Sec 234E-Bombay HC Stay Order

S. 234E: High Court grants ad-interim stay against operation of notices levying fee for failure to file TDS statement

S. 234E of the Income-tax Act, 1961 inserted by the Finance Act, 2012 provides for levy of a fee of Rs. 200/- for each day's delay in filing the statement of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). A Writ Petition to challenge the validity of s. 234E has been filed in the Bombay High Court. The Petition claims that assessees who are deducting tax at source are discharging an administrative function of the department and that they are a "honorary agent" of the department. It is stated that this obligation is onerous in nature and that there are already numerous penalties prescribed for a default. It is stated that the fee now levied by s. 234E is "exponentially harsh and burdensome" and also "deceitful, atrocious and obnoxious". It is also claimed that Parliament does not have the jurisdiction or competence to impose such a levy on tax-payers.

The Bombay High Court has, vide order dated 28.04.2014, granted ad-interim stay in terms of prayer clause (d) i.e. stayed the operation of the impugned notices levying the fee.

See also Narath Mapila LP School vs. UOI (Ker), Adithya Bizorp Solutions India vs. UOI (Kar) & Om Prakash Dhoot vs. UOI (Raj) where similar interim orders of stay have been passed. The CBDT has vide Circular No. 07/2014 dated 04.03.2014 extended the due date of filing of the TDS/TCS statement for Government deductors

Rashmikant Kundalia vs. UOI (Bombay High Court)

crossed cheque and account payee cheque

FYI - Rajmoti Industries vs. ACIT (Gujarat High Court)

S. 40A(3): There is a difference between “crossed cheque” and “account payee cheque”. Payment by crossed cheque attracts s. 40A(3) disallowance

FATCA

The Foreign Account Tax Compliance Act (FATCA), enacted in 2010 by US Government, aims to check and impose withholding tax on illicit activities of US taxpayers who use offshore accounts to evade taxes. The final FATCA regulations, issued in January 2013, are set to come into effect from July 1, 2014 after signing of Intergovernmental Agreements (IGA) with different countries. On April 11, 2014, India reached an agreement 'in substance' with USA on FATCA.

Resolutions to be proposed at the ensuing AGM

Friends pl add on to do list immediately after 28th April

Resolutions to be proposed at the ensuing AGM

1)      Increase in borrowing limit and creation of charge - S/180 (I) (c) & 180 (I) (a)

2)      Accepting Public Deposits - S/73 & 76

3)      Change/ Alteration in AOA –Adopt Table F

4)      Invt. in other body Corporates - S/186

5)      Appointment of Branch Auditors (Dubai Branch)

6)      Related Party transactions, if any - S/188

7)      Appointment of Auditors – Within 3yrs of notification S/139 (2)

8)      Issue of Securities (CPs etc) on Pvt. Placement - S/42

9)      Appt of CFO & other KMPs - Board approval as 203

10)   Fixing Remuneration of KMPS - Board approval as 203

11)   Appt. of independent directors - S/149(10) to (12)

Actions immediately to be taken on  notification of the Act

1)      Identify related parties – To be notified to a/cs and SAP team

2)      Print new Business letters, bills etc with CIN no. – s/12(3) (c)

3)      Devise CSR policy & spending – s/135

4)      Adopt new Whistle Blower Policy – Vigil mechanism – 177(10)

5)      File Return on Public Deposits within 3 months – 74(1)

6)      Return on change in Top 10 shareholders – within 15 days -  S/93

7)      To obtain positive consent for receiving documents by email (S/101)

8)      Obtain certificate of Independence from Directors S/149 (7)

10)   Terms of reference of Audit committee –Additional items to be placed before audit committee at each meeting - S/177 (4)

11)   Nomination & Remuneration policy to be approved by Board – S/178 (3) & (2)

12)   Terms of reference of Stakeholder committee – Additional items to be placed before the Committee - S/178 (6)

13)   Devise Code for independent Directors – Schedule IV

14)   Observe Secretarial standards for Board & General meetings S/118 (10)

15)   Reconstitute Board (within 1year)– for (i) appl. of ID’s for 5yrs (ii) not liable to retire by rotation –S/149 (10) to (13)

16)   Maintain Register of KMPs - S/170

17)   Can pay sitting fees upto Rs. 1lakh S/197 (5)

18)   Check the compliance required by unlisted Public companies (if paid-up/networth exceed prescribed limits)- refer Annexure (will be circulated separately)

Additional compliances

1)      To attend at least 1 Board Meeting in 12 months or vacate office S/167 (1) (b)

2)      Change in top 10 shareholders S/93

3)      File Board Resolutions passed  U/S 179

4)      File Report on AGM – S/121

5)      Postal Ballot Applicable to Pvt. Cos – S/110

6)      Directors Responsibility Statement – Clause  (e) & (f) of S/134 (5) have laid down adequate “internal financial controls” (defined in the Act) – To devise policy on internal financial controls.

