A NOTE ON NEW COMPANIES ACT, 2013 The long awaited new Companies Act, 2013, after a lot of expectations and speculations, was finally notified in the Gazette of India. The new law, which is more comprehensive than its predecessor with 470 sections spread over 29 chapters and 7 schedules, replaces the six decade old Companies …
Amendments relating to service tax proposed in the Finance (No.2) Bill, 2014 as passed by the LokSabha on 25-7-2014, with relevant Notifications issued, are discussed as under. The date on which the amendments are effective are indicated against each clause. The Bill will be enacted when assented to by the President.
[A] RATE OF SERVICE TAX, PAYMENT OF TAX & INTEREST FOR DELAYED PAYMENT:
Note: In the case of a service provider, whose value of taxable services provided in a financial year does not exceed sixty lakh rupees, the aforesaid rate of interest shall be reduced by 3% (i.e., 15% or 21% or 27%).
[B] ALTERATION IN TAX BASE:
1) Alteration to Negative List of Services: The service tax base is broadened by removing the following services from the Negative List:
a) Till now, ‘radio taxis’ as well as ‘metered cab’ were covered by the negative list and hence not taxable. Now the definition of ‘metered cab’ is amended to exclude ‘radio taxis’. Thus, service by ‘radio taxi’ will now be taxable. The abatement available to ‘rent-a-cab’ service will be available to ‘radio taxi’ as well. This will bring service by ‘radio taxi’ at par with ‘rent-a-cab’ service. [Effective from date of Notification after enactment]
b) Currently, selling of space or time slots is taxable only for advertisements broadcast by radio & TV. Now the scope of taxability is expanded. After the amendment, only sale of space for advertisement in ‘print media’ will be covered by the negative list. The relief available to ‘Print media’ includes only book’ & ‘newspaper’. Business directories, yellow pages & trade catalogs which are primarily meant for commercial purposes are specifically excluded from the definition of `print media’ and hence sale of space therein will now be taxable. Sale of space or time slots for advertisements on internet websites, cell phones, bill boards & hoardings, conveyances, ATM’s, aerial advertising, theaters, etc. are now taxable. [Effective from date of Notification after enactment]
2) New Exemptions: [effective from 11-7-2014] The following services will now be exempt:
a) Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of such waste or processes incidental thereto.
b) Life micro-insurance schemes for the poor, approved by IRDA, where sum assured does not exceed Rs.50,000/-.
c) Specialized financial services received by RBI from outside India in relation to management of Forex reserves.
d) Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India.
e) Transport within India of organic manure and cotton (ginned or baled) by a vessel, or by rail or by road by a GTA.
f) Services by way of loading, unloading, packing, storage or warehousing of cotton (ginned or baled). Till now, exemption was restricted to such activities in relation to rice only.
3) Withdrawal & Alterations to Existing Exemptions: [effective from 11-7-2014]
a) Exemption to clinical research on human participants is withdrawn.
b) At present, all services provided by educational institutions [providing educational services specified in the negative list] to their students, faculty and staff does not attract service tax; this will continue. However, in respect of services received by such educational institutions, presently, exemption is being operated through the concept of ‘auxiliary educational services’. Several doubts & disputes had arisen in interpreting the scope and meaning of ‘auxiliary educational services’. To bring clarity, the concept of ‘auxiliary educational services’ is omitted. Now only specified services received by an eligible educational institution will be exempt:
In view of this rationalization, exemption extended so far in respect of renting of immovable property service received by educational institutions, stands withdrawn.
c) Exemption available to accommodation services having declared tariff of less than Rs.1,000/- per day is being redrafted. With this amendment, accommodation services provided by any entity, commercial or otherwise, will be covered by the exemption.
d) Exemption of transportation service to passengers by air-conditioned contract carriages (e.g. buses) stands withdrawn. Here contract carriage does not include a radio taxi.
e) Exemption to services provided to Government, a local authority or a Governmental authority will be limited to specific services by way of water supply, public health, sanitation conservancy, solid waste management and slum improvement/up gradation. Any other activity not directly connected in relation to the aforesaid functions will not be exempt. (more…)
An Indian Citizen who stays abroad for:-
Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens.
