RBCO NEWSLETTER January 2015
Preface
The Narendra Modi government is set to unleash
several big-ticket announcements over the next few
weeks, starting with changes in the land acquisition
law through an ordinance, setting the stage for the
budget that will be unveiled at the end of February by
the finance minister . To define the success of ‘Make in
India’ campaign, to ease the clearance process, the
government favours expansion of the list of exempted
sectors under the land law to include defence,
education, healthcare and infrastructure.
Added to it, the FDI Policy review has been made in
Defence, Railways & Construction Sector increasing
Foreign Investment cap under the Automatic Route.
We have included a detailed note on the same.
Compounding of offences under Direct Tax laws also
requires special mention. Companies have to be aware
of the various amendments and updates to be legally
compliant and conduct effective business. We hope our
newsletter serves the purpose.
CA V.Thiagarajan
Partner
Corporate Law
the calender year with a minimum gap of
ninety days between the two meetings.
(viii) A small company need not include Cash
Flow Statement as part of its financial
statement.
(ix) Provision regarding mandatory rotation of
auditor/maximum term of auditor being 5
years in case of an individual and 10 years in
case of a firm of auditors is not applicable to
an OPC will apply to a small company as
well.
(x) They still have to maintain statutory
registers, minutes Books, books of account,
common seal, hold an annual general
meeting, have a registered office, have
minimum of two directors and two
shareholders.
MINISTRY OF CORPORATE AFFAIRS - INITIATIVES
IN THE LAST SIX MONTHS
Enhancing Efficacy of Companies Act, 2013
(i)
SMALL COMPANIES – A brief note
(i)
“Small Company” newly introduced by the
Companies Act, 2013.
(ii) Qualification : Paid Up Capital not more
than Rs.50 lakhs (OR) Turnover as per last
statement of P&L not exceeding Rs.2 crore.
(iii) Not applicable to (A) a holding company or
a subsidiary company; (B) a company
registered u/sec 8 of the Act; or (C) a
company or body corporate governed by
any special Act (D) public company.
(iv) Eligibility may be differ each year according
to applicability.
(v) Priveleges & exemptions available as
applicable to a one person company/
(vi) The annual return of a Small Company can
be signed by the company secretary alone,
or where there is no company secretary, by
a single director of the company.
(vii) May hold only two board meetings in a
year, i.e. one Board Meeting in each half of
R.Bupathy & Co.,
(ii)
(iii)
40 clarifications/elaborations have been
made in the form of circulars to remove
doubts
and
facilitate
smooth
implementation of Companies Act, 2013.
Fifteen amendments in various Companies
Rules have also been carried out to achieve
similar objectives.
In seven instances statutory orders to
'remove difficulties' have been issued for
smooth implementation of Companies Act,
2013.
To derive greater benefits of outcomes of
CSR initiatives, relevant rules have been
amended enabling wider spread of CSR
funding; new items eligible for funding have
also been added to provide impetus to
sanitation
and
environment-related
concerns.{Contribution to Swach Bharat
Mission & Clean Ganga Project included)
Providing Greater Clarity in Companies Act, 2013
for Ease of Doing Business
(iv)
To make Company Law even more business
and growth friendly amendments have
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RBCO NEWSLETTER January 2015
been moved and already approved by the
Lok Sabha to:
a.Bring provisions for minimum capital and
company seal at par with international best
practices.
b.Make approval for related party
transactions simpler without unduly
diluting
safeguards
for
minority
shareholders.
c.Provide explicit penalties for failure to
honour terms and conditions of deposits.
d. To retain the stringent bail provision for
the serious offences of fraud.