7)      Auditors – Appoint for 5yrs – Existing limit to be considered S/139 (2) – Ratification every year

8)      To inform auditor & ROC about appointment within 15 days – S/139

9)      Relative of auditor not to hold shares in excess of Rs. 1lakh S/141

SEBI INTRODUCED amendments to clause 35B (E-voting facility) and clause 49 (Corporate Governance)

SEBI has pursuant to a master circular issued today, introduced amendments to clause 35B (E-voting facility) and clause 49 (Corporate Governance) of the equity listing agreement. The master circular will supersede all other earlier circulars issued by SEBI on Clauses 35B and 49 of the Equity Listing Agreement. The revised Clause 35B would be applicable to all listed companies and the modalities would be governed by the provisions of Companies (Management and Administration) Rules, 2014.

Following are some of the highlights of the revised Clause 49:

1.       Applicability

a)      To all listed companies with effect from 1 October 2014.

b)      The provisions of Clause 49(VI)(C) [constitution of risk management committee] will be applicable to top 100 listed companies by market capitalisation as at the end of the immediate previous financial year.

2.       Related Party Transactions i.e. a transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged:

a)      Applicable to all prospective transactions.

b)      A “related party” is a person or entity that is related to the company. Parties are considered to be related, if one party has the ability to control the other party or exercise significant influence over the other party, directly or indirectly, in making financial and/or operating decisions and includes certain specified entities.

c)       Company is obliged to formulate a policy on materiality of related party transactions and also on dealing with Related Party Transactions.

d)      A transaction with a related party will be considered material, if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds five percent (5%) of the annual turnover or twenty percent (20%) of the net worth of the company as per the last audited financial statements of the company, whichever is higher.

e)      All Related Party Transactions will require prior approval of the Audit Committee.

f)       All material Related Party Transactions will require approval of the shareholders through special resolution and the related parties will have to abstain from voting on such resolutions.

g)      Details of all material transactions with related parties will have to be disclosed quarterly along with the compliance report on corporate governance.

h)      All existing material related party contracts or arrangements as on the date of this circular which are likely to continue beyond March 31, 2015 will have to be placed for approval of the shareholders in the first General Meeting subsequent to 1 October 2014. A company may choose to get such contracts approved by the shareholders even before 1 October 2014.

Equal treatment of all shareholders

3.       Companies are obliged to provide equal treatment to all shareholders including minority and foreign shareholders.

Whistle blower mechanism

4.       Companies will have to establish a whistle blower mechanism.

Accounting standards

5.       Implement the prescribed accounting standards in letter and spirit in the preparation of financial statements taking into consideration the interest of all stakeholders.

Disclosure of interest by board and key executives

6.       Members of the Board and key executives are obliged to disclose to the board whether they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or matter directly affecting the company.

Woman director and Independent director

7.       Mandatory appointment of a woman director and independent directors.

8.       An independent director cannot act as such in more than seven listed companies.

9.       Any person who is serving as a whole time director in any listed company cannot serve as an independent director in more than three listed companies.

10.   An independent director can hold office for a term up to five consecutive years

CBDT on Roads-BOT

Important CBDT Circular On Depreciation/ Amortisation Of Intangible Assets

The CBDT has issued Circular No. 09/2014 dated 23.04.2014 in which it has dealt with the important issue of treatment of expenditure incurred for development of roads & highways in Build-Own-Transfer (BOT) agreements.

The CBDT has expressed the view that as the assessee does not hold any rights in the project except recovery of toll fee to recoup the expenditure incurred, the assessee cannot be treated as the "owner" of the property and cannot be allowed depreciation u/s 32(1)(ii) of the Act.

However, the CBDT has also held, following the law laid down in Madras Industrial Investment Corp 225 ITR 802 (SC), that the entire cost of construction and development of the infrastructure facility has to be amortized evenly over the period of the concessionaire agreement and allowed as business expenditure u/s 37(1) of the Act.

