Revised Schedule III

Notified IND-AS Schedule III - Emphasis on Statement of Changes in Equity

April 7, 2016

CA Vinayak Pai V

Introduction

The switch over from prevailing accounting standards to Indian Accounting Standards (IND-AS) for Phase 1 companies happens in the current fiscal year that commenced on April 1, 2016. For Phase 2 companies, the transition date for converging with IND-AS is also April 1, 2016.

On 6 April 2016, the Ministry of Corporate Affairs, notified an IND-AS compatible Schedule III to the Companies Act, 2013 and this amends the said Schedule by inserting an additional layer for companies that are required to converge with IND-AS. The Revised Schedule III provides general instructions and the formats for preparation and presentation of the Balance sheet and the income statement for companies that are required to comply with the Companies (Indian Accounting Standards) Rules, 2015.

There is much more emphasis on the Statement of Changes in Equity under IND-AS Schedule III than under the prevailing accounting framework (AS). While the statement of changes in equity is another schedule to the balance sheet and therefore not new to financial statement preparers/auditors in India, there are numerous core IFRS concepts (On which IND-AS is based) that come into play in a large measure, that surround the statement of changes in equity, when one starts analyzing impact of various IND-AS on individual corporate balance sheets.

IND-AS Schedule III - Statement of Changes in Equity

a) Backdrop

As per section 2(40) of the Companies Act, 2013, financial statement includes a statement of changes in equity, if applicable.

b) IND-AS Schedule III balance sheet requirements

   i) On the face of the balance sheet

A company is required to provide the following line items under equity on the face of the balance sheet:

    i) Equity share capital, and

   ii) other equity

  ii) In the Statement of Changes in Equity

The following needs to be provided in the statement of changes in equity as a schedule:

   a) Equity share capital (with the balance at the beginning of the reporting period, changes in equity share capital during the period and the closing balance)

   b) Other Equity

  •  Share application money pending allotment

  •  Equity component of compound financial instruments

  •  Reserves and surplus segregating

  •  Capital reserve,

  •  Securities premium reserve,

  •  Other reserves, and

  •  Retained earnings

  •  Components of other comprehensive income (OCI)

  •  Debt instruments through other comprehensive income

  •  Equity instruments through other comprehensive income

  •  Effective portion of cash flow hedges

  •  Revaluation surplus

  •  Exchange differences on foreign operations translation

  •  Other OCI items

  •  Money received against share warrants

It may be noted that other reserves need to be classified in the notes to the financial statements as capital redemption reserve, debenture redemption reserve and share options outstanding account.

Practical application of IND-AS Schedule III

IND-AS in-scope companies would need to apply the requirements of Revised Schedule III from the transition date. This means that Phase 2 companies are required to prepare a IND-AS Schedule III compliant balance sheet as of the date of transition namely April 1, 2016 in the preparation of both the stand-alone and consolidated financial statements. The requirements of the notified schedule also needs to be complied for steady-state external financial reporting too.

In the preparation of the consolidated balance sheet, non-controlling interest (NCI), if applicable, in a subsidiary needs to be reckoned and accounted appropriately in the statement of profit and loss, total comprehensive income layer of comprehensive income and in the statement of changes in equity. The requirements of IND-AS 1 and IND-AS 110 also, run in parallel.

Conclusion

Companies need to gear their internal financial accounting and reporting processes as well as their internal control mechanisms to comply with the requirements of the new financial reporting regime.

The statement of changes in equity, albeit another schedule to the financial statement, nevertheless plays a key role in imbibing the finer concepts that make the IFRS framework conceptually different from current Indian GAAP. Preparers and auditors need to make note of this.

The author can be reached at Vinayakpaiv@hotmail.com

FAQs on Panama Papers

1. What are the 'Panama Papers'?
The 'Panama Papers' are a set of confidential documents leaked from one of the biggest law firms of Panama - 'Mossack Fonseca'. The Panama Papers provide information about thousands of offshore entities, identities of their shareholders and directors. It listed various world leaders, public officials, billionaires, celebrities, sports stars and politicians.

2. How much data has been leaked and by whom?
a)  The leaked data consists of 11.5 Million Documents in around 2,600 GB taken from the Mossack Fonseca's internal database by one of its employees.
b)  These documents were obtained by Sueddeutsche Zeitung, a daily newspaper headquartered in Munich, Germany. Sueddeutsche shared the Panama Papers with the Washington-based International Consortium of Investigative Journalists (ICIJ) and other news outlets, including the BBC, the Guardian and the Indian Express.
c)  Sueddeutsche mentioned that an employee at the law firm had leaked the data, telling the newspaper that he had risked his life in doing so.

