dealer. The authorized dealer means the various institution having
  3. banking licenses.
  4. The application in the prescribed form (Form FNC) should be submitted to the RBI.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

REPORTING OF FORM FC-TRS TO RBI

REPORTING OF FORM FC-TRS TO RBI

www.carajput.com FC-TRS

www.carajput.com FC-TRS

RBI Circular No. 40 dated 1st February 2016; RBI has made it mandatory to report any transactions and filing of forms online in respect of issue and transfer of shares from an Indian Entity to outside India.

What is RBI Compliance under FORM-FC-TRS? 

  • Foreign currency transfer is the absolute full form of the Form FC-TRS.
  • It is a process used by shareholders residing outside India who are residing in India or vice versa when transferring their shares.
  • The FC-TRS form, together with the FC-GPR form, will be uploaded to its authorized dealer bank, which will send the very same form to the Reserve Bank Of India.
  • Foreign investors can invest in Indian companies by purchasing/acquiring existing shares from Indian shareholders or from other non-resident shareholders.
  • General permission has been granted to non-residents / NRIs for the acquisition of shares by way of transfer.
  • Any transfer of shares takes place between a resident and a non-resident, the resident individual or the entity has to report the transaction to RBI by filing of Form FC-TRS online at https://www.ebiz.gov.in. The reporting of Form FC-TRS should be submitted to the AD category bank within a period of 60 days from the date of receiving the money.

What is the process of Form FC-TRS 

a) Download form from Pre-filled Form FC-TRS from https://www.ebiz.gov.in

b)Fill the required details of the Investee Company

(i) Name of the Company

(ii) PAN of the Company

(iii) Address of the Company

(iv)Telephone Number of the Company

(v) Fax Number of the Company

(vi) Email ID of the Company

(vii) Main Business Activity of the Company as per the NIC Code  2008 series

c)Enter the details of the Buyer

(i) Name of the Buyer

(ii) Address of the Buyer

(iii) Telephone Number of the Buyer

(iv) Email ID of the Buyer

(v) Nature of the Investing Entity

(vi) Date and Place of Incorporation of the Investing Entity

d)Details of the Seller

(i) Address of the Seller

(ii) Telephone Number of the Seller

(iii) Email of the Seller

(iv) Name of the Disinvesting Entity

e)Enter the details of the Foreign Investment in the Company.

f)Mandatory Attachments

(i) Declaration by the Non-resident Buyer

(ii) KYC Form in respect of Non-resident Investor

(iii) Copy of FIRC (To be procured from Bank receiving the remittance)

(iv) Valuation Report by a Chartered Accountant or SEBI registered Merchant Banker

g)Once the form is completed in all respects without any error; the Name, Designation, Place, and Digital Signature of the Declarant is to be attached

After following all the above steps the form is now ready to be uploaded on the Ebiz portal. Upon uploading the Form an “Application Number” is generated instantly and it can be used to keep a track of the status of the Form.

It has to be well kept in mind that merely uploading the Form does not mean that all the compliances have been fulfilled, the compliance shall deem to be complete only after approval by the Reserve Bank of India (RBI).

General Instructions for filling the FC-TRS 

  • The electronic form (Form) can be accessed from service landing page and can be filled offline
  • If you choose “Load prefill data” option while opening the form, then some fields may get prefilled with data you have filled previously while applying for this service. You may change this data if you wish.
  • The saved draft can be accessed later from “My Saved Drafts” section in Menu options. This draft is available for 3 months or until the form is submitted.
  • Field marked with * are mandatory and needs to be filled in before a form can be submitted on e-Biz portal. You may not be able to leave some of the field’s blank in the e-Form. In case you wish not to enter data in a field, please input “NA” if it is a text/description field or a 0, if it is a numeric field.
  • The e-form needs to be digitally signed using a digital signature by the applicant. If an applicant wishes to make any modifications to an already signed e-Form, right-clicking on the signature field and choosing “Clear signature” will enable editing of the form and any modifications can be made to the form

Electronic Attachments required for FORM FC-TRS :

Upload the file using the attached link and if you wish to remove any file, use the remove link.

  • Reason for delay in submission: this attachment is required if the form is submitted after 30 days from the date of receipt of funds
  • CS Certificate
  • Certificate from SEBI registered Merchant Banker / Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
  • Disclaimer certificate
  • Statutory Auditor Certificate
  • Board resolution
  • LRN(Loan Registration Number) allotted
  • Copy of FIPB approval (if required)
  • Transfer of shares details, if applicable

If the investor and remitter are separate entities, Than Give the following documents:

  • No objection certificate from the remitter for  the shares being allotted to the third party mentioning their relationship
  • Letter from the foreign investor explaining the reason for making a subscription to shares by the remitter on his behalf
  • Copy of agreement/Board resolution from the investee company for issue and allotment of shares to the foreign investor, other than the remitter
  • KYC report for the beneficiary

Any other attachments: Add any other document if required.

Step Required for Form FC-TRS

Following below step required for filling FC-TRS following below actions:

Step 1: Apply the registration for Business Users

Step 2: Logging in to the FIRM USER

Step 3: Signing in to the SMF and connecting to your workplace.

Step 4: Choose the type of return.

Step 5: Details of Selected common investment

Step 6: Specific information or details to be filed as required

Step 7: Details of particular Transfer as specified

Step 8: Complete details of Remittal as per specified required.