The CBDT's view with regard to the assessee not being the "owner" runs counter to the law laid down in Noida Toll Bridge 213 Taxman 333 and several other judgements. In Swarna Tollway, the ITAT has conducted a thorough analysis of the entire law on the subject and concluded that the assessee has to be treated as the "owner" even though it has limited rights on the structure. The Tribunal relied on several judgements of the Supreme Court including Mysore Minerals 239 ITR 775 (SC) where the concept of "owner" has been considered in great detail.

Unfortunately, the CBDT has not applied its mind these aspects and come to a conclusion in a summary manner.

It is well settled that a Circular which is contrary to the law has no binding effect (seeDeath of a Circular).

However, the CBDT's directive that the expenditure should be amortized and allowed as business expenditure is welcome.

Regards,

VMVSR

SEBI's New Corporate Governance Norms

SEBI's New Corporate Governance Norms: A more transparent roadmap for Listed Entities

In a step towards ensuring lucidity in the regime, the Capital Market Regulator, SEBI, has floated new Corporate Governance Norms and revised Clause 35B with the basic premise of promoting interest of varied stakeholders on one hand and aligning the provisions of extant Clause 49 of the Listing Agreement with the Companies Act, 2013 on the other.

The new norms aim to intensify the corporate governance framework for listed companies in India and are considered as a step forward to increment harmonisation in SEBI & MCA laws. 

The main highlights are outlined as follows:

• Amendment in Clause 35B in line with the Section 108 of the Act read with Rule 20 of Companies (Management and Administration) Rules, 2014, thereby casting a mandate on all the listed Companies for the mandatory electronic voting facility to all the members of the Company to exercise their right to vote on the resolutions which the company intends to pass, at the general meetings through electronic means. As per the extant SEBI Circular, only top 500 Listed Companies are mandatorily required to give e-voting facility to the members.
• In line with Section 149 (6) of the Act, now the Nominee Directors have been excluded from the definition of Independent Directors.
• In line with the provisions of vigil mechanism as specified in section 177 (9) of the Act, SEBI has mandated whistle blower mechanism in every listed company. Under the extant Cl 49, its a non mandatory requirement.
• Role of audit committee has been extended and its roots are made widespread. This is very categorically reflected in the provisions of the new Clause, which has expanded the role of audit committee.
• Stock options have been prohibited for independent director to protect their independence in real sense, in alignment with section 197 of the Act.
• Broadened the ambit of Independent Directors as compared with the extant arena of Independent Directors
• Board has also mandated for separate meeting for independent directors. This is also in line with the provisions of the Act. The Act also provides for atleast one separate meeting of independent director without attendance of non-independent director and members of management in a year. The intent is to provide the independent directors an opportunity to formulate the action plans to guide and drive themselves and to establish a better coordination between them because the Act poses enhanced responsibility on the independent directors.
• A listed company is a type of corporate entity which deals with public at large in a wider way than the others do, so it is the need of the hour to have a committee to maintain relations with stakeholders, hence the requirement of Stakeholders Relationship Committee has been provided by SEBI. SEBI has also mandated for mandatory Nomination Committee, with the Chairman being Independent, which under the extant Clause is a non mandatory requirement.
• The Act has posed the requirement of performance evaluation of Directors on nomination and remuneration committee. In lines with the said provision, SEBI has also mandated for evaluation of performance of independent directors and board of directors in a listed company.
• As per the amendment, in all listed companies, any RPT is to be priorly approved by the audit committee. In addition, all material RPTs are to be approved by the shareholders, by way of special resolution, with the related parties being abstained from voting.  In this regard, SEBI has clearly defined what will tantamount to RPTs and material RPTs.
• In addition, the four walls of RPTs have also been widened to include the elements of Accounting Standards and Companies Act 2013 as well. 
• All listed companies to have at least one woman director on their Boards. 
• SEBI by taking stricter view has specified the maximum number of boards an independent director can serve on listed companies, which is restricted to 7. This number has further been reduced to 3, in case the person is serving as a whole time director in a listed company. 
• SEBI has prescribed the maximum tenure of five consecutive years for the Independent Directors that can be further extended to another term of upto five consecutive years subject to shareholders' approval by way of special resolution. Further, after the expiration of the term or extended term, such independent director shall be eligible for being appointed as an independent director only after expiration of 3 years of ceasing to be an independent director.
• Bodies Corporate which are subject to regulations under other statutes (e.g. banks, financial institutions, insurance companies, etc.) are required to comply with the new norms to the extent that it does not violate the provisions of their respective statutes. However, the Mutual Funds are exempt from the applicability of such new norms.
• In addition to the above mentioned mandates, the Board has also included the specific provisions related to the following:
• Policy on dealing with RPTs
• Enhanced Disclosure requirements related to remuneration of directors
• Divestment of material subsidiaries
• Disclosure of letter of appointment of independent directors along with their detailed profile
• Policy on Risk management
• Mandatory requirement to formulate Risk management Committee is only on top 100 listed entities by market capitalisation.
• Providing training to independent directors
• Boards of Companies have to satisfy themselves that plans are in place for orderly succession for appointments to the board and senior management.

