The Institute of Chartered Accountants of India (ICAI) has terminated the membership of the auditors, internal auditors & accountants of Satyam Computer Services for whole life. The institute has also imposed a fine of Rs 5 lakh on each of them. This is maximum punishment the ICAI can award for such misconducts.

In order to give autonomy to the Public Sector Banks(PSBs) on the issue of selection and appointment of Statutory Central Auditors (SCAs), the work of selection and appointment of SCAs henceforth, has been delegated to individual PSBs for the year 2014-15 on wards.

Delisting

• Delisting and buyback offer should be done through exchanges
• At least 25% of the total number of public shareholders will have to be sought by Cos
• Offer price will be based on an average of promoters' offer price and investors' tender price with a threshold of 90% of equity
• Promoter cannot make a delisting offer if group entity has sold shares within 6 months of the board meeting to decide delisting
• Option to the acquirer to delist directly through Delisting Regulations pursuant to triggering takeover regulations provided.

The NSE (National Stock Exchange) has put in place a system to register a complaint on its website. Investors/public has the option to provide details on the matter either anonymously or otherwise on violations/manipulations by market participants that may adversely affect the market quality and integrity.

Market regulator SEBI has mandated the appointment of Company Secretary as compliance officer for the purpose of the newly- framed listing regulations. The latest SEBI requirement widens the area of responsibilities of a Company Secretary and makes him solely responsible for compliance of listing regulations, according to capital market observers.

The Supreme Court has held that the Board for Industrial and Financial Reconstruction (BIFR) will continue to have jurisdiction over any sick company referred to the agency even if its net worth becomes positive. The board is also the sole authority to decide whether or not such a company can be moved out of its supervision, the court observed.

The Madras High Court last week ruled that subordinate courts cannot invoke the Contempt of Court Act to punish a person disobeying judicial orders. That power belongs only to the Supreme Court and the High Courts.

It is clarified by Minstry of Corporate Affairs (MCA) that the provisions related to prospectus and allotment of securities under the new companies law will not be applicable to foreign currency bonds that are issued exclusively to persons residing outside India. New FCCBs guidelines are being worked out by the ministry.

The Supreme Court has said that the revival of a sick company will take precedence over recovery proceedings. The provisions of the Sick Industrial Companies Act (SICA), 1985, will prevail over the Recovery of Debts Due to Banks and Financial Institutions (RDBB) Act, 1993, said a three-judge bench, headed by chief justice of India HL Dattu.

The new land acquisition law has given a severe blow to governments which issue notifications of take-over, but do nothing for years and even deny payments to the land owners. If the delay is more than five years, even if caused by stay orders from courts, the acquisition will lapse.

In a big relief to commodity futures market players, the government has exempted commodities kept in regulated warehouses from the purview of stock limits imposed by state governments to curb hoarding under the Essential Commodities Act.

The Government has tabled the Companies (Amendment) Bill before the Parliament. The bill proposes punishment for illegal money pooling activities, amid rising instances of people getting duped by such fraudulent schemes. Besides, the changes pertain to related party transactions, fraud reporting by auditors, public inspection of board resolutions, responsibilities of audit committee, requirement of minimum paid-up share capital and strengthening of benches for hearing winding up cases. Amendments have been proposed with regard to restrictions on bail, making common seal optional and jurisdiction of special courts to try offences.

Mobile phone operators like Vodafone, Reliance Communications and Idea will not be able to claim credit for the excise duty paid on the items used in their towers to meet the final service charge liability with the Central Board of Excise and Customs (CBEC) asking all field officers to deny the facility.

Punjab: Tax only at first point of sales for TVs, cold drinks, refrigerators, etc
Gujarat: Limited input tax credit, none on naphtha
Kerala: Turnover tax of 2% on textiles
Tamil Nadu: Input tax credit only within the state
Maharashtra: No input tax credit on crude oil

It is clarified that in each of the below mentioned three situations, the limitation of six months would apply when the credit is taken for the first time. It would not apply for taking re-credit of amount reversed in case of the following:

• If the payment of value of input service and service tax payable is not made within three months of date of invoice, bill or challan, then the CENVAT Credit availed is required to be paid back by the manufacturer or service provider. Subsequently, when such payment of value of input service and service tax is made, the amount so paid back can be re-credited.
• According to Rule 3(5B) of CCR, 2004, if the value of any input or capital goods before being put to use on which CENVAT Credit has been taken, is written off or such provisions made in Books of Account, the manufacturer or service provider is required to pay an amount equal to credit so taken. However, when the inputs or capital goods are subsequently used, the amount so paid can be re-credited in the account.

Section 40A(2) - Excessive or unreasonable payments of Salary to director 
The High Court of Delhi has held that where due to efforts of director of assessee-company, business of assessee had increased substantially and he was assisting assessee in its new hotel project, excessive salary payment to him was reasonable.

The Income Tax Appellate Tribunal (ITAT) has clarified that money paid under the consent decree mechanism to settle disputes is permissible as business expenditure and cannot be equated to penalty levied for breaching law.

What the case is all about: It relates to the issue of 8.7 crore shares by Shell India Markets Pvt Ltd to its overseas parent company Shell Gas BV in March 2009. The shares were issued at RS 10 a share, which the income-tax authorities contested and pegged higher at Rs180 a share. The I-T Department charged Shell India of under-pricing a share transfer within the group by Rs 15,220 crore, and consequently evading taxes.

How the case evolved: Shell India moved the Bombay High Court contesting that the issue of shares was capital transaction and out of the transfer pricing bracket.

The High Court ruled in favour of Shell. The order will have an impact on other multinationals fighting the tax department on similar grounds. The government is not likely to appeal further, in line with its decision to reduce tax litigation. Vodafone case was also decided in favour of tax payer, which had similar facts.

A single consolidated view of all investments made by a person in mutual funds and other securities held in demat form would be provided from March 2015. AMCs/MF-RTAs (Asset Management Companies/ Mutual Fund-Registrar & Transfer Agents) would have to provide the data with respect to the common PANs to the depositories within three days from month end.

Mitsui, Toyota and Marubeni are likely to be among Japanese companies that would sign the first set of bilateral advance-pricing agreements (APA) with India shortly. These agreements will provide certainty to Japanese multinational firms operating in India and avoid conflicts over sharing of taxes between India and that country.

What is an APA?

An agreement between a taxpayer and the tax authority over the methodology to be used for computing the arm's-length price of transactions carried out among group firms

What are bilateral APAs?

Those involving a taxpayer, the Indian tax authority and a foreign tax authority

Which are the big firms locked in transfer-pricing disputes?

Vodafone, Shell, Microsoft, IBM, Maruti, Gillette, Bharti Airtel, Essar, Standard Chartered, HSBC
Securities & Capital Markets, Havells, Nokia.

SEBI plans to allow foreign venture capital investors (FVCI) to invest in core investment companies (CIC) which fund the infrastructure sector. CICs are companies which have their assets predominantly as investments in shares for holding stake in group companies which is neither for trading nor for carrying on any other financial activity.

Indian corporates, both listed and unlisted, would be able to raise money through depository receipts in 34 foreign jurisdictions including Argentina, Australia, Brazil, China, Finland, France, Greece, Iceland, Ireland and ltaly, from December 15.

According to Association of Power Producers, a grouping of private power companies, projects of 136,000 MW involving a capital outlay of over Rs 620,000 crores have been affected due to
various factors. A Panel headed by India Infra-structure Finance Company Chairman Santosh B Nayar has looked into their demands on ways to rescue the stressed assets and has submitted its recommendations to the finance ministry:

• For projects stuck in court cases, the account may be allowed to continue as "standard" till a final settlement is reached.
• For existing projects, delayed beyond two years, the provisioning by banks should be kept at 0.4 per cent instead of 5 per cent that is required at present. The panel also said that all viable projects may be allowed a one-time dispensation for refinancing with an extension in the repayment tenure.
• In order to tackle the issue of funding of cost overruns, the lenders may be allowed to decide on the quantum of funding and revise the repayment schedule.
• The power ministry should come out with a policy on long-term fuel linkage for projects whose coal blocks have been cancelled.

