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SP Nagrath & Co's Missive for April 2014

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Here we are with the Thirty fifth successive issue of our monthly ‘Missive’.

We trust you will enjoy reading this Missive, even while soaking in the contents. We would very much appreciate your feedback which consistently helps us in improving and upgrading the contents.

Thanks and regards,

Knowledge Management Team

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SP Nagrath & Co's Missive for April 2014

  1. 1. MISSIVE Volume XXXV April 2014
  2. 2. Topics Page No Direct Tax 1 Transfer Pricing 6 Service Tax 8 Value Added Tax 8 Customs 9 Case Law 10 FEMA 11 Company Law 12 Transactions that made headlines 17 Never hold your head high with pride or ego, even the winner of a gold medal gets his medal only when he puts his head down!!! Index Dear Patron Here we are with the Thirty fifth successive issue of our monthly ‘Missive’. We trust you will enjoy reading this Missive, even while soaking in the contents. We would very much appreciate your feedback which consistently helps us in improving and upgrading the contents. Thanks and regards, Knowledge Management Team
  3. 3. 1 DIRECT TAX CIRCULAR NO. 8/2014 DATED 31-3-2014 CLARIFICATION ON INTERPRETATION OF PROVISIONS OF SECTION 10(2A) IN CASES WHERE INCOME OF FIRM IS EXEMPT Tax Authorities has been denying the exemption to partners on share of profit in cases where firm is not liable to tax by virtue of some exemption or deduction based on the following grounds: 1. Exemption to partners is applicable only when the firm has suffered tax on such income. 2. The term ‘total income’ signifies taxable income, since, exempt income does not form part of the total income of the firm, and hence, partner is not eligible to exemption in respect of its share in the exempt income of the firm. 3. Share of profit in the hands of the partner can be exempt only to the extent such profits are taxed in the hands of the firm. The above circular brings an end to the much debated issue by clarifying the fact that 'total income' of the firm for sub section (2A) of section 10 of the Act, as interpreted contextually, includes income which is exempt or deductible under various provisions of the Act. It is, therefore, further clarified that the income of a firm is to be taxed in the hands of the firm only and the same can under no circumstances be taxed in the hands of its partners. Accordingly, the entire profit credited to the partners' accounts in the firm would be exempt from tax in the hands of such partners, even if the income chargeable to tax becomes NIL in the hands of the firm on account of any exemption or deduction as per the provisions of the Act. Union of India v/s Tata Chemical Ltd. [2014]43 taxmann.com 240(SC) The Supreme Court held that interest is payable to a tax deductor on refund of excess tax withheld Facts In the recent precedent of Tata Chemical Ltd.(‘assessee/ taxpayer/ Company’) the Hon’ble Supreme Court dealt with the issue that whether the taxpayer, who is entitled to refund of excess taxes withheld by it under the provisions of the Income tax Act, 1961 (‘the Act’), is also entitled to refund thereon. The taxpayer withheld taxes on the amount credited to two technicians from a foreign company for services of the technicians and reimbursement of expenditure. The rate of taxes withheld under Section 195(2) of the Act was in pursuance to the Special Order passed by Assessing Officer (‘AO’) directing the taxpayer to deduct tax at the rate of 20 percent before remitting the aforesaid amount, i.e., total amount credited including the amount of reimbursements, to the foreign company. After such deposit, the taxpayer appealed CIT(A) against AO’s Special Order, wherein, while allowing the appeal concluded that the reimbursement of expenses was not part of the Income, and accordingly directed refund of
  4. 4. 2 tax deducted at source on such reimbursements along with interest thereon as provided under Section 244A(1) of the Act. The AO held that Section 244A provides for interest only on refunds due to taxpayer and not to the deductor and declined the claim of the Company. Held Aggrieved from the decision, the Company appealed the matter to higher authorities. The Supreme Court’s ruling was in favour of the assessee and Hon’ble Supreme Court opined as under:-  As held by the Courts, while awarding interest, it is a kind of compensation of use and retention of the money collected by the tax department. When the collection is illegal there is corresponding obligation on the tax department to refund such amount with interest for the period they have retained the money deposited.  Refund due and payable to the taxpayer is debt- owned and payable by the tax department. There being no express statutory provision for payment of interest on the refund of excess amount/ tax collected by the tax department, the Government cannot shrug off its apparent obligation to reimburse the deductor’s lawful monies with the accrued interest or the period of undue retention of such monies.  The present case does not fall either under Section 244A(1)(a) or (b) of the Act. Therefore, in such a case, the opening words of Section 244A(1)(b) specifically referred to ‘as in any other case’ the interest is payable from the date of payment of tax. Alkaben B Patel vs. Income Tax Officer (Ahmedabad ITAT – Special Bench) Time limit of 'six months' in sec 54EC means 'six British Calendar months' in view of the General Clauses Act, 1897 Facts Assessee claimed exemption u/s 54EC from Long term capital gains on account that the sale consideration was utilized in the purchase of ‘specified asset’ i.e. NHAI bonds within six months from the date on which the transfer took place. Revenue contended that no exemption was available since the asset was transferred on 10th June 2008 whereas the investment was made on 17th December 2008 (date on which amount stands withdrawn from the relevant bank account), thereby alleging that the investment was made after the expiry of the specified period. ITAT Special Bench interpreted the meaning of phrase “six months” and held in the favour of the Assessee. Held The ITAT Special Bench held as follows: 1. The term 'month' is not defined in The Income Tax Act, therefore seeking the help of an another statute ; hence, examined the term "month" as per