 

 

 

All the above said requirements as amended by the SEBI shall be made applicable to the listed companies' with effect from October 01, 2014 and accordingly, all existing material related party contracts or arrangements as on the date of this circular which are likely to continue beyond March 31, 2015 shall be placed for approval of the shareholders in the first General Meeting subsequent to October 01, 2014 or even before the said date.  

Comments:

Undoubtedly, the new norms will ensure more transparency in the day to today workings of listed entities but the roadmap ahead for the listed companies as well as for the Independent Directors is not simple as the new Corporate Governance Norms prescribes a stringent regime.

ICAI expresses its concern on the proposed definition of “Accountant” in DTC, 2013 - (17-04-2014)

ICAI expresses its concern on the proposed definition of “Accountant” in DTC, 2013 - (17-04-2014)

As the members are aware, the Direct Taxes Code, 2013 has proposed to widen the scope of the definition “Accountant” to include other professionals as well. It is a fact that various provisions in the Income-tax Act, 1961 under which chartered accountants have been given the responsibilities to undertake audit and certification of accounts of various entities have the emphasis on “audit” of the relevant accounts which is the exclusive domain of Chartered Accountants. 

The Council of ICAI is aware that the proposed change is a cause of major concern to the entire profession. In this regard, ICAI has through a representation to Ministry of Finance, placed on record its concern not only for the profession, but for the country as a whole since issuance of audit certificates by persons having limited knowledge of audit of accounts will not only be professionally incorrect and but will raise many concerns including causing huge revenue leakages. 

A meeting in this regard was held with Mr. Rajiv Takru, Revenue Secretary and Mr. R.K.Tewari, Chairman, CBDT on 16.4.2014, wherein CA. K. Raghu, President, ICAI and CA. Manoj Fadnis, Vice President, ICAI emphasized on the fact that there is a very significant difference in the area of expertise of other professionals vis-a-vis Chartered Accountants. 

Members be assured that the Council of ICAI is equally concerned and will not leave any stone unturned to save the profession and the nation. 

Standard Operating Procedure instructions for IT

FYI- Detailed instructions have been issued by the CBDT to all the assessing officers laying down a Standard Operating Procedure (SOP) for verification and correction of demand by the AOs. As per this SOP, the taxpayers can get their outstanding tax demand reduced/deleted by applying for rectification along with the requisite documentary evidence of tax/demand already paid. The SOP also makes special provisions for dealing with the tax demand upto Rs. 1,00,000/- in the case of Individuals and HUFs in order to accommodate certain extra ordinary situations. The SOP is expected to mitigate the long standing grievances of taxpayers by way of reduction/deletion of tax demands. The CBDT has further noted that many taxpayers are committing mistakes while furnishing their tax credit claims in the return of income. Such mistakes include quoting of invalid/incorrect TAN; quoting of only one TAN against more than one TAN tax credit; furnishing information in wrong TDS Schedules in the Return Form; furnishing wrong challan particulars in respect of Advance tax, Self-assessment tax payments etc. As a result of these mistakes, the tax credit cannot be allowed to the taxpayers while processing returns despite the tax credit being there in 26 AS statement. The CBDT, therefore, desires the taxpayers to verify if the demand in their case is due to tax credit mismatch on account of such incorrect particulars and submit rectification requests with correct particulars of TDS/tax claims for correction of these demands. The rectification requests have to be submitted to the jurisdictional assessing officer in case the return was processed by such officer, or the taxpayer is informed by CPC, Bangalore that such rectification is to be carried out by Jurisdictional assessing officer. In all other cases of processing by CPC, Bangalore, an online rectification request can be made by logging in to e- filing website http://incometaxindiaefiling.gov.in as per the procedure given in detail in its Help Menu.

Amendments to clause 35B (E-voting facility) and clause 49 (Corporate Governance) of the equity listing agreement.

SEBI has pursuant to a master circular issued today, introduced amendments to clause 35B (E-voting facility) and clause 49 (Corporate Governance) of the equity listing agreement. The master circular will supersede all other earlier circulars issued by SEBI on Clauses 35B and 49 of the Equity Listing Agreement. The revised Clause 35B would be applicable to all listed companies and the modalities would be governed by the provisions of Companies (Management and Administration) Rules, 2014.

