News Letter - jsa-cs.comjsa-cs.com/image/News_letter_July_2.pdf · material contained in this News Letter. ... MGT-7 under the Companies Act, 2013 . MCA – G.S.R. 27.07.2016 Companies

News Letter

JAYA sHArMA & AssOCIAtes

PrACtCING COMPANY seCretArIes

Issue for the month of July 2016 - II

Our office is presently situated at - Our email address is 2101, 21st Floor, Sai Akashdeep CHSL, [email protected], Saibaba Park, Evershine Nagar, [email protected] Malad (West), Mumbai – 400 064. Contacts: +91 9819501557 Tele Fax: +91 22 28818135

DIsCLAIMer This News Letter provides general information available at the time of preparation. The News Letter is intended as a news update and Jaya Sharma & Associates neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this News Letter. It is recommended that professional advice be taken based on the specific facts and circumstances. This News Letter does not substitute the need to refer to the original pronouncements.

Legal Updates

Links of important Notification & Circulars:

Authority Dated Notification & Circulars Name of website MCA - General Circular 8/2016

29.07.2016 Relaxation of additional Fees and extension of last date of in filing AOC-4, AOC-4(XBRL), AOC-4(CFS) and MGT-7 under the Companies Act, 2013

www.mca.gov.in

MCA – G.S.R. 27.07.2016 Companies (Incorporation) Third Amendment Rules, 2016 www.mca.gov.in

MCA – G.S.R. 742(E)

27.07.2016 Companies (Accounts) Amendment Rules, 2016 www.mca.gov.in

MCA – Notification No. S.O. 2554(E)

27.07.2016 Special Court under section 435 of the Companies Act, 2013 www.mca.gov.in

MCA – G.S.R. (E) 21.07.2016 National Company Law Tribunal Rules, 2016 www.mca.gov.in

MCA – G.S.R. 717(E)

21.07.2016 National Company Law Appellate Tribunal Rules, 2016 www.mca.gov.in

MCA – G.S.R. 704(E)

19.07.2016 Companies (Share Capital and Debentures) Third Amendment Rules, 2016

www.mca.gov.in

MCA – Notification No. S.O. 2463(E)

19.07.2016 In exercise of the powers conferred by sub- section (1) of section 381 of the Companies Act, 2013 (18 of 2013)

www.mca.gov.in

RBI - RBI/2016-17/30

28.07.2016 Retail Participation by Demat Account Holders in the Government Securities Market: Access to NDS-OM Platform

www.rbi.org.in

RBI/2016-17/28 28.07.2016 Guidelines for Relief Measures by NBFCs in areas affected by Natural Calamities

www.rbi.org.in

RBI/2016-17/27 28.07.2016 Priority Sector Lending –Targets and Classification- Bank loans to MFIs for on-lending - Qualifying asset - Revised loan limit

www.rbi.org.in

Income Tax Circular No.28/2016

27.07.2016 Clarification regarding attaining prescribed age of 60 years/80 years on 31st March itself, in case of Senior/Very Senior Citizens whose date of birth falls on 1st April, for purposes of Income-tax Act, 1961

www.incometaxindia.gov.in

Income Tax - F No 370133/30/2016-TPL

25.07.2016 Draft Rules for prescribing the manner of determination of amount received by the company in respect of share - section 115QA of the Income-tax Act, 1961-reg.

www.incometaxindia.gov.in

Case Laws: 1. Subsidy by way of refund of excise duty and interest for setting up a new industrial

undertaking is a capital receipt & not taxable as income. Alternatively, such receipts are "derived" from the industrial undertaking and are deductible u/s 80-IB: Supreme Court of India in CIT Vs. Shree Balaji Alloys decided on April 19, 2016: Gist of the Case: The assesse, pursuant to the New Industrial Policy announced for the State of J&K, received excise refund and interest subsidy, etc which it claimed to be a capital receipt. In the alternative, it was claimed that the same was eligible for deduction u/s 80-IB. The AO, CIT (A) and Tribunal rejected the claim and held the receipts to be revenue on the ground that the subsidy (i) was for established industry and not to set up a new one, (ii) it was available after commercial production, (iii) it was recurring in nature, (iv) it was not for purchasing capital assets and (v) it was for running the business profitably. On appeal by the assesse, the High Court (333 ITR 335) reversed the lower authorities and held as follows: (i) The ratio of Sahney Steel 228 ITR 253 (SC), Ponni Sugars 306 ITR 392 (SC) and Mepco