  5. 5. 3 section 3(35) of General Clauses Act, 1897 which says "month" shall mean a month reckoned according to the British calendar i.e. last day of the month. 2. Being an incentive provision, the same should be interpreted liberally (CBDT Circular No. 791 dated 02.06.2000). In the present case, the intention is to attract investment to be used for the development of infrastructure etc. The question as to whether a statute is mandatory or directory, depends upon the intent of the legislator and not upon the language in which it is clothed. The meaning and intention of the legislator is to be judged by the language, but these are to be considered not only from phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other. 3. After scrutinizing few more sections of the Act it is evident that on some occasion the Legislature had not used the terms "Month" but used the number of days to prescribe a specific period. For example in Section 254(2A) First Proviso it is prescribed that the Tribunal may pass an order granting stay but for a period not exceeding one hundred and eighty days. This is an important distinction made in this statute while subscribing the limitation/ period. This distinction thus resolves the present controversy by itself. Indus Towers Ltd. vs. Commissioner of Income Tax (2014) 44 taxmann 3 [Delhi High Court] Receipts from provision of passive infrastructure services to the mobile operators amount to renting and would attract lower TDS deduction under section 194-I and not under section 194C Facts The petitioner, Indus Towers Ltd., provided passive infrastructure services to the mobile operators ('customers'), which, inter-alia, included, tower, shelter, diesel generator sets, batteries, air conditioners, etc. It applied for issue of a lower deduction certificate at rate of 0.5% on its project receipts under Sec. 194C of the IT Act, but AO issued lower deduction certificate at rate of 2.5% under Sec. 194-I of the IT Act. Writ was filed to challenge the revisionary order of CIT who affirmed the decision of AO. The issue before the High Court was whether the activity, i.e., provision of passive infrastructure services by petitioner to the mobile operator would constitute renting within the extended definition under Explanation to Section 194-I or whether the activity was service without any element of hiring or letting out of premises? Held The High Court held in the favour of Revenue contending that TDS was deductible u/s 194I but not on account of renting of land but for use of plant and equipment @ 2% based on the following grounds: 1. The definition of "renting" has to be viewed in perspective. What strikes instantly is that the definition is clear as to the nature of transactions it covers
  6. 6. 4 ("means"). Secondly, it is expansive in sweep ("any other…arrangement for the use, (either separately or together)" any land, building, machinery or plant irrespective of ownership of the payee is covered. The Parliamentary intent was clear that transactions - the consideration for which otherwise may not be covered by rent - also ought to be within Section 194-I, by use of the expression "other … arrangement for the use". Whilst there is no doubt that the intention of the parties in the present case was to ensure that the use of technical and specialized equipment maintained by Indus should be resorted to; at the same time, there is no escape from the fact that the infrastructure is given access to, and in that sense, it is given for the "use" of the mobile operators. The towers in a sense are the neutral platform without which mobile operators cannot operate. 2. If one goes back in time each mobile operator - which is now Indus' customer - used to carry out this activity, by necessarily renting premises and installing the same equipment. Of course, the rent paid then to the owner, whenever such transactions were leases, were business expenses. Yet leases or such like arrangement had to be resorted to. That situation has remained unchanged; now instead of the mobile operator performing the task, it is done exclusively by Indus. The dominant intention however, in these transactions - between Indus and its customers - is the use of the equipment or plant or machinery. The "operative intention" here, to borrow the phrase from Rajbir Kaur v. S. Chokesiri and Co., AIR 1988 SC 1845 , was the use of the equipment. The use of the premises was incidental; in that sense there is an inseparability to the transaction as spelt out in Sultan Brothers (P) Ltd. v Commissioner of Income Tax, 1964 (51) ITR 353 . Gulshan Malik v/s Commissioner of Income-tax [2014] 43 taxmann.com 200 (Delhi) 36 months period under Section 2(42A) for booking rights should be counted from date of buyer's agreement with builders High Court of Delhi manifested its comments over taxability of capital gains on sale of immovable property as long term or short term. The issue under consideration is that whether the date of booking the rights in an apartment should be considered or the date of signing buyer’s agreement with the builder should be taken into consideration. The 36 months period under Section 2(42A) of the Act for deciding whether booking rights are short-term capital asset or long-term capital asset should be counted from date of buyer's agreement and not from the date of booking/date of allotment application/ confirmation letter where the allotment application/confirmation letter states clearly that no right to provisional or final allotment accrues until Buyer's agreement is signed and returned to the builder.
