LEGAL UPDATES /DECISIONS 1. DIRECT TAXES UPDATE Compiled by : CA. Haresh P. Kenia SECTION 194A OF THE INCOME-TAX ACT, 1961, READ WITH RULES 31A AND 37BA, OF THE INCOME-TAX RULES, 1962 - DEDUCTION OF TAX AT SOURCE - INTEREST OTHER THAN INTEREST ON SECURITIES - TDS ON INTEREST ON DEPOSITS MADE UNDER CAPITAL GAINS ACCOUNTS SCHEME, 1988 WHERE DEPOSITOR HAS DECEASED NOTIFICATION NO.8/2017, DATED 13-9- 2017 It has been brought to the notice of CBDT that in cases of deceased depositor who has made deposits under the Capital Gains Accounts Scheme, 1988; the banks are deducting TDS on the interest earned on such deposits in the hands of the deceased depositor and issuing TDS certificates in the name of the deceased depositor, which is not in accordance with the law. Ideally in such type of situations, the TDS certificate on the interest income for and upto the period of death of the depositor is required to be issued on the PAN of the deceased depositor and for the period after death of the depositor is required to be issued on the PAN of the legal heir. Under sub-rule (5) of Rule 31A of the Income-tax Rules, 1962, the Director General of Income-Tax (Systems) is authorized to specify the procedures, formats and standards for the purposes of furnishing and verification of the statements or claim for refund in Form 26B and shall be responsible for the day-to-day administration in relation to furnishing and verification of the statements or claim for refund in Form 26B in the manner so specified. In exercise of the powers delegated by the Central Board of Direct Taxes (Board) under sub-rule (5) of Rule 31A of the Income-Tax Rules, 1962, the Principal Director General of Income-Tax (i) (ii) (Systems) hereby specifies that in case of deposits under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased: TDS on the interest income accrued for and upto the period of death of the depositor is required to be deducted and reported against PAN of the depositor, and TDS on the interest income accrued for the period after death of the depositor is required to be deducted and reported against PAN of the legal heir, unless a declaration is filed under sub-rule(2) of Rule 37BA of the Income-tax Rules, 1962 to that effect. SECTION 90, READ WITH SECTIONS 90A AND 139, OF THE INCOME-TAX ACT, 1961 AND RULES 12 AND 128 OF THE INCOME- TAX RULES, 1962 - DOUBLE TAXATION RELIEF - FOREIGN TAX CREDIT - PROCEDURE FOR FILING STATEMENT OF INCOME FROM A COUNTRY OR SPECIFIED TERRITORY OUTSIDE INDIA AND FOREIGN TAX CREDIT NOTIFICATION NO.9 [DGIT(S)-ADG(S)-3/ E-FILING NOTIFICATION/FORM 67/2017, DT 19-9-2017 Foreign Tax Credit. An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in rule 128 of the Income Tax (18th amendment) Rules, 2016. As per sub-rule (9) of rule 128 the statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of 22
VOL. 21 NO. 5 / NOVEMBER 2017 income. In exercise of the powers delegated by Central Board of Direct Taxes ( Board ) under rule 12(4) of the Income Tax Rules, 1962, the Principal Director General of Income-Tax (Systems) hereby lays down the following procedures: Online filing of Form 67: 1. All assessee s who are required to file return of income electronically under section 139(1) as per rule 12(3) of the Income Tax Rules 1962, are required to prepare and submit Form 67 online along with the return of income if credit for the amount of any foreign tax paid by the assessee in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India. Preparation and Submission of Form 67 2. Form 67 shall be available to all the assessee s login. The assessee is required to login into the e- filing portal using their valid credentials. A link for filing the Form has been provided under e- File! Prepare and Submit Online Forms (Other than ITR). Select Form 67 and assessment year from the drop down. Instructions to fill the form are enclosed along with the form. The completed Form 67 can be submitted by clicking on Submit button. Digital Signature Certificate or Electronic Verification Code is mandatory to submit Form 67. 3. Submission of Form 67 shall precede filing of return of income. MISCELLANEOUS - LODGING OF TAX ARREAR CLAIMS AND IMPLEADING AS A PARTY BEFORE NCLTs LETTER [F.NO.ADDL.DIT(R)/BIFR/2017-18/8/733], DATED 20-9-2017 Previously the sick companies used to move Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The BIFR had its benches only at Delhi. This Act has been repealed now w.e.f 1-12-2016. The cases of sick companies are now governed by Insolvency and Bankruptcy Code 2016 (IBC- 2016) adjudicated by National Company Law Tribunal(NCLT) having 11 Benches at New Delhi (two benches), Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai. The appeals against the orders of these benches can be filed before National Company