Unregistered Directors of Dormant Companies
(i)
Filing of appointment of Cost Auditors
(ii)
Simplification of forms and procedures for Easy
Compliance
(v)
To make compliances and reporting easy
and convenient to companies following
major initiatives have been taken:
a. Four prescribed forms have been
discontinued along with substitution of a
simple declaration instead of affidavits for
several purposes.
b. Procedural requirements for foreign
nationals to be Directors in Indian
Companies have been drastically reduced.
c. Arrangements have been completed for
integration of Name Availability, allotment
of Direct Identification Number (DIN),
Company
Incorporation
and
Commencement of Business with the
unified e-business portal being developed
by the Ministry of Industries and
Commerce.
d. Fee payable by small companies for
various services significantly reduced.
e. Arrangements to enable Indian
companies to follow new Accounting
Standards, i.e. IndAS (compatible with the
International Financial Reporting Standards
- IFRS) completed. This will facilitate access
for Indian companies to international
capital markets.
[Source - PRESS RELEASE, DATED 24-12-2014]
R.Bupathy & Co.,
Companies which do not have any of their
Directors/Signatory details registered in the
MCA21 system and who are desirous of
filing DIR-3C Form have been requested to
get atleast one authorised signatory
registered by contacting the concerned
Registrar of Companies.
In response to representation received from
stakeholders the Government has issued
clarification under Rule 5(1) & 6(2) of
Companies Cost Records and Audit Rules,
2014 regarding maintenance of cost records
and filing of notice of appointment of Cost
Auditor in Form CRA 2. Date of filing of said
form has been extended upto 31.1.2015
without penalty and late fee. Further
Companies that had filed Form 23C for
appointment of Cost Auditor for financial
year 2014-’15 need not file Form CRA 2
afresh.
[MCA General Circular No.42/2014 dated
12.11.2014]
DIRECT TAXES
Income Tax
Registration under FATCA to avoid TDS
(i)
(ii)
(iii)
India has entered into an Inter-Government
agreement with the United States of
America under Foreign Accounts Tax
Compliance Act (FATCA).
Government of India, has now advised that
to avoid withholding tax, Foreign Financial
Institutions (FFIs) in Model 1 jurisdictions,
such as India, need to register with IRS and
obtain a Global Intermediary Identification
Number (GIIN) before January 1, 2015.
The FFIs who have registered but have not
obtained a GIIN should indicate to the
withholding agents that the GIIN is applied
for, which may be verified by the
Page 2
RBCO NEWSLETTER January 2015
(iv)
withholding agents in 90 days. In this
regard, the FAQ published on the IRS
website (updated as on December 22,
2014), as received from the Government of
India, is furnished in the Annex.
[CIRCULAR NO DBR. AML. No. 9644
/14.07.018/2014-15, DATED 30-12-2014]
Also refer Circular DBOD. AML. No. 20472
/14.07.018/2013-14 dated June 27, 2014 on
the captioned subject.
[NOTIFICATION
NO.
GSR
863(E)
[F.NO.2/3/2014.NS-II], DATED 2-12-2014]
GUIDELINES FOR COMPOUNDING OF OFFENCES
UNDER DIRECT TAX LAWS, 2014
c.
SECTION 80C – DEDUCTIONS
a.
(i)
Reliance Retirement Fund notified
Reliance Retirement Fund set up by the
Reliance Mutual Fund registered with SEBI
is notified under section 80C deduction for
the assessment year 2015-16 and
subsequent
assessment
years.
NOTIFICATION
NO.
90/2014
[F.NO.
178/63/2012-ITA-I], DATED 23-12-2014
Sukanya Samriddhi Yojna notified
Sukanya Samriddhi Yojna is an exclusive
deposit scheme for a girl child.
(ii) The deposit in the said scheme is eligible for
Section 80C deduction.
(iii) It can be started in any Post Office or Banks.
(iv) The scheme can be started any time after
the child birth or before completing ten
years and to be continued till completion of
14 years.
(v) Maturity date is 21 years from date of
opening or marriage date of girl child
whichever is earlier.
(vi) Withdrawal upto 50% allowed only when
18 years for higher education.
(vii) Minimum contribution Rs.1000 per annum
in multiples of Rs.100 per month and
maximum upto Rs,1,50,000 per annum.
(viii) Interest rate to be notified by the
Government.