Step 9: Complete details of Shareholding pattern to be enter

Step 10: Submit an Online form

Verification required for FORM FC-TRS:

Enter the following details in this section:

  1. Name of the Person
  2. Name of the Place
  3. Date of signing the electronic form
  4. Designation.
  5. Digital Signature of Authorized signatory of the investee company.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

REPORTING OF FORM FC-GPR TO RBI

REPORTING OF FORM FC-GPR TO RBI

fcgpr www.carajput.com

fcgpr www.carajput.com

RBI Circular No. 40 dated 1st February 2016; RBI has made it mandatory to report any transactions and filing of forms online in respect of issue and transfer of shares from an Indian Entity to outside India.

www.carajput.com; NRI; OCI; NR; FCTRS

www.carajput.com; NRI; OCI; NR; FCTRS

Form FC-GPR comes into use whenever there is a new issue of shares. The onus to submit the form or comply with the laws is on the resident entity.

Any Company or Organization receiving foreign investment must report the transaction to the RBI within a stipulated timeline. Similar to the filing of FC-TRS which is filed online, the Form FC-GPR is also required to be filed online.

What is TimeLine of Form FC-GPR

www.carajput.com;FC-GPR

www.carajput.com; FC-GPR

The timeline is briefly described below:

  1. a) Foreign funds received
  2. b) Within 30 days of receiving the money file ARF (Advance Remittance Form) with the RBI
  3. c) RBI will issue UIN (Unique Identification Number) after submission of ARF
  4. d) Within 180 days from the date of receiving the money, allot the shares
  5. e) File FC-GPR within 30 days from the date of allocation of shares.

    www.carajput.com;FC-GPR(SMF)

    www.carajput.com; FC-GPR(SMF)

Before reporting the transaction, the applicant needs to obtain the following:

  • Unique Identification Number from RBI by reporting of Advanced Foreign Remittance.
  • KYC report for the beneficiary if the beneficiary and remitter are different entities.
  • CS certificate
  • Certificate from SEBI registered Merchant Banker / Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India
  • Disclaimer Certificate
  • Statutory Auditor Certificate
  • Board resolution
  • LRN(Loan Registration Number) allotted
  • Copy of FIPB approval (if required)
  • Details of Transfer of shares if any
  • No objection certificate from the remitter for the shares being allotted to the third party mentioning their relationship
  • Letter from the foreign investor explaining the reason for making subscription to shares by the remitter on his behalf
  • Copy of agreement/Board resolution from the investee company for issue and allotment of shares to the foreign investor, other than the remitter
  • Reason for delay in submission (if required)

Once all the above documents are obtained, the applicant shall duly fill the Form FC-GPR and complete it in all respects without any error, attach the Digital Signature of the applicant and upload the form online at https://www.ebiz.gov.in. In this case also, it is to be noted that merely filing the Form FC-GPR does not discharge an entity of its duties in regard to compliance of the relevant laws, the same shall be considered complete only after it is approved by the RBI.

www.carajput.com;FC-GPR; FDI

www.carajput.com; FC-GPR; FDI

Document required for FCGPR 

The following documents shall be required for FCGPR Filing
1 MOA of the Company
2 Board resolution for allotment of shares  
3 FIRC 
4 KYC form Bank
5 CS Certificate
6 Valuation report

General Instructions

  • The electronic form (Form) can be accessed from service landing page and can be filled offline
  • If you choose “Load prefill data” option while opening the form, then some fields may get prefilled with data you have filled previously while applying for this service. You may change this data if you wish.
  • The saved draft can be accessed later from “My Saved Drafts” section in Menu options. This draft is available for 3 months or until the form is submitted.
  • Field marked with * are mandatory and needs to be filled in before a form can be submitted on e-Biz portal. You may not be able to leave some of the field’s blank in the e-Form. In case you wish not to enter data in a field, please input “NA” if it is a text/description field or a 0, if it is a numeric field.
  • The e-form needs to be digitally signed using a digital signature by the applicant. If applicant wishes to make any modifications to an already signed e-Form, right-clicking on the signature field and choosing “Clear signature” will enable editing of form and any modifications can be made to the form.

Electronic Attachments:

Upload the file using the attached link and if you wish to remove any file, use the remove link.

  • Reason for delay in submission: this attachment is required if the form is submitted after 30 days from the date of receipt of funds
  • CS Certificate
  • Certificate from SEBI registered Merchant Banker / Chartered Accountant indicating the manner of arriving at the price of the shares issued to the person resident outside India.
  • Disclaimer certificate
  • Statutory Auditor Certificate
  • Board resolution
  • LRN(Loan Registration Number) allotted
  • Copy of FIPB approval (if required)
  • Transfer of shares details, if applicable
  • If the investor and remitter are separate entities, please provide the following documents:
  • No objection certificate from the remitter for the shares being allotted to the third party mentioning their relationship
  • Letter from the foreign investor explaining the reason for making subscription to shares by the remitter on his behalf
  •  Copy of agreement/Board resolution from the investee company for issue and allotment of shares to the foreign investor, other than the remitter
  •  KYC report for the beneficiary
  • Any other attachments: Add any other document if required.
Enter the following details in this section:
  • Name of the Person
  • Name of the Place.
  • Date of signing the electronic form
  • Designation.
  • Digital Signature of Authorized signatory of the investee company.

After the New Process of RBI :

FC-GPR; www.carajput.com; Timeline

FC-GPR; www.carajput.com; Timeline

FIRMS has decreased the number of phases via which any reporting is carried out by constraining its response to: pending approval & approval or refusal as opposed to eBiz, where there have been multiple phases with the possibility of resubmission. It should therefore be noted that under FIRMS, there is no possibility of resubmitting, resending, or affixing any clarification as soon as the report is generated. The Authorized Dealer Bank must take due to precaution whilst also approving or dismissing the form and therefore can not take more than 5 – 7 business days doing the same.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

CORPORATE AND PROFESSIONAL UPDATE JANUARY 15,2016

CORPORATE AND PROFESSIONAL UPDATE JANUARY 15,2016

Untitled20A

INCOME TAX ACT

SECTION 2(15)

CHARITABLE PURPOSE

Object of general public utility/Trade promotion association : Where assessee-association was formed with an object to promote leather trade, in view of fact that assessee’s receipt of rent from non-members by allowing them to keep their stalls in trade fairs organised by assessee was negligible in comparison to total trade receipts, assessee’s case could not be said to be covered under proviso to section 2(15) – [2015] 406 (Kolkata – Trib.)

