Saturday, 15 July, 2017

Vistra India Update 331

July 1 - July 15, 2017

INCOME TAX

Cash transactions above the value of Rs. 2 lakhs - Clarification

Section 269ST of the Income Tax Act 1961 provides that no person shall receive an amount of Rs. 2 lakhs or more in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.

The Central Government has clarified that in respect of receipt in the nature of repayment of loan by non-banking financial companies (NBFCs) or housing finance companies (HFCs), the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions of section 269ST.

Click to view the circular

FORM 3CD – Amendment notified.

Hitherto, the details relating to deposit and repayment of any loan exceeding the limits specified under section 269SS and 269T is being captured in Form 3CD.  Now, the Central Government has amended the Form 3CD to include any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

Click to view the circular

Rules for valuation of unquoted Equity Shares – Final rules notified

The Central Government has amended and notified the final rules for determining the fair market value of unquoted equity shares. The amended rules considers separate valuation for jewellery, artistic works and immovable property to be considered for determining the fair market value of unquoted equity shares.  The fair market value of unquoted equity shares = (A+B+C+D - L) × (PV)/(PE), where

A= book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) in the balance-sheet as reduced by

  • any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any and
  • any amount shown as asset including the un amortised amount of deferred expenditure which does not represent the value of any asset

B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer

C = fair market value of shares and securities as determined in the manner provided in this rule;

D = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property

L= book value of liabilities shown in the balance sheet, but not including the following amounts, namely

  • the paid-up capital in respect of equity shares
  • the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company
  • reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation
  • any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto
  • any amount representing provisions made for meeting liabilities, other than ascertained liabilities
  • any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares

PV= the paid up value of such equity shares

PE = total amount of paid up equity share capital as shown in the balance-sheet

Click to view the circular

COMPANY LAW

National Company Law Tribunal (Amendment) Rules, 2017

The Ministry of Corporate Affairs (“MCA”) has amended the National Company Law Tribunal (NCLT) Rules to provide the procedure of appeal to NCLT against the order by the Registrar of Companies to remove the name of the Company under section 248 of the Companies Act, 2013.

Click to view the circular

Clarification on Exemptions/Relaxations to Private Companies

The Ministry of Corporate Affairs had issued notifications under Section 462 of the Companies Act, 2013, providing exemptions under various provisions of the Act to Private Companies. One such exemption provided was that the audit report of following types of Private Companies need not include an affirmation as to whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

  • One person Company
  • Company having turnover less than Rs. 50 Crores as per latest audited financial statement OR which has aggregate borrowings from banks or financial institutions or any Body Corporate at any point of time during the financial year less then Rs. 25 Crore.

Now the Central Government has replaced the word “OR” in the 2nd para above with the word “and”. Accordingly, the auditor of the Private Company need not express opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls if such private company satisfies the following condition.

  • Company having turnover less than Rs. 50 Crores as per latest audited financial statement AND which has aggregate borrowings from banks or financial institutions or any Body corporate at any point of time during the financial year less then Rs. 25 Crore.

Click to view the circular

Companies (Appointment and Qualification of Directors) Amendment Rules, 2017

The Ministry of Corporate Affairs (“MCA”) has amended the appointment and qualification of directors Rules, 2014 to provide that the requirement of having two independent directors will not be applicable to the following Unlisted Public Companies

  • Joint Venture
  • Wholly Owned Subsidiaries and
  • A dormant Company as defined under section 455 of the Companies Act, 2017

Further, a new Form DIR 5 is notified to apply for surrendering the DIN.

Click to view the circular

Companies (Meeting of Board and its Powers) Second Amendment Rules, 2017

The Ministry of Corporate Affairs (“MCA”) has amended the rules relating to meeting of the Board of Directors and its powers to provide:

  1. That any director who intends to participate in the meeting through electronic mode may intimate about such participation at the beginning of the calendar year and such declaration shall be valid for one year. However, that such declaration shall not debar him from participation in the meeting in person in which case he shall intimate the company sufficiently in advance of his intention to participate in person.
  2. That the draft minutes recorded at the end of discussion of each agenda shall be preserved by the company till the confirmation of the draft minutes in accordance with sub-rule (12).
  3. Every public company which is required to appoint independent directors as per rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 shall constitute an audit committee, a nomination and remuneration committee

Click to view the circular

GOODS AND SERVICE TAX

Furnishing a Letter of Undertaking in place of a bond for export without payment of integrated tax

The Central Board of Excise and Customs has issued various notifications and circulars to specify the conditions and safeguards for the registered person who intends to supply goods or services for export without payment of integrated tax and for furnishing a Letter of Undertaking in place of a Bond. 

The following registered person shall be eligible for submission of Letter of Undertaking in place of a bond:-

(a) a status holder as specified in paragraph 5 of the Foreign Trade Policy 2015-2020; or
(b) who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding financial year,
and he has not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws in case where the amount of tax evaded exceeds two hundred and fifty lakh rupees.

Click to view the circular

Clarification on Inter-state movement of various modes of conveyance, carrying goods or passengers or for repairs and maintenance

Section 25(4) of Central Goods and Services Tax Act, 2017 provides that a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.  Further Schedule I to the said Act specifies situations where activities are to be treated as supply even if made without consideration which also includes supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business. The Government has clarified that on taxability of Inter-state movement of various modes of conveyance, carrying goods or passengers or for repairs and maintenance between distinct persons as specified in section 25(4) of the said Act, including trains, buses, trucks, tankers, trailers, vessels, containers aircrafts except in cases where such movement is for further supply of the same conveyance, will be not treated as provision of service and therefore IGST will not be payable on the above services.

Click to view the circular

Import of Services by SEZ units or developer is exempt from Integrated Tax

The Government of India has exempted the SEZ units or developers from payment of whole of Integrated Tax on import of services provided, such services are being used for authorized operations. 

Click to view the circular

CUSTOMS

Publishing of rate of exchange for conversion of the foreign currency

The Central Board of Excise and Customs (CBEC) vide Notification No. 70 /2017 - Customs (N.T.) notified the rate of exchange for conversion of the foreign currency into Indian currency or vice versa for Export and Import of goods, with effect from 7th of July 2017.  The Notification is appended below for reference:

Click to view the circular 

Recent Newsletters