Tuesday, 28 February, 2017

Vistra India Update 322

February 16th  -28th , 2017

Income Tax

Clarification for determination of Place of Effective Management (POEM) of a company, other than an Indian company

The concept of POEM for deciding the residential status of a company was introduced by the Finance Act, 2015. It is effective from 01.04.2016 and accordingly shall apply from assessment year 2017-18 onwards. The final guidelines on POEM contain some unique features. Active Business outside India (ABOI) test has been provided, so as not to cover companies outside India which are engaged in active business. The intent is not to target Indian Multi Nationals which are engaged in business activity outside India. The intent is to target shell companies and companies which are created for retaining income outside India although real control and management of affairs is located in India. It was emphasized that these guidelines are not intended to cover foreign companies or to tax their global income, merely on the ground of presence of Permanent Establishment or Business connection in India.  The central government had mentioned in its press release that POEM guidelines shall not apply to companies having turnover or gross receipts of Rs. Fifty crore or less in a financial year.  

Section 6(3) of the Income Tax Act 1961 provides that a company is said to be resident in India in any previous year, if (i) it is an Indian company or (ii) its place of effective management in that year is in India. it is now clarified that section 6(3)(ii) mentioned above  shall not apply to a company having turnover or gross receipts of Rs. Fifty crore or less in a financial year.    

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Company Law

Closure of place of business by a foreign company 

Subsection 2 of Section 391 of the Companies Act, 2013 (made effective from 15th December 2016) states that the provisions of Winding up of Companies as stated in Chapter XX are applicable to the closure of place of business of a foreign Company in India as if it were a Company incorporated in India. However, it is now clarified that the provisions of subsection (1) and (2) of section 391 should be read harmoniously and accordingly the winding down provisions as stated in chapter XX are applicable only to those foreign companies having place of business in India and has issued prospectus or IDRs pursuant to Chapter XXII of Companies Act, 2013.  

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Companies (Transfer of Pending Proceedings) Amendment Rules, 2017

Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016 provides  that all petitions relating to winding up pending before a High Court under clause (e) of section 433 of the Act on the ground of inability to pay its debts shall be transferred to National Company Law Tribunal (NCLT) provided that the petitioner shall submit all required information for admission of the petition including details of the proposed insolvency professional to the Tribunal within sixty days from date of the notification. The amendment Rules extend the time limit from 60 days to 6 months.

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Publishing of rate of exchange for conversion of the foreign currency

The Central Board of Excise and Customs (CBEC) vide Notification No. 12 /2017 - Customs (N.T.) has 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 17th of February 2017.  

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Labour Laws

Ease of Labour Law Compliance rules – Combined Registers to be maintained for 9 Central Labour laws notified

The Ministry of Labour and employment has notified the “Ease of Compliance to maintain Registers under various Labour Laws rules, 2016” effective from 21 February 2017 in line with the Government’s policy of ease of doing business and streamlining of labor law reforms. This rules would be applicable for maintenance of combined registers under the following 9 Central Labour laws: 

  1. Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (27 of 1996);
  2. Contract Labour (Regulation and Abolition) Act, 1970 (37 of 1970);
  3. Equal Remuneration Act, 1976 (25 of 1976);
  4. Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 (30 of 1979);
  5. Mines Act, 1952 (35 of 1952)
  6. Minimum Wages Act, 1948 (11 of 1948);
  7. Payment of Wages Act, 1936 (4 of 1936);
  8. Sales Promotion Employees (Conditions of Service) Act, 1976 (11 of 1976); and
  9. Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955);

The salient features of the rules are:

  1. Combined registers pertaining to information of employees, wages, loan/recovery, attendance and rest/leave to be maintained by employers as per the prescribed forms in the schedule.
  2. The registers shall be maintained either electronically or in hard copy.
  3. If the registers are maintained in electronic form, then, layout and presentation of the register may be adjusted without changing the integrity, serial number and contents of the columns of the register.

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