3. What does the Panama Papers reveal?
a)  The Panama Papers contain information on 2.15 lakhs offshore entities connected to people from more than 200 countries.
b)  The leaked data covers nearly 40 years period from 1977 through the end of 2015.
c)  It reveals the database of individuals who have set-up offshore entities through the Panama law firm.
d)  These individuals are either holding direct ownership or indirect ownership (beneficial ownership) in the offshore entities.
e)  Some of the Indians have also floated offshore entities at a time when foreign exchanges laws of India did not allow them to do so.

4. What is the authenticity of documents leaked?
Ramon Fonseca, one of the co-founder of the Mossack Fonseca, confirmed the authenticity of the papers being used in articles published by more than 100 news organizations around the world. He told to one of the Panama's news channel that the documents are real and were obtained illegally through a hacking method.

5. Who is 'Mossack Fonseca' and what is its role in this entire controversy?
a)  Mossack Fonseca & Co. is a law firm and corporate service provider based in Panama with more than 40 offices worldwide.
b)  It specializes in commercial law, trust services, investor advisory and international structures.
c)  It provides services like incorporating companies in offshore jurisdictions, wealth management, private banking, accounting services, etc.
d)  This law firm is one of the seven firms that collectively represent more than half of the companies incorporated in Panama.
e)  It also provides assistance in transferring funds, buying property, setting-up trusts or signing agreements with entities.
f)  Mossack Fonseca plays a crucial role in incorporating entities in tax havens. It had incorporated 14,658 active companies in Panama till August, 2013 out of which 4,646 companies were incorporated without providing any information about their shareholders.

6. How entities incorporated in Panama provide secrecy about the beneficial owners?
a)  Panama offers the most favorable and most flexible company incorporation laws available in the world. Private Interest Foundations are also available, and are one of the most widely used estate planning structures in the world today.
b)  Panama is the registered domicile for over 400,000 corporations & foundations, making it one of the most popular jurisdictions in the world to incorporate.
c)  Panama does not impose any reporting requirements for non-resident Panamanian corporations.
d)  Panama does not allow "piercing the corporate veil".
e)  Panamanian corporations share certificates can be issued in Nominative or Bearer form (anonymous form of ownership), with or without par value.
f)  Panamanian Companies can have directors, officers and shareholders of any nationality and resident of any country.
g)  The offshore entity in Panama need not appoint natural persons as directors or have individuals as shareholders.
h)  Neither the directors nor the officers of Panamanian corporations need to be shareholders. Meetings of directors, officers, and shareholders may be held in any country and accounting books may be kept in any country.
i)  It is not necessary for the interested parties to be present in Panama for the purpose of establishing a corporation. Corporations conducting business outside of Panama do not require a commercial license for offshore business activities.
j)  Registered Panamanian Agents offers its own executives to serve as shareholders or directors. Sometimes an intermediary law firm or a bank acts as a director or a nominee shareholder. So the real beneficiary remains hidden.
k)  The registered agent provides an official overseas address, a mail box, etc., none of which traces back the entity to the beneficial owner.

7. What are the key advantages of incorporating a Panamanian Company?
a)  The incorporation process is fast and can be achieved in 3 days.
b)  The identity of the shareholders is not publicly available.
c)  Nominee and bearer shares are allowed.
d)  There are no currency restrictions although the US dollar is regularly used.
e)  The transfer of shares can be done freely, which facilitates the transmission of assets in a confidential manner.
f)  The shareholders, directors and officers can be of any nationality and residents of any country.
g)  Meetings can be held in Panama or in any jurisdiction, subject to tax advice.
h)  Accounts do not need to be held in Panama.

8. What are Panama foreign exchange rules?
a)  Panama's circulating currency is the US Dollar, and Panama has no currency exchange controls or currency restrictions, so funds can flow in and out of the country freely.
b)  Panama uses the U.S. dollar as its legal currency, instilling tremendous fiscal and monetary discipline while keeping inflation very low - under 2 percent for the last 40 years.
c)  Panama has no restrictions on monetary remittances abroad, including dividends, interests, branch profits and royalties. No restrictions on funds flowing in or out of the country.
d)  A dollar economy insulates Panama from global economic shocks. During the Asian monetary crisis of 1998, Panama became one of the healthiest economies in Latin America.

9. How secure is banking infrastructure of Panama?
a)  Panama is one of the most secure offshore financial center - where privacy and confidentiality is vigorously protected by constitutional law.
b)  Panama offers the best bank secrecy and corporate book secrecy laws in the world.
c)  Panama has no provision for "piercing the corporate veil".
d)  Revealing banking information to third parties is a crime, punishable by prison.
e)  Panama has no mutual legal assistance treaties (MLAT's) for sharing of banking information with any other nation and does not recognize court rulings from other countries.
f)  Panama City is home to the second largest   international banking center in the world next to Switzerland. Panama has the most modern and successful international banking center in Latin America, with more than 150 banks from 35 different countries.
g)  Approximately 150 international banks are located in Panama. Total assets in Panamanian banks are over US$150 billion.
h)  Some of the banks present in Panama's banking center are: Citibank, HSBC, Dresdner Bank, Bank of Tokyo, Bank of Boston, Banco Nacional de Paris, International Commercial Bank of China, Societe Generale, Banque Sudameris, BBVA, Banco Uno, Banco General, PriBanco, Banco del Istmo, Global Bank, MultiCredit Bank, PanaBank, ABN Amro, Banco Aliado, Banco Continental, BancoLat, BIPAN, Lloyds TLB Bank, Bank of Nova Scotia BIPAN, Bank of Nova Scotia, and much more.