Industries 319 ITR 208 (SC) is that to determine whether incentives & subsidies are revenue or capital receipts, the purpose underlying the incentives is the determinative test. If the object of the subsidy scheme is to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the subsidy scheme is to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. It is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form or the mechanism through which the subsidy is given is irrelevant;

(ii) On facts, the object of the subsidy scheme was (a) to accelerate industrial development in J&K and (b) generate employment in J&K. Such incentives, designed to achieve a public purpose, cannot, by any stretch of reasoning, be construed as production or operational incentives for the benefit of assesses alone. It cannot be construed as mere production and trade Incentives;

(iii) The fact that the incentives were available only after commencement of commercial production cannot be viewed in isolation. The other factors which weighed with the Tribunal are also not decisive to determine the character of the incentive subsidies in view of the stated objects of the subsidy scheme;

(iv) Question whether the subsidy receipts are eligible u/s 80-IB not decided.

On appeal by the department to the Supreme Court HELD dismissing the appeal.

2. It is date on which option for conversion of debentures into shares is exercised that open offer obligation gets triggered under the Regulations: Securities Appellate Tribunal, Mumbai Bench in Victor Fernandes Vs. SEBI decided on April 13, 2016

Gist of the Case: When a person subscribes to fully convertible debentures under an agreement which has no fixed date for conversion of the said debentures into equity shares, then that person is said to have acquired shares of that company only on a date on which the option for conversion of debentures into equity shares is exercised and open offer obligation under the Regulations, if any, gets triggered on the date on which such option is exercised. The Securities Appellate Tribunal has considered the agreement under which debentures were acquired which had no fixed date for conversion into equity shares. It has also gone into the facts of this particular case, and then passed an appropriate order. While doing so it has observed that when sub-clause (b) of sub-section (2) of regulation 13 specifically provides that the date on which option for conversion is exercised shall be the date for triggering the open offer process, it is improper on the basis the format set out in the Regulations to hold that even if option is not exercised, open offer obligation gets triggered of on execution of convertible securities, since it is well established that even if there is any conflict between the regulation and the format prescribed there under, the regulation shall prevail. Hence, it is not possible to hold that the deeming fiction created for the purposes of disclosures in the format prescribed in the Regulation has to be applied while determining the highest negotiated price for the purpose of open offer under the Regulations.

3. Secured creditor is entitled to proceed only against the secured assets mentioned in the notice under sub-section (2) of section 13. However, in terms of sub-section (2) of section 13 the secured creditor is also free to proceed first against the guarantors or sell the pledged assets: Supreme Court of India in Axis Bank Vs. SBS Organics Pvt. Ltd. And another decided on April 22, 2016 Gist of the Case: Where the borrower fails to discharge his liability in full within the period specified in the notice issued under sub-section (2) of section 13 the mandate of sub-section (3) of that section is that the said notice should contain details of the amount payable by the borrower and also of the secured assets intended to be enforced by the secured creditor in the event of non-payment of the dues as per the said notice but deposit made as pre-condition to prefer appeal is not secured asset, and its refund cannot be denied on disposal of appeal. The Supreme Court dismissed appeal of the secured creditor bank finding no merit in it. It also observed that the appeal under section 18 is permissible only against the order passed by the Debt Recovery Tribunal under section 17, where the scope of enquiry is limited to the steps taken under sub-section (4) of section 13 against the secured assets. Since the partial deposit made before the Debt Recovery Tribunal as pre-condition for considering the appeal is not a secured asset, it is not a secured debt either, since the borrower or the aggrieved person has not created any security interest on such pre-deposit in favour of the secured creditor. Hence on disposal of appeal, if the appellant makes a prayer for refund of the pre-deposit, the same, has to be allowed. Bank has no lien on pre-deposit which is made with the Debt Recovery Tribunal and not bank.

4. Where bar to suit by a company arises under an article of the articles of association of the company, there can be no ratification by the official liquidator: High Court of Mumbai in Subhiksha Trading Services Ltd. Vs. Azim premji decided on May 12, 2016 Gist of the Case:

Where a suit filed, on behalf of a company on the date it was filed, was infirm in view of one of its articles of the article of association of the company, it cannot be sought to be rendered proper merely by the happen chance of the company having subsequently been ordered to be wound up. The contention that the official liquidator can ratify the failure to obtain consent as required under the relevant article cannot be accepted, as it would amount to an opportunistic misuse of the provisions of law. Moreover, section 9 does not authorise the official liquidator to continue proceedings which were initiated illegally and without authority and which mere non est.

The High Court of Bombay has held that the present suit qua plaintiff No. 1 is not maintainable for want of authority of plaintiff No.2 to file the suit an behalf of plaintiff No. 1 and the suit is accordingly dismissed.