(ix) Interest payment is compounded upto 14
yrs thereafter option for monthly payout.
(x) There is no special tax benefit available.
d.
e.
b.
(i)
R.Bupathy & Co.,
f.
g.
In super session of all including the
guidelines issued vide F.No. 285/90/2008IT(Inv.)/12 dated 16th May 2008, new
guidelines are now issued for compliance by
all concerned to be effective from
01.01.2015 applicable to all applications for
compounding received on or after the
aforesaid date.
The applications received before 01.01.2015
shall continue to be dealt with in
accordance with the guidelines dated
16.05.2008.
Section 279(2) of the Act provides that any
offence under chapter XXII of the Act may,
either before or after the institution of
proceedings, be compounded by the
CCIT/DGIT.
Nature of offences:
For detailed provisions kindly refer the
below Circular.
LETTER [F.NO.285/35/2013 IT
(INV.V)/108, DATED 23-12-2014]
First Bilateral Advance Pricing Agreement
(i)
CBDT has signed its first Bilateral Advance
Pricing Agreement with Japan on
19.12.2014.
TDS from Salaries during FY 2014-15 u/sec 192
(i)
(ii)
The CBDT has issued Circular providing the
detailed income tax slabs and TDS
procedures
applicable
to
Salaried
Employees for the FY 2014-15.
Kindly
refer
CIRCULAR
NO.
17/2014[F.NO.275/192/2014-IT(B)], DATED
10-12-2014 for detailed reference
Page 3
RBCO NEWSLETTER January 2015
officers, as the procedure prescribed for
audit is essentially a procedure for
verification mandated in the statute.
[Refer Circular No. 181/7/2014-Service Tax
dated 10.12.2014]
INDIRECT TAXES
Mandatory Production of records and audit
reports for Service Tax Audit
(i)
(ii)
(iii)
(iv)
(v)
Rule 5(A)(2) has been substituted in the
Service Tax Rules, 1994 vide notification no.
23/2014-Service Tax dated 5th December,
2014. This rule, interalia, provides for
scrutiny of records by the audit party
deputed by the Commissioner. Such
scrutiny essentially constitutes audit by the
audit party consisting of departmental
officers. An Assessee is required to produce
the statutory records required to be
maintained under the Service tax Rules, and
also cost audit reports and income tax audit
reports to the audit parties.
Verification of records mandated by the
statute is necessary to check the correctness
of assessment and payment of tax by
the assessee in the present era of selfassessment.
Earlier Hon’ble High Court of Delhi in the
judgment dated 04.08.2014 in the case of
M/s Travelite (India) [2014-TIOL-1304-HCDEL-ST] had quashed rule 5A(2) of the
Service Tax Rules, 1994 on the ground that
the powers to conduct audit envisaged in
the rule did not have appropriate statutory
backing.
Following this, a new clause (k) was added
to sub-section (2) of section 94 following
amendment dated 06.08.2014, which deals
with rule making powers of the Central
Government which is reproduced below –
“(k) imposition, on persons liable to pay
service tax, for the proper levy and
collection of tax, of duty of furnishing
information, keeping records and the
manner in which such records shall be
verified.”
It may be noted that the expression
“verified” used in section 94(2)(k) of the
said Act is of wide import and would include
within its scope, audit by the departmental
R.Bupathy & Co.,
RBI/FEMA
RBI HAS LIBERALISED OVERSEAS DIRECT INVESTMENT
BY INDIAN PARTY
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Foreign Exchange Management (Transfer or
Issue of any Foreign Security) (Amendment)
Regulations, 2004 was issued under
Notification No. FEMA.120/RB-2004 dated
July 7, 2004 and further amended under
A.P. (DIR Series) Circular No. 96 dated
March 28, 2012.
In order to grant more flexibility to the
Indian party, it has been decided to further
liberalize certain regulations of the
Notification as detailed below.
