Finance Bill, 2015 was passed in Lok Sabha on 30.04.2015 with certain amendments via a notice of amendment dated 30.04.2015. In this article, I have covered some of the amendment in Provisions related to Direct Taxes. Lok Sabha approves Finance bill 2015 –
1. Mat Exemption to Foreign Companies
In the original bill, it was provided to only FII. 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 a foreign company has been proposed to be excluded from changeability 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.
2. MAT exemption on notional gain arising on transfer of share of SPV
A new clause is proposed to be inserted to recompute the gains from transfer of said units 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 the time of exchange where such shares are carried at a value other than the cost through profit & loss account.
Accordingly, notional loss arising from the transfer of an asset or notional loss arising from a change in carrying a number of said units and actual loss from the transfer of said units shall be added back to the book profit for the purpose of computation of MAT.
3. Deduction under Section 80D in case of individual
The Finance Bill, 2015 as presented originally omitted to propose an amendment to clause (a) and clause (b) of subsection (2) of Section 80D to enable assessee to claim a deduction of Rs. 25,000 instead of Rs. 15,000. However, subsection (4) of Section 80D was amended to allow deduction of Rs. 30,000 instead of Rs. 25,000 if an individual or his family member or any of his parent is a senior citizen or very senior citizen.
4. 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). Thus, the Finance Bill, 2015 as passed by the Lok Sabha has proposed to omit the words ‘at any time’ which shall have the effect that a company shall be deemed to be resident in India if its place of effective management is in India.
5. 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:
(a) holds, as a beneficial owner or otherwise, any asset (including financial interest in any entity) located outside India or has signing authority in any account located outside India; or
(b) is a beneficiary of any asset (including any financial interest in any entity) located outside India. However, the 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 a beneficial owner of such an asset.
6. Subsidies are no longer capital receipts
To end the dispute, it is proposed to amend the definition of ‘Income’ under Section 2(24) in the Finance Bill, 2015 as passed by the Lok Sabha. A new subclause (xviii) is proposed to be inserted in Section 2(24) to provide that assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assesse [other than one considered under Explanation 10 to Section 43(1)] would be included in assessee’s income. Thus, any subsidy which is not reduced from the actual cost of the asset in view of provisions of Explanation 10 to Section 43(1) shall be taxable as revenue receipts of the assessee
7. Bad debts could be claimed without writing off debt in books of account
In order to remove this anomaly, it is proposed in the Finance Bill, 2015 as passed by the Lok Sabha that bad debts could be claimed without writing off in books of account if the amount of debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and disclosure standard notified under section 145(2) without recording the same in the accounts. Thus, Section 36(vii), once again, proposed to be amended to get back to original position (i.e., the position that stood till Assessment Year 198889) but to a limited extent
8. Interest on loan is taken for acquisition of an asset could only be capitalized till the asset is first put to use
The Finance Bill, 2015 as passed by Lok Sabha proposes to remove this distinction in allowability of interest in the case of existing business and in the case of extension of existing business. It proposes to remove the words “for extension of existing business or profession” from proviso to Section 36(1)(iii). Thus, it is proposed that interest on borrowings used for the acquisition of asset till the asset is put to use shall not be allowed as a deduction in any case.
9. Determination of period of holding and cost of acquisition in case of shares acquired on redemption of GDRs
It is proposed that cost of acquisition of shares acquired by a non-resident on redemption of GDRs shall be the price of such shares as prevailing on any recognized stock exchange on the date on which a request for redemption is made by the assessee.
10. Additional Depreciation and Investment Allowance allowed to industries set up in Bihar and West Bengal
The Finance Bill, 2015 as presented on February 28, 2015 proposed to allow higher additional depreciation at the rate of 35% (instead of 20%) in respect of the actual cost of new machinery or plant acquired and installed by a manufacturing undertaking or enterprise setup in the notified backward area of the State of Andhra Pradesh and the State of Telangana. The Finance Bill, 2015 as passed by the Lok Sabha proposes to extend the benefit of additional depreciation and investment allowance to the manufacturing undertaking or enterprise setup in the notified backward area of State of Bihar and State of West Bengal as well.
Distributing gifts at shareholders’ meet will attract fine now
Distribution of gifts at shareholders’ meet will soon be a thing of past as the government brings in stringent norms to strengthen corporate governance practices and curb misdoings.
The elaborate and stringent secretarial standards, to be effective from July 1, would also require companies to explain clearly the “objectives and implications” of resolutions that are put for voting by shareholders.
The standards, which have been put in place after extensive deliberations involving various stakeholders, would be compulsory and corporates that fail to comply with these norms could even face penalties under the Companies Act, 2013.