Following are some of the highlights of the revised Clause 49:

1.       Applicability

a)      To all listed companies with effect from 1 October 2014.

b)      The provisions of Clause 49(VI)(C) [constitution of risk management committee] will be applicable to top 100 listed companies by market capitalisation as at the end of the immediate previous financial year.

2.       Related Party Transactions i.e. a transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged:

a)      Applicable to all prospective transactions.

b)      A “related party” is a person or entity that is related to the company. Parties are considered to be related, if one party has the ability to control the other party or exercise significant influence over the other party, directly or indirectly, in making financial and/or operating decisions and includes certain specified entities.

c)       Company is obliged to formulate a policy on materiality of related party transactions and also on dealing with Related Party Transactions.

d)      A transaction with a related party will be considered material, if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds five percent (5%) of the annual turnover or twenty percent (20%) of the net worth of the company as per the last audited financial statements of the company, whichever is higher.

e)      All Related Party Transactions will require prior approval of the Audit Committee.

f)       All material Related Party Transactions will require approval of the shareholders through special resolution and the related parties will have to abstain from voting on such resolutions.

g)      Details of all material transactions with related parties will have to be disclosed quarterly along with the compliance report on corporate governance.

h)      All existing material related party contracts or arrangements as on the date of this circular which are likely to continue beyond March 31, 2015 will have to be placed for approval of the shareholders in the first General Meeting subsequent to 1 October 2014. A company may choose to get such contracts approved by the shareholders even before 1 October 2014.

Equal treatment of all shareholders

3.       Companies are obliged to provide equal treatment to all shareholders including minority and foreign shareholders.

Whistle blower mechanism

4.       Companies will have to establish a whistle blower mechanism.

Accounting standards

5.       Implement the prescribed accounting standards in letter and spirit in the preparation of financial statements taking into consideration the interest of all stakeholders.

Disclosure of interest by board and key executives

6.       Members of the Board and key executives are obliged to disclose to the board whether they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or matter directly affecting the company.

Woman director and Independent director

7.       Mandatory appointment of a woman director and independent directors.

8.       An independent director cannot act as such in more than seven listed companies.

9.       Any person who is serving as a whole time director in any listed company cannot serve as an independent director in more than three listed companies.

10.   An independent director can hold office for a term up to five consecutive year

Press Note on Tax Credit

CBDT optimist on Standard Operating Procedure; Urges taxpayers to file rectification request for TDS mismatches

April 18, 2014

SECTION 139D OF THE INCOME-TAX ACT, 1961 - FILING OF RETURN IN ELECTRONIC FORM - EXTENSION OF FACILITY TO TAXPAYERS TO VERIFY IF DEMAND IN THEIR CASE IS DUE TO TAX CREDIT MISMATCH ON ACCOUNT OF INCORRECT FURNISHING OF SPECIFIED PARTICULARS AND SUBMIT RECTIFICATION REQUESTS WITH CORRECT PARTICULARS OF TDS/TAX CLAIMS FOR CORRECTION OF THESE DEMANDS

PRESS NOTE NO.402/92/2006-MC, DATED 17-4-2014

 

Detailed instructions have been issued by the CBDT to all the assessing officers laying down a Standard Operating Procedure (SOP) for verification and correction of demand by the AOs. As per this SOP, the taxpayers can get their outstanding tax demand reduced/deleted by applying for rectification along with the requisite documentary evidence of tax/demand already paid. The SOP also makes special provisions for dealing with the tax demand upto Rs. 1,00,000/- in the case of Individuals and HUFs in order to accommodate certain extraordinary situations. The SOP is expected to mitigate the long standing grievances of taxpayers by way of reduction/deletion of tax demands.

 

The CBDT has further noted that many taxpayers are committing mistakes while furnishing their tax credit claims in the return of income. Such mistakes include quoting of invalid/incorrect TAN; quoting of only one TAN against more than one TAN tax credit; furnishing information in wrong TDS Schedules in the Return Form; furnishing wrong challan particulars in respect of Advance tax, Self-assessment tax payments etc. As a result of these mistakes, the tax credit cannot be allowed to the taxpayers while processing returns despite the tax credit being there in 26AS statement. The CBDT, therefore, desires the taxpayers to verify if the demand in their case is due to tax credit mismatch on account of such incorrect particulars and submit rectification requests with correct particulars of TDS/tax claims for correction of these demands. The rectification requests have to be submitted to the jurisdictional assessing officer in case the return was processed by such officer, or the taxpayer is informed by CPC, Bangalore that such rectification is to be carried out by Jurisdictional assessing officer. In all other cases of processing by CPC, Bangalore, an online rectification request can be made by logging into e-filing website http://incometaxindiaefiling.gov.in as per the procedure given in detail in its Help Menu  

