Friday, April 15, 2016
The High Court of Gujarat held that where assessee claimed deduction of secret commission paid to employees of different companies who had given business to assessee, since assessee had not kept any accounts as to where and to whom such commission was paid, Tribunal was justified in allowing assessee's claim to extent of one per cent of total sales.
Salary of NR for rendering service in US won't be taxed in India as per DTAA even if salary was received in India
Sum paid by 'Dish TV' to TV Channels to receive their programmes for further telecasting would attract TDS u/s 194J
Nearly four years after a deal, India has implemented the new DTAA with Indonesia. The new agreement will take effect in respect of incomes derived on or after April 1, 2017. Some of the significant aspects of the new pact include the introduction of a 'Limitation of Benefit' (LOB) clause and provision for exchange of banking information for tax administration purposes.
To reduce grievances of tax payers, the CBDT has set up a dedicated structure for delivery and monitoring of taxpayer services. CBDT Member (Revenue and Tax Payer Services) will oversee the related services in Central Board of Direct Taxes. Two separate Directorates - Directorate of Tax Payer Services I and Directorate of Tax Payer Services II - have been set up, it added. Together, these Directorates will be responsible for delivery and monitoring of taxpayer services in the field offices and e-services deliverable through various electronic platforms of the Department.
Now, Assessing Officers can grant a stay of demand until the first appeal is disposed if the taxpayer pays 15 per cent of the disputed demand. The CBDT has further said that in case of any deviation from the standard pre-payment of 15 per cent by the Assessing Officer, the case will be referred to the administrative Principal Commissioner or Commissioner will take a final call. In case, despite a 15 per cent stay, the tax payer is still unhappy, he can approach the jurisdictional administrative Principal Commissioner or Commissioner.
1 year time-limit to claim refund of ST counted from date of receipt of export proceeds and not from date of export
Indian companies will have to pay service tax on any service they avail from the government or local authority from the next fiscal year, broadening the scope of the levy to include not just spectrum but all auctions, right of way, licence fees and development rights. These will all attract service tax, now applied at 15%, inclusive of two cesses
- AS 2: Valuation of Inventories
- AS 4: Contingencies and events Occurring after Balance Sheet Date
- AS 10: Property, Plant and Equipment
- AS 13: Accounting for Investments
- AS 14: Accounting for Amalgamation
- AS 21: Consolidated Financial Statements
- AS 29: Provisions, Contingent Liabilities and Contingent Assets
Market regulator SEBI has mandated that all draft offer documents filed between April 1, 2017 and March 31, 2019 will have to state accounts according to the Ind AS for the latest three years and according to Indian GAAP for the next two years. This is being done to harmonize the statement of accounts in a public offering with the phase wise implementation of Ind AS, being done by the MCA.
Every company including a foreign company, except –
- a banking company; an insurance company; company licenced under section 8; a one person company; a small company
- a private limited company not being a subsidiary or holding company of a public company having
- paid up capital and reserves and surplus not more than rupees one crore; and
- total borrowings not more than rupees one crore;and
- total revenue not more than rupees ten crore
- Applicable for the Financial years commencing on or after 1st April, 2015
- Whether the title deeds of immovable properties are held in the name of the company. If not, provide the details thereof
- In respect of loans, investments, guarantees, and security whether provisions of section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide the details thereof.
- In case, the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 have been complied with? If not, the nature of such contraventions be stated;
- Whether the company has defaulted in repayment of loans or borrowing to a financial institution, bank, Government or dues to debenture holders? If yes, the period and the amount of default to be reported (in case of defaults to banks, financial institutions, and Government, lender wise details to be provided)
- Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays or default and subsequent rectification, be reported
- Whether managerial remuneration has been paid or provided in accordance with relevant provisions
- Whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 and the details have been disclosed in the Financial Statements etc.
- Whether the company has made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and whether section 42 of the Companies Act, 2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not, provide the details in respect of the amount involved and nature of non-compliance;
- Whether the company has entered into any non-cash transactions with directors or persons connected with him, whether the provisions of section 192 of Companies Act, 2013 have been complied with;
- Whether the company is required to be registered as an NBFC under section 45-IA of the Reserve Bank of India Act, 1934 and whether the registration has been obtained
The High Court of Delhi held that where appellants did not impugn either allotment of Rights Issue or their removal from Board of Directors at relevant time and raised such grievances only when company's economic difficulties were over and it was on path of substantial progress, appellant's interest in company was limited to their initial shareholding and nothing more.
More than 30 industries that have zero pollution load have been exempted from taking environmental clearance as the centre released a new four-colour classification scheme for industries based on their pollution potential. Under the new categorization system, industries that pollute the most have been put in the red category, while the moderately polluting units are classified orange. Industries that have a significantly low pollution load have been placed in the green category, while those that operate without causing any pollution have been categorized as white. Terming it a "landmark" decision that gives a "fair picture" of the industries, Environment Minister Prakash Javadekar said the new system of recategorisation is based on an elaborate scientific exercise. The existing system was creating problems because it did not reflect the actual pollution caused by the various units.
Directors not liable to vacate office on failing to file returns as company was barred to hold meetings by an injunction
Investors will soon get to know the commissions that mutual funds pay distributors. The Securities and Exchange Board of India (SEBI) has asked mutual fund houses to clearly mention the actual commission, including gifts and junkets, given to distributors in the half-yearly account statement. "The term `Commission' here refers to all direct monetary payments and other payments made in the form of gifts, rewards, trips, event sponsor ships, etc. by fund houses to distributors.