Law Appellate Tribunal (NCLAT) at Delhi. Recently, a case has come to the notice wherein the Hyderabad Bench of NCLT has passed an order under sections 30(6) and 31 of IBC-2016 allowing various reliefs under the Income-Tax Act without even making the Department a party to the dispute. The steps to contest the same are being initiated separately. Subsequently the website of Insolvency and Bankruptcy Board of India (www.ibbi.gov.in) has been accessed and it is found that public announcements with regard to initiation of Resolution Process, Voluntary Liquidation Process and Liquidation Process have been made in 287, 29 and 4 cases respectively as of now. Under the provisions of IBC 2016, the NCLT is required to make a public announcement for resolution/insolvency of the sick company (called corporate debtor under IBC-2016) for submission of claims under section 15 of IBC- 2016. You are requested to direct the Assessing Officers having jurisdiction over these cases to notify the demands due from these sick companies to the Resolution Professionals/ Insolvency Professionals (details of whom are also available on the website) immediately. Simultaneously a request to the NCLT should also be made for impleading the Department as a party to the case in case any other reliefs under the Income-tax Act are envisaged in the Resolution Plan. A request to Ministry of Corporate Affairs/NCLT/ IBBI for notifying the Department in every such case is being moved separately so that the need to identify such cases on one to one basis is obviated. As this is likely to take some time, the field officers may be directed to regularly access the site of www.ibbi.gov.in so as to prevent any delay in future. 23
2. UPDATE ON SEBI AND CORPORATE LAW Compiled by : SEBI CA. Neha Gada CA. Rajen Gada A. CIRCULARS 1. Integration of broking activities in Equity Markets and Commodity Derivatives Markets under single entity MIRSD/MIRSD1/CIR/P/2017/104 dated September 21, 2017] On account of the Integration, FMC restriction with regard to usage of the words Stock, Shares and Securities in their name by commodity broker stands withdrawn. Also, authorisation for adjustment of funds among stock exchange and commodity exchange will not be applicable if such adjustment is within the same broking entity. 2. Schemes of Arrangement by Listed Entities and (ii) Relaxation under Sub-rule (7) of Rule 19 of the Securities Contracts (Regulation) Rules, 1957, 2017 Board of India vide Circular No. CFD/DIL3/ CIR/2017/105 dated September 21, 2017] SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017, laying down the procedure for Scheme of Arrangments has been amended to bring it in line with Securities Contract Regulation Rules. 3. Clarification to Enhanced Supervision Circular Board of India vide Circular No. CIR/HO/ MIRSD/MIRSD2/CIR/PB/2017/107 dated September 25, 2017] SEBI has amended the requirement wherein brokers had to upload client data to the Stock exchanges. 4. Prevention of Unauthorised Trading by Stock Brokers Board of India vide Circular No. CIR/HO/ MIRSD/MIRSD2/CIR/P/2017/108 dated September 26, 2017] With effect from Jainuary 1, 2018, Stock Brokers will be required to keep evidence of the client placing such order, it could be, inter alia, in the form of: (a) Physical record written & signed by client; b.telephone recording; (c) Emailfrom authorized email id; (d) Log for internet transactions; (e) Record of SMS messages; and (f) Any other legally verifiable record. 5. Foreign Portfolio Investment in Corporate Debt Securities IMD/FPIC/CIR/P/2017/112 dated September 29, 2017] SEBI has introduced imperfect hedging of debt portfolios of Mutual funds and has prescribed exposure limits and disclosures requirements for the same. 6. Categorization and Rationalization of Mutual Fund Schemes IMD/DF3/CIR/P/2017/114 dated October 6, 2017] SEBI has decided to categorise and rationalize all open ended scheme, whether existing or where comments have been received from SEBI or where the documents have been filed and are awaiting comments from SEBI or are in the process of being filed. The categorization is based on type of scheme i.e. Equity, Debt, Hybrid, Solution Oriented or Other Scheme. Further, Large Cap, Mid Cap and Small Cpa have also been defined. 7. Non-compliance with the Minimum Public Shareholding (MPS) requirements 24