Unpaid taxes if a Pvt Ltd company

Unpaid taxes of Private limited Company could not be recovered from its director if he was not grossly negligent in his affairs -GUJ HC- Jashvant lal Vs.ITO

Parliament competent to impose Service Tax on Restaurants and hotels: Bombay HC

Bombay HC upholds service tax levy on AC restaurants; Differs from Kerala HC ratio

 

Bombay HC dismisses writ filed by Indian Hotels and Restaurant Association, upholds validity of service tax levy on air-conditioned restaurants serving liquor u/s 65(105)(zzzzv) of Finance Act; Rejects assessee's challenge to Parliament's competence to tax sale / purchase of goods by way of / as part of any service, covered under "State List" read with Article 366(29A)(f) of Indian Constitution; Tax on sale / purchase of goods and tax on services two distinct concepts; To say that Parliament is denuded of its competence to tax restaurant services entails violence to plain language of Constitutional provisions; Service tax does not tax sale of goods, but services provided in such sale; Entry 54 in List II does not envisage service tax on services rendered by restaurant to any person, as referred u/s 65(105)(zzzzv); Rejects Kerala HC's single Judge ruling in Kerala Classified Hotels and Resorts Association for want of categorical finding that tax in question covered by State List; HC accepts Revenue's reliance on SC ruling in Tamil Nadu Kalyana Mandapam pertaining to catering services  : Bombay HC

Section 40(a)(ia),

IT: In view of retrospective amendment in section 40(a)(ia), deduction made in last month of financial year would be allowable, if same was deposited before filing of return under section 139(1)

[2014] 42 taxmann.com 547 (Rajasthan)

HIGH COURT OF RAJASTHAN

Commissioner of Income-tax, Udaipur
v.
Choudhary Construction Company

Sum received by retiring partner

Sum received by retiring partner towards his share capital wasn’t liable to capital gain tax
April 14, 2014[2014] 43 taxmann.com 253 (Hyderabad - Trib.)

New e forms

FYI - The ministry of Corporate Affairs vide public notice dated 11th April 2014 stated  that all the new e forms   under the Companies Act 2013 would be available for  uploading from the 28th day of April 2014 (instead of staggered roll out of new e forms from the 14th of April, 2014)

CIN Mandatory

Corporate Identification Number (CIN) to be mandatorily mentioned on letterheads etc. from 1st April, 2014

In the latest from the Ministry of Corporate Affairs, 183 new Sections of the Companies Act 2013 have been notified to take effect from April 1, 2014.

As per Section 12 of the Act notified from 1st April, 2014, every company is mandatorily required to mention its Corporate Identification Number (CIN) along with the name and address of registered office on letterheads, invoices, notices and on all official correspondence and publications. Additionally, contact details, email and website address, if any, must be incorporated in such documents mentioned from April 1, 2014.

In case of any failure to quote the CIN number, penalty of Rs 1,000 per day shall be imposed on the defaulting company and on every officer in default for every day during which the default continues. However, maximum penalty imposable shall not exceed Rs 100,000.  

Direct Taxes Code

The Finance Ministry has released a revised and comprehensive "Direct Taxes Code 2013″. The said Code contains several significant changes with far-reaching implications to the law and practice of income-tax. The Code also seeks to make the law more simplified and comprehensible. There is specific emphasis in the Code on measures to tax tax evasion. The Finance Ministry has also issued a paper highlighting the salient features of the Direct Taxes Code 2013

Source: ITAT Online

"accountant" means a chartered accountant within the meaning of the Chartered Accountants Act, 1949 and who holds a valid certificate of practice under sub section (1) of section 6 of that Act, and shall include

-

(i) a company secretary within the meaning of the Company Secretaries Act, 1980

(ii)a cost accountant within the meaning of the Cost and Works Accountants Act,

1959 ; or

(iii) any person having such qualifications as the Board may prescribe,

for the purposes specified in this behalf.