  7. 7. 5 Vikas Lok Sewa Smiti v/s Commissioner of Income-tax -II, Agra (ITAT Agra Bench) The assessee was engaged in educational activities, merely because it engaged Z, a commercial venture for setting up of school or to provide educational programs to school of assessee, it would not make assessee disentitled for registration Facts The assessee was an educational society registered under the Societies Registration Act. It engaged ‘Z’ for providing educational contents and producing or procuring educational software and providing guidance for setting up schools and conducting classes for vocational courses. It filed application for grant of registration under Section 12AA of the Act. The Commissioner, on perusal of the documents, found that school was being projected as an upper end educational experience where boarding and lodging facility would be available, once the construction would be completed; and that 'Z' was a company, which was being run as commercial venture and was not having any registration under Section 12A of the Act and exemption under Section 10(23). The Commissioner held that only for the reason that the society would be running a school, it could not be said that the society was carrying charitable activities. The Commissioner, accordingly, found that the assessee would run a commercial venture and, hence, registration claim was denied. Held Ongoing through the definition of 'charitable purpose', it is clear that the education per se is charitable activity. The Commissioner did not dispute that the aims and objects of the society are educational only and as such charitable in nature. Moreover, merely because the assessee had engaged 'Z', a commercial venture, the assessee would not be disentitled for registration. Ultimately, it is the society who has to run educational school for achieving its objects. Further, at the stage of grant of registration genuineness of the objects has to be tested. Thus, there was enough of documentation to prove that the assessee was engaged in educational activities and had the same aims and objects and, as such, satisfied the requirement of Section 12AA of the Act for grant of registration. In view of the above, the impugned order was set aside and the Commissioner was directed to grant registration to the assessee under Section 12AA of the Act from the date of filing of application before him as per law.
  8. 8. 6 TRANSFER PRICING Whirlpool of India Ltd. Vs. DCIT I.T.A .No.- 426/Del/2013 (ASSESSMENT YEAR-2008-09) Expenses in nature of discount are outside purview of total composition of AMP expenses for purposes of determination of their ALP The assessee incurred certain amount of advertisement expenses and claimed exclusion of certain sum described by it as 'Pricing adjustment' from AMP expenses for purpose of determination of ALP in that regard. It claimed that such 'Pricing adjustment' was nothing but a leverage in the maximum retail price of the products sold to the dealers and distributors of the assessee-company as a profit mark-up in the form of extra trade discount. The TPO did not accept the Assessee's contention for the elimination of this amount from the total AMP expenses by opining that it was a tool employed by the assessee to create the brand loyalty amongst its dealers. The DRP and, in turn, the Assessing Officer accepted the TPO's point of view on this aspect. The Special Bench of the Tribunal in the case of LG Electronics India (P.) Ltd. has held that 'the expense in connection with the sales which do not lead to brand promotion cannot be brought within ambit of 'AMP expenses' for determining the cost/value of international transactions'. It has further been held that the logic in the exercise of finding out the AMP expenses towards creation of marketing intangible for the foreign AE starts with identifying the expenses which are otherwise in the nature of AMP. If an expenditure itself is not in the nature of AMP, that ought to be excluded at the very threshold. From the above observations of the Special Bench on this issue, it is manifest that the expenses, which are in the nature of discount, are outside the purview of total composition of AMP expenses for the purposes of determination of their ALP. The TPO duly accepted the nature of the amount as discount and incentives to the Assessee's dealers and distributors. He proceeded to include this amount in the total AMP expenses by holding that it was a tool employed by the assessee to create this brand loyalty among the dealers. Thus, it is patent that the nature of the amount in question is undisputed, as being discount given to dealers on the sales made. Once it is held that a particular amount is discount and is not in the nature of direct advertisement expenses, the same stands expelled from the qualifying amount which undergoes the process of determination of ALP of the AMP expenses. Bharti Airtel Limited Vs. Additional Commissioner of Income Tax I.T.A. No.: 5816/Del/2012 Assessment year: 2008-09 A transaction (such as a corporate guarantee) which has no bearing on profits, incomes, losses or assets of the enterprise is not an ‘international transaction’ u/s 92B(1) and not subject to transfer pricing The assessee issued a corporate guarantee to Deutsche Bank on behalf of its associated enterprise, Bharti Airtel (Lanka), whereby it guaranteed repayment for working capital facility. The assessee claimed that since it had not incurred any cost on account of issue of such guarantee, and the guarantee was issued as a part of the shareholder activity, no transfer pricing adjustment could be made. However, the TPO held that as the AE had benefited, the ALP had to be computed on CUP method. This was upheld by the DRP by relying on the retrospective amendment to s. 92B which specifically included guarantees in