Noting some companies are routing funds raised abroad to India by flouting the norms in this regard, RBI has asked banks not to give guarantees to companies for such borrowing and non compliance will lead to penal action. Some companies are accessing the markets abroad for debt funds through foreign arms - holding company, associate, subsidiary or group companies. This money is routed to the Indian company which accounts for the sole or major operations of the group, RBI said in a communication to banks. Such funds are raised at rates exceeding the ceiling applicable under the foreign exchange management regulations. These companies use different methods and structures for channeling such funds for Indian operations, including investment in rupee bonds floated by Indian company.

To put port connectivity works on a fast track, 12 Indian ports will pool the resources to set up a new company. The Union government is set to clear a proposal for creation of a Port Infrastructure Vikas Nigam Ltd. The company will construct, operate and maintain rail and road infrastructure to facilitate connectivity for transportation of goods from ports in India or abroad.

The Railways is opening up for investment by foreign and domestic players sanctioned projects worth Rs 12,000 crore. This amount would go up if one were to add the high-speed rail link projects costing almost Rs 77,000 crore which are yet to be sanctioned and some projects - such as the North-South freight corridor and passenger terminal development of several stations - whose costs are yet to be worked

The government is likely to set the benchmark for determining net present value of coal blocks earmarked for auction at double the price of domestic coal, according to a senior official. This assumes importance as 90% of net present value (NPV) of a tonne of coal will be the floor price for auctioning the blocks and 10% of the total NPV of the block will have to be paid up- front by the highest bidder. NPV is the current valuation of future earnings from a coal block.

Crude oil prices are set to decline further, with the Organization of the Petroleum Exporting Countries (OPEC) deciding to maintain output at 30 million barrels per day, resisting calls from Venezuela that the group stem the slide in prices.

The Reserve Bank of India (RBI) has eased the norms for parking external commercial borrowings (ECBs) to allow companies to keep them as fixed deposits for six months for use at a later stage.

Mineral mines operating on less than five hectares in a critically polluted, protected or eco-sensitive zone can get green nod from states.

To relax exit policy rules for road projects, the Govt. has decided to allow Road developers to sell their completed or stuck project, which will free them up to invest in other projects. Currently, developers have to hold at least 26% stake in highway projects.The proposed change will be applicable for highway projects signed up before 2009 as well.

As per the newly announced electronics policy, among other sops, the Government will offer 100 per cent subsidy on Central Sales Tax (CST) and VAT refund equal to 90 per cent of capital investment made for expansion of the existing manufacturing units.

Falling food and commodity prices saw wholesale inflation easing to a five-year low in October.

The licensee shall be allowed to sell defence items to government entities under the control of Ministry of Home Affairs, State Governments, PSUs and other valid defence licensed companies without prior approval of the Department of Defence Production (DoDP). The government has also decided to deregulate the annual capacity for production of defence items by industrial licensees with the condition that licensees shall submit half yearly production returns to the Department of Industrial Policy and Promotion and DoDP.

• Minimum Foreign investment cut to $5m from $10 m
• Conditions set aside for hospital, tourism, SEZ, NRIs and old age homes
• Minimum Floor area cut to 20000 sq m from 50000 sq m
• 3 years lock in removed; developer can exit on completion, if earlier
• Minimum land area condition for serviced housing plots removed
• The Indian entity investing in the project will only be allowed to sell plots for which trunk infrastructure, including roads, water supply, street lighting, drainage and sewerage, have been developed.
• Earlier exits may be allowed
• Investor can transfer stake to another before completion of a project, subject to FIPB clearance.
• In completed projects, 100 per cent FDI under the automatic route is allowed for operation and management of townships, malls/shopping complexes and business centres.
• Projects committing at least 30 per cent of the total cost for low-cost affordable housing would be exempted from the minimum built- p area and capitalization requirements, with a three-year lock-in period.

Finance minister Arun Jaitley said that Government auditors must undertake their work in a straightforward manner and not sensationalize or convert public opinion into a lynch mob, cautioning them against aiding an environment of finger pointing through their reports. Auditor has to scrutinize thoroughly the decision-making process. Auditors should distinguish between a decision that's wrong in hindsight and corruption. "If he finds a corrupt view, then the level of discretion he exercises in commenting has to be (an) entirely different standard. If he finds two views are possible and his own view is probably different, he then can have a more liberal approach. The minister said audits were a requirement of good governance because accountability and transparency are essential for this.

The government is planning to clear the air on reporting of internal financial controls made compulsory in the new Companies Act. The government has asked the Institute of Chartered Accountants of India (ICAI) to issue guidelines.

For the purposes of clause (i) of sub-section (3) of section 143 for the financial years commencing on or after 1st April, 2015, the report of the auditor shall state about existence of adequate internal financial controls system and its operating effectiveness. The auditor of a company may voluntarily include the statement referred above for the financial year commencing on or after 1st April, 2014 and ending on or before 31st March, 2015.

Paving way for sale of PSU shares worth an estimated Rs 60,000 crore over three years, the government has notified rules for minimum 25 per cent public shareholding in listed state-owned firms. To comply with these norms, over 30 listed PSUs will need to raise their public shareholding to minimum 25 per cent by August 21, 2017.

It is mandatory for all listed companies to immediately inform the exchange about all material and/or price sensitive events, which could have a bearing on the performance, operations or price of the company or its shares.

The Securities Appellate Tribunal (SAT) came down heavily on the Securities and Exchange Board of India (SEBI) in the DLF case over what it termed as over-regulation. SAT said, "You pass 10 such orders and the whole economy will crash. Is this regulation or abolition?... They (SEBI) are going more towards abolition mode than regulation...and it is clearly over-regulation. What do you get, what pleasure, out of such orders? You cannot recognise the effect of such orders. They are not to be called word-class regulators."

Existing requirement of obtaining registration as stock broker/clearing member for each stock exchange/clearing corporation has been done away with and instead a single registration with any stock exchange/clearing corporation shall be required. For operating in any other stock exchange(s)/clearing corporation(s), approval will be required from the concerned stock exchange or clearing corporation.

Stock exchanges may waive penalty for a client code modification where stock broker is able to produce evidence to the satisfaction of the stock exchange to establish that the modification was on account of a genuine error.

In case the companies registered under section 8 of the Companies Act, 2013 (corresponding to section 25 of Companies Act, 1956) receive deposit of rupees one lakh under sub-section (1) of section 160 of the Companies Act, 2013, then the Board of directors of the section 8 company is to decide as to whether the deposit made by or on behalf of the person failing to secure more than twenty-five percent of the valid votes is to be forfeited or refunded.

The matter has been examined and it is hereby clarified that in case of companies, who have filed their balance sheets and annual accounts on or after 01/04/2014, but prior to launch of CLSS- 2014, disqualifications under clause (a) of sub- section (2) of section 164 of the Companies Act, 2013 shall apply only for prospective defaults, if any, by such companies.

Minsitry has decided to extend the Company Law Settlement Scheme, 2014 up to 15th November, 2014.

The Supreme Court has said that all directors involved in the day-to-day running of a company can be made liable for a bounced cheque, but not one who resigned before the cheque was issued. The Supreme Court said that a case can only be quashed under Section 482 of the Criminal Procedure Code by a High Court if a director is wrongly arraigned. In cheque-bouncing cases, the court said managing directors in charge of company affairs, directors or officers who sign cheques can be arraigned as accused. Any other director can also be made liable if the person was in charge of and was responsible for the conduct of business. Other officers of a company can be made liable in such a case if a specific role by way of consent, connivance or negligence is alleged against them.

India might have more than 14 lakh registered companies but only about 9.87 lakh entities were active at the end of August, according to official  data.