5. Rectification of mistake, Scope of appeal: High Court of Mumbai in Safari Mercantile Pvt. Ltd. Vs. ITAT decided on July 12, 2016 Gist of the Case:

S. 254(2): In an order passed in a Miscellaneous Application, the Tribunal cannot deal with the merits of the issue. The Tribunal must recall the original appellate order and refix the matter for hearing and pass an order u/s 254(1) of the Act.

This Court in its order dated 31st July, 2007 has while setting aside the order dated 7th March, 2007 of the Tribunal dismissing the petitioner’s Miscellaneous Application had held that there was an error apparent from the record in the order dated 9th May, 2006. The direction of the Court in its order dated 31st July, 2007 to the Tribunal to dispose of the Miscellaneous Application on merits as there is an error apparent on record in the order dated 9th May, 2006. This disposing of Miscellaneous Application could only be after recalling the conclusion in its order dated 9th May, 2006 allowing the Revenue’s appeal and hearing the petitioner on the issue of penalty being imposable even in the absence of a demand notice being served upon the assessee. This was for the reason that its conclusion was reached without having considered the petitioner’s contention that no penalty can be imposed in the absence of receipt of a demand notice by the petitioner. However, the Tribunal in the impugned order has dealt with the issue of imposition of penalty being imposed under Section 221 of the Act even without service of demand notice under Section 156 of the Act upon an assessee. This the Tribunal could have only done while passing an order in appeal. The consequent order which would have been passed in appeal would enable the parties to challenge the same before this Court in an appeal under Section 260A of the Act. The procedure adopted by the Revenue in this case has deprived the right of statutory appeal to the petitioner. No appeal is entertained by this Court from an order dismissing the Miscellaneous Application for rectification under Section 254(2) of the Act. Thus in the process of atoning for a mistake, one should take utmost care to ensure no further prejudice is caused. The rejection on merits of the contentions of the parties by the Tribunal on a substantial question of law is subject to the statutory right of appeal under Section 260A of the Act. This right cannot be bypassed by dealing with the merits in a Miscellaneous Application for rectification.

NEWS HIGHLIGHTS: 1. Guide To Income Declaration Scheme, 2016 And Direct Tax Dispute Resolution Scheme, 2016:

The Income Declaration Scheme, 2016 and the Direct Tax Dispute Resolution Scheme, 2016 are very important initiatives of the Government. These have created unprecedented interest amongst the taxpayers and tax professionals. However, several stake holders have complained that the numerous clarifications and press releases issued by the CBDT as well as the expert opinions and other resources are scattered at various places and that this is hindering effective compliance of both schemes. To aid our fellow professionals and tax payers, AIFTP (All India Federation of Tax Practitioners) has prepared a Guide in which all the resources are arranged in a systematic manner. In addition to the statutory resources, the Guide also has articles from eminent professionals like Dr. K. Shivram, Sr. Advocate, CA PN Shah, CA Chetan Karia and CA Arti Shah who have provided valuable perspective into the nuances of the both schemes. It may also be noted that itatonline.org and AIFTP has also arranged for a panel of eminent experts comprising of leading Advocates and Chartered Accountants to answer queries from taxpayers and professionals relating to both schemes. The questions asked to, and answers given by, the expert panel are included in the Guide.

2. CBDT Extends Due Date For Furnishing Returns Of Income For AY 2016-17: On consideration of reports of Bank strike on 29th July, 2016 (Friday) and the 31st July, 2016 (Sunday), being a Bank-Holiday, in order to avoid any inconvenience to the taxpayers while making payment of taxes pertaining to returns of income for Assessment Year 2016-2017 , which are required to be filed by 31st July, 2016 as per provisions of Section 139(1) of Income-tax Act , 1961, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income-tax Act, 1961, hereby extends the ‘due date’ for filing such returns of Income from 31st July, 2016 to 5th August, 2016, in case of taxpayers throughout India who are liable to file their Income-tax return by the said ‘due date’. Vide another another order dated 29th July 2016, the CBDT has extended the due date for income-tax assessees in the State of Jammu &Kashmir to 31st August 2016. (F.No. 225/195/2016/ITA.II).

3. CBDT Prescribes Standard Operating Procedure (SOP) For Handling AIR Transactions Without Valid PAN: The CBDT has vide directive dated 22nd July 2016 prescribed the Standard Operating Procedure (SOP) to be followed by the field staff for handling AIR transactions without valid PAN. The CBDT has also vide letter dated 25th July 2016 revised the template of the letter to be addressed by the field officers while handling reported cases of AIR transactions. (F.No.225/193/2016/ITA.1I).