Market regulator SEBI allowed stock exchanges to introduce Cross-currency futures and exchange traded Cross-currency option contracts in multiple currency pairs. The Cross currency futures will be available in various pairs, including Euro (EUR)-US Dollar (USD), Pound Sterling (GBP)-USD and USD-Japanese Yen (JPY). On the exchange traded option contracts front, Euro Rupee (INR), GBP-INR and JPY-INR have been added to the existing USD-INR pair, SEBI said in a circular.
The Reserve Bank of India has revised rules pertaining to revival of advances to small businesses and asked lenders to form district level committees to resolve stressed loans to Micro, Small and Medium Enterprises (MSMEs). Restructuring of loan accounts with exposure of above ` 25 crore will continue to be governed by the extant guidelines on Corporate Debt Restructuring (CDR) or Joint Lenders' Forum (JLF) mechanism. There will be district-level committees which will resolve the stress in MSMEs under their jurisdictions. In case of a MSME banking with multiple lenders, the lead bank's panel's should deal with the issue. The committees shall comprise regional head of the bank as chairperson, and MSME loans incharge as the convener and member. The bank should also appoint an external expert nominated by the bank and a representative of the State Government.
The government has launched a portal, Indian IP Panorama, which will act as a single window interface for information on intellectual property and provide guidance on leveraging it for competitive advantage. The portal seeks to increase awareness and build sensitivity towards IP, among stakeholders in the SME sector, Academia and Researchers.
Non Performing Assets in Banking Sector - Impacting Economic Growth Need for credit monitoring mechanism
An In-depth research into the issues involved clearly bring out following major issues:-
- The Assessment of credit need, strength and sources of promoters, viability of the project, estimated time for completion, risk of contingency, regulatory and policy risk is inefficient and ineffective. The systems are not commensurate to the need and there is significant lack of appropriate skills within the banking sector.
- The professional integrity, ethics, professional business friendly approach need commitment and strengthening.
- The terms of sanction including pre-disbursal and post disbursal conditions are not complied with in majority of the cases, including in respect of
- Promoter's contribution
- End use of funds
- Prior approval before further borrowing
- Major capital expenditure commitment by borrower and the group companies.
- Share transfer/pledge by promoters including borrowing against the same and its end use
- Investment in associates, subsidiaries etc.
- Extending advances not in the ordinary course of business
No effective action is taken by the banks in case of non compliance and in most of large cases, a relaxed view is taken
- Monitoring of audited accounts and quarterly results of the borrowers, their subsidiary companies, associates and other group companies and related parties is seriously weak
- The drawing power allowed to borrowers on the basis of inventory and debtors is not supported by credible and verified information.
- The Issues highlighted in the borrower's Audit Report and Notes to Accounts are ignored.
- Diversion of funds or improper end use is not monitored by detailed scrutiny of Annual/Quarterly financial statements. The break up schedules and actual facts behind the published figures are ignored.
- Related party transactions, overdue debtors, non moving stocks, advances not relating to business, unapproved investments are all ignored.
- Increase in Current liabilities, Secured loans of borrower from third parties, Borrowings from other banks, NBFCs, Commercial paper, Debentures and Deposits are not taken into consideration while monitoring credit.
- The bank's Board of Directors, Top management and Middle management have a big dearth of knowledge and skill to analyse borrower's financials, notes and their qualification in their Audit Reports. There is hardly any system to monitor financial statements and actual physical operations of even very large borrowers on an ongoing basis or even during disbursements.
- Early warning signals are not captured for necessary action.
- The appointment of auditors has been left in the hands of top management of banks, adversely impacting quality and depth of audit
- Even branch audits appointments has been restricted to 20% large branches and appointments are made very late towards end of March, while expecting and insisting reports in 7 to 10 days, leaving hardly any time for detailed review. The appointment is being made by management and not by independent persons.
- Inadequate action is taken on audit reports by bank auditors including account wise comments in long form Audit Reports. Even there is no focus on credit monitoring through a specialized Audit keeping in view that internal credit monitoring is very weak.
- The concurrent audit's scope coverage and reporting requirements are mis-directed to routine verification's
- There is a need for major overhaul in the Indian Banking system including:
- Strengthening of the Board of directors, top management and key positions by capable and rightly qualified persons. Employment of qualified Chartered Accountants in larger numbers will significantly help.
- Borrowers have to have the fear of judiciary and legal action including loosing of management and control of the entity itself
- The time spent on judiciary process needs to be curtailed drastically.
- Credit Monitoring within the bank and from outside experts of high quality need to be institutionalized. There is a need to appoint 2 independent professional Directors as selected by Banks to monitor day to day operations and fund management
- A regular Bank Information System is to be put in place so that periodical updates of borrower, Group companies, subsidiaries, associates, related party transactions and specific areas and nature of transactions is duly reported to the bank as certified by an Independent firm of Chartered Accountants.
- The Bank Auditors need to bring out all cases of misfeasance, diversion of funds, potential sickness and lack of financial discipline among borrowers, independently in an efficient and excellent manner
- The appointment of auditors needs to be undertaken independent of Bank's management.
- RBI has been one of the most effective regulator and banking supervision and guidance has to be revamped significantly by RBI. Even RBI annual inspection report should be an open public document at least for all levels of bank management and all Auditors and consultants.
- A comparative study of status of NPA in Private sector banks & Public sector bank need to be done to understand the real reasons of high NPA in public sector banks
- The role of politicians, ministry of finance and administrators in the working of public sector banks.
- Industry specific factors shall be considered before declaration of an account as NPA. Every industry has its distinctive features. Let the NPA norms be formulated and modified accordingly.