I. Who is a person of Indian Origin?
A. For the purpose of availing of the facilities of opening and maintenance of bank accounts and investments in shares/securities in India:
A foreign citizen (other than a citizen of Pakistan or Bangladesh) is deemed to be of Indian Origin, if
A spouse( not being a citizen of Pakistan or Bangladesh ) of an Indian citizen /Indian origin is also treated as a person of Indian origin provided the Bank accounts are opened or investments in shares/securities in India are made by such persons jointly with their NRI spouses.
B. For Investment in immovable properties:
A foreign citizen (other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri lanka or Nepal), is deemed to be of Indian origin if,
II. NON RESIDENT INDIANS UNDER INCOME TAX ACT:
The laws in this regard are quite complicated as these it does not define who is nonresident. Rather these define who is resident and who are not ordinarily resident. Therefore, if a person does not fall in the category of resident or not ordinarily resident, he / she will be non-resident.
III. RESIDENTIAL STATUS OF AN INDIVIDUAL
Residential status of an individual or HUF or a company is of great importance in Indian Income Tax Act as the liability to pay tax in India does not depend on the nationality or domicile of the Tax payer but on his residential status. Residential Status is determined on the basis of physical presence i.e. the number of days of stay in India in any year. There are three types of status based on the stay in India:-
A. Resident:
Stay in India for the above criteria may be continuous or intermittent.
2. A company is resident in India if:-
Section 123 of the Companies Act, 2013 requires every company to provide depreciation in accordance with the provisions of Schedule II. This section has come into force with effect from 1st April 2014 implying that the Companies will be required to compute depreciation in their financial statements for the year closing on 31st March 2015 in accordance with Schedule II.
In Companies Act, 1956, Section 205, required every company to provide for depreciation in accordance with Schedule XIV.
A. Major Changes:
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value.the useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity.
It does not define the term ‘residual value’. AS-6 on Depreciation in para 10 states as under:
“Determination of residual value of an asset is normally a difficult matter. If such value is considered as insignificant, it is normally regarded as nil. On the contrary, if the residual value is likely to be significant, it is estimated at the time of acquisition/installation, or at the time of subsequent revaluation of the asset. One of the bases for determining the residual value would be the realisable value of similar assets which have reached the end of their useful lives and have operated under conditions similar to those in which the asset will be used.”
B. Impact of Change
With the change in concept, in the first of year of change i.e. the current year each company will have to work out the useful life of each of the asset, whether it is more or less as given in Schedule II, the remaining of the useful life, carrying amount as on the last day of the previous year. The rate of the depreciation to be applied to each of the assets depending upon its remaining useful life will be required to be worked out.
C. Comparison
In the table below, useful life based on rates given in Schedule XIV of the 1956 Act and rates based on useful life given in Schedule II of the 2013 Act, has been given in respect of only those items where there is variation. (more…)
Mere book adjustment can’t be deemed as contravention of Sec. 269SS/269T Section 271D, read with sections 271E, 269SS and 269T, of the Income-tax Act, 1961 – Penalty – For failure to comply with section 269SS (Book adjustment) Making book adjustment of funds by assessee firm with sister concern without making payment of cash, could not …
Summary of changes made in Passed Finance Bill, 2015.
On April 30, 2015, the Lok Sabha passed the Finance Bill. The Bill which was presented originally in the Lok Sabha on February 28, 2015 is not passed in its original shape. Various changes have been made in the Bill. New amendments are proposed, some proposed amendments are removed, so on and so forth. A gist of all changes made in the Finance Bill, 2015 as passed by the Lok Sabha viz-a-viz the Finance Bill, 2015 as presented in the Lok Sabha are presented here.