It is clarified that for the purposes of the trusts that it is not barred for a trustee, being a body corporate, to hold partnership in an LLP in its name without the addition of the statement that it is a trustee.

It is clarified that Schedule III to the Companies Act, read with the applicable Accounting Standards does not envisage that a company while preparing its CFS merely repeats the disclosures made by it under stand-alone accounts being consolidated. In the CFS, the company would need to give all disclosures relevant for CFS only.

Nothing in Rule 6 shall apply in respect of preparation of consolidated financial statement by an intermediate wholly-owned subsidiary, other than a wholly-owned subsidiary whose immediate parent is a company incorporated outside India. No CFS (Consolidated Financial Statements) need to be prepared in such cases at each level. In case of a company which does not have a subsidiary or subsidiaries but has one or more associate companies or joint ventures or both, for the consolidation of financial statement in respect of associate companies or joint ventures or both, will not apply during 2014-15. MCA Notification dtd. 14th October, 2014

The High Court of Gujarat held that at the time of granting approval of exemption under section 80G, only object of trust is required to be examined and, therefore, assessee’s application seeking approval under section 80G(5) could not be rejected on ground that it failed to incur expenditure to extent of 85 per cent of its income during relevant year

The High Court of Kerala held that where assessee handed over possession of property to builder on first installment of sale consideration, transfer of property took place when said installment was received.

The High Court of Punjab and Haryana held that unless and until, there is receipt of exempted income for concerned assessment years, section 14A cannot be invoked.

The High Court of Allahabad held that Sec. 69A couldn’t be invoked on a presumption that unaccounted money was bound to flow in a real estate deal.

The High Court of Andhra Pradesh held that where assessee made payment in cash on insistence of seller and there was no doubt about genuineness of payment, no dis allowance could be made under section 40A(3).

Second proviso to Sec. 40(a)(ia) inserted w.e.f. 1.4.2013 should be treated as retrospectively applicable from 1.4.2005 and no dis allowance for want of TDS can be made if payee has paid tax thereon. Assessee must be given opportunity to file Form 26A. As per this newly inserted proviso, the assessee is required to file Form No. 26A as per rule 31ACB of the Income Tax Rules, 1962 so as not to be held as an assessee in default as per the proviso to section 201 of the Act. As held in the decision of the co-ordinate bench in the case of S.M. Anand vs. ACIT (supra), since the assessee in the period under consideration i.e. assessment year 2005-06, could not have contemplated that such a compliance was to be made, we also in the case on hand, remit the matter to the file of the Assessing Officer for affording the assessee adequate opportunity to file Form No.26A and verification of whether the said payee has reflected the payment/receipt in his books of account and offered the same to tax in the period under consideration.

As a matter of course, in all such cases the assessing officer should give an option to the assessee to have the valuation made by the departmental valuation officer to avoid miscarriage of justice. Even in a case where no such prayer is made by the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.

We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd 319 ITR 306 applies to employees' contribution  as well as employers' contribution.

In a landmark verdict rendered on October 10, the Bombay High Court has held that issuance of shares by an Indian company to its overseas parent is not exigible to arms- length price (ALP) test under Chapter X of the Income Tax Act, which houses the transfer-pricing (TP) law. The HC, allowing Vodafone's writ, declared the order null and void and decided the question of jurisdiction against the tax administration, holding that shares issuance at premium (or inadequate premium) is merely tantamount to capital account transaction and didn't warrant the rigours of transfer-pricing adjustment, a position that has shaken investor confidence in the past few years. The HC held that transfer pricing rigours can be applied only if the transaction yields income to the associated enterprises.

The Central Board of Direct Taxes (CBDT) has raised the upper limit on redeployed employees from older business units from the 20%, introduced in July this year, to 50% of the total technical staff strength in the new IT-SEZs.

Amid a debate on disclosure of names of suspected black money holders, the government of Switzerland said information exchanged under the Swiss-India tax treaty cannot be disclosed "in principle" to a court or any other body outside the proceedings of a "specific and relevant" case.

The NDA government is planning to set up a constitutional body to dismantle taxation barriers and create a 'Common National Market' for the entire country to ensure free movement of goods across state borders. A commission will be tasked with dismantling taxation barriers such as tax on inter-state trade of goods (CST) and Octroi or entry tax. Further it will have to design policy interventions to address market failures and identify obsolete legislation which should be repealed.

Services provided in relation to serving of food or beverages by a restaurant, eating joint or mess, having the facility of air conditioning or central air heating in any part of the establishment, at any time during the year (hereinafter referred as 'specified restaurant') attracts service tax. In a complex, if
there is more than one restaurant, which are clearly demarcated and separately named but food is sourced from a common kitchen, only the service provided in the specified restaurant is liable to service tax and service provided in a non air-conditioned or non centrally air- heated restaurant will not be liable to service tax.

Doubts have been raised in certain quarters regarding powers of a Central Excise officer to conduct audit, in the background of a recent judgment of Hon'ble High Court of Delhi dated 04.08.2014 in case of M/s Travelite (India) [2014- TIOL-1304-HC-DEL-ST] wherein the Hon'ble court has held that the powers to conduct audit as envisaged in Rule 5A (2) of the Service Tax Rules, 1994, does not have appropriate statutory backing and therefore quashed the rule. It may be noted that the judgment did not deal with the issue of audit in Central Excise. It is further clarified that in Central Excise there is adequate statutory backing for audit by the Central Excise Officers. The statutory provisions relevant for audit is clause (x) of Section 37(2) and Rule 22 of the Central Excise Rules, 2002.

In a major setback to PSU (Public Sector Undertaking) banks, the Supreme Court said farmers will get precedence over banks for the recovery of cane dues, amounting to around Rs 5,440 crore, from sugar mills in Uttar Pradesh.

China just overtook the US to become the world's largest economy, according to the International Monetary Fund. Basically, the method used by the IMF is on the basis of purchasing power parity.

The Government will take over all the coal blocks whose allocations were cancelled by a Supreme Court order and start the allocation process in 3-4 months through transparent e-auctions. An ordinance also paves way for commercial mining by the public sector and their joint ventures with private sector.

Indian companies have managed to borrow more from overseas markets and that too at lower rates since the new government took office, according to latest data from the Reserve Bank of India (RBI). At the same time, their weighted average margin for floating rate loans came down to below 3 per cent over 6 month London Inter bank Offered Rate (LIBOR) from 4 per cent. For fixed rate loans, the minimum rate came down nearly 200 basis points to 10.5% against over 12.5 % in the same period a year ago.

The Centre will contribute 50% of the total cost incurred on stipend in training one lakh apprentices by 2017 under this new scheme. This will reduce the financial burden on smaller units as well as encourage more youths to take up vocational training. Human Resource Development (HRD) ministry runs a similar scheme in which it contributes to the stipend cost of graduates, technicians and diploma holders.

Banks have been advised by RBI to ensure that customers are not unnecessarily asked to submit additional proofs of addresses for current addresses in cases where proofs of addresses for permanent addresses are already available. Banks are requested to confirm latest by October 17, 2014, that the above mentioned instruction has been communicated to all their branches and the same have been meticulously complied with. RBI/2014-15/264 dtd. 13th October, 2014.

The Government of Delhi has revised the circle rate under the Indian Stamp Act for the purpose of payment of stamp duty very substantially as per the Notification No.F.1(953)/Regn. Br./Div. Com./HQ/2014/5943 dated 22nd September, 2014. The modification has come into force from 23rd September, 2014 and has created a big havoc in the real estate market. The circle rates in most of the areas are substantially higher as compared to the market rate prevalent in Delhi, specially in case of commercial, industrial and public utility land uses where the circle rates are multiplied by 2 in case of industrial and public utility uses and multiplied with 3 in case of commercial uses. This situation have not only put additional burden of phenomenal stamp duty to be paid on transfer of properties but have also brought in an additional burden on the buyers as well as on the sellers. In terms of deeming provisions of Section 50C and Section 56 of the Indian Income Tax Act, the difference between the actual transaction rate and the stamp duty circle rates have to be treated as income separately in the hands of buyer as well as in the hands of the seller, unless they are able to prove that the actual market rate is different based on valuation done by the tax department.