Existing facility: Creation of charge on
shares of JV / WOS / step down subsidiary
(SDS) in favour of domestic / overseas
lender for the purpose of availing facilities
(funded or non-funded) by the Indian party
and / or the concerned JV / WOS is under
the automatic route.
Added facility: For the purpose of securing
the funded and / or non-funded facility to
be availed of by the Indian party or by its
group companies / sister concerns /
associate concerns or by any of its JV / WOS
/ SDS (irrespective of the level) under the
automatic route subject to the conditions
prescribed.
Creation of charge on the domestic assets in
favour of overseas lenders to the JV / WOS /
step down subsidiary which presently
requires prior approval of the Reserve Bank
has been added to the automatic route
subject to prescribed conditions.
Creation of charge on the overseas assets of
JV / WOS / SDS of an Indian party in favour
of a domestic lender to the Indian party or
to its group / sister / associate concern or to
Page 4
RBCO NEWSLETTER January 2015
any of its overseas JV / WOS / SDS which
presently requires prior approval of the
Reserve Bank has been added to the
automatic route subject to prescribed
conditions.
(vii) Important conditions: The loan / facility
availed by the JV / WOS / SDS from the
domestic / overseas lender shall be utilized
only for its core business activities overseas
and not for investing back in India in any
manner whatsoever;
(viii) A certificate from the Statutory Auditors’ of
the Indian party, to the effect that the loan
/ facility availed by the JV / WOS / SDS has
not been utilized for direct or indirect
investments in India, is to be obtained and
kept by the designated AD;
to the conditions specified in the Press Note
7 (2014 Series) dated August 26, 2014.
[A.P. (DIR SERIES 2014-15) CIRCULAR NO.
46, DATED 8-12-2014]
REVIEW OF FDI POLICY – SECTOR SPECIFIC
CONDITIONS- RAILWAY INFRASTRUCTURE
(i)
The extant Foreign Direct Investment (FDI)
policy for railways sector has also since
been reviewed. Department of Industrial
Policy and Promotion (DIPP) has now
permitted
100%
FDI
in
railway
Infrastructure sector under automatic route
subject to conditions. [A.P. (DIR SERIES
2014-15) CIRCULAR NO. 47, DATED 8-122014]
[Source: RBI/2014-15/371 A.P. (DIR Series)
Circular No.54 dated 29.12.2014]
REVIEW OF FDI POLICY – SECTOR SPECIFIC
CONDITIONS–CONSTRUCTION DEVELOPMENT
SECTOR
REPORTING ON NON-COOPERATIVE BORROWERS
(i)
(i)
RBI has issued advisory to all banks and
Financial Institutions to classify a borrower
as a co-operative or non-cooperative
borrower, to report and take stringent
measures on the latter.
[Circular DBR.NO.CID.BC.54/ 20.16.064/ 2014-15,
dated 22-12-2014]
FDI IN INDIA - REVIEW OF FDI POLICY - SECTOR
SPECIFIC CONDITIONS- DEFENCE
(ii)
The extant FDI policy for defence sector has
since been reviewed. Department of
Industrial Policy and Promotion (DIPP) has
now provided a list of defence items as
finalised by Department of Defence
Production, Ministry of Defence and has
clarified that items not in the list would not
require industrial license for defence
purposes. Further, on a review, effective
from
August
26,
2014,
foreign
investment i.e. FDI, FIIs, RFPIs, NRIs, FVCIs
and QFIs upto 49% under government route
shall be permitted in defence sector subject
R.Bupathy & Co.,
(ii)
(iii)
Under the Consolidated FDI Policy Circular
of 2014', effective from 17th April, 2014,
relating to Construction Development
Sector 100% equity participation under the
Automatic Route was allowed to FDI in
Townships, housing, built-up infrastructure
and construction-development projects
(which would include, but not be restricted
to, housing, commercial premises, hotels,
resorts, hospitals, educational institutions,
recreational facilities, city and regional level
infrastructure)
Under the revised FDI Policy review
Construction-development projects would
include development of townships,
construction of residential/commercial
premises, roads or bridges, hotels, resorts,
hospitals,
educational
institutions,
recreational facilities, city and regional level
infrastructure, townships.