10. Why an offshore company is incorporated in Panama or other tax havens?
a)  Shell Companies are non-operational companies. These are legal entities having no independent operations, significant assets or employees.
b)  It is not time consuming or expensive to establish anonymous shell corporation. Agents charge fees of $800 to $6,000 as upfront cost and an annual charge for formation of companies and other additional services.

CARO 2016 Notified

MCA notifies CARO, 2016, applicable for FY beginning on or after April 1, 2015

Inclusion of Interest Income in the Return of Income filed by Persons liable to Pay Tax

Press Information Bureau
Government of India
Ministry of Finance
23-March-2016 17:29 IST
Inclusion of Interest Income in the Return of Income filed by Persons liable to Pay Tax

                     Information regarding interest earned by individuals and business entities on term deposit is filed with the Income Tax Department by banks including co-operative banks and other financial institutions and State treasuries etc. Form 26AS reflects only those payments on which tax has been deducted and it can be viewed by the individual tax payer by logging in to www.incometaxindiaefiling.gov.in. The information about interest payments without deduction of tax is also filed by the payer with the Department.

Central Board of Direct Taxes(CBDT) hereby informs the persons earning interest income that interest credited/received on deposits is taxable unless exempt under Section 10 of the Income-tax Act. Such interest income should be shown in the return of income even in cases where Form 15G/15H has been filed if the earning is not exempt under Section 10 of the Income-tax Act and the total income of the person exceeds the maximum amount not chargeable to tax.

Tax payers are advised to collect correct details of interest received or credited and

·         file their return of income for assessment year 2014-15 (if not filed already) on or before 31.03.2016 in case their total income exceeds the maximum amount not chargeable to tax.
·         revise their return of income for assessment year 2014-15/2015-16 if the return already filed does not include taxable interest income.
·         file return of income for assessment year 2015-16, if  not filed so far by including taxable interest income if any, on or before 31.03.2016 and avoid penalty u/s 271F.

For more details, you may contact your Assessing Officer or Toll free number        1800-180-1961.

                                                             *************

DSM

e Filing of Form 15H/G-Procedure

 Step-wise Procedures and Guide for e-filing of Form 15G 15H by Deductors

Step-wise Procedures and Guide for e-filing of Form 15G 15H in electronic form by the deductors to the office of the income tax

CBDT vide notification No. 76/2015 dated 29/09/2015 provided for the electronic filing of form 15G and form 15H declarations by person claiming receipt of certain incomes without deduction of tax wef 01/10/2015.

Later Directorate of lncome-tax (Systems) vide Notification No. 04/2015 dated 01/12/2015 further specified the procedure , formats and standards facilitating electronic filing of the Form 15G and 15H.

Electronic formats have since been finalised and have been made live. Income Tax Department has also specified Instructions to e-File "Statement of Form 15G/15H which are reproduced here under together with added visuals to help users.

(A) Registration Process:

To electronically file the "Statement of Form 15G/15H", the user should hold a valid Tax Deduction Account Number (TAN) and should be registered at incometax e-filing website in the category  as "Tax Deductor & Collector".

For Registration, go to registration page, select "Tax Deductor & Collector"  and complete the registration process.

(B) Filing Process:

(1) Download FORM 15G/15H utility from Downloads page -> Forms (Other than ITR) -> FORM 15G/FORM 15H (Consolidated) in zip format

(2) Extract/un-zip the files into a folder and click on the ".bat" file to activate Form 15G/15H as the case may be

(3) Please note that the Form 15G and 15H utilities require the following pre-requisite platforms to run:

(i) Operating systems – Windows 7 or above, latest Linux or Mac OS 10.10(OS X Yosemite)

(ii) Java Runtime Environment Version 7 update 6 or above

(4) Filling the form:

(i) The electronic utility have the following menu options

For first time filing, use lower menu bar. The top menu bar can be used to open a a saved file, save a draft and generate xml after validation.

(ii) Steps involved:

Step-1: Form 15G/H(Consolidated) -> Fill TAN and select the applicable quarter and     financial year for which the declaration is to be given.

Step-2: Basic Details -> Fill  10 alphanumeric Unique Identification No. starting with G (for Form 15G) and starting with H (for Form 15H) followed by 9 digits followed by financial year and TAN, then fill details of the assessee (PAN/name, address etc.). Date on which declaration was received. Number of declarations received. Date when income was paid/credited.