SEBI has undertaken a large number of admirable steps in development of  a modern capital market infrastructure and regulatory framework. A large number of new initiatives have been introduced on the lines of developed international markets including electronic trading, T+2 Settlement, demat shares, option, future and other derivatives, index funds, alternative investment fund, real estate investment trust (REIT), infrastructure investment trust besides detailed regulation on initial public offering (IPO), private placement, listing, trading, stock brokers, insider trading, market manipulation and many other. In spite of so many initiatives, regulations, vigilance, inspection, show cause notices, suspension from capital market and financial penalties, the confidence of investors for investment in the capital market is getting eroded further in last 5 years. The capital market sensex is on its highest level, arising out of significantly improved sentiments on the basis of Modi Government initiatives and action plan. In spite of attaining a record level, in case we consider the impact of inflation the share market prices are at 50% to 60% level as compared to 2008 index levels. The stock market is not able to channelize the genuine investments from the household savings and from other small, medium and large investors. The retail capital market at the primary market level as well as at the level of secondary market investment are at record low level in terms of participation of the retail investors. The cash market delivery transactions are very low. The poor level of activity at the primary market level is seriously impacting availability of Risk capital and resultant growth. It is, therefore, important for SEBI and the Government to examine following important suggestions to bring back necessary confidence in the capital market:

• Mandatory valuation: Free pricing of equity shares has to be replaced by mandatory valuation as contemplated in the Companies Act 2013. The promoters and the Companies need to take responsibility of projection and estimated discounted cash flow. Alternatively the valuation can be taken from independent Valuers appointed by SEBI.
• Over Priced Issues - mandatory dilution: In case the actual market price of an Initial Public Offer or FPO fall substantially (more than 20%) below their issue price during the 1st year of the issue (on the basis of a weighted average of delivery transaction during the 1st year of listing), the company must be legally mandated to issue additional shares against consideration already paid to the suffering shareholders to adequately compensate them. The promoters may also be permitted as an option to bring in matching equity in case do not want dilution of their shareholding.
• Independent Auditors: The Companies Act initiative to not to permit interested shareholders to participate in voting in favour of related party resolution, need to be extended to appointment of auditors. The shareholders who are directly or indirectly connected with those charged with Governance should not be permitted to appoint or retire or remove the statutory auditors. The statutory auditors need to be empowered to look after the interest of minority and of those who are not in day-to-day governance.
• Limit Derivatives to only actual real hedging: SEBI need to curtail unnecessary speculation and manipulation of market by limiting derivatives and hedging to only underlying existing exposure of the transacting party. The current derivative market is intensely speculative and is in the nature of gambling in majority of cases. The derivative market is also being used to manipulate prices by false turnover and transactions, just to make money at the cost of genuine investor.
• Unfair and non-competitive market practices: The algo trading (based on mechanized software) and co-location of server of certain specific parties in the premises of Stock Exchange are a completely unfair practice against principles of equal competition and equal opportunity to all investors and traders in the market. The investors of far-flung locations in Assam, Bengal, Orissa , Tamil Nadu, Kerala, Kashmir, Haryana, Punjab and U.P. etc. are completely at a disadvantage vis a vis co-located servers. How can SEBI justify such a wrongful action against the interest of the general investors.
• The buying and selling based on an electronic software result into large scale fluctuations in the price without bringing any value to the market.
• Development Role of SEBI: SEBI need to concentrate on development of capital market by inculcating financial literacy and improving corporate governance, credibility and integrity of the capital market.
• Investor Protection role: SEBI's role need to be limited to making regulations, vigilance, inspection and launching of investigations
• Independent court prosecution: The decision to commence prosecution and adjudication has to be completely left to specialized courts and cannot be and should not be done internally by SEBI to ensure proper justice and control corruption. The imposition of hefty fines cannot be left to regulator SEBI & should be left to judiciary.
• Confidentiality: SEBI should not publicize any disciplinary action initiatives by SEBI, till the time the accused is held prima facie guilty by an appropriate court/ independent judicial process and charges are framed. The current practice being unnecessary sensation & impact reputation of accused even before they are prima facie guilty.
• The Interim orders to suspend promoters, companies or intermediaries and investors from participation in the capital market, without providing an opportunity of being heard, after a proper independent judicial process is completely against the interest of natural justice. In any case no such order should be continued unless confirmed by judiciary within 15 days.
• Security Disposal right need to be intact: No investor should be prohibited to sell their investment except when such securities are fraudulently acquired or money laundering cases even in cases of suspension from capital market.
• Investors' Protection Mechanism: SEBI should introduce a proper fast track judicial mechanism under which investors can file cases against market intermediaries, promoters and companies and other participants in the capital market to redress their grievances and to claim compensation for the misstatement, manipulation or fraudulent action. It is important that investors are adequately safeguarded against any manipulative practices. Even NGO's, uninterested independent parties and class action suites may be permitted before such judicial authority with appropriate appellate process. The vibrant capital market and sustained growth in the equity segment as well as in the debt segment are crucial for the Indian economy. The general investors can channelize huge risk capital to the capital market fuelling growth momentum, subject to having credibility, integrity and fair treatment in addition to transparency.

The Securities & Exchange Board of India (SEBI) has issued a Master Circular to include circulars up to September 30, 2014. The Master Circular is a compilation of all the existing/applicable circulars issued by SEBI in respect of Mutual Funds.

The Securities & Exchange Board of India (SEBI) has issued a Master Circular to include circulars
up to September 30, 2014. The Master Circular is a compilation of all the existing/applicable circulars issued by SEBI in respect of Mutual Funds.

The Supreme Court has stated that customs authorities cannot assess value of imported goods at a rate higher than that declared by the importer without disclosing the basis of such assessment. The Customs Valuation Rules enable the authorities to determine the value of the imported goods on the basis of identical imported goods of comparable transaction. In the case of Giri Enterprises vs Commissioner of Customs, the court was of the view that, the firm must be given an opportunity to establish that its transactions are not comparable.

The High Court of Punjab & Haryana has held that rules 96ZO(3), 96ZP and 96ZQ, up to extent of providing for mandatory minimum penalty without mens rea and without any element of discretion, are excessive and unreasonable restriction on fundamental rights and are, accordingly, ultra vires Act and Constitution.

The Supreme Court of India has held that High Court cannot dismiss appeal on merits where appellant remained absent or left unrepresented on hearing; High Court can only dismiss appeal without going into merits.

The High Court of Madras has held that as per user test, goods used in erection of machinery would become component of same and therefore, credit cannot be denied on ground that goods are not covered under definition of capital goods.

The High Court of Madras has held that a photocopy of invoice cannot be recognized either as an original or duplicate or triplicate or quadruplicate; it is no document at all in terms of rules and, therefore, no credit can be taken on basis thereof.

The New Delhi Bench of CESTAT has held that for appeal before Commissioner (Appeals), time-
limit for filing appeal has been expressed in 'months' where under 'month' would mean 'British Calendar Month' and cannot be construed '30 days'.

The High Court of Punjab & Haryana has held that since application for waiver of pre-deposit is an application filed during pend ency of appeal, any order passed thereon is an order passed in appeal by Appellate Tribunal; hence, pre-deposit order of Tribunal is appeal able before High Court under section 35 G and accordingly, writ would not be maintainable.

The New Delhi Bench of CESTAT has held that development of land for township (involving leveling, demarcation of plots, boundaries, underground cabling/pipe lining, etc.) is not taxable under 'construction of residential complex services' and 'works contract services'.

The New Delhi Bench of CESTAT has held that computer data processing for foreign clients in relation to client's Computer Reservation System (CRS)/computer software and database located outside India amounts to Business Auxiliary Services, but, it amounts to Export of Service under Export of Services Rules, 2005 and not liable to service tax.