“No gifts, gift coupons, or cash in lieu of gifts shall be distributed to members at or in connection with the meeting,” according to the Secretarial Standard on General Meetings.
The norm would be applicable to all types of general meetings as well as those of debenture holders and creditors of registered companies in the country.
These standards have been prepared by the Institute of Company Secretaries of India (ICSI). After approval from the Corporate Affairs Ministry, the same have been notified.
In a move that would help curb instances of dubious deals, a notice sent to shareholders would have to clearly explain in detail each item for which approval is sought by the companies.
The explanatory statement should list out all the facts that would enable the member to understand the “meaning, scope and implications” of the particular item of business.
Further, there should be quorum through the meeting. With regard to directors who are absent, the chairman would have to explain the same to the concerned members.
Among others, every listed company have to prepare a report on the annual general meeting and the same has to be submitted to the Registrar of Companies.
With respect to board meetings, the draft minutes should be circulated to all the members of the board for their comments within 15 days from the date of conclusion of the meeting.
Around 8 lakh companies in the country would have to comply with these secretarial standards to be fully compliant under the Act.
Form INC-29 Fast Track Company Registration
To simplify and fast track the procedure for company registration in India, the Ministry of Corporate Affairs (MCA) has introduced Form INC-29 – Integrated Incorporation Form. Form INC-29 Company Registration has merged the process of getting Director Identification Number (DIN), Name Approval and Incorporation application into one single process – thereby significantly reducing the time taken to start a company in India. We look at the Form INC-29 and the procedure for fast track company registration in India using Form INC-29.
E-Form INC-29 deals with the single application for reservation of name, incorporation of a new company and/or application for allotment of DIN. This E-Form is accompanied by supporting documents including details of Directors & subscribers, MoA and AoA etc. Once the E-Form is processed and found complete, a company would register. Also, DINs gets issued to the proposed Directors who do not have a valid DIN. Maximum three Directors are allowed for using this integrated form for allotment of DIN while incorporating a company.
The following types of companies can be registered using Form INC-29:
- Private Limited Company
- One Person Company
- Limited Company
- Producer Company
Following is the procedure:
Step 1: Obtain Digital Signature
To file Form INC-29, the digital signature of one of the Directors will be required. Hence, Digital Signature must be obtained for one of the proposed Directors of the Company. Class 2 Digital Signature will be required for filing form INC-29 and digital signature can be obtained from IndiaFilings.com.
To obtain Digital Signature, the signed Digital Signature form along with a self-attested copy of PAN Card and Address Proof must be submitted.
Step 2: Prepare Form INC-29
Along with the application for Digital Signature Certificate, Form INC-29 can also be prepared as follows:
Director cum Subscribers having DIN Number
In case there is any Director cum Subscriber who already possess DIN, then the DIN Number of that person can be entered in the appropriate field.
Directors cum Subscribers NOT having DIN Number
In case there is any Director cum Subscriber who does not have DIN, then the DIN application can be made in the Form INC-29 itself by submitting the following information and documents:
- Personal Details, Occupational Details and Educational Qualification
- PAN Number – In case of Indian National
- Passport Number – In case of Foreign National
- Email Address of the Director
- Address information of the Director
- Proof of Identity – Voters ID Card / Driver’s License / Passport / Aadhar Card
- Proof of Address – Bank Statement / Electricity Bill / Telephone Bill / Mobile Bill
Name of the Company
Only one name can be provided while using INC Form 29. Therefore, it is important that the name provided be strictly in accordance with the Guidelines for Naming a Company, as per Companies Act, 2013. In case the proposed name is not accepted while using Form INC-29, then the application would be rejected and many of the incorporation documents would have to be freshly prepared.
The following are important points to be kept in mind while applying for name using Form INC-29:
- Is the proposed company name provided as per Companies Act, 2013 in the correct format?
- Are any of the subscribers carrying on business in the same name with a Proprietorship or Partnership?
- Does the proposed company name contain the name of any blood relative?
- Does the proposed company name require any approval from Sectoral Regulator like RBI or SEBI or others?
- Is the proposed company name identical or similar to an existing company name or LLP name of the foreign company name?
- Is the proposed company name identical or similar to a filed or registered trademark?
Incorporation Documents to be attached with Form INC-29
The following incorporation documents must be prepared, signed by the Directors/Subscribers and attached with Form INC-29.
1. Memorandum of Association (MOA)
2. Articles of Association (AOA)
3. Affidavit and declaration by first Subscribers and Directors.
4. Proof for Registered Office Address. – Rental Agreement / Sale Deed.
5. Copies of a utility bill of the registered office address that are not older than 2 months.
6. If the proposed company name is a filed or registered trademark, then NOC from the trademark applicant or owner must be attached.
In addition to the above documents, additional documents may have to be attached on a case to case basis.