  9. 9. 7 the definition of “international transaction”. On appeal by the assessee to the Tribunal HELD allowing the appeal: (i) A transaction between two enterprises constitutes an “international transaction” u/s 92B only if it has a bearing on profits, incomes, losses, or assets of such enterprises”. Even the transactions referred to in the Explanation to s. 92 B, which was inserted with retrospective effect (which includes giving of guarantees under clauses (c)), should also be such as to have a bearing on profits, incomes, losses or assets of such enterprise; (ii) The onus is on the revenue to demonstrate that the transaction has a bearing on profits, income, losses or assets of the enterprise. The said impact has to be on real basis, even if in present or in future, and not on contingent or hypothetical basis. There has to be some material on record to indicate, even if not to establish it to hilt, that an intra AE international transaction has some impact on profits, income, losses or assets; (iii) When an assessee extends assistance to the AE, which does not cost anything to the assessee and particularly for which the assessee could not have realized money by giving it to someone else during the course of its normal business, such an assistance or accommodation does not have any bearing on its profits, income, losses or assets, and, therefore, it is outside the ambit of international transaction u/s 92B (1). Maersk Global Centres (India) Private Limited, Vs. Asst. Commissioner of Income Tax I.T.A. No.7466/Mum/2012 Assessment Year: 2008-2009 The Special Bench of the Mumbai ITAT considering two issues held as under: Whether BPO companies can be compared with KPO entities The Tribunal held that IT enabled services cannot be further dissected into BPO and KPO services for the purposes of comparability analysis inter-alia in view of the following: i. Due to a broad range of activities in the ITeS sector and significant overlap between such services, no strict line of distinction can be drawn between low end BPO or high end KPO activities; ii. The upward shift of BPO industry in the value chain has resulted in emergence of KPOs and due to the mixed nature of both services, the artificial segregation or creation of a third ‘in-between’ category is not possible. Companies earning abnormally high profit margins as comparable companies: (i) Indian TP regulations deviate from the OECD guidelines by adopting the arithmetic mean instead of quartile range suggested by the OECD, which excludes outliers. (ii) Potential comparables cannot be excluded merely on the ground of abnormally high profits. (iii) Such abnormal margins should trigger further investigation and analysis to inter-alia ascertain whether such high profits reflect a normal business condition or arise from some abnormal conditions during the year; are there any differences in functions and if all comparability conditions are met by such potential comparables.
  10. 10. 8 SERVICE TAX Department cannot enforce demand in respect of reimbursement of expenses In case of Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India, 2013 Honorable Delhi High Court has held that service tax is not applicable on reimbursement of expenses incurred by Service Provider. Thereafter, department has filed appeal before Apex Court (C.A. No.2013/2014). Till date the issue related to taxability of reimbursements is pending before Apex Court however department is proceeding further in terms of Show Cause Notices as well as enforcing demand against service providers. Recently, aggrieved by various show cause notices issued by the Service Tax Department in terms of Section 67 of the Finance Act, 1994 read with Rule 5 (1) of the Service Tax (Determination of Value) Rules, 2004; petitioners has filed writ petitions before Honorable Delhi High Court (M/s. Balaji Mariline Pvt. Ltd. Versus Joint Commissioner, Service Tax, Commissioner of Service Tax 2014). In this case, referring the judgment of Delhi High Court in case of Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India, 2013, honorable Delhi High Court has directed Service Tax Department not to proceed further in terms of the impugned show cause notices or draw or enforce any demand against the petitioner. The court has also clarified that the Service Tax Department would, however, be at liberty to initiate proceedings in the event of and having regard to the final orders of the Supreme Court in the pending appeal. VALUE ADDED TAX Central Sales Tax (Delhi) [Amendment] Rules,2014 Reconciliation Return Rule 4 of CST (Delhi) Rules has been amended. In addition to the returns required under Rule 3, every dealer shall also furnish to the Commissioner, a Reconciliation Return for a year in Form 9 relating to receipt of declarations/certificates within a period of 6 months from the end of the year to which it relates. The return shall be filed electronically. The return may be revised by the end of the financial year next to which it relates. Amendment and Cancellation of Registration Certificate In the said rules, after Rule 10, Rule 10A has been inserted which provides that the application for cancellation of registration can be filed in Form 10 and application for amendment of registration can be filed in Form 11. Notification No.F.3(27)Fin.(Rev-I)2013- 14/DSVI/292 dated 5.03.2014 Online filing of information/return by using digital signature To facilitate the dealer/person to submit information/return etc. online by using digital signatures, the provisions contained In the Information Technology Act, 2000 and the rules made and directions given under the Information Technology Act. 2000 have been extended to the procedures under the Delhi Value Added Tax Act, 2004 and Delhi Value Added Tax Rules, 2005. Notification No.F.3(21)Fin/(Rev- I)/2013/DSVI/347 dated 26.03.2014