SECTION 10(23C)

EDUCATIONAL INSTITUTIONS

Profit motive : At stage of registration, under section 10(23C) authority is only required to examine nature, activity and genuineness of institution and mere existence of some profit does not disqualify applicant if sole purpose of its existence is not profit making but educational activities – [2016] 30 (Allahabad)

SECTION 44AD

CIVIL CONSTRUCTION BUSINESS

Merely because, assessee’s income from civil construction work had been accepted at six per cent of contract receipt in earlier year, it could not be ground to claim that for relevant year also, assessee’s income was to be assessed at six per cent of contract receipt – [2016]  19 (Patna – Trib.)

SECTION 69

UNEXPLAINED MONEY

Seized books : Addition to assessee’s income merely on basis of papers seized from possession of assessee’s brother was unjustified when material sought to be relied on was not corroborated – [2016]  29 (Calcutta)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments – Method of computation/RPM v. TNMM : Where Tribunal held in earlier year in assessee’s case that RPM was appropriate method as assessee was distributor, but prima facie facts of relevant year suggested that assessee was not merely a distributor, matter should be reconsidered afresh –[2016]  21 (Mumbai – Trib.)

SERVICE TAX

SECTION 65(25b)

TAXABLE SERVICES – COMMERCIAL OR INDUSTRIAL CONSTRUCTION SERVICES

Abatement in respect of construction services cannot be denied where ‘minor credit’ inadvertently taken by assessee has been reversed with interest – [2016]  27 (Ahmedabad – CESTAT)

SECTION 80

PENALTY – NOT TO BE IMPOSED IN CERTAIN CASES

Where internal auditor of company perpetrated fraud by booking ‘service tax due’ as ‘income’/’commission’ in books of account and it was found that directors of company were aware thereof, company was liable to evasion penalty for consequent non-payment of service tax – [2016] 25 (Mumbai – CESTAT)

Where delayed payment was not due to any bona fide confusion occurring in prevalent statue and related provisions were quite crystal clear, penalty cannot be waived merely on ground of ignorance of law, as it is not a reasonable cause under section 80 – [2016]  23 (Ahmedabad – CESTAT)

CST & VAT

SECTION 8 OF KERALA VALUE ADDED TAX ACT, 2003

TAX INCIDENCE AND LEVY – COMPOUNDED TAX RATES

Where for assessment years 2005-06 and 2006-07, assessee applied for payment of tax on compounded basis at lower rate under section 8(a)(i) and in meanwhile section 8(a)(i) was amended on 28-8-2005 with effect from 1-4-2005 and assessee in order to satisfy conditions laid down in amended section 8(a)(i) applied for cancellation of its central sales registration for assessment year 2005-06 after 28-8-2005 and for assessment year 2006-07 at commencement of said year, assessee was not entitled to concessional rate of tax for assessment year 2005-06 but not for assessment year 2006-07 – [2016]  22 (Kerala)

CENVAT CREDIT RULES

RULE 2(l)

CENVAT CREDIT – INPUT SERVICE – INSURANCE SERVICES

Mediclaim of employees is in nature of welfare measure and is voluntary and is not taken in compliance with any statutory requirement; therefore, a provider of advertising services cannot take input service credit of mediclaim insurance premium – [2016]  26 (Ahmedabad – CESTAT)

STATUTES

CORPORATE LAWS

Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Amendment Regulations, 2016 – Amendment in Regulations 5, 6, 9, 13, 14, Schedule I & Form I and Omission of Regulation 31 – NOTIFICATION F.NO.CCI /CD /AMEND / COMB.REGL./2016, DATED 7-1-2016

Establishment of Local Office of SEBI at Jammu – NOTIFICATION NO.SEBI/LAD-NRO/GN/2015-16/028, DATED 1-1-2016

Payment of Contribution by Employers by 15th of following Mont H – Removing of Grace Period of 5 Days –CIRCULAR  NO.WSU/9(1)2013 / SETTLEMENT, DATED 8-1-2016

Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2016 – Amendment in Regulation 2 – NOTIFICATION NO.SEBI/LAD-NRO/GN/2015-16/29, DATED 11-1-2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

CORPORATE AND PROFESSIONAL UPDATE JANUARY 13,2016

CORPORATE AND PROFESSIONAL UPDATE JANUARY 13,2016

Untitled5A

DIRECT TAX:

  • Income Tax 1st Amendment Rules, 2016 Notified vide notification no. 3/2016/2015.
  • Corrigendum to Notification No. 93/2015 dated 16/12/2015 has been issued vide Notification No 1/2016 – Dated 12-1-2016.
  • Service of an independent contractor – whether would be taxable as salary contrary to the contract of service – Whether it is professional or skilled work; nature of establishment and the right to reject are also required to be scanned before arriving at the conclusion of the employer-employee relations. Suresh Kumar Hooda Versus The Commissioner of Income Tax, Rohtak and another.
  • Allowability of exemption u/s 10(1) – For earning agricultural income it is not necessary that the assessee must own the land and it is enough if it is established that the agricultural organizations have been actually carried on by the assessee. Monsanto India Ltd Versus Addl Commissioner of Income Tax.
  • Protocol amending the agreement between Government of the Republic of India and the Government of the Republic of Belarus for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on property (Capital) notified vide notification no. 2/2016.
  • Transfer pricing adjustment – TPO take the amount of ALP at NIL – determination of Management Consultancy Fee – foreign exchange loss in financial transactions cannot be considered as service charge for the intra group- (M/s. DQ Entertainment (International) Ltd, Versus Asst. Commissioner of Income Tax, Circle-1 (2) , Hyderabad – 2016 (1) TMI 451 – ITAT HYDERABAD).
  • Reopening of assessment – it is evident that the AO did not corroborate or examine the information received from the investigation wing before recording his own satisfaction of escaped income and initiating the reassessment proceedings. – Notice u/s 148 quashed – Tri – Income Tax- (Vardai Overseas (P) Ltd. C/o Shri V.K. Sabharwal, Adv. Versus Income Tax Officer, Ward-8 (3) , New Delhi-2016 (1) TMI 450 – ITAT DELHI)
  • IT:Service of an independent contractor – nature of establishment and the right to reject are also required to be scanned before arriving at the conclusion of the employer-employee relations – Suresh Kumar Hooda Vs. CIT, Rohtak and anr (Punjab & Haryana High Court).
  • DTAA:Amendment made in the Agreement between Republic of India and the Government of the Republic of Belarus to make the treaty effective from 19 NOV 2015 – Notification No.2/2016, Dt.13th Jan 2016.
  • IT:  Addition u/s 68 – cash credit – the alleged surplus cash accumulated in the cash book out of the withdrawals from the bank is to be considered as source of re-deposit – Minalben Dipakbhai Mehta Vs. ITO, W-3(3) Suat (ITAT Ahmedabad)
  • ITAT affirms sanctity of CA certificate; denies to impose penalty for TDS default relying upon such certificate [2016] 65 taxmann.com 68 (Mumbai – Trib.)  ADIT (IT) v. Leighton Welspun Contractors (P.) Ltd.
  • On foreign travel of directors disallowed as company had no business in such locations [2016]  92 (Bombay) Advance Power Display Systems Ltd. v. CIT
  • Trading in derivate can’t be held as speculative if co. has only income from other sources
    [2016]  62 (Delhi – Trib.) A.K. Capital Markets Ltd. v. DCIT
  • TDS u/s 194J – Procurement of ready study data by the parent company from another foreign company and supplying it to the assessee amounts – Non deduction of tds on technical services rendered to a resident – No TDS required. Commissioner of Income Tax (Tds) Versus Heramec Ltd – 2016 (1) TMI 503 – ANDHRA PRADESH HIGH COURT
  • Addition u/s 68 cash credit – the alleged surplus cash accumulated in the cash book out of the withdrawals from the bank is to be considered as source of re-deposit. Smt. Minalben Dipakbhai Mehta Versus ITO, Ward-3 (3) Suat. – 2016 (1) TMI 489 – ITAT AHMEDABAD
  • Initiatives taken by CBDT to reduce litigation
  • Now CBDT would issue refunds up to Rs. 5,000 without adjustment of outstanding tax liability
  • CBDT notifies forms for accumulation of income by a trust
  • Disallowance on account of interest expenses u/s.40A(2)(b) – the unsecured loan was required to be paid on demand but in the case of related parties there was no such condition. We are of the considered view that the interest 18 is reasonable- (Asian Mills Pvt. Ltd. Versus Deputy Commissioner of Income Tax, Addl. Commissioner of Income Tax – 2016 (1) TMI 449 – ITAT AHMEDABAD).
  • Disallowance u/s 14A gets attracted even if a mix of interest bearing & non-bearing funds used to make investments earning exempt income [M/s Thermotech Engineering vs. ACIT, Pune (ITAT Pune), ITA No.- 533/PN/2013, A.Y 2009-10].
  • Cancellation of Registration u/s 12AA(3) should be based on activities of Trust and not of Trustees [Friends of WWB India vs Director of Income Tax-Exemption (ITAT Ahmedabad), ITA No. 2076/Ahd/2014, A.Y 2009-10].
  • IT: Addition u/s 68 – The existence of shares of 1,50,000 in the hands of assessee was established by filing concerned demat account. Therefore the conditions for making addition under section 68 were missing – ACIT-13(3), Mumbai Vs.  Late Shri Himatlal H. Dadia (ITAT MUMBAI)
  • Initiation of penalty proceedings u/s 271(1)(c) without specifying basis makes such proceedings void -ab-initio.
  • Benefit of reduced penalty allowed if duty and interest paid within 30 days of communication of SCN/order [Principal Commissioner of Service Tax vs. Tops Security Ltd (Delhi High Court); CEAC 42/2015].
  • Tax Reforms Committee submits its first report – Recommends presumptive scheme for professionals, lower TDS rates
  • IT: Easwar Committee suggested several taxpayer-friendly measures to improve ease of doing business, reduce litigation and accelerate the resolution of tax disputes, such as:
  • Simplifying provisions related to TDS and increase in threshold for payment subject to TDS
  • TDS rates for individuals be reduced to 5% from 10%
  • Deletion of Section 143 (1D) to avoid undesirable delay in issue of refund
  • Making the process of refunds faster and pay 12-18% interest if refund issued beyond 6 months.
  • Payment of Interest on refund due out of Self Assessement Tax
  • Stock trading gains of up to Rs.5 Lac to be treated as capital gains and not business income
  • Deptt. to desist from the practice of adjusting tax demand of a taxpayer whose tax return is under assessment against legitimate refunds due.
  • Deferring the contentious Income Computation and Disclosure Standards (ICDS) provision.
  • IT:  Disallowance on account of bogus purchases – Merely because notices u/s 133(6) could not be served on the suppliers assessee- buyer cannot be put to an inconvenience of disallowance when he has provided the correct address of those parties – DCIT Versus Norma India Ltd. (ITAT Delhi)

INDIRECT TAX:

  • It is here by seeked to further amend notification No 12/2012-Central Excise dated 17.03.2012 so as to increase the Basic Excise Duty rates on Petrol and Diesel(both unbranded and branded).
  • Introduction of Tariff Notification in respect of fixation of tariff value of Edible Oil, Brass, Poppy Seed, Areca Nut, Gold & Silver.
  • Activities of street light maintenance cannot be equated with maintenance of road bridge tunnel etc. – Exemption not available – In Re : K. Ram Mohan – 2016 (1) TMI 543 – AUTHORITY FOR ADVANCE RULINGS, NEW DELHI
  • Area based exemption – substantial expansion by way of installed capacity by not less than 25 – Notification No. 50/2003-CE dated 10/6/03 – it was contended that production capacity of the both the units are to be counted as one – benefit of exemption allowed- CCE, Meerut – II Versus M/s Prakash Straw Board Pvt. Ltd. – 2016 (1) TMI 521 – CESTAT NEW DELHI
  • ST: Activities of street light maintenance cannot be equated with maintenance of road bridge tunnel etc. – Exemption not available – K. Ram Mohan (Authority for Advance Rulings, New Delhi).
  • ST: Govt. is considering higher Service Tax Exemption Limit to benefit small service provides.
  • Likely to hike Service Tax exemption threshold for small service providers “service tax exemption threshold limit could be hiked from Rs 10 lakh to Rs 25 lakh.” said a government source.
  • Service-tax: ‘Mistaken payment’ of service tax in excess of actually payable amount amounts to ‘deposit’ and time-limit of section 11B would not apply to refund thereof [2016] 57 (Ahmedabad – CESTAT) Nobles Constructions Gujarat (P.) Ltd. v. Commissioner of Service Tax.
  • Mobile phone and courier services used for business purposes are eligible for credit [2016] 65 taxmann.com 88 (Ahmedabad – CESTAT) Commissioner of Central Excise & Service Tax v. Miranda Tools
  • ST: Restoration of appeal – CESTAT dismissed the appeal for non compliance of stay order – the delay of 5 days in depositing the amount is condoned – appeal restored before the tribunal – M/s MPA Marketing Pvt. Ltd. Vs. CESTAT & anr (Punjab And Haryana High Court)
  • Levy of personal penalty on co-noticees – when the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest plus 25 of the duty as penalty there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods – (Commissioner of Central Excise And Customs Aurangabad / Nashik – II Versus Ambika Waste Management Pvt Ltd, Ambadas Santosh Ngargoje, Harishkumar Harjivandas Gandhi, Shree Salasar Ispat Pvt Ltd – 2016 (1) TMI 438 – CESTAT MUMBAI).
  • Cenvat Credit – Eligible input services – Other welfare service i.e. service tax paid on the services of purchase of gift and setting up of mandap in the factory premises for celebrating Dussera festival is not eligible to be held as credit as this seems to be not connected with the business of the appellant- (Mahindra Casting Ltd. Versus Commissioner of Central Excise, Pune I – 2016 (1) TMI 437 – CESTAT MUMBAI).
  • VATForm GE-I & GE-II for the period from Apr, 2015 to Dec, 2015 to be furnished by 15 FEB 2016. Notification, dt.12 JAN 2016.
  • DVAT:– All Govt Entities having their offices functioning within NCT of Delhi are required to furnish an Quarterly Return in ‘Form GE-II’, of purchases made by them for purpose of consumption or use by them from the dealers registered under the Act and having a valid TIN.
  • Restoration of appeal – CESTAT dismissed the appeal for non compliance of stay order – the delay of 5 days in depositing the amount is condoned – appeal restored before the tribunal- M/s MPA Marketing Pvt. Limited Versus Customs, Excise and Service Tax Appellate Tribunal and another – 2016 (1) TMI 482 – PUNJAB AND HARYANA HIGH COURT
  • ST: Incentive received for achieving the targets is not excludible from the assessable value of the service which as per Sec-67 is the gross amount received for the service rendered – M/s Hari Om Telecom Vs. CCE, Chandigarh (CESTAT New Delhi)
  • Likely to hike Service Tax exemption threshold for small service providers
    It may enhance to 25 lacs.
  • Delhi VAT authority isn’t empowered to pass an order until power thereof is delegated by Commissioner[2016]  103 (Delhi) Yongnam Engineering & Construction (P.) Ltd. v. Commissioner, DVAT
  • DVAT: Due date to file Form-9 (Online Reconciliation Return) extended to 29.2.16. Cir.No.34, dt.15.01.2016.
  • Delhi VAT-Filling of reconciliation return for year 2014-15- Date extended to 29.02.2016.
  • Increase in Excise Duty on Petrol by 75 paise and on Diesel by Rs. 2 per litre [Notification No. 2/2016-Central Excise]
  • ST: Refund – service tax was mistakenly paid – amount paid by the appellant under Manpower Recruitment Agency Services is required to be refunded because no tax can be collected without the authority of law –Sharam Sewa Associates Vs. CCE, Allahabad (CESTAT Allahabad)

COMPANY LAW:

Query: A Private Limited company accepted unsecured loan from its existing two Directors. This is exempt deposit under section 73 of the Companies Act, 2013. Subsequently above two Directors resigned from the Directorship of the Company. Is the loan becomes deposits after their resignation? Is the loan becomes repayable after resignation not to attract deposit Rules?

Answer: There is no necessity to repay the loan immediately and at the time of acceptance of loan from the person who has given loan were directors of the company and the money can be retained till the date of maturity.

Query:Whether Security Deposit given to Director for taking his premises on rent will attract section 185? Please Guide.

Answer: Yes, it attract section 185 but not applicable in case of private company if- a) In share capital of private company, no other body corporate has invested any money and, b) If the borrowings of such company from banks/ Financial Institutions/ body corporate is less than twice of its paid-up capital or Rs. 50 Crore (Whichever is lower) and, c) Company has no default in repayment of such borrowings, and also not applicable in case of public company, if- loan given to a M.D or W.T.D as part of conditions of service or Approved by a Special Resolution.