The New Delhi Bench of CESTAT has held that providing buses to clients for dropping of staff is covered under Tour Operator Services; and further renting of hired cabs amounts to 'rent-a-cab operator services' and liable to service tax accordingly.

The New Delhi Bench of CESTAT has held that refund of service tax on services not provided cannot be denied on ground that same was not shown as 'receivable' from Revenue in Balance Sheet.

As negotiations with States on Goods and Services Tax (GST) enter a critical stage, the Centre is looking forward to implementation of the new indirect tax regime from April 1, 2016.

The High Court of Allahabad has held that where there was mass unawareness about liability to pay service tax and department had issued 200 notices to different service providers on same issue, there was no intention to evade service tax on part of assessee (in not paying service tax) and hence, penalties were not leviable.

The High Court of Bombay has held that Freight and destination charges (in respect of clearance of goods at destination by foreign recipient) cannot, prima facie, be included in value of Clearing and Forwarding Agent's services and cannot be charged to tax.

The New Delhi Bench of CESTAT has held that services provided by an Indian commission agent to foreign principal by way of promotion of business of such foreign principal in India against commission in foreign exchange, amounts to export of service and not liable to tax.

The Hon'ble Supreme Court in case of M/s Super Synotex India Ltd. [2014] 43 taxmann.com 140 on the issue of abatement of sales tax under an abatement scheme where the assessee was allowed to retain 75% of the sales tax collected from the buyer and was required to deposit only the remaining 25% with the State Government. Under the circumstances, Hon'ble Court held that after 01.07.2000 i.e. under the transaction value regime, 75% of the sales tax retained by the assessee would form part of the assessable value.

Detailed and close scrutiny of the terms of JV agreement has been initiated by Service Tax Department in each case, to determine the service tax treatment of cash calls including taxable service provided by a JV to its members, taxable services received by a JV from its members or third party and taxable services provided by members to the JV.

The ITAT, Chennai has held that where assessee, conducting hotel management course in association with international acclaimed institutions, paid certain amount to those institutions towards study curriculum which included teachers textbooks, teaching aids, associated marketing tools and materials etc, since there was no transfer of any technical know how or technical services, amount in question did not fall in category of technical fee requiring deduction of tax at source at time of making payment.

The ITAT, Chennai has held that where State Electricity Board certified that assessee had generated power by using windmills for more than 180 days in relevant year, depreciation at full rate of 80 per cent was to be allowed on those windmills.

The ITAT, Chennai has held that no tax was deductible at source on commission payment to overseas agent for procuring orders, as said services not being in nature of technical services, payments in question were not taxable in India.

The ITAT, Delhi has held that matter relating to determination of Arms Length Price (ALP) of transactions was to be remanded back for disposal afresh on basis of internal comparison of profits from international transactions entered into with AE and with unrelated parties.

The High Court of Karnataka has held that expenditure incurred for acquiring non-compete right is capital in nature entitled to depreciation under section 32(1)(ii).

The High Court of Delhi has held that even where existence of Permanent Establishment (PE) of petitioner non-resident company was in dispute, if petitioner had not filed return in response to notice issued under section 148, it did not act strictly in accordance with law.

The High Court of Madhya Pradesh has held that where principal amount of loan being never been claimed by assessee as its expenditure, its waiver would not amount to income of assessee.

The High Court of Bombay has held that where assessee offered incentive to distributors/stockists on meeting of sales target on principal to principal basis, that incentive could not be treated as commission payment under section 194H.

The Mumbai bench of ITAT held that a sustained advertisement campaign to create public awareness and consciousness of a brand and launch of new product is revenue expenditure and hence a tax deductible expense.

India's attempt to unearth black money received a big boost, with the G20 endorsing a far-reaching global initiative to stamp out tax evasion through automatic information exchange by 2017-2018 and resolving to coordinate to protect the tax base through cross-border arrangements.

Taking a stern view of the undue "harassment" of taxpayers during scrutiny of their cases, the CBDT has issued orders asking the Income Tax Department to complete these inquiries in quick time and not drag them "unnecessarily".

The Reserve Bank of India has decided to to permit issue of equity shares against any other legitimate dues payable by the investee company, remittance of which does not require prior permission of the Government of India or Reserve Bank of India under FEMA, 1999 or any rules/ regulations framed or directions issued there under subject to extant FDI guidelines on sectoral caps, pricing guidelines etc. And net of applicable taxes.

The Gujarat High Court has struck down a part of the Reserve Bank of India (RBI) circular that allows banks to declare all directors of a defaulting company wilful defaulters and bar them from banking services or other business ventures for five years. The circular shatters the concept of the identity of a company different and distinct from its directors without providing any safeguards. It does not distinguish between a director who is involved in the day-to-day functioning of a company as against those who are not. The circular paints all directors with the same brush.

The Department of Industrial Policy and Promotion (DIPP) has set up an eight-member expert panel for the quick redressal of grievances and queries of global and domestic investors.

Companies and individuals who have furnished guarantees for wilful defaulters can also be accused as wilful defaulters, as per the new norms issued by the Reserve Bank of India. The central bank said that not just companies but even individuals who manage companies and other companies within the group can be tagged as wilful defaulter by banks. Additionally, a borrower can be declared wilful defaulter for using funds for purposes other than that for which a loan was taken. Further if an individual on board of a firm is tagged a wilful defaulter, even another firm on whose board he serves cannot avail of bank loans.

SEBI notified norms for listing of business trust structures, REITs and InvITs that would help attract more funds in a transparent manner into realty and infrastructure sectors. Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvITs), whose norms were approved by the regulator in August, would get tax incentives of a pass through.

The Finance Ministry has asked the Reserve Bank to tighten lending norms to prevent borrowers from opening multiple current accounts outside their consortium banks.

Measures taken for simplification:

• Single document for proof of identity and proof of address
• No separate proof of address is required for current address customers can submit only one roof of address (either current or permanent) while opening a bank account or while undergoing periodic updation.
• No separate KYC documentation is required while transferring accounts from one branch to another of the same bank

Small Accounts

Those persons who do not have any of the 'officially valid documents' can open 'small accounts' with banks. A 'small account' can be opened on the basis of a self-attested photograph and putting her/his signature or thumb print in the presence of an official of the bank.

New Ground Rules

• Government plans to remove/reduce MAT on SEZ developers and units
• Government may allow developers to use the SEZ's infrastructure for commercial purposes
• Govt. is planning to exempt SEZs from the Land Acquisition Act and also digitize procedures
• May prescribe time limits for disposal of activities related to SEZ developers

Make in India campaign of Prime Minister Narendra Modi has evoked lots of attention all over the world. Prospective investors from China, Japan, USA etc are eagerly watching changes being made in the directions of investment liberalization . There is no doubt that with this PM has taken a major initiative to bring Indian and International Corporate Sector on one platform to aggressively boost industrial production and growth in India. The Hon'ble Prime Minister acknowledged that the business environment in India needs substantial improvement and has also committed to the nation that the government will take all necessary steps to uplift India from 134th position (as per World Bank Group Report) to 50th position internationally in "ease of doing business" on most immediate basis and the government will take all necessary action in this regard. Ease of doing business would not be possible by simply organizing meetings between central and state governments. Some concrete and immediate steps would be required to be taken. The All India Chartered Accountants Society along with National Economic Forum have decided to effectively support the government in the aforesaid initiative and to suggest & bring out to the government attention, a concrete action plan in various areas so that the same can be considered for implementation by the government. A special committee has been set up to undertake detailed research on regular basis and to bring out proposed action plans, policy and suggestions to the Central Government, State Governments and regulatory bodies to achieve the objective of bringing out a major change in the business environment conducive to Indian economy. Some of the important issues which have already been identified and referred to the High Powered Committee of AICAS - NEF for working out detailed suggestions and specific action plan/ amendments needed are:

DIRECT TAX

 The draft direct tax code will require a comprehensive discussion at least for 12 months before a final decision is taken on its implementation. The tremendous confusion created by the government while implementing the Companies Act 2013, is a lesson to be learnt before implementing any new major legislation.