  11. 11. 9 Appropriate Government Treasury for collection of tax, interest, penalty or any other amount due under the Act The following banks located in the National Capital Territory of Delhi have been notified as the ‘Appropriate Government Treasury’ for collection of tax, interest, penalty or any other amount due under the Act or Central Sales Tax Act, 1956 from the dealers registered or liable to be registered under the Act, casual traders and contractees (TAN holders): 1. Allahabad Bank 2. Axis Bank 3. Bank of Baroda 4. Bank of Maharashtra 5. Canara Bank 6. Central Bank of India 7. Corporation Bank 8. HDFC Bank 9. ICICI Bank 10. IDBI Bank 11. Indian Bank 12. Indian Overseas Bank 13. Kotak Mahindra Bank 14. Oriental Bank of Commerce 15. Punjab & Sind Bank 16. Punjab National Bank 17. State Bank of India 18. Syndicate Bank 19. UCO Bank 20. Union Bank of India 21. United Bank of India 22. Vijaya Bank. Notification No.F.7(400)/Policy/VAT/2014/1387- 1398 dated 28.03.2014 CUSTOMS Conversion Rate for Foreign Exchange Rate of exchange of conversion of each of the following foreign currency into Indian currency or vice versa shall, with effect from 21st March, 2014 be the rate mentioned against it in the given tables: SCHEDULE-I S. No. Foreign Currency Rate of exchange of one unit of foreign currency equivalent to Indian rupees (For Imported Goods) (For Export Goods) 1. Australian Dollar 56.85 54.50 2. Bahrain Dinar 167.10 157.90 3. Canadian Dollar 55.10 53.75 4. Danish Kroner 11.55 11.15 5. EURO 85.65 83.65 6. Hong Kong Dollar 7.95 7.80 7. Kuwait Dinar 223.75 211.35 8. New Zealand Dollar 52.95 51.45 9. Norwegian Kroner 10.25 9.95 10. Pound Sterling 102.45 100.20 11. Singapore Dollar 48.60 47.55 12. South African Rand 5.80 5.45 13. Saudi Arabian Riyal 16.80 15.90 14. Swedish Kroner 9.70 9.40 15. Swiss France 70.35 68.60 16. UAE Dirham 17.15 16.20 17. US Dollar 61.75 60.75 SCHEDULE-II S. No. Foreign Currency Rate of exchange of 100 units of foreign currency equivalent to Indian rupees (For Imported Goods) (For Export Goods) 1. Japanese Yen 60.55 59.10 2. Kenya Shilling 73.00 68.85
  12. 12. 10 Notification No.24/2014-Customs (N.T.) dated 20th March, 2014 CASE LAWS Commissioner of Central Excise, Aurangabad v. Komal Enterprises, (2014) Credit allowed even if vendor has charged duty wrongly Recently, the CESTAT, MUMBAI BENCH in the case of Commissioner of Central Excise, Aurangabad v. Komal Enterprises, (2014) held that buyer is eligible to avail CENVAT Credit of duty charged by supplier irrespective of the fact that activity carried on by supplier does not amount to manufacture of goods. The assessee in the cited case was engaged in manufacture of springs and press pans for which he procured S.S.Wires from supplier. The supplier has paid duty on such wires and the appellant took credit of the duty paid. Department argued that supplier's process of drawing wire from wire rods did not amount to manufacture and, therefore, no duty was payable by supplier and, accordingly, no credit could be taken by assessee. Honorable Tribunal held that the supplier issued CENVATable invoices and paid duty thus as per rule 9 of CENVAT Credit Rules, 2004, assessee was entitled credit of duty paid. CCE Salem vs. Salem Starch & Mfr’s Service Indl. Co-op. Society Ltd., 2014 Clearing & Forwarding Agent Services The assessee society was receiving the goods from its member-manufacturers at its doorstep for auction sale to member merchants. It stored the products, tested its quality, provided a finance facility for the manufacturers by way of advances, sold the products on auction whereafter the buyer took delivery of the goods. The Court held that in absence of any responsibility to collect the goods from the manufacturer’s premises nor to arrange for dispatch to the buyer, the assessee cannot be held to be a clearing and forwarding agency. B. G. Shirke Construction Technology Pvt. Ltd. vs. CCE, 2014 Commercial or Industrial Construction service Sports Complex Stadium constructed for the purpose of holding games which was allowed to be used by the public later on, on payment of user charges is a public facility for the recreation of the public and it does not come under the category of commercial or industrial construction merely because some amount is charged for using the facility. Hence construction of sports stadium being a non- commercial construction is not liable for service tax under the category of “Commercial or Industrial Construction service”. Tandus Flooring India Pvt. Ltd. vs. CST 2014 Export of Service / Place of provision of service Where the applicant proposed to engage itself in providing Marketing and Sales Support Services to a US and Chinese companies for sale of their products in India, for which it was to receive monies in convertible foreign