Step-3: Income details ->Fill details of income paid or credited, identification number/account, section under which tax is deductible etc.

(5) File validation and generating XML

After filling the form click on "validate" button on the top menu bar. All validation errors shall be displayed at the right hand side blue box. correct the errors and after validation test is passed, click on "Generate XML" and save the file.

(6) DSC is Mandatory to file FORM 15G/15H. Generate signature for the zip file using DSC Management Utility which is available under Downloads tab at income tax efiling website

(7) Login at incometax efiling website through TAN registered, Go to e-File -> Upload Form 15G/15H

(8) Upload the "Zip" file along with the signature file.

(C) Filing Status:

To view the status of the uploaded form 15G/15H files, Go to My account -> View Form 15G/15H.

Once uploaded the status of the statement shall normally be "Uploaded". The uploaded file shall be processed and validated. Upon validation the status shall be either "Accepted" or "Rejected" which will reflect within 24 hours from the time of upload.

Accepted statements shall be sent to CPC-TDS for further processing. In case if "Rejected", the rejection reason shall be available and the corrected statement can be uploaded.

(D) List of validations:

List of various validations carried out on the uploaded statements before they are accepted or rejected are as under:

• Schema validations – uploaded xml should comply with the published schema
• Other Business Validations –
• Only one original will be accepted for combination of TAN, Financial Year, Form and quarter.
• TAN, Filing Type, Quarter and Financial Year entered in XML should match with the TAN, Quarter, Financial Year and Filing Type in upload screen.
• UIN should be unique for the TAN and financial year
Financial year and TAN in the UIN should match with the TAN and Financial Year for which the statement is being uploaded.

CBDT on Coercive Recovery of TDS

CBDT Bars Coercive Recovery Of TDS From Payee Even If Payer Has Defaulted By Non-Deposit Of TDS With Govt

The CBDT has issued Office Memorandum dated 11.03.2016 by which it has drawn attention to its earlier letter dated 01.06.2015 in which it was stated that in case of an assessee whose tax has been deducted at source but not deposited to the Government's account by the deductor, the deductee assessee shall not be called upon to pay the demand to the extent tax has been deducted from his income. It was further specified that section 205 of the Income-tax Act, 1961 puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch in such situations cannot be enforced coercively. The CBDT has noted that instances have come to the notice of the Board that these directions are not being strictly followed by the field officers. The CBDT has accordingly reiterated the instructions contained in its letter dated 01.06.2015 and directed the assessing officers not to enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor

Real Estate Regulation-Role of CAs'

Real Estate (Regulation and Development) Act, 2016-Role of Chartered Accountants

Real Estate (Regulation and Development) Act, 2016  has been passed by the Lok Sabha on 15/03/2018. The Bill seeks to streamline and regulate the real estate project working by incorporating various measures to safeguard general public by prescribing adequate procedures and penal provisions.

Recognising the skills of the Chartered Accountants, they have been given due importance and role in the Bill towards protecting the misapplication of the deposits by the promoters.

Role of Chartered Accountants

Amounts from the separate account maintained for deposit of amounts received from allottees shall be withdrawn by the promoter after it is certified by an engineer, an architect and chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project.

Also the promoter shall get his accounts audited within six months after the end of every financial year by a chartered accountant in practice, and shall produce a statement of accounts duly certified and signed by such chartered accountant. During the audit it shall be verified that the amounts collected for a particular project have been utilised for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project.

Also Chartered Accountants can be appointed as legal representative by the promotor to present him or its case before the Appellate Tribunal or the Regulatory Authority.

 

 

Real Estate (Regulation and Development) Act, 2016 Key Highlights

Prior registration of real estate project with Real Estate Regulatory Authority.

Before advertising, booking, selling or inviting persons to purchase any plot, apartment or building etc. in any real estate project registration of the real estate project with the Real Estate Regulatory Authority is must. Ongoing projects to make an application for registration within a period of three months.

However Registration not required:—where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed does not exceed 8 (eight) inclusive of all phases.  Also registration is not required for new allotment or renovation, repair or re-development not involving marketing, advertising.

Registration shall be granted within 30 days and if the prescribed Authority fails to grant the registration or reject the application, the project shall be deemed to have been registered.

Display of project details for public viewing

A web based online system for submitting application for registration of projects shall be developed. The promoter upon registaration shall be given a ogin Id and password to create his web page on the website of the Authority and give all details of the proposed project  for public viewing,

Application for registration of real estate project.

Application shall be made in prescribed form with prescribed fee and shall include details of promoters, projects launched in past five years, approval letters/certificates to commence project, lay out plan, allotment letter, agreement for sale proforma , garage, declaration to legal title etc.

Handling with money received from allottees

Application for registration shall be accompinied by a declaration stating that 70% of the amounts realised for the real estate project shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.

Registration of real estate agents.