Investment will be subject to the following
conditions:
A. Minimum area to be developed under
each project would be as under:
Page 5
RBCO NEWSLETTER January 2015
B.
C.
D.
E.
a. In case of development of
serviced plots, no minimum land
area requirement.
b. In
case
of
constructiondevelopment projects, a minimum
floor area of 20,000 sq. meter.
Investee company will be required to
bring minimum FDI of US$ 5 million
within six months of commencement
of the project. The commencement of
the project will be the date of approval
of the building plan/lay out plan by the
relevant
statutory
authority.
Subsequent tranches of FDI can be
brought till the period of ten years
from the commencement of the
project or before the completion of
project, whichever expires earlier.
(i) The investor will be permitted to
exit on completion of the project or
after
development
of
trunk
infrastructure i.e. roads, water supply,
street lighting, drainage and sewerage.
(ii) The Government may, in view of
facts and circumstances of a case
permit repatriation of FDI or transfer of
stake by one non-resident investor to
another non-resident investor, before
the completion of project. These
proposals will be considered by FIPB on
case to case basis inter-alia with
specific reference to Note (i).
The project shall conform to the norms
and standards, including land use
requirements
and provision of
community amenities and common
facilities, as laid down in the applicable
building control regulations, bye-laws,
rules, and other regulations of the
State
Government/Municipal/Local
Body concerned.
The Indian investee company will be
permitted to sell only developed plots.
For the purposes of this policy
"developed plots" will mean plots
R.Bupathy & Co.,
F.
G.
where trunk infrastructure i.e. roads,
water supply, street lighting, drainage
and sewerage, have been made
available.
The Indian investee company shall be
responsible for obtaining all necessary
approvals, including those of the
building/layout plans, developing
internal and peripheral areas and other
infrastructure facilities, payment of
development, external development
and other charges and complying with
all other requirements as prescribed
under
applicable
rules/byelaws/regulations
of
the
State
Government/Municipal/Local
Body
concerned.
The State Government/ Municipal/
Local Body concerned, which approves
the building/development plans, will
monitor compliance of the above
conditions by the developer.
NOTE: The following additional points need
attention
FDI not permitted in real estate/farm/TDRs
(iv)
(v)
It is clarified that FDI is not permitted in an
entity which is engaged or proposes to
engage in real estate business, construction
of farm houses and trading in transferable
development rights (TDRs).
Real estate business" will have the same
meaning as provided in FEMA Notification
No. 1/2000-RB dated May 03, 2000 read
with RBI Master Circular i.e. dealing in land
and immovable property with a view to
earning profit or earning income therefrom
and does not include development of
townships,
construction
of
residential/commercial premises, roads or
bridges,
educational
institutions,
recreational facilities, city and regional level
infrastructure, townships.
Page 6
RBCO NEWSLETTER January 2015
Minimum Area & Investment, Exit policy
not to apply to the following:
(vi)
(xii)
The conditions at (A) to (C) above, will not
apply to Hotels & Tourist resorts, Hospitals;
Special Economic Zones (SEZs); Educational
Institutions, Old Age Homes and Investment
by NRIs.
Minimum Area & Investment not applicable
if 30% invested in low cost affordable
housing
(vii)
100% FDI for maintenance
SEBI provides single registration for Depository
participants
(i)
The conditions at (A) and (B) above, will
also not apply to investee/joint venture
companies which commit at least 30
percent of the total project cost for low cost
affordable housing.
(ii)
Other points
(viii) An Indian company, which is the recipient
of FDI, shall procure a certificate from an
architect empanelled by any Authority,
authorized to sanction building plan to the
effect that the minimum floor area
requirement has been fulfilled.
(ix) 'Floor area' will be defined as per the local
laws/regulations of the respective State
governments/Union territories.