  13. 13. 11 exchange, the Authority on Advance Ruling held that the place of provision service to be provided by the applicant would be outside India since the location of the service recipient is in China and US respectively (vide rule 3 of the Place of Provision Rules, 2012). Further, since the case met with the requirements of Rule 6A of Service Tax Rules, 1994, the applicants service would also be considered as “export” of service. FEMA A.P. (DIR Series) Circular No. 113 dated March 26, 2014 External Commercial Borrowings (ECB) for Civil Aviation Sector Vide A.P. (DIR Series) Circular No. 113 dated April 24, 2012, External Commercial Borrowings (ECB) can be raised by airline companies for working capital as a permissible end-use, under the approval route, subject to the conditions stipulated in the said Circular. The scheme was extended till December 31, 2013 vide A.P. (DIR Series) Circular No. 116 dated June 25, 2013. On a review and subject to all other conditions stipulated in aforesaid Circular dated April 24, 2012, remaining unchanged, it has been decided, vide this Circular, that this scheme of raising ECB for working capital for Civil Aviation Sector will continue till March 31, 2015. A.P. (DIR Series) Circular No. 114 dated March 27, 2014 Risk Management and Inter Bank Dealings Under the extant guidelines of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 (Notification No. FEMA/25/RB-2000 dated May 3, 2000) as amended from time to time and A.P. (DIR Series) circular no. 58 dated December 15, 2011, relating to hedging of currency risk of probable exposures based on past performance by residents: (a) Exporters are allowed to hedge currency risk on the basis of a declaration of an exposure up to an eligible limit computed as the average of the previous three financial years’ (April to March) actual export turnover or the previous year’s actual export turnover, whichever is higher. (b) Importers are allowed to hedge up to an eligible limit computed as 25 percent of the average of the previous three financial years’ actual import turnover or the previous year’s actual import turnover, whichever is higher. (c) All forward contracts booked under this facility by both exporters and importers are required to be on fully deliverable basis. In case of cancellation, exchange gain, if any, should not be passed on to the customer. Vide this circular, in order to provide greater operational flexibility, it has been decided to relax the restriction at paragraph (c) above. Henceforth, contracts booked up to 75 percent of the eligible limit mentioned at paragraph (a) and (b) above may be cancelled with the exporter/importer bearing/being entitled to the loss or gain as
  14. 14. 12 the case may be. Contracts booked in excess of 75 percent of the eligible limit mentioned at paragraph (a) and (b) above shall be on a deliverable basis and cannot be cancelled, implying that in the event of cancellation, the exporter/importer shall have to bear the loss but will not be entitled to receive the gain. A.P. (DIR Series) Circular No. 115 dated March 28, 2014 Merchanting Trade Transactions – Revised Guidelines By A.P. (DIR Series) Circular No. 95 dated January 17, 2014 the existing guidelines laid out in A.P. (DIR Series) Circular Nos.106 & 4 dated June 19, 2003 and July 19, 2003, respectively, were reviewed, in the light of the recommendations of the Technical Committee on Services / Facilities to Exporters under Chairmanship of Shri G. Padmanabhan, to further liberalise and simplify the procedure. In view of suggestions received from merchanting traders and trade bodies, the guidelines on merchanting trade transactions have been further reviewed and revised guidelines have been issued vide this circular. COMPANY LAW Below mentioned Rules have been notified by the Ministry of Corporate Affairs in relation to different chapters of the Companies Act, 2013, effective from 1st April, 2014: Sl. No . Respecti ve Chapter of the Compan ies Act, 2013 Subject Matter Date of Notification 01 Chapter 1 The Companies (Specification of definition details) Rules, 2014 27th March, 2014 02 Chapter 2 The Companies (Incorporation) Rules, 2014 30th March, 2014 03 Chapter 3 The Companies (Prospectus and Allotment of Securities) Rules, 2014 27th March, 2014 04 Chapter 4 The Companies (Share Capital and Debenture) Rules, 2014 27th March, 2014 05 Chapter 5 The Companies (Acceptance of Deposits) Rules, 2014 31st March, 2014 06 Chapter 6 The Companies (Registration of Charges) Rules, 2014 27th March, 2014 07 Chapter 7 The Companies (Management and Administration) Rules, 2014 27th March, 2014 08 Chapter 8 The Companies (Declaration and Payment of Dividend) Rules, 2014 27th March, 2014 09 Chapter 9 The Companies (Accounts) Rules, 2014 27th March, 2014 10 Chapter 10 The Companies (Audit and Auditors) Rules, 2014 31st March, 2014 11 Chapter 11 The Companies (Appointment and Qualification of Directors) Rules, 2014 27th March, 2014 12 Chapter 12 The Companies (Meeting of Board and its Powers) Rules, 2014 27th March, 2014 13 Chapter The Companies 31st March,