No real estate agent shall be able to facilitate the sale or purchase in a real estate project registered without obtaining registration under new Act. The registration shall be given by the Authority for the entire State/Union territory.

False advertisement or prospectus

If a person makes an advance or a deposit on the basis of false information in advertisement or prospectus, or on the basis of any model apartment, plot or building, and sustains any loss or damage by reason of any incorrect, false statement he shall be compensated and if he  intends to withdraw from the proposed project, the promoter shall return his entire investment along with interest at prescribed rates.

No deposit/advance without first entering into agreement for sale and its registration.

A promoter shall not accept more than ten per cent of the cost of the apartment, plot, or building etc. as an advance payment or an application fee, without first entering into a written agreement for sale with such person and register the said agreement for sale.

Insurance of real estate project

The promoter to obtain all specified insurances which shall stand transferred to the benefit of the allottee or the association of allottees, as the case may be, at the time of promoter entering into an agreement for sale with the allottee.

Return of amount and compensation for delay

If the promoter fails to complete or is unable to give possession within scheduled time, he shall in case allottee wishes to withdraw from the project, return the amount with interest at prescribed rates. For those allottee who do not wish to withdraw, the promoter shall pay interest for every month of delay, till the handing over of the possession.

Rights  of allottees

• to obtain the information relating to sanctioned plans layout plans along with the specifications
• to know stage-wise time schedule of completion of the project

Real Estate Appellate Tribunal

Appellate Tribunal to be formed within one year. The Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice. Also it shall not be bound by the rules of evidence contained in the Indian Evidence Act, 1872. However, the Tribunal shall for the purpose of discharging its functions shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908.

Offences and Penal Provisions for Promoters/real Estate Agents

All offences by promoters/real estate agents against the requirements of the Act, order of the Prescribed Authority, Tribunal etc. have been made punishable with fine, penalty in addition to 3 years maximum imprisonment.

Offences and Penal Provisions for Allottees

Any allottee failing or contravening the orders, directions of the Applellate Tribunal, shall be punishable with imprisonment for a term which may extend upto one year or with fine for every day during which such default continues, which may cumulatively extend up to ten per cent. of the plot, apartment or building cost, as the case may be, or with both

Compounding of  punishment with imprisonment

However, any punishment with imprisonment may, either before or after the institution of the prosecution, be compounded by the court on such terms and conditions and on payment of such sums as may be prescribed.

10 key takeaways from Companies Amendment Bill, 2016. Analysis on Companies Amendment Bill,2016

Companies Amendment Bill, 2016 (the bill) was introduced in Lok Sabha on 16^th March, 2016. Most of the amendments proposed in bill are broadly aimed at addressing difficulties in implementation of provisions of Companies Act, 2013.

Key amendments proposed in the bill are as follows:

  1) Appointment of auditors: It has been proposed to do away with the requirements of annual ratification by members with respect to appointment of auditors. Further, under the exisitng provisions, the auditor who has resigned from the company needs to file Form No. ADT-3 with the company and ROC. His failure to do so may attract maximum penalty of Rs 5 lakhs. Now it has been proposed to reduce such penalty to Rs 50,000. However, such penalty should not exceed the remuneration of auditor.

  2) Prohibition on loan or guarantee: Bill seeks to limit the prohibition on loans, advances, etc., to any person in which any of the director is interested in. It has been proposed to allow companies to give loan's or guarantee's or provide security to any person in whom any of the director is interested in subject to passing of special resolution by the company and utilisation of loans by the borrower for its principal business activities.

  3) Restrictions on layers of investment companies: Under the existing provisions a company shall make investment through not more than two layers of investment companies. The Bill proposes to delete the restrictions on layers of investments.

  4) Managerial remuneration: It has been proposed to do away with requirement of obtaining special resolution and approval of Central Govt. for payment of managerial remuneration in excess of prescribed limits of Schedule V. However, for making such payments prior approval of bank or public financial institution or non-convertible debenture holder or secured creditor is also required before taking approval from shareholders.

  5) DIN: It has been proposed to recognise any other identification number, as may be prescribed, in place of DIN.

  6) Repayment of deposit: Under the exising provisions, pubic deposits shall be repaid within one year from commencement of the Companies Act, 2013 or from due date of payment, whichever is earlier. Now the bill proposes to provide that such public deposits shall be repaid within 3 years from the enforcement of Section 74 (Repayment of deposit etc., accepted before commencement of the Act) of the Companies Act, 2013 or before expiry of the period for which deposits were accepted, whichever is earlier.

  7) Simplification of private placement: Bill proposes to simplify the requirements with reference to private placements, such as doing away with separate offer letter, reducing number of filings with registrar.

  8) Liberty on public issue: Bill proposes to remove the restriction which requires company to make issue only after one year has elapsed from the date of commencement of its business.