MAT exemption extended to foreign companies.
The Finance Bill, 2015 presented originally proposed that long-term capital gains and short-term capital gains (on which STT is paid) arising to FIIs would be excluded from the chargeability of MAT. Further, expenditures, if any, debited to the profit and loss account, corresponding to such income would also be added back to the book profit for the purpose of computation of MAT.
Thus, the Finance Bill, 2015 proposed to provide relief from MAT only to FIIs without extending such relief to foreign companies. The foreign company would be liable to pay MAT on capital gains arising from transfer of securities and income arising from royalty, interest or FTS even if such income would not be chargeable to tax or taxable at lower rate in India by virtue of applicable double taxation avoidance agreements (‘DTAA’)or any provision of the Income-Tax Act.
The impact of such proposal would be that foreign companies would be liable to pay MAT even on that income which was exempt from tax by virtue of DTAAs or Income-tax Act.
Therefore, the Finance Bill, 2015 as passed by Lok Sabha proposes to provide relief from MAT to foreign companies as well.
Capital gains from transfer of securities, interest, royalty and FTS accruing or arising to foreign company has been proposed to be excluded from chargeability of MAT if tax payable on such income is less than 18.5%. Further, expenditures, if any, debited to the profit loss account, corresponding to such income shall also be added back to the book profit for the purpose of computation of MAT.
MAT exemption on notional gain arising on transfer of share of SPV.
The Finance (No. 2) Act, 2014 inserted clause (xvii) in Section 47 to provide that transfer of share of special purposes vehicle (‘SPV’) to a business trust in exchange of units allotted by that trust to the transferor shall not be regarded as transfer, thus, no capital gain would arise on such transaction.
The Finance Bill, 2015 as passed by Lok Sabha proposes to exclude the following from the chargeability of MAT:
A new clause is proposed to be inserted to re-compute the gains from transfer of said units (as referred to in point (c) above) which shall be added back for computation of MAT. It is proposed that the amount of gain from transfer of said units shall be computed by taking into account the cost of shares exchanged with units or the carrying amount of the shares at time of exchange where such shares are carried at a value other than the cost through profit & loss account.
Accordingly, notional loss arising from transfer of asset or notional loss arising from change in carrying amount of said units and actual loss from transfer of said units shall be added back to the book profit for the purpose of computation of MAT.
A new clause is proposed to be inserted to re-compute the loss from transfer of said units which shall be reduced from the book profit. It is proposed that the amount of loss from transfer of said units shall be computed by taking into account the cost of shares exchanged with units or the carrying amount of the shares at time of exchange where such shares are carried at a value other than the cost through profit & loss account.
Deduction under Section 80D in case of individual.
The Finance Bill, 2015 as presented originally omitted to propose amendment to clause (a) and clause (b) of sub-section (2) of Section 80D to enable assessee to claim deduction of Rs. 25,000 instead of Rs. 15,000. However, sub-section (4) of Section 80D was amended to allow deduction of Rs. 30,000 instead of Rs. 25,000 if individual or his family member or any of his parent is a senior citizen or very senior citizen.
Accordingly, it is proposed in the Finance Bill, 2015 as passed by the Lok Sabha that the existing deduction of Rs. 15,000 shall be substituted with Rs. 25,000. The following table highlights the deduction available to an Individual under Section 80D:
| Deduction in respect of | Individual and his family(none of them is a senior citizen) | Parents of Individual(none of them is a senior citizen) | Individual and his family(if senior citizen or very senior citizen) | Parents of Individual(if senior citizen or very senior citizen) |
| (a) | (b) | (c) | (d) | |
| ■ Health Insurance | 25,000 | 25,000 | 30,000 | 30,000 |
| ■ Contribution to CGHS | 25,000 | – | 25,000 | – |
| ■ Preventive health check-up | 5,000 | 5,000 | 5,000 | 5,000 |
| ■ Medical expenditure if no amount is paid in respect of health insurance | – | – | 30,000(only in case of very senior citizen) | 30,000(only in case of very senior citizen) |
| Maximum Deduction | 25,000 | 25,000 | 30,000 | 30,000 |
Note: Deduction for preventive health check-up of assessee, spouse, dependent children and parents shall not exceed in aggregate Rs 5,000.