Query:One company is having 1 subsidiary and 2 associates companies as on 31.03.2015. Whether consolidation of all the companies is required or only the consolidation of subsidiary companies?

Answer: As per Section 129(3) of the Companies Act 2013, where a company has one or more subsidiaries, it shall, in addition to financial statements provided under sub section (2), prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub section (2). Further explanation to this sub section provides that “the word subsidiary shall include associate company and joint venture”.

Query: Kindly provide me the Consent letter format for conducting EGM at shorter notice?

Answer: Unlike the Companies Act, 1956, the MCA does not provide any format. Even there is no format provided in the Rules. In fact proviso to sub section 1 of section 101 only mentions that the shorter notice to be given by the shareholders. Wherever in the MCA the section mentions that “as may be prescribed” the same has been provided by the Rules. As the phrase “as may be prescribed” is not mentioned in the section, the presumption is that no format would be prescribed. Thus liberty has been granted to the shareholders with regard to the fomat of the notice. The safe course would be to follow the form 22A prescribed under the Companies Act, 1956 with requisite changes.

CORPORATE SOCIAL RESPONSIBILITY

Query:What is meaning of ‘any financial year’ mentioned in Section 135 (1) of the Companies Act, 2013?

Answer: “Any Financial year” referred under Sub- Section (1) of Section 135, implies any of the three preceding financial years

Query: Compliance under section 135 of the Act i.e. Corporate Social Responsibility, is applicable from which Financial Year?

Answer: the spending of requisite amount on CSR activities came into force from April, 2014.

  • Central Government has notified 13th day of January 2016 as the date from which commencement if section (5), (6), (7) of Section 125 of Companies Act, 2013 come into force except with respect to manner of administration of the Investor Education & Protection fund.
  • MCA has issued Frequently Asked Questions (FAQs) with regard to Corporate Social Responsibility under section 135 of the Companies Act,2013 vide General Circular 1/ 2016 dated 12.01.2016.
  • MCA: Services on the www.mca.gov.in portal will not be available from 08:00 AM to 06:00 PM on Saturday, 16th JAN 2016 due to periodic maintenance activities.

OTHER UPDATES:

  • Startup India: Hon’ble PM Modi launches Startup India Program on Sat, 16 JAN 2016 to boost innovation based business with many incentives and ease of doing business.
  • ICAI: Result of the CA Final Exams held in Nov’ 2015 and CPT Exams held in Dec, 2015 declared y’day (17-01-2016) – Congrats who cleared and all the Best who appears next time.
  • We congratulate our CA students, who have passed exams. CA result analysis: CA final both group 5.75 %, Group 1- 12.61%, Group 2- 11.99 %, CPT -34.45 %.
  • Sovereign Gold Bonds, 2016 to be open for subscription from 18.01.2016 to 22.01.2016 vide its Notification F.No. 4(19)-W&M/2014 dated 14.01.2016.
  • Rules for the Investor education & protection fund authority (Appointment of Chair Person and Members, holding meeting and provision for offices and officers) Rules 2016.
  • All Govt. entities in Delhi to file return for purchases made by them for purpose of consumption
  • New Juvenile Justice Act comes into force from Jan 15, 2016.
  • Stamp duty paid to increase authorised capital is capital expenditure [2016] 65 taxmann.com 94 (Mumbai – Trib.) Inventurus Knowledge Services (P.) Ltd. v. ITO
  • CCI: Shri Devender Kumar Sikri, an officer of 1975 batch IAS took oath as Chairman of Competition Commission of India (CCI).
  • SEBI: SEBI has established its Local Office at Jammu under the administrative control of its Northern Regional Office at New Delhi.
  • ICAI has extended last date “for complying with the CPE hours requirement for the Calendar Year 2015” – from 31st December, 2015 to 31st March, 2016.
  • Applicability of MRP based valuation to institutional buyers for goods specified U/s. 4A of Excise Act.
  • Refund allowable where Service tax is paid twice by Appellant due to clerical error [Tikaula Sugar Mills Ltd. Vs. CCE, Meerut-I (2015 (12) TMI 884 – CESTAT New Delhi)].
  • Rent-a-cab services to SEZ Unit for transportation of its staff to and from their residence is exempt from Service Tax.
  • Minister of State for Finance Jayant Sinha on Thursday said that the government will present the Budget for 2016-17 on February 29, 2016.
  • Section 80IB(10) – Canopy/ Porch cannot be treated as part of Built up Area as it is not habitable [DCIT vs. Smt. Suman Jagannath Pharande (ITAT Pune)].
  • Revision valid under section 263 where AO has not made any enquiry about quantification of losses claimed [ITAT Delhi in the case of G. E. Money Financial Services Ltd. vs. DCIT].
  • Being ownership vest with lessor in leased including sale & lease back assets, depreciation u/s 32 allowed [ITAT Mumbai in the case of ICICI Ltd. vs. ACIT].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

CORPORATE AND PROFESSIONAL UPDATE JANUARY 5, 2016

CORPORATE AND PROFESSIONAL UPDATE JANUARY 5, 2016

Untitled89A

INCOME TAX ACT

SECTION 2(22)

DEEMED DIVIDEND

Loans and advances to shareholders : SLP dismissed against High Court’s order wherein it was held that amount advanced to assessee-partner by firm could not be taxed as deemed dividend merely on ground that some amount lying in firm’s account was collected by firm on behalf of company of which assessee was a MD-cum-shareholder

SECTION 5

INCOME – ACCRUAL OF

Interest on share application money : Interest earned on application money deposited in bank is taxable in year of allotment of shares –

SECTION 10B

EXPORT ORIENTED UNDERTAKING

Reconstruction of business: Where Assessing Officer disallowed assessee’s claim for deduction under section 10B on plea that assessee was formed by reconstruction of business of one ‘F’ and Commissioner (Appeals) allowed claim of deduction holding that there was no transfer of old plant and machinery by ‘F’ to assessee and manufacturing activity carried on by assessee was by use of new plant and machinery, since said findings had not been rebutted by revenue, order of Commissioner (Appeals) deserved to be upheld