Specifics: The existing Income Tax Act, 1961 may be comprehensively amended to delete complicated provisions and various limitations, introduced in the law with a negative mind set. Provisions relating to MAT, Dividend Distribution tax, certain provisions of section 56, transfer pricing, Dis allowances and unnecessary conditions should be made reasonable.

Corruption: The physical interaction between tax department and the assessee has to be done away with except in very exceptional cases. Unnecessary litigation, appeal, survey, searches and raids may be limited only to money laundering cases. A sense of faith and comfort need to be developed between the tax payers and the government. Computerization in variance with the provisions and spirit of the Act at several places has created great discomfort by errors in tax credit and tax refunds. Provisions relating to advance Ruling' may be expanded and strengthened. The rules of interpretation of tax laws may be changed to real intention of the legislature rather than strict interpretation of the exact language. The spirit behind legislation, with a positive note will generate conducive investment climate.

The tax rates and slabs need rationalization.

INDIRECT TAX

The goods and services tax (GST) as a single indirect tax is of utmost importance to be achieved. A separate GST for Centre and for States will not achieve any purpose and will create major issues.The Central Government need to sacrifice their supremacy and final say in favour of State Governments (2/3rd majority). The Central Government may keep veto power in very exceptional cases. The tax collection machinery of the Central Government may need to be under administrative charge of the state governments, similar to Indian Police Service so that on a national level minimum bench mark standard of tax collection procedure and tax payer fair dealings can be implemented. In the meanwhile Service tax law, Excise and Custom procedures need to be curtailed with minimum tax exemption level to rationalize.

CORPORATE LAWS

The Companies Act, 2013 will require comprehensive amendments. The small, mid- size and big companies as well as private companies, closely held public companies and listed companies are to be dealt with separately and rather require exemption from compliance of most of the provisions. The compliance and procedures need to be substantially reduced to eradicate unnecessarily excessive cost and harassment of the corporate. Self-regulation guidelines and least reporting is the key. It is important to give complete liberty to closely held / private limited companies to conduct their business and finances in a free manner, till such time the funds from public are not taken and up to a minimum bench mark of bank borrowing.

Penalties: Penalties and prosecutions to be restricted only to areas impacting public interest adversely. Additional fee is enough for procedural delay/other non-compliance's.

CAPITAL MARKETS

Capital markets need to ensure to eradicate excessive speculation and gambling like transactions. The manipulation of valuation, top line, bottom line and market prices need to be curbed more effectively by bringing in system based checks and balances and independent review and evaluation by regulator appointed professionals.

FINANCIAL MARKET

The financial market has a major role in providing equity capital as well as the debt funding. The interest rates need to be reduced by 30% in short term and by at least 50% from current levels in medium term to ensure growth of manufacturing, real estate, trading and service sector. The non-performing assets will also be substantially reduced. It is important to freely allow Indian entrepreneurs to create new banks, NBFCs and financial institutions in India and outside India, to be monitored with positive guideline regulations. The Foreign Direct Investments, Overseas Direct Investments need to be promoted, at the same time domestic investments need to be given comparatively more liberal treatment to ensure creation of large capacity and capability in India for an efficient and effective business. Road map for full convertibility has to be put in place. INR has to be made a more acceptable currency internationally.

Labour Laws need to be rationalized to bring social security as well as reasonable treatment to employees. A dignified balance between employer and employee rights and responsibility is a must for a robust widespread inclusive growth.

Infra Sector: Power Sector, Special Economic Zones, ports, highways, residential infrastructure, commercial real estate, defense sector all will need special nursing and policy support.

The agriculture sector is the backbone of India growth. There is a need to bring out a new Green Revolution. Sugar industry desperately needs policy support and freedom from input price control. The white revolution providing milk industry need to be more competitive and many more large players are needed. The quality and prices both are negatively impacting because of monopolistic position of few giants. Integrated development of industry and agriculture has to be planned. Water bodies up gradation, River Linkages, Water Treatment cleanliness and availability of free potable water need to be converted into a national movement. The Swatch Bharat Abhiyan (Clean India Movement) will substantially contribute to the growth of businesses and make in India. The cleanliness needs in all walks of life coupled with high morale, ethics and transparency in approach will take India towards sustained growth. The health and education are two most important areas to provide major strength to a strong, capable, intelligent and committed Indian workforce. The Vision of Prime Minister and his BJP Team need efficient and effective execution with participation by all.
What is needed is a positive economic & governance environment. We sincerely look forward for participation by all intell- actuals & practical guidance from experienced Indians to move in the right direction aggressively, efficiently & effectively with a focus on Make in India Growth.

The Delhi High Court has dismissed the write petition of the Builders Association seeking to
restrain the central government from enforcing the PF Act on casual construction workers.

The Supreme Court has settled differences in decisions of high courts and ruled that removing sand, gravel and other minerals from river and other places without permission could be criminally charged on two accounts: firstly, under the Mines and Minerals Development & Regulation Act, for violation of the conditions of mining lease; and secondly as theft of property of the state.

The Supreme Court has reiterated that the scope of interference by it in an arbitration award is very limited. "Where there is an error apparent on the face of the record or the arbitrator has not followed the statutory legal position, then only it would be justified in interfering with the award published by the arbitrator".

Employee Provident Fund Organisation (EPFO) made it mandatory for firms to provide their employees' bank account numbers with IFSC code of bank branch to facilitate allotment of universal PF A/c No. & payment to its subscribers.

The Supreme Court has held that, if ordinarily, a landlord cannot be asked to prove his title before getting his tenant evicted on any one of the grounds stipulated for such eviction. There is no reason why he should be asked to do so only because he happens to be a Non-Resident Indian.

A five-judge Constitution Bench of the Supreme Court, while resolving earlier conflicting judgments by smaller Benches, has ruled that in tenancy matters, High Court shall not exercise its appellate power to re-assess the evidence for coming to a different finding on facts. The Court held that revision power is not and cannot be equated with the power of reconsideration of all questions of facts as a court of first appeal.

In the case of CIT, New Delhi Vs Vatika Township Private Ltd and Others, the Supreme Court has held that law passed today cannot apply to events of the past. The court said that if we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. Supreme Court observed that the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, and arises necessarily by distinct implication.

• Exemption: Companies with share capital of exemption less than Rs 10 crore and net worth of less than Rs 25 crore, besides those listed on the SME (Small & Medium Enterprises) and SME's institutional trading platforms (ITP), have been given the option of implementing SEBI's corporate governance norms.
• Independent directors should not have or have had any material pecuniary relationship with a company, its parent/ subsidiary/ associate/ promoters/ or directors during the last two financial years or during the current fiscal. The maximum tenure for independent director would be according to the Companies Act 2013 as against the 10 years stipulated earlier.
• The Chairman of a company has been allowed to be a member of the nomination and remuneration committee (earlier he was not a part), but cannot chair these committees - the chairmanship would remain with an independent director.
• Risk management body: Securities and Exchange Board of India (SEBI) added the risk management committee of a company should have majority representation from the board, and has to be chaired by a board member, though senior executives may be inducted as members. Earlier, this was not specified.
• For Related party transactions (RPT), SEBI has explained that a "transaction" with a related party shall be construed to include single transaction or a group of transactions in a contract. SEBI has substituted its definition of a related party by the one defined by the Companies Act 2013 and the applicable accounting standards.
• A material RPT is one that if a transaction exceeds 10 per cent of a company's annual turnover. Earlier, it was the higher of 5 per cent of turnover or 20 per cent of net worth.
• The audit committee of the company has been allowed to grant omnibus approvals for proposed RPTs, provided the committee lays down a criteria for such approval.