  9) Annual Return: Bill proposes to remove the extract of annual return forming part of Board's report and provide disclosure of web address/web-link of the annual return in Board's report. It also proposes to omit requirement regarding disclosure of indebtedness, and modify requirement of disclosure of names, addresses, countries of incorporation, registration and percentage of shareholding of Foreign Institutional Investors.

10) Maintenance of registered office: Under the existing provisions, the company has to maintain its registered office within 15 days of its incorporation. The bill proposed to provide that a company to has to maintain its registered office within 30 days of incorporation.

100 % income tax deduction of profits of eligible affordable housing project: Detailed provisions

100 % income tax deduction of profits of eligible affordable housing project: Detailed provisions

With effect from
the FY 2016-17

‘80-IBA. (1) Where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to the provisions of this section, be allowed, a deduction of an amount equal to hundred per cent. of the profits and gains derived from such business.

(2) For the purposes of sub-section (1), a housing project shall be a project which fulfils the following conditions, namely:—

(a) the project is approved by the competent authority after the 1st day of June, 2016, but on or before the 31st day of March, 2019, in accordance with such guidelines as may be prescribed;

(b) the project is completed within a period of three years from the date of approval by the competent authority:

Provided that,—

(i) where the approval in respect of a housing project is obtained more than once, the project shall be deemed to have been approved on the date on which the project was first approved by the competent authority; and

(ii) the project shall be deemed to have been completed when a certificate of completion of project as a whole is obtained in writing from the competent authority;

(c) the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent. of the aggregate built-up area;

(d) the project is on a plot of land measuring not less than one thousand square meters where such project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the area of twenty-five kilometers from the municipal limits of these cities, or two thousand square meters
within the jurisdiction of any other municipality or cantonment board;

(e) the residential units comprised in the housing project does not exceed thirty square meters where such project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the area of twenty-five kilometers from the municipal limits of these cities, or sixty square meters, where such project is located within the jurisdiction of any other municipality or cantonment board;

(f) where a residential unit in the housing project is allotted to an individual, no other residential unit in the housing project shall be allotted to the individual or the spouse or the minor children of such individual;

(g) the project utilises—

(i) not less than ninety per cent. of the floor area ratio permissible in respect of the plot of land under the rules to be made by the Central Government or the State Government or the local authority, as the case may be, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the area of twenty-five kilometers from the municipal limits of these cities, or

(ii) not less than eighty per cent. of such floor area ratio where such project is located in any area other than the areas referred to in sub-clause (i); and

(h) the assessee maintains separate books of account in respect of the housing project.

(3) Nothing contained in this section shall apply to any undertaking which executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government).

(4) Where the housing project is not completed within the period specified under clause (b) of sub-section (2) and in respect of which a deduction has been claimed and allowed under this section, the total amount of deduction so claimed and allowed in one or more previous years, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business
or profession” of the previous year in which the period for completion so expires.

(5) Where any amount of profits and gains derived from the business of developing and building housing projects under any scheme for the housing is claimed and allowed under this section for any assessment year, deduction to the extent of such profit and gains shall not be allowed under any other provisions of this Act.

(6) For the purposes of this section,—

(a) “built-up area” means the inner measurements of the residential unit at the floor level, including projections and balconies, as increased by the thickness of the walls, but does not include the common areas shared with other residential units, including any open terrace so shared;

(b) “competent authority” means the authority empowered by the Central Government;

(c) “floor area ratio” means the quotient obtained by dividing the total covered area of plinth area on all the floors by the area of the plot of land;

(d) “housing project” means a project consisting predominantly of dwelling units with such other facilities and amenities as the competent authority may specify subject to the provisions of this section;

(e) “residential unit” means an independent housing unit with separate facilities for living, cooking and sanitary requirements, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through and interior door in a shared hallway and not by walking through the living space of another household.

