Sunday, June 1, 2014

[aaykarbhavan] Source Business Line and Business standard updates



 

Source  Business Line

Postpone e-voting by a year, CII petitions Ministry

KR SRIVATS

 

 

NEW DELHI, JUNE 1:  

The mandatory e-voting facility for all businesses to be transacted at general meetings should be applicable only from April 1 next year, Confederation of Indian Industry (CII) has suggested.

Corporates would get a huge relief if they are allowed a one year cooling period for implementing this norm, the chamber said in a representation to the Corporate Affairs Ministry.

The apex industry chamber has made a slew of suggestions on the new company law and the rules notified for implementation of this legislation.

The new legal framework — applicable from April 1, 2014 — requires listed companies or companies having 1,000 or more shareholders to provide for e-voting in respect of businesses to be transacted in general meetings.

Seeks clarification

CII has urged the ministry to clarify whether all voting via electronic mode would be held as conclusive evidence in any court of law in India.

This would encourage companies to use e-voting and, thereby, contribute to implementing the Corporate Affairs Ministry's green initiatives, the chamber said.

(This article was published on June 1, 2014)

 

Source  Business standrd

Some gifts from non- relatives are tax- exempt


NEHA PANDEY DEORAS

Agift from someone is always welcome. The hitch is when some, especially financial gifts, become taxable. Even so, not always; gifts from relatives are exempt from income tax ( I- T). And, gifts from non- relatives can also be tax- exempt, under certain conditions.

Some assets for which I- T is applicable, if gifted, are: |Cash of more than 50,000 |Immovable property such as land and buildings |Movable property — shares and other securities ( debt, derivatives, futures & options) |Jewellery and bullion |Art and antiquities ( paintings, sculptures and so on).

Now, situations when gifts from non- relatives can also be exempt from tax:

Gift as inheritance

All gifts under a will, and all amounts received on the death of a person as a part of the inheritance, are fully exempt from IT.

Says Mayur Shah, tax director at EY, " When assets or gifts are received as inheritance even from non- relatives, it is exempt. The assets can be passed with or without a will." For instance, someone has no relative and gives away all his wealth to a friend. The friend will not be taxed for the assets got.

Here, the onus of proving the assets got were under inheritance is with the friend, say experts. On the owner's death, the friend will require a probate ( the term for legally certifying the will for implementation) from a court. The court will wait for a year, to check if someone else comes forward as a blood relation or heir to the assets. This will need to be announced through anewspaper – in English and a regional language. If no one comes forward, the probate will be issued and the property transferred in the friends name, say experts.

Under Section 56 of the I- T Act, certain gifts are liable to income tax as income from other sources. This provision is applicable only for individuals and Hindu Undivided Families (HUFs). Even if a gift is received by any Trust or Association of Persons, it is not liable for I- T as "income from other sources".

Again asset transfer from a Trust should be as inheritance or it will become taxable, says Shah. For example, if a person creates a Trust when hes alive where the beneficiaries are non- relatives and which dissolves on the death of the Trust creator, it might not always be considered inherited assets.

On contemplation of death of a donor

Shah of EY says if an individual has a fatal disease and it is known he might not survive for long, he can transfer all his assets ( as gifts) to his near and dear ones while alive. The near and dear need not be relatives. In such cases, the beneficiary( ies) may not have to pay IT on the assets received.

From public charitable trust or institution

Many registered charitable institutions and non- government organisations provide financial help to individuals for education or medical treatment.

Such monetary help is also exempt from I- T. A fund from any foundation, university or other educational institution or hospital or any trust or any institution referred to in Section 10( 23C) are all exempt.

Thus, scholarships, stipends or charities received from a charitable institution would be completely exempt from I- T in the hands of the recipients, says Shah of EY. Here, there is no monetary threshold, provided the trust or institution giving the charity is registered under Section 12AA.

Cash of less than ~ 50,000

Rajesh Srinivasan, partner at Deloitte, Haskins and Sells LLP, says cash gifts of any amount less than 50,000 from a nonrelative are exempt from I- T.

Thus, some experts advise accepting cash gifts of more than 50,000 in a financial year only from relatives, as it is completely exempt from tax. It is important to know the definition of the word ' relative' for this purpose. It can be |Spouse of the individual getting the gift |Brother or sister of the individual getting the gift |Brother or sister of the spouse of the individual getting the gift |Brother or sister of either of the parents of the individual getting the gift |Any lineal ascendant of the individual getting the gift or his/ her spouse For instance, if X receives a gift of 1 lakh in cash from his fathers brother or paternal uncle, it would be exempt from I- T, since the paternal uncle would be a brother of the parent of the individual getting the gift and would come within clause ( iv) above.

Hence, whenever you receive any gifts from relatives, check whether the person concerned comes within one of these categories. If not, he would be considered a non- relative and gifts from such people would be exempt only to the extent of 50,000 in a financial year. Since a HUF can't have relatives, any gifts received by it in excess of 50,000 in a year would be liable for I- T.

Importantly, says Kuldip Kumar, executive director ( tax ®ulatory services) at PwC, one should be careful when getting gifts from relatives abroad because of the black (unaccounted) money issue. "Also, many a time to avoid tax on gifts from strangers, people route such expensive gifts through relatives abroad (where different laws may be applicable). Here, if the relative is a retired person or a housewife who doesn't earn, you can be caught for avoiding tax," he adds. Even cars received as a gift from non- relatives will be tax- exempt.

The provision of taxation of gifts became applicable in respect of those got on or after September 1, 2004, and before April 1, 2006, if a monetary gift exceeds 25,000. From April 1, 2006, this amount was increased to 50,000, so that cash gifts and gifts by cheque or bank draft from non- relatives and from non- exempted categories can be fully exempt from I- T up to 50,000 in aggregate in one financial year.

On marriage or such occasions

"Any gift received from any person ( a non- relative) on the occasion of marriage or any other such ceremonial occasions would not be liable to I- T at all," says Srinivasan of Deloitte, Haskins and Sells. There is no monetary limit attached to this exemption.

Experts say the hitch is that it has so far not been clarified if gifts for a specific ceremony like marriage or child birth should have been received on the date of marriage or can be got a few days before or after, too. Typically there isnt any problem as long as the gift received was for the recipients marriage but there is no exact clarity on it.

Certain specified assets such as jewellery, art and financial assets are taxed in the hands of the beneficiary; be clear about when this doesn't apply

 

Is corporate India ready to blowthe whistle? 
The onus is on companies to put in place a vigil mechanism to detect and deter fraud 
WHISTLEBLOWER ESSENTIALS


SUDIPTO DEY

When in December last year Grant Thornton, one of the biggest accounting firms in the world, conducted a survey among 250- odd CXOs and business heads in India on perception of fraud risks, it threw up some interesting findings. Sample these: [1]Over 40 per cent of the respondents said, incidences of