Maximum deduction if individual or any member of his family and any of his parent is senior citizen or very senior citizen: Rs. 60,000 [ (c) + (d)]
Residential Status of a Company.
The Finance Bill, 2015 as presented earlier proposed to amend Section 6 to provide that a company shall be said to be resident in India if its place of effective management, at any time in that year, is in India. In other words, the concept of Control or Management (wholly in India) is replaced with Place of Effective Management (at any time in India).
The amendment proposed in the original Finance Bill, 2015 might have caused difficulty in establishing the place of effective management as a company might have place of effective management in more than one country at any point of time during the year.
Thus, the Finance Bill, 2015 as passed by the Lok Sabha has proposed to omit the words ‘at any time’ which shall have effect that a company shall be deemed to be resident in India if its place of effective management is in India
Filing of return is mandatory if assessee has foreign assets.
The Finance Bill, 2015 as passed by the Lok Sabha has proposed mandatory filing of return by a person, being a resident other than not ordinarily resident in India, who at any time during the previous year:
However, filing of return shall not be mandatory under this proviso for an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India, if income arising from such an asset is includible in the income of the person who is beneficial owner of such an asset. (more…)
REGISTRATION OF A COMPANY BY FILING JUST ONE FORM – OFFICIAL AMENDMENTS IN THE COMPANIES (AMENDMENT) BILL, 2014 ( INC-29: STARTING MAY 2015)
The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today gave its approval for moving of the following Official Amendments in the Companies (Amendment) Bill, 2014 :-
These Official Amendments will address issues related to ease of doing business and put in place a speedier process for approval of draft notifications for providing exemptions etc. from specific provisions of the Act to a class of companies.
INC-29: Starting May 2015, Registration of a company by filing just one form.
As one of the biggest reform in the process of setting up company in India, MCA recently in its webcast announced the introduction of a new e-form INC-29, for filing application for registering a company. So now instead of filing e-forms DIN-3, INC-1, INC-7/2, INC-22 & DIR-12, we can only file form INC-29. It is a single form in place of 5 forms. The e-form is scheduled to be introduced w.e.f 1st May 2015.
It is to be noted that with the introduction of INC-29, the existing e-forms i.e. DIN-3, INC-1, INC-7/2, INC-22, DIR-12, will continue to function as it is. The single form facility will be in addition to the current process of registering a company.
Apart from e-form 29, MCA is also going to introduce e-form 30 & 31 for filing Memorandum of Association & Articles of Association.
So now a company can be registered in the following 2 ways:
| 1st Option- the regular route: | 2nd option- the faster route |
Filings:
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Filings:
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Companies (Amendment) Bill, 2014 The Union Cabinet today gave its approval for moving of the following Official Amendments in the Companies (Amendment) Bill, 2014 :- Doing away with the requirement for filing a declaration by a company before commencement of business or exercising its borrowing powers and rationalizing the procedure for laying draft notifications granting exemptions …
Required documents before the start of the Secretarial Audit Following List of first set of required documents from the client before the start of the Secretarial Audit :- Latest Annual Report and Memorandum of Association & Articles of Association. Notice of all the Meetings with email Copy send to the Directors of the Company. Minutes …
Mere liquidation of shares in short span of time doesn’t mean that assessee was doing business in shares Section 45, read with section 28(i), of the Income-tax Act, 1961 – Capital gains- Chargeable as – Business income vs Capital gains – Shares dealings Circulars and Notifications: Circular No. 4/2007, dated 15-6-2007. Where assessee made investment in …