CBDT on stay of demand

Analysing CBDT's Office memorandum dated 29.02.2016 regarding stay of demand

Reference to the relevant paragraph in the Union Budget Speech 2016	Paragraph 169 of the Union Budget 2016 "The Income-tax Department is also issuing instruction making it mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals). In case of deviation, assessing officer has to get orders of his superiors. The tax payer also has an option to go to superior officer in case he does not agree with conditions of stay order passed by the subordinate officer."
Reference to the present office memorandum	F.No.404/72/93-ITCC dated 29.02.2016
Why this new office memorandum?	For partial modification of Instruction No. 1914 dated 21.03.1996 to provide for guidelines for stay of demand at the first appeal stage
What is the existing provision in Instruction No. 1914 dated 21.03.1996 on the subject?	Ref: part 'C'of the Instruction • A demand will be stayed only if there are valid reasons for doing so • Mere filing of an appeal against the assessment order will not be a sufficient reason to stay the demand. • While granting stay, the Assessing officers (AO) may require the assessee to offer a suitable security (bank guarantee, etc.) and/ or require the assessee to pay a reasonable amount in lump sum or in installments.
What is the hardship faced by assessees at present	AOs often insist on payment of a very high proportion of the disputed demand before granting stay of the balance demand. This often results in hardship for the taxpayers seeking stay of demand.
What is sought to be achieved through this new office memorandum?	To streamline and standardize the quantification of the 'lumpsum amount' to be paid by the assessee in order to grant stay of the balance amount by the AO
What are the new conditions vis-à-vis grant of stay?	• the outstanding demand shall be disputed before CIT (A) • the AO shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand • Subject to the two exceptions that are listed below
Exception 1 – AO can demand payment of a sum higher that 15%	If the AO is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court /or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in a search or survey operation, etc.) or,
Exception 2 – AO can permit payment of a sum lower that 15%	If the AO is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.)
What should the AO do in cases of Exception 1 or Exception 2?	The AO shall refer the matter to the administrative Pr. CIT/ CIT, who after considering all relevant facts shall decide the quantum/ proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.
The AO grants stay of demand after payment of 15% of disputed tax by assessee and if the assessee is still aggrieved, what shall he do?	The assessee can approach the jurisdictional administrative Pr. CIT/ CIT for a review of the decision of the assessing officer.
Time limit for disposing off the stay application by AO	The AO shall dispose of a stay petition within 2 weeks of filing of the petition
Time limit before PrCIT or CIT of disposing off AO's reference application or assessee's review application	The same shall be disposed of by the Pr. CIT/ CIT within 2 weeks of the assessing officer making such reference or the assessee filing such review, as the case may be.
Conditions that can be imposed by the AO for granting stay of demand	The AO may impose such conditions as he may think fit. He may, inter alia • require an undertaking from the assessee that he will cooperate in the early disposal of appeal failing which the stay order will be cancelled; • reserve the right to review the order passed after expiry of reasonable period (say 6 months) or if the assessee has not cooperated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations; • reserve the right to adjust refunds arising, if any, against the demand, to the extent of the amount required for granting stay and subject to the provisions of section 245.
Effective date	Immediate effect from 29.02.2016

CA PRASANTH

e Form 35

CBDT notifies new Form for e-filing of appeal before CIT(A)

March 2, 2016

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INCOME-TAX (THIRD AMENDMENT) RULES, 2016 - SUBSTITUTION OF RULE 45 AND FORM NO.35

NOTIFICATION NO. SO 637(E) [NO.11/2016 (F.NO.149/150/2015-TPL)], DATED 1-3-2016

In exercise of the powers conferred by sub-section (1) of section 249, read with 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 (3^rd Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962 (herein after referred to as the said rules), for rule 45, the following rule shall be substituted, namely:-

"45. Form of appeal to Commissioner (Appeals).—(1) An appeal to the Commissioner (Appeals) shall be made in Form No. 35.

(2) Form No. 35 shall be furnished in the following manner, namely:—

(a)

in the case of a person who is required to furnish return of income electronically under sub-rule(3) of rule 12,—

(i)		by furnishing the form electronically under digital signature, if the return of income is furnished under digital signature;
(ii)		by furnishing the form electronically through electronic verification code in a case not covered under sub-clause (i);

(b)

in a case where the assessee has the option to furnish the return of income in paper form, by furnishing the form electronically in accordance with clause (a) of sub- rule(2) or in paper form.

(3) The form of appeal referred to in sub-rule (1), shall be verified by the person who is authorised to verify the return of income under section 140 of the Act, as applicable to the assessee.

(4) Any document accompanying Form No. 35 shall be furnished in the manner in which the said form is furnished.

(5) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall—

(i)		specify the procedure for electronic filing of Form No.35 and documents;
(ii)		specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule(2), for the purpose of verification of the person furnishing the said form; and
(iii)		be responsible for formulating and implementing appropriate security, archival and retrieval of policies in relation to the said form so furnished."

3. In the said rules, in Appendix-II, for Form No.35, the following form shall be substituted, namely:—

"FORM NO. 35 (See rule 45) Appeal to the Commissioner of Income-tax (Appeals)

Start Up Definition

Startups India entity definition. Eligibility criteria-up to 5 years, turnover up-to 25 crores, recognition process through mobile app/website-Notification | 19-02-2016 |

 

MINISTRY OF COMMERCE AND INDUSTRY
(Department of Industrial Policy and Promotion)

NOTIFICATION

New Delhi, the 17th February, 2016

G.S.R. 180(E).—The Government of India has announced 'Startup India' initiative for creating a conducive environment for startups in India. The various Ministries of the Government of India have initiated a number of activities for the purpose. To bring uniformity in the identified enterprises, an entity shall be considered as a 'startup'-

a) Up to five years from the date of its incorporation/registration,

b) If its turnover for any of the financial years has not exceeded Rupees 25 crore, and

c) It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property;

Provided that any such entity formed by splitting up or reconstruction of a business already in existence shall not be considered a 'startup'; Provided further that in order to obtain tax benefits a startup so identified under the above definition shall be required to obtain a certificate of an eligible business from the Inter-Ministerial Board of Certification consisting of:

a) Joint Secretary, Department of Industrial Policy and Promotion,

b) Representative of Department of Science and Technology, and /

c) Representative of Department of Biotechnology

Explanation:

1. An entity shall cease to be a startup on completion of five years from the date of its incorporation/registration or if its turnover for any previous year exceeds Rupees 25 crore.