Manufacture activity: Where assessee imported standard gold into India and then converted it into jewellery or ornaments and exported those ornaments, said activity amounted to manufacture/production of articles or things for export which qualified for deduction under section 10B

SECTION 32

DEPRECIATION – ALLOWANCE/RATE OF

ReassessmentWhere while sending proposal for approval of reassessment, Assessing Officer maintained that audit objection raised by audit party that assessee being contractor, depreciation on dumper, lorries, etc. could not be allowed at rate of 30 per cent but at 15 per cent, was not acceptable, but he recorded said objection as reason to believe, re-assessment was not valid

SECTION 36(1)(iii)

INTEREST ON BORROWED CAPITAL

Applicability of : Where assessee advanced money to unrelated company ‘V’ for purchase of a property and money was retained by company ‘V’ till legal notice was sent, same could not be said to be an interest free loan or advance for disallowing interest under section 36(1)(iii)

SECTION 37(1)

BUSINESS EXPENDITURE – ALLOWABILITY OF

Penalty : Where in respect of contract for providing coverage of Commonwealth Games, assessee had to pay certain amount to PrasarBharati as performance bank guarantee on account of inadequate performance of said contract, it was to be allowed as deduction under section 37(1)

SECTION 50C

CAPITAL GAINS – SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES

Applicability of : Substitution of ‘full value of consideration received’ with ‘stamp value’ in terms of section 50C is applicable only in hands of seller of property who has to compute capital gain under section 48 pursuant to transfer of a capital asset

SECTION 56

INCOME FROM OTHER SOURCES – CHARGEABLE AS

Gifts : Section 56(2)(vii) is applicable on cases in which individual or HUF receives immovable property on or after 1-10-2009 and, therefore, where property was purchased by assessee in financial year 2007-08, mandate of section 56(2)(vii) could not be applied retrospectively

SECTION 69A

UNEXPLAINED MONEY

Firm, in case of : Where in support of capital introduced by partners of firm, assessee filed additional evidence before Tribunal in shape of confirmations from both partners and source of capital introduced by them with help of their bank pass books, since said evidence was not available before authorities below, matter was to be remanded back for disposal afresh

SECTION 69B

UNDISCLOSED INVESTMENTS

Immovable property : In case of purchase of property by assessee, in absence of any positive material on record, mere higher value of property estimated by DVO or Registered valuer could not form basis for making addition under section 69B

SECTION 73

LOSSES – IN SPECULATION BUSINESS

Raising of claim : Mere fact that assessee has not disclosed speculative loss in specified column of return would not give right to revenue authorities to disallow claim of assessee of set off of brought forward loss

SECTION 194A

DEDUCTION OF TAX AT SOURCE – INTEREST OTHER THAN INTEREST ON SECURITIES

None of the State or Central enactments make any distinction between a co-operative society engaged in carrying on banking business and a co-operative bank. Section 7(1) of the Banking Regulation Act,1949 which obliges co-operative society carrying on the business of banking to use the words “bank”, “banker” or “banking” as part of its name clinches the issue. Therefore, a co-operative bank will be covered under the category “co-operative society engaged in carrying on banking business” and will be exempt from deducting TDS u/s 194A only if interest paid does not exceed the limit of Rs.10,000 during the financial year as specified in section 194A. A co-operative bank cannot avail the general unlimited exemption from TDS on interest u/s 194A available to co-operative societies

SECTION 253

APPELLATE TRIBUNAL – APPEALS TO

Scope of : In case of order passed by DRP, right to file an appeal by department does not extend to a point decided either way by Assessing Officer/TPO himself, which remains intact even after direction given by DRP

INTEREST-TAX ACT

SECTION 2(7)

INTEREST

Delayed payment of bills of exchange : Interest payable on default in payment of amounts due under a discounted bill of exchange being a compensation amount received by bank for delayed payment of bills of exchange, is not chargeable as interest under Interest Tax Act)

WEALTH-TAX ACT

SECTION 34AB

VALUER, REGISTERED – REGISTRATION OF VALUER

To get registration as a ‘valuer of immovable property’ under section 34AB of Wealth-tax Act it is not necessary for applicant to gain experience of ten years as consulting engineer or valuer under Wealth-tax Rules, after acquisition of educational qualifications; experience gained prior thereto can also be considered for that purpose

COMPANIES ACT

SECTION 403

OPPRESSION AND MISMANAGEMENT

Where son with a view to defraud his father collided with directors of father’s old company and claimed possession of company’s properties, CLB was justified in directing removal of directors of old company to handover charge of company’s properties and assets to its newly appointed directors

SECURITIES CONTRACTS (REGULATION) ACT

SECTION 2(j)

STOCK EXCHANGE – PETITIONER WAS A STOCK EXCHANGE

Where in a money suit filed by respondent company, petitioner stock exchange filed application seeking to summon record of business transactions of respondent-company, application was to be dismissed as documents were not relevant having regard to nature of suit

SERVICE TAX ACT

SECTION 65(3)

TAXABLE SERVICES – ADVERTISING AGENCY’S SERVICES

 Where assessee : (a) took certain prominent places in city on rental basis, (b) installed infrastructure/boards thereon, (c) displayed advertisement of clients in form of billboards thereon, and (d) collected rent for such display, then, said rental could not be charged to service tax under ‘advertising agency’s services’

SECTION 65(12)

TAXABLE SERVICES – BANKING AND OTHER FINANCIAL SERVICES

Mark-up earned by credit card companies on foreign currency conversion in case of cardholders visiting outside India, is not taxable under Banking and Other Financial Services. Moreover, same is a service received, rendered and consumed abroad and accordingly, outside scope of service tax in India