(x)
Completion of the project will be
determined as per the local bye-laws/rules
and
other
regulations
of
State
Governments.
It is clarified that 100% FDI under automatic
route is permitted in completed projects for
operation and management of townships,
malls/shopping complexes and business
centres.
(iii)
Notification
No.
LAD-NRO/GN/201415/18/1952 dated December 24, 2014
amending the SEBI (Depositories and
Participants) Regulations, 1996 (hereinafter
referred to as DP Regulations) providing for
single
registration
for
Depository
participants.
As per the amendment, the existing
requirement of obtaining certificate of
initialregistration to act as a participant and
subsequently permanent registration to
continue to act as a participant for each
depository has been done away with.
Henceforth, one certificate of initial
registration and subsequently permanent
registration through any depository shall be
required after commencement of the
Securities and Exchange Board of India
(Depositories
and
Participants)
(Amendment) Regulations, 2014.
[SEBI CIR/ MIRSD/5/ 2014 dated
30.12.2014]
Affordable Housing Projects
(xi)
Project using at least 40% of the FAR/FSI for
dwelling unit of floor area of not more than
140 square meter will be considered as
Affordable Housing Project for the purpose
of FDI policy in Construction Development
Sector. Out of the total FAR/FSI reserved for
Affordable Housing, at least one-fourth
should be for houses of floor area of not
more than 60 square meter.
R.Bupathy & Co.,
Page 7
RBCO NEWSLETTER January 2015
CLIENT AWARENESS CORNER
Refund of accumulatedCenvat Credit for export of
services/goods under Rule 5 of Cenvat Credit
Rules, 2004read with NotificationNo: 05/06 CE
(NT)dated 14.03.2006
1. Refund application in Form A as annexed with
the said notification.
2. Copy of the relevant Shipping Bills or Bills of
Export duly certified by the officer of customs to
the effect that the goods have in fact been
exported(in case of final products).
3. Copy of invoices issued by the input service
providers.
4. Copy of invoices for services exported.
5. Certificate from the bank certifying realization
of export proceeds (in caseof export of output
services).
6. Relevant extracts of the records maintained
under the Central ExciseRules, cenvat credit rules
or service tax rules, in original, evidencing taking
ofCENVAT credit, utilization of such credit in
payment of excise duty or servicetax and the
balance unutilized credit during the given period.
7. Statement of input invoices showing details of
payment of service tax andamount claimed.
8. The Table given in (DD) as provided under the
Notification 07/2010-CE(NT) dated 27.02.10, duly
certified by a person authorized by the Board
ofDirectors(in the case of a limited company) or
the proprietor or any partner(in case of
partnership firm) if the amount of refund claimed
is less than Rs. 5lakh, the Table shall also be
certified by the Chartered Accountant whoaudits
the annual accounts of the exporter for the
purposes of CompaniesAct, 1956 or the Income
Tax Act, 1961, as the case may be, if the amount
ofrefund claimed is more than Rs. 5lakh.
9. Declaration certifying the correctness of the
particulars given by the claimant.
Refund claim of service tax under section 11B of
CEA, 1944 read with section 83 of the Finance Act,
1994.
1. Application in prescribed Form –R.
2. Copy of TR-6/ GAR-7/PLA/ copy of return
evidencing payment of duty.
3. Copy of invoices (in original)
4. Documents evidencing that duty has not been
passed on to the buyer.
5. Any other document in support of the refund
claim.
6. Any other document as prescribed by the
Central Excise Officer.
“Courage is resistance to fear, mastery of
fear- not absence of fear”
- Mark Twain
Disclaimer: The contents of this newsletter do not constitute an opinion or professional advice. The information in
this publication has been obtained or derived from sources believed by RBCO to be reliable but does not guarantee
that it is accurate or complete. The users of this document are advised to seek independent professional opinion
before taking any course of action or decision. Also, the contents are not exhaustive. Kindly see the referred
provisions, Circulars/Notifications etc., for full text.
R.Bupathy & Co.,
Page 8