VOL. 21 NO. 5 / NOVEMBER 2017 Board of India vide Circular No. CFD/CMD/ CIR/P/2017/115 dated October 10, 2017] With regard to the Companies not maintaining MPS, SEBI has laid the procedure for action to be taken by the Stock Exchanges against these defaulting companies, the quantum of fine to be levied and the action to be taken against the promoters and directors of such defaulting companies. 8. Criteria for Settlement Mode of Commodity Derivative Contracts CDMRD/DMP/CIR/P/2017/116 dated October 16, 2017] SEBI has enlisted the scenarios in which cash settlement of delivery contract may be undertaken over physical delvery. 9. Securities and Exchange Board of India (International Financial Services Centres) Guidelines, 2015 Amendments MRD/DSA/CIR/P/2017/117 dated October 17, 2017] The Guidelines have been amended to allow any entity, either in India or abroad, to form a Company in IFSC to act as a trading member of a stock exchange and/or a clearing member of a clearing corporation in IFSC. For further details, please refer SEBI website at www.sebi.gov.in. CORPORATE LAW A. NOTIFICATIONS 1. Commencement of proviso to section 2(87) of Companies Act, 2013 vide notification no. S.O. 3086(E) dated September 20, 2017] The definition of subsidiary as defined in section 2(87) of the Companies Act, 2013 have come into effect from September 20, 2017. 2. Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2017 vide notification no. S.O. 1267 (E) dated October 13, 2017] The Rules have been amended for laying down the procedure for transfer of unclaimed shares to the Investor Education Protection Fund. 3. Notification for Commencement of section 247 of Companies Act 2017 vide notification no. S.O. (E) dated October 18, 2017] The provisions of section 247 of the Companies Act, 2013 with regard to Valuation by registered valuers have come into effect from October 18, 2017. 4. Notification for delegation of powers under section 247 of CA 2013 to Insolvency and Bankruptcy Board of India vide notification no. S.O. (E) dated October 23, 2017] The Central Government has delegated its power and function under section 247 of the Companies Act, 2013 with regard to Valuation by registered valuers to the Insolvency and Bankruptcy Board of India. B. RULES 1. Companies (Acceptance of Deposit) Second Amendment Rules, 2017 vide notification no. G.S.R. 1172(E) dated September 19, 2017] The Rules have been amended to allow Special IFSC Public and private companies to undertake 25
borrowing and limits have been prescribed for such borrowings. 2. Companies (Restriction on number of layers) Rules 2017 vide notification no. G.S.R. 1176(E) dated September 20, 2017] This states that no company shall have more than 2 layers of subsidiaries except Banking Companies, Non -Banking Finance Company, Insurance Company and Government Company. It has also laid down the manner of computation of layers. 3. Companies (Registered Valuers and Valuation) Rules, 2017 vide notification no. G.S.R. (E) dated October 18, 2017] MCA has notified The (Registered Valuers and Valuation) Rules, 2017 which deals with various aspect of registered valuer and valuation such as Eligibility, Qualifications And Registration Of Valuers, Recognition of Registered Valuers Organisations, Eligibility for Registered valuers, Cancellation or Suspension of certificate of registration or recognition, Valuation standards. The rules have provided Model Code Of Conduct for Registered Valuers. C. CIRCULARS 1. Transfer of Shares to IEPF Authority vide General Circular No. 12/2017 dated October 16, 2017] The Circular provides for the manner of transfer of shares into the demat account maintained with NSDL and CDSL and unpaid dividend, etc. on such shares into the account of Punjab National Bank. 2. Relaxation of additional fees and extension of last date of filing of AOC-4 XBRL E- Forms using Ind AS under the Companies Act, 2013 vide General Circular No. 13/2017 dated October 26, 2017] The due date for filing of Form AOC-4 XBRL eform for Companies which have prepared based on IND-AS has been extended to March 31, 2018 without payment of any additional fees. 3. Relaxation of additional fee and extension of last date of filing of AOC-4 and AOC-4 (XBRL non-indas) under the Companies Act,2013 vide General Circular No. 14/2017 dated October 27, 2017] The due date for filing of Form AOC-4 and AOC- 4 (XBRL non-indas) eforms for Companies which have prepared based on IND-AS has been extended to November 28, 2018 without payment of any additional fees. For further details, please refer MCA website at www.mca.gov.in Our Association s mouthpiece News & Views has readership circulation of more than 1250 chartered accountant and student members. We have now started accepting advertisement for staff vacancy. In case you have any vacancy at your office or at any of your client for qualified chartered accountants or students or any administrative job, we will publish your requirement in the Journal. This will be at very nominal cost of Rs. 1,500 for quarter page advertisement per issue. We will be taking advertisement on first cum first serve basis. Kindly contact CVO CA Office on +91-22- 24105987 and speak to Vaibhavi for more details. 26