  15. 15. 13 13 (Appointment and Remuneration of Managerial Personnel) Rules, 2014 2014 14 Chapter 14 The Companies (Inspection, Investigation and Enquiry) Rules, 2014 31st March, 2014 15 Chapter 21 The Companies (Authorised to Registered) Rules, 2014 31st March, 2014 16 Chapter 22 The Companies (Registration of Foreign Companies) Rules, 2014 31st March, 2014 17 Chapter 24 The Companies (Registration Offices and Fees) Rules, 2014 31st March, 2014 18 Chapter 26 The Nidhi Rules, 2014 28th March, 2014 19 Chapter 29I The Companies (Adjudication of Penalties) Rules, 2014 28th March, 2014 20 Chapter 29II The Companies (Miscellaneous) Rules, 2014 28th March, 2014 Clarification with regard to section 180 of the Companies Act, 2013 [General Circular No 4/2014 dated 25/03/2014] It has been clarified by the Ministry of Corporate Affairs that the ordinary resolution passed under section 293 of the Companies Act, 1956 prior to 12.09.2013 with reference to borrowings (subject to the limits prescribed) and / or creation of security on the assets of the company will be regarded as sufficient compliance of the requirements of section 180 of the Companies Act, 2013, for a period of one year from the date of notification of said section 180. Commencement Notification of the Companies Act, 2013 [Reference No S.O(E) dated 26/03/2014] In exercise of the powers conferred by sub section (3) of section 1 of the Companies Act, 2013 (18 of 2013) the Central Government had notified 183 new sections of the said Act, on the 26th day of March, 2014, effective from 1st day of April, 2014. Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Amendment Rules, 2014 [Reference No G.S.R(E) dated 27/03/2014] In exercise of the powers conferred by sub- section (1) of section 642 read with sub-section (3) of section 205C of the Companies Act, 1956 (1 of1956), the Central Government had made the Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with Companies) Amendments Rules, 2014, effective from the 31st day of March, 2014. In order to amend the Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012 (hereinafter referred to as the said rules): 1. In rule 2 of the said rule, after clause(a), the following clause has been inserted namely: ‘(aa) “corresponding new Bank” means the corresponding new Bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and
  16. 16. 14 Transfer of Undertakings) Act, 1970 (5 of 1970)and clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. 2. In rule 3 of the said rules, after the words, figures and letter, “section 205C of the Act”, the following words, figures, letter and brackets have been inserted namely: “and corresponding new Bank shall with in a period of 90 days from the date of holding their Annual General Meeting every year, identify the money transfer to the Unpaid Dividend Account in pursuance of section 10B of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and section 10B Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, which remains unpaid or unclaimed for a period of seven years from the date of such transfer.” 3. In Form 5INV annexed to the said rules, for the word “company” wherever it occurs, the words “company and corresponding new Bank” shall be substituted. Investor Education and Protection Fund (awareness and protection of investors) Amendment Rules 2014 [Reference No G.S.R(E) dated 27/03/2014] In exercise of the powers conferred by sub- section (1) of section 642 read with sub-section (3) of section 205C of the Companies Act, 1956 (1 of1956), the Central Government had made the Investor Education and Protection Fund (awareness and protection of investors) Amendment Rules 2014, effective from the 31st day of March, 2014. In order to amend the Investor Education and Protection Fund (awareness and protection of investors) Rules, 2001 (hereinafter referred to as the said rules): 1. In rule 2 of the said rules, after clause (d), the following clause has been inserted namely: ‘(da) “corresponding new bank” means the corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980(40 of 1980):’ 2. In rule 3 of the said rules, in sub-rule (i), after the words “Any money required to be credited by the companies to the fund, as provided in the Act”, the following shall be inserted, namely: “and any money transferred to the Unpaid Dividend Account of a corresponding new bank in pursuance of section 10B of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and section 10B of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, which remains unpaid or unclaimed for a period of seven years from the date of such transfer” 3. In Form I annexed to said rules, for the word “company”, wherever it occurs, the words “company and
  17. 17. 15 corresponding new bank” shall be substituted. Nomenclature of various forms prescribed under the provisions of Companies Act, 2013. [Reference No: S.O(E) dated 27/03/2013] In order to facilitate easy understanding of the e-forms being rolled out under the provisions of Companies Act, 2013 and Rules made thereunder, the Ministry of Corporate Affairs had notified the nomenclature of various forms prescribed under the provisions of Companies Act, 2013 that are mandatorily numbered alpha-numeric unlike numbering of various forms under the Companies Act, 1956. Initial of forms is to be started with alphabet of two or three letters based on the subject of the Chapter, followed by serial number of the form. This will define the nature of the forms and would be easy to recognise. Online payment of stamp duty and court fee stamp for issue of certified copies [General Circular No 5/2014 dated 28/03/2014] With a view to identify and improve the component causing delay in issue of certified copies the Ministry has enabled payment of Stamp Duty as well as Court fee online through MCA Portal effective from 31st March, 2014. Amount of Court Fee shall be added to the MCA fee calculated by the system for getting Certified Copies based on the State in which the registered office of the company is situated. Stamp Duty for obtaining certified true copy would also be paid electronically through the system as per the existing process, which will be calculated based on document, number of copies requested and the State in which the registered office of the Company is situated. Roll out plan of various forms under the Companies