RBCO NEWSLETTER January 2015
Transcription
RBCO NEWSLETTER January 2015
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 Page 1 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