Chartered Accountants firms are now allowed to be registered/reconstituted with more than 20 partners w.e.f 01.04.2014 under the Indian Partnership Act as in the case of a firm under the Limited Liability Partnership Act.

The Institute of Chartered Accountants of India has set a target to complete the amendments to Ind-AS by Nov. 30. It is expected that these would be notified shortly thereafter. ICAI has recommended these to apply to any consolidated financial statement for notified companies.

The Corporate Affairs Ministry has decided not to allow Power Sector companies to capitalise the borrowing costs incurred during the extended delay in commencement of commercial production, even if the plant was otherwise ready. Also, in cases of phased operationalisation of projects, the costs attributable to the completed phases - which were previously being capitalised till the entire project was complete - would have to be now charged to the profit and loss account. The clarification only reiterates the existing principles in the accounting standards, it is expected to bring in consistency in the application of these principles.

Where a company adopts a useful life different from what is specified in Part C or uses a residual value different from the limit specified in Schedule II of Companies Act, 2013, the financial statements shall disclose such difference and provide justification in this behalf duly supported by technical advice.

The Ministry of Medium, Small and Micro Enterprises has announced process to simplify the setting up new enterprises. All States will have an online registration system for MSMEs in the next two months.

Henceforth, salaried people earning up to Rs 15,000 a month will have to compulsorily maintain an employee provident fund account, with the Government notifying the new norm. Earlier the salary limit was Rs 6,500 a month. The minimum pension has also been hiked to Rs 1,000/month.

The Ministry of Corporate Affairs (MCA) has clarified share transfer forms executed before the Companies Act came into effect from 1st April, 2014 can be accepted by companies.

An Indian company can now hold its board meeting in a foreign country, say Singapore with its directors participating in that meeting through video conferencing from, say Mumbai. The Corporate Affairs Ministry has diluted the rigor of video participation of directors in board meetings. Prior to this change, directors were allowed to participate in board meetings through video-conferencing only when meeting was held in India.

The CESTAT, New Delhi Bench has held that where assessee has claimed reimbursements of bills of contractor/transporters and bills are in name of service recipient, said reimbursements are received as 'pure agent' and not includible in value of services.

The High Court Of Madras has held that where consideration charged by service provider appears to be below cost incurred by him, valuation under rule 3 on 'cost basis' can be resorted to only after: (a) agreement showing consideration is rejected under section 67(1)(i) and (b) procedure under rule 4 of Service Tax Valuation Rules is followed.

The High Court of Bombay has held that where Assessing Officer allowed assessee's claim for deduction of expenses incurred on issue of Foreign currency Convertible Bonds (FCCBs), in view of fact that unless option was exercised by bondholders, conversion of those bonds into equity shares was not permissible, impugned revisional order passed by Commissioner disallowing expenditure in question on ground that FCCBs in real sense, were equity shares right from beginning and that conversion of bonds was only a routine technical compliance as per regulations and guidelines, was not sustainable

In The ITAT Delhi Bench 'B' has held that a trust or institution which is carrying on educational activities will fall within ambit of charitable purpose under section 2(15) even if it incidentally involves carrying on of commercial activities.

The High Court of Delhi has held that In order to determine tax ability of capital gain arising from
sale of property, it is date of allotment of property which is relevant for purpose of computing holding period and not date of registration of conveyance deed.

The Institute of Chartered Accountants of India (ICAI) has issued the revised Guidance Note on Tax Audit u/s 44AB of the Income Tax Act, 1961.

Reserve Bank of India has decided to allow banks to fund cost overruns, which may arise on account of extension of DCCO up to 2 years (infra projects) and 1 year (others), without treating the loans as 'restructured asset' subject to the following conditions:

• Banks may fund additional 'Interest During Construction', which may arise on account of delay in completion of a project;
• Other cost overruns (excluding Interest During Construction) up to a maximum of 10% of the original project cost;
• The Debt Equity Ratio as agreed at the time of initial financial closure should remain unchanged subsequent to funding cost overruns or improve in favour of the lenders and the revised Debt Service Coverage Ratio should be acceptable to the lenders;
• Disbursement of funds for cost overruns should start only after the Sponsors/ Promoters bring in their share of funding of the cost overruns; and
• All other terms and conditions of the loan should remain unchanged or enhanced in favour of the lenders.

The Reserve Bank of India proposes to cut banks' group exposure limit by as much as 15 percentage points to reduce the systemic risk posed by lending too much to any single business house. This means that credit to any particular group will have to be restricted to 25% of a bank's capital, down from 40% now.

The Reserve Bank of India has decided to permit Non-Deposit Accepting NBFCs with asset size of ` 100 crore and above to act as sub-agents under Money Transfer Service Schemes (MTSS) subject to conditions.

The Reserve Bank of India has issued Guidelines on Registration and Operations of Mortgage Guarantee Companies under Section 45L(1)(b) of the Reserve Bank of India Act, 1934" (herein after called Guidelines) issued vide notifications no. DNBS (PD) MGC No. 3, 4 and 5/CGM (PK)- 2008 dated February 15, 2008. The guidelines regarding capital adequacy, contingency reserve, classification of investment and provision for losses on guarantees involved have been revised.

Revising its OFS regulations, in line with board approval in June, The Securities & Exchange Board of India (SEBI) said that the OFS mechanism would now be available to top 200 companies by market capitalization in any of the last four completed quarters. So far, top-100 companies were allowed to tap this fast-track route, while only promoter shareholders could sell their shares. Following the changes, any non-promoter shareholder with at least 10 per cent stake in eligible companies would be allowed to offload shares through OFS route.

• Any employee of a listed company should disclose the number of shares held within 2 working days of purchase/ acquisition
• Any change in such holdings over Rs 5 lakh in value or 25,000 shares or 1% of total shareholding should be disclosed within 2 working days
• All employees should conduct transactions of companies' shares only in a valid trading window
• Trading window is closed when results, dividends, rights, bonus, expansion plans, change in policies are published
• Trading window is opened 24 hours after price-sensitive information is published

• Restriction on the number of directorships: The maximum number of boards that an independent director can serve on listed companies is seven. If such person is serving as a whole-time director in a listed company, then he cannot serve more than three boards.
• Mandatory to have woman director: Have at least one woman director in the board
• Expanded role of Audit Committee: Audit Committee must have minimum three directors as members, and two-third of members as independent directors. The committee plays a significant role regarding the appointment and monitoring of auditors, financial reporting of the company, monitoring inter-corporate loans, related party transactions, reviewing the functioning of the whistle blower mechanism, etc.
• Compulsory whistle-blower mechanism: Vigil mechanism must provide adequate safeguards to prevent victimization of the whistle blower
• Expansion in definition of related-party transactions (RPTs): All RPTs requires prior approval of the audit committee. Even a transaction between related-parties without any charge has been included in the definition of RPT
• Tenure of independent directors: Restricts the total tenure of an independent director to two terms of 5 years each

The Parliament has approved the Securities Laws (Amendment) Bill to empower the market regulator to crack down on Ponzi schemes. The new law would empower SEBI investigators to conduct searches and seek information from suspected entities, both within and outside the country. However, as a safeguard, any search operation can be conducted only after approval of a designated court in Mumbai.

Key Provisions

• Any pooling of funds of over Rs 100 cr will be considered collective investment scheme
• Set up special courts for fast trail of offences under SEBI act.

The Securities & Exchange Board of India (SEBI) has proposed that a listed company should inform the stock exchanges all events which are 'price sensitive', and have bearing on performance or operation of the listed entity, unless otherwise expressly stated, within 1 day from the event. The Companies will have to explain the delay if such disclosures are not made in a day. Some of the events listed by SEBI as price-sensitive include commencement of commercial production, change in the general character or nature of business, material capacity addition or material product launch, issuance or forfeiture of securities, all types of agreement, disruption of operations, litigation, revision in ratings and outcome of board meetings, among others.