ITR- AY 2014-15

INCOME-TAX (FOURTH AMENDMENT) RULES, 2014 - AMENDMENT IN RULE 12 & SUBSTITUTION OF FORMS SAHAJ (ITR-1), ITR-2, SUGAM (ITR-4S) AND ITR-V

NOTIFICATION NO.24/2014 [F.NO.142/2/2014-TPL]/SO 997(E), DATED 1-4-2014

In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax rules, 1962, namely:—

1. (1) These rules may be called the Income-tax (4th Amendment) Rules, 2014.

(2) They shall come into force with effect from the 1st day of April, 2014.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), in rule 12,—

(a)		in sub-rule (1), for the figures "2013", the figures "2014" shall be substituted;
(b)		in sub-rule(2), in the proviso after the words and figures "section 115JB" the words "or to give a notice under clause (a) of sub-section (2) of section 11" shall be inserted;
(c)		in sub-rule (3), in the first proviso,—

(A)

after clause (aab), the following clause shall be inserted, namely:—

"(aac)

a person required to furnish the return in Form ITR-5, other than a firm to which clause (aaa) is applicable, shall furnish the return for the assessment year 2014-15 and subsequent assessment years in the manner specified in clause (ii) or clause (iii);";

(B)

for clause (b), the following clause shall be substituted, namely:—

"(b)

a person required to furnish the return in Form ITR-7 shall furnish the return for assessment year 2014-15 and subsequent assessment years,—

(A)		in case it is furnished under sub-section (4B) of section 139, in the manner specified in clause (ii);
(B)		in other cases, in the manner specified in clause (i) or clause (ii) or clause (iii):";

(d)		in sub-rule (4), after the words, "report of audit", the words "or notice" shall be inserted;
(e)		in sub-rule (5), for the figures "2012", the figures "2013" shall be substituted.

3. In the said rules, in Appendix-II, for "Forms SAHAJ (ITR-1), ITR-2, SUGAM (ITR-4S) and ITR-V" the "Forms SAHAJ (ITR-1), ITR-2, SUGAM (ITR-4S) and ITR-V" shall be respectively substituted as follows:—

FORM SAHAJ (ITR-1)

FORM ITR-2

FORM SUGAM (ITR-4S)

FORM ITR-V

Bank Audit: Minimise bank audit risk by maintaining documentation

Bank Audit: Minimise bank audit risk by maintaining documentation: Train ur staffs to Identify NPAs: By CA Nitesh More

1) Our audit risk is minimized If:

a)    We are able to identify & recognize the NPAs properly,

b)    We maintain proper documentation of our audit.

Otherwise if subsequently, RBI inspector detect additional NPAs & on that basis , if RBI complain to ICAI, one may be in trouble.

2) TRAIN YOUR STAFFS TO IDENTIFY NPAs: Identification of the NPAs is one of the major Task in Bank Branch audit. If your article clerks & other staffs are able to identify the NPAs than you will be able to implement proper income recognition & provisioning norms as per RBI guidelines. So train your article clerk to indentify the NPAs.  

3) Non performing Assets : An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank. A non performing asset (NPA) is a loan or an advance where;

i. Interest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan,

ii. The account remains ‘out of order’ as indicated at paragraph 5 below, in respect of an Overdraft/Cash Credit (OD/CC),

iii. The bill remains “overdue” at paragraph 6 below for a period of more than 90 days in the case of bills purchased and discounted,

iv. The instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops,

v. The instalment of principal or interest thereon remains overdue for one crop season for long duration crops,

vi. The amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction undertaken in terms of guidelines onsecuritization dated February 1, 2006.

vii. In respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

4) In case of interest payments, banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter. In addition, an account may also be classified as NPA in terms of paragraph 4.2.4 of this Master Circular.

5) ‘Out of Order’ status:An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 'out of order'.

6)  ‘Overdue’ :Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid on the due date fixed by the bank.

7)  INCOME RECOGNITION

7.1 Income Recognition Policy

7.1.1 The policy of income recognition has to be objective and based on the record of recovery. Internationally income from non-performing assets (NPA) is not recognised on accrual basis but is booked as income only when it is actually received. Therefore, the banks should not charge and take to income account interest on any NPA. This will apply to Government guaranteed accounts also.

7.1.3 Fees and commissions earned by the banks as a result of renegotiations or rescheduling of outstanding debts should be recognised on an accrual basis over the period of time covered by the renegotiated or rescheduled extension of credit.

7.2 Reversal of income

7.2.1 If any advance, including bills purchased and discounted, becomes NPA, the entire interest accrued and credited to income account in the past periods, should be reversed if the same is not realised. This will apply to Government guaranteed accounts also.