2. Entity means a private limited company (as defined in the Companies Act, 2013), or a registered partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2002).

3. Turnover is as defined under the Companies Act, 2013.

4. An entity is considered to be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property if it aims to develop and commercialize:

a. A new product or service or process, or

b. A significantly improved existing product or service or process, that will create or add value for customers or workflow.

Provided that the mere act of developing:

a. products or services or processes which do not have potential for commercialization, or

b. undifferentiated products or services or processes, or

c. products or services or processes with no or limited incremental value for customers or workflow

would not be covered under this definition.

5. The process of recognition as a 'startup' shall be through mobile app/portal of the Department of Industrial Policy and Promotion. Startups will be required to submit a simple application with any of following documents:

a) a recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a postgraduate college in India; or

b) a letter of support by any incubator which is funded (in relation to the project) from Government of India or any State Government as part of any specified scheme to promote innovation; or

c) a recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator recognized by Government of India; or

d) a letter of funding of not less than 20 per cent in equity by any Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit; or

e) a letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or

f) a patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of business being promoted.

Department of Industrial Policy and Promotion may, until such mobile app/portal is launched make alternative arrangement of recognizing a 'startup'. Once such application with relevant document is uploaded a real-time recognition number will be issued to the startup. If on subsequent verification, such recognition is found to be obtained without uploading the document or uploading any other document or a forged document, the concerned applicant shall be liable to a fine which shall be fifty per cent of paid up capital of the startup but shall not be less than Rupees 25,000.

This notification shall come into force on the date of its publication in the Official Gazette. [F. No. 5(91)/2015-BE. I]

RAVNEET KAUR, Jt. Secy

Amendment to Mega Exemption Notification-ST

Finance Ministry grants service tax exemption for services provided by Government / local authority to business entity having turnover upto 10 lakhs in preceding financial year w.e.f. April 1, 2016; Amends Notification No. 25/2012-ST dated June 20, 2012 : Ministry of Finance Notification 

CBDT on Section 154

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

North Block, New Delhi, the 15th of February, 201016

Subject: Following the prescribed time limit in passing order under sub-section (8) of 154 of Income tax Act, 1961-regd

Sub-section (8) of section 154 of the Income-tax Act, 1961 ('Act') stipulates that where application for amendment is made by assessee/deductor/collector with a view to rectify any mistake apparent from record, the income-tax authority concerned shall pass an order, within a period of six months from the end of the month in which such an application is received, by either making amendment or refusing to allow the claim. It has been brought to the notice of the Board that the said time limit of six months has not been observed in deciding some applications. In such cases, the authorities often take a view that since no action was taken within the prescribed time-frame, application of the taxpayer is deemed to have lapsed, thereby not requiring any action.

2. The matter has been examined by the Board. In this regard, the undersigned is directed to convey that the aforesaid time-limit of six months is to be strictly followed by Assessing Officer while disposing applications filed by the assessee/deductor/collector under section 154 of the Act. The supervisory officers should monitor the adherence of prescribed time limit and suitable admin action may be initiated in cases where failure to adhere to the prescribed time frame is noticed.

3. The contents of this Instruction may be brought to the notice of all for necessary compliance.

4. Hindi version to follow.

(Rohit Garg)
Deputy Secretary to the Government of India

(F. No. 225/305/2015-ITA.II)

 

 

 

 

 

 

 

 

 

 

 

 

Instruction No. 01/2016

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

North Block, New Delhi, the 15th of February, 201016

Subject: Passing rectification order under section 154 Income Tax Act, 1961-regd

Instances have come to the notice of the Board that in some cases, rectification order under section 154 of the Income Tax Act, 1961 ('Act') is being passed by the Assessing Officer on AST system without giving copy of the order to the taxpayer concerned. This is causing grievance to the taxpayers as they remain unaware of such order s and consequently, are unable to pursue the matter further, either in appeal or rectification, if required.

2. Sub-section (4) of section 154 of the Act mandates that rectification order shall be passed in writing by the Income Tax authorities. Therefore, on consideration of the matter, the Board hereby directs that all rectification applications must be disposed of after passing an order in writing, to be duly served upon the taxpayers concerned and not by merely marking necessary rectification on the AST System.

3. The contents of this instruction may be brought to the notice of all for necessary compliance.

4. Hindi version to follow.

(Rohit Garg)

Deputy Secretary to the Government of India