Eligible investors, viz., SEBI registered Foreign Institutional Investors (FIIs), Qualified Foreign Investors (QFIs), Registered Foreign Portfolio Investors (RFPIs) and long term investors registered with SEBI, may purchase eligible government securities.

Reserve Bank of India has decided that recognized non-resident ECB lenders may extend loans in Indian Rupees subject to conditions.

The Reserve Bank of India has decided to simplify the procedure by delegating powers to the AD Category - I banks to approve even those cases where the Average Maturity Period (AMP) of the fresh External Commercial Borrowings is exceeding the residual maturity of the existing ECB under the automatic route subject to conditions.

RBI Circular DBOD.BP.BC.No.24/21.04.132/ 2014-15 dated 15/7/2014 on ‘Flexible Structuring
of Long Term Project Loans to Infrastructure and Core Industries’ enables banks to flexibly structure new long term project loans to infra- structure and core industries by takeout financing over life of the project. The conditions have been further relaxed for exposure above ` 1,000 Cr.

The existing provision of capital subsidy for USEP (Urban Self Employment Programme) and UWSP
(Urban Women Self-Help Programme) components of Swarna Jayanti Shahari Rozgar Yosjana (SJSRY) has been replaced by interest subsidy for loans to Individual enterprise (SEP- I), Group enterprise (SEP- G) and Self Help Groups (SHGs) in all districts headquarters (irrespective of population) and all the cities with population of 1 lakh or more.

RBI has decided that the concessions / credit relaxations to borrowers / customers in the State of Jammu & Kashmir, as laid down in our Circular No. DBOD. No.BP.BC.77/21.04.012/ 2003-2004 dated April 21, 2004, will continue to be operative up to March 31, 2016.

The Scheme can also be used for acquisition of immovable property outside India. The require-
ment of post facto reporting stands withdrawn.

The Union Cabinet allowed 100% foreign direct investment (FDI) in the Railways for the first time.This step is intended to raise funds for expansion of the Railways.

High Speed Rail Plan

• 100% FDI allowed in railway infrastructure segments like electrification, signaling, high speed tracks and suburban,etc.
• 100% FDI will also be allowed through Special Purpose Vehicle (SPV) route for last mile connectivity.
• FDI allowed in PPP projects, suburban & high speed lines and freight lines.
• Such proposals will not have to go through the Foreign Investment Promotion Board.

The Department of Industrial Policy and Promotion (DIPP) has notified changes to foreign investment policy. And the foreign direct investment limit has been raised to 49% from 26% based prior government approval. Over 49% on case-by-case basis, subject to guidelines.

Non-Banking Financial companies (NBFCs) cannot lend more than 50% of the value of shares pledged as collateral while giving loans of Rs 5 lakh and above. NBFCs with an asset size of Rs 100 crore can accept only Group 1 securities as collateral and will also have to disclose details of shares pledged with them.

The banking sector is going through a testing time. On one hand non- performing assets have risen significantly and on the other there are serious allegations of fraud and corruption embalming many banks. RBI and previous Government need to owe this responsibility. Their decision to delegate the responsibility of appointment of Statutory Auditors and Bank Branch Auditors in favour of bank managements, withdrawal of Audit for 5 years in more than 60% branches, shifting independent concurrent Audit to internal staff working under direction of top management, non-revision of Audit fee for 7 years, regular criticism and sidestepping of independent Directors and middle management, all this has resulted in adverse impact on internal control mechanism in banks. RBI's NPA classification being rule based, could not address challenges of economic downturn and large number of adverse economic factors impacting the working of key sectors. The Indian industry and businesses need a positive policy and regulatory support.

The role of external credit rating agencies in India has been far from satisfactory. Even in U.S. Lehman Brothers crisis, the credit rating was completely misled by technical factors. The Indian banks should rely only on internal credit rating system, which are quite robust. The increasing reliance on external credit rating agencies is also responsible for non- identification of problem areas at right time. The approach of credit rating agencies lack transparency and is based only on technical parameters, rather than real credibility of the borrower.

Independent credit ratings do not add any value and only cause unnecessary hardship and credit delays. The Government may consider a periodical detailed independent credit appraisal for loans beyond Rs. 100 crore. The credit appraisal report need to be detailed rather than a single digit credit rating number, providing no rational support.
The Govt. needs to take serious concrete actions in following important areas of Governance in the banking sector:

• The selection process of CMD and ED of PSU banks needs a professional approach and it cannot be left to RBI and Department of Banking. The Quality, skill and capability of the top management is very crucial.
• The Executive Directors need adequate board level experience before they can be considered for the top position. The current practice of selections or promotions based on seniority and clean track record alone may not be enough.
• The PSU banks CMD contenders also need to present their long term vision and approach in an open recruitment process. The actual performance of CMDs and EDs need a periodical detailed hot review by an independent professional group under guidance of the Finance Minister.
• The organizational structure and the middle management consisting of General Manager and Deputy General Manager need to be empowered to ensure proper internal control and to restrict too much concentration of power on top.
• The Board of Directors and Audit Committee need to spend adequate time in planning, organizing and control. The current practice of 1 hour to 2 hours meeting, without any advance agenda, briefing, MIS or regular reporting are highly inadequate and actually leave the decision making only in the hands of top management, without adequate effort Board effort to monitor and supervise the performance.
• The independent directors need to be carefully selected and adequately remunerated for time spent and responsibility taken. The full time functionaries need to take main responsibility. The Government and RBI representatives on the Board need to play more responsible and active role
• A 360 degree feedback on performance of top management can be taken from middle level management, borrowers and other stake holders.
• The banks need to develop internal strength to understand and monitor sector specific issues.
• The banking guidelines on purpose and uses of funds need to be self-regulated by the borrower. The concept of diversion of funds need modification and to be more practical to provide adequate flexibility and to regulate manipulation. Diversion cannot be equated to siphoning.
• Non-Core Area: The banks may consider dis-investment in non-core areas to other PSU's, to provide adequate capital.
• The sale of non-performing assets to Asset Reconstruction Companies has brought in fraudulent and corrupt practices. Existing ARCs have not contributed positively for revival of business and have concentrated on One Time Settlement or mortgaged assets acquisition. It may be important for the government to assign all non-performing assets at their full book value to 100% government/PSU owned Asset Reconstruction Companies. This will comprehensively improve focus on NPA's which can be revived and disposal of the rest. The focus and emphasis being on revival of a positive and developmental attitude.
• Professional Inter mediation: In the current atmosphere, serious discussions are being made in regulatory quarters to eradicate professional consultants and intermediaries. The individual and corporate consultants play a very important role in planning, techno-economic feasibility study, development of new financial products and specially designed financial structure to help the entrepreneurial borrowers as well as the banks. The corrupt attitude of few miscreants need not be generalized as it may severally impact the working of the entire financial market and may unnecessarily eradicate very important professional input. The role of corporate players and bank entities is much larger in syndication of loans.
• NPA Review committee: The appointment of a High Powered 4 Member Review Committee by IBA, at the  behest of RBI, consisting of ICSI, CMA, Valuers and Engineers will not bring any result. The Institute of Chartered Accountants has rightly decided to not to sponsor a member. The monitoring of potential NPA has to be undertaken by the banks individually and as a group/consortium.
• Fear Psychosis: It is important to eradicate fear psychosis of a potential CBI or Vigilance inquiry in case a particular loan goes bad. The top management and middle management business decisions need to be respected, except in case of cheating.
• The private sector banks and PSU banks cannot be compared as the PSU banks significantly contributed to education sector, small scale sector, agricultural sector and financial inclusion.
• Willful Defaulters: The banks need to be extra careful while categorizing delays and non- payments as willful default. The non-performing assets have mainly risen due to poor economic growth, business slow down and external factors including lack of coal linkages, cancellation of telecom licenses, delay in implementation in power sector and road sector projects, untimely payment by state level electricity companies and other reasons beyond control of management.