7.2.2 In respect of NPAs, fees, commission and similar income that have accrued should cease to accrue in the current period and should be reversed with respect to past periods, if uncollected.

 CA NITESH MORE

 Depreciation on Fixed Assets in Banks 

After reading Accounting policy of different banks it has been noted that they refer to "Guidelines of RBI" as regard to Depreciation on computers, but no such guidelines available. The Expert panel for Bank Audit of ICAI also failed to furnish any such guidelines so far.

Besides this some banks are providing depreciation on computers for full year irrespective of date of addition. For other assets some are applying rates of companies act, some are using Income Tax 1961 rates. Some are using 182 days, some are using 180 days and some are using 30th Sep as the period for providing half depreciation. When Each and every bank is having different set of policy as regard to Depreciation how it can be said that they are providing depreciation as per RBI Guidelines or their results are comparable.

Following are extracted from Accounting Policy (schedule-17) of the banks:

Central Bank of India 

·  Fixed Assets (other than computers which are depreciated on Straight Line Method) are depreciated under 'Written Down Value Method’ 

·  Depreciation on additions to assets, made upto 30^th September is provided for the full year and on additions made thereafter, is provided for the half year. No depreciation is provided on assets sold before 30^th  September and depreciation is provided for the half year for assets sold after 30^th  September.

State Bank of India

·        In respect of assets acquired during the year for domestic operations, depreciation is charged for half a year in respect of assets used for upto 180 days and for the full year in respect of assets used for more than 180 days, except depreciation on computers and software, which is charged for the full year irrespective of the period for which the asset was put to use.

Punjab & Sind Bank

·        Depreciation is provided for on Computers at 33.33%, on straight-line method; additions are depreciated for the full year irrespective of the date of addition as per RBI guidelines. 

·        Other Fixed assets on written down value method at the rates prescribed by the Income Tax Act 1961; additions effected before 30th September are depreciated for full year and additions effected thereafter are depreciated for half year. 

·        No depreciation is provided on assets sold/disposed of during the year.

State Bank of Hyderabad

·        In respect of assets acquired during the year, depreciation is charged for half year in respect of assets used for up to 182 days and for the full year in respectof assets used for more than 182 days, except depreciation on computers/ATMs and software, which is charged for the full year irrespective of the period for which the asset was put to use

·        The rates of depreciation and method of charging depreciation are as under : 

·        Computers/ATMs                              SLM                                         33.33% every year 

·        Computer software forming an integral part of hardware                     WDV                                        60%

·        Computer Software which does not form an integral part of hardware                                           100%, in the year of acquisition

Oriental Bank of commerce

·        Depreciation on assets (including revalued assets), is charged on the Written Down Value at the rates prescribed by the Income Tax Rules, 1962; except in respect of computers on which depreciation is provided on Straight Line Method @ 33.33% as per RBI guidelines

·        Depreciation is not provided in the year of sale/disposal of asset;

Bank of Baroda

·        Depreciation on Fixed Assets, other than on computers, is provided under the written down value basis at the rates prescribed in Schedule XIV to the Companies Act, 1956. 

·        Depreciation on computers is provided on Straight Line Method at the rate of 33.33% in line with theguidelines of Reserve Bank of India 

·        While depreciation on additions is provided for full year, no depreciation is provided in the year of sale/disposal.

Dena Bank

·        Depreciation is charged on Written Down Value (W.D.V.) method at the rates prescribed under the Income Tax Rules, 1962 except Computer hardware purchased before 01.04.2000 are depreciated @ 25% p.a. on W.D.V. method and purchased on or after 01.04.2000 are depreciated @ 33.33% on Straight Line Method.

United Bank of India

·        Software are capitalized with computers

·        Depreciation on assets other than computers, ATMs and Software is provided for under written down value method, in the manner and as per the rates prescribed under Schedule XIV to the Companies Act, 1956. The rate is rounded off to next absolute number. Depreciation on the revalued portion of the assets is adjusted from Revaluation Reserve. 

·        Depreciation on computers, Automatic Teller Mahchine (ATM) and software are provided on straight-line method @ 33.33% on pro-rata basis from the date of acquisition as per RBI guidelines.

Canara Bank

·        Fixed Assets excluding Computers are depreciated under Written Down Value Method at the rates determined by the management on the basis of estimated useful life of the respective assets. As per theguidelines of Reserve Bank of India, depreciation on Computers is charged at 33.33% on Straight-Line Method. 

·        Depreciation on additions to fixed/leased assets is charged for the full year irrespective of the date of acquisition.  No depreciation is provided in the year of sale/disposal.