Act, 2013 and continuance of forms under the provisions of Companies Act, 1956 [General Circular No 6/2014 dated 28/03/2014] In order to facilitate the completion of notified sections the Ministry has planned a staggered roll out of various forms. It has been decided to waive fees for all event based filing whose due date falls between 01/04/2014 to 30/04/2014. For the same, a separate Circular will be being issued by the Policy Cell of this Ministry. From 01/04/2014 to 14/04/2014 except existing e-forms mentioned in Table given herein below no other e-forms will be available for filing. Other Front office portal services will continue. From 01/04/2014 to 13/04/2014 the period will be used for clearing pending e-forms already filed under the provisions of Companies Act, 1956. Sl No. Old form Purpose of form 01 66 Form for submission of compliance certificate with the Registrar 02 14LLP Form for intimating to Registrar of Companies of conversion of the company into limited liability partnership (LLP). 03 20B Form for filing annual return by a company having a share capital with the Registrar
  18. 18. 16 04 21A Particulars of annual return for the company not having share capital 05 23AC Form for filing balance sheet and other documents with the Registrar 06 23ACA Form for filing Profit and Loss account and other documents with the Registrar 07 23ACA- XBRL Form for filing XBRL document in respect of Profit and Loss account and other documents with the Registrar 08 23AC-XBRL Form for filing XBRL document in respect of balance sheet and other documents with the Registrar 09 23C Form of application to the Central Government for appointment of cost auditor 10 23D Form for Information by Cost Auditor to Central Government 11 35A Information to be furnished in relation to any offer of a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company 12 A-XBRL Form for filing XBRL document in respect of compliance report and other documents with the Central Government 13 FTE Application for striking off the name of company under the Fast Track Exit(FTE) Mode 14 I-XBRL Form for filing XBRL document in respect of cost audit report and other documents with the Central Government 15 5-INV Transfer unpaid dividend amount to IEPF 16 21 Order of the court/authority till 14/04/2014 17 Refund Application for requesting refund of fees paid 18 Bank ACC Application for simplifying bank account opening process as user shall not be required to submit any physical application form. 19 Investor Complaint Form Form for filing complaint(s) against the company Table of Fees: Fee for filings etc. under section 403 of the Companies Act, 2013 [Circular dated 01/04/2014] Pursuant to rule 12 of the Companies (Registration of Offices and Fees) Rules, 2014 the Ministry of Corporate Affairs had notified a Table of fees for the documents required to be submitted, filed, registered or recorded or for any fact or information required or authorized to be registered under the Act, within the time specified in the relevant provision on payment of such fee as provided in the said Table. Commencement of provisions of the Companies Act, 2013 with regard to maintenance of books of accounts and preparations/adoption/filing of financial statements, auditors report, Boards report
  19. 19. 17 and attachments to such statements and reports- Applicability with regard to relevant financial year [General Circular dated 08/2014 dated 04/04/2014] Pursuant to the receipt of various requests for clarification with regard to the relevant financial year with effect from which such provisions of the new Act relating to maintenance of books of account, preparation, adoption and filing of financial statements (and attachments thereto), auditors report and Board's report will be applicable, the Ministry of Corporate Affairs had clarified that the financial statements (and documents required to be attached thereto), auditors report and Board report in respect of financial years that commenced earlier than 1st April, 2014 shall be governed by the relevant provisions/ Schedules/ rules of the Companies Act, 1956 and that in respect of financial years commencing on or after 1st April, 2014, the provisions of the new Act shall apply. TRANSACTIONS THAT MADE HEADLINES  Diageo makes fresh open offer to buy majority stake in United Spirits for up to $1.9B  Tata Steel selling Kiwi distribution arm for around $24M  OnMobile set to sell Voxmobili for up to $26M  Sun Pharma to buy Ranbaxy in $3.2B all-stock deal  Japan's Meidensha Corp buys 23% stake in Prime Electric  KEC sells its Thane land asset to Tata Housing for $35M  UPL sells entire stake in Brazilian agrochemical JV for $59M  Deal of the month: Taqa buying Jaypee Group’s two hydro power assets for $1.6B  Facebook to buy virtual reality goggles maker for $2B  Oberoi Realty to buy land in Mumbai from Tata Steel for $190M
  20. 20. www.spnagrath.com A-380, Defence Colony, New Delhi – 110024, India. This publication is intended as a service to clients and associates and to provide them with details of the important Transaction updates. It has been prepared for the general guidance on matters of interest only, and does not constitute professional advice. No person shall act upon the information contained in this publication without obtaining specific professional advice. Due care has been taken while compiling the information, however, no representation (express or implied) is given as to the accuracy or completeness of the information contained in this publication

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