CENTRAL EXCISE ACT

SECTION 11B

LEVY AND COLLECTION OF DUTY – CLAIM FOR REFUND OF DUTY

Where assessee’s refund claim filed within period of limitation was rejected by both probable jurisdictional Commissionerates, such rejection was unsustainable

SECTION 35C

APPEALS – RECTIFICATION OF MISTAKES/REVIEW – APPELLATE TRIBUNAL

Non-consideration of issue of time-bar raised by assessee would amount to a mistake apparent from record and same can be rectified by Tribunal and would not amount to ‘re-appreciation of evidence’

CENVAT CREDIT RULES

RULE 5

CENVAT CREDIT – REFUND OF

Where assessee, a provider of rent-a-cab service and outdoor catering service, claimed refund of cenvat credit against export of service, payment received by assessee in Indian rupees through foreign bank was receipt of payment in convertible foreign exchange and further above services would qualify as input service – [2016] 65taxmann.com 7 (Mumbai – CESTAT)

STATUTES

CORPORATE LAWS

Enemy Property (Amendment and Validation) Ordinance, 2016

Setting up of IFSC Banking Units (IBUS) – Permissible Activities

Non-Fund based Facility to Non-Constituent Borrowers of Bank

Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by FIS – Amendment in Master Circular DBR.No.FID.FIC.3/01.02.00/2015-16, Dated 1-7-2015

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

CORPORATE AND PROFESSIONAL UPDATE JANUARY 04, 2016

CORPORATE AND PROFESSIONAL UPDATE JANUARY 04, 2016

Untitled213

INCOME TAX ACT

SECTION 69

UNEXPLAINED INVESTMENTS

Purchase of property : Where Tribunal after a detailed examination of documents had arrived at conclusion that assessee-firm failed to explain source of amount paid for purchase of property, same was rightly held as unexplained investment.

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments/Adjustments – General : Payment making good foreign exchanges losses in hands of AE due to unexplained delay in payment could not be considered as payment for management and consultancy services

Comparables and adjustments : Where comparables had debtors, inventories and creditors, while assessee was not having any debtors and was entirely funded by advance received from AE against supplies, then in order to bring parity between results of selected comparables and that of assessee, it was essential that adjustment for working capital was made on results of such comparables

SECTION 158BA

BLOCK ASSESSMENT IN SEARCH CASES – ASSESSMENT OF UNDISCLOSED INCOME

Two set of books of account : Where document said to be maintained by assessee for invoking section 158BA(3) was very vague, without having details of dates and proof of transaction with parties except parties names and amount, this document would not be considered as ‘other documents’ maintained in normal course to exclude relevant amount from block period

SECTION 206AA

DEDUCTION OF TAX AT SOURCE – REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER

Correction of PAN entries : System of processing TDS statements gives an option to assessee-deductor to correct invalid/No PAN entries in TDS statement through a correction statement without any restriction of correcting particular PAN with regard to number of characters

SECTION 221

COLLECTION AND RECOVERY OF TAX – PENALTY PAYABLE WHEN TAX IN DEFAULT

Defective notice : Where notice for initiation of penalty proceedings against assessee had not been issued under section 221 and penalty order had also not been passed under section 221 but under section 140A(3), this mistake was not covered under umbrella of provisions of section 292B

SECTIONS 234A

ADVANCE TAX – INTEREST, CHARGEABLE AS

Rectification : Where rectification order was passed in respect of short levy of interest under sections 234A and 234B but she was never given opportunity to file her objections, said order, being in violation of principles of natural justice, was to be set aside

COMPANIES ACT

SECTION 433

WINDING UP – CIRCUMSTANCES IN WHICH COMPANY MAY BE WOUND UP

Where company had raised a bonafide dispute in respect of debt alleging failure of winding up petitioner, a travel agent, to secure visa for company’s Managing Director, no order for winding up could be passed against company

CENTRAL EXCISE ACT

SECTION 35G

APPEALS – CONDONATION OF DELAY – HIGH COURT

In case of delay in filing of appeal by department, condonation of delay application must be signed by department’s officials and signing of said application/affidavit by clerk of department’s counsel is highly condemnable

CENVAT CREDIT RULES

RULE 2(a)

CENVAT CREDIT – CAPITAL GOODS

Where applicant gas transporter will engage contractor to lay pipelines and contractor will procure pipes and valves from manufacturer who will issue invoice to contractor showing applicant as consignee and pipes will be delivered directly at applicant’s work-site, applicant can avail cenvat credit on pipes and valves on basis of invoice issued by contractor, if contractor is a registered dealer

STATUTES

DIRECT TAX LAWS

Section 197, read with sections 195, 206C, of the Income-tax Act, 1961 – Deduction of Tax at Source – Certificate for deduction at lower rate – Advisory for deductors

CORPORATE LAWS

Section 458, read with section 208, of the Companies Act, 2013 – Delegation by Central Government of its powers and functions – Delegation of powers to specified Regional Directors under section 208 Online System for Registration/Renewal of Broking Licenses –

Investment by Gold ETFs in Gold Monetisation Scheme of Banks

Procedure for ensuring Compliance with Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (SECC Regulations) by listed Stock Exchanges

Extension of credit facilities to Overseas Step-Down subsidiaries of Indian Corporates

Revised contents of Application-Cum-Bidding form and Manner of Disclosure

Procedure to deal with cases prior to 1-4-2014 involving offer/allotment of securities to more than 49 up to 200 investors in a Financial Year

INDIRECT TAX LAWS 

Omnibus general exemption to goods specified in Chapters 1 to 98 of Tariff – Amendment in Notification No. 12/2012-C.E., Dated 17-3-2012

Cenvat Credit (Sixth Amendment) Rules, 2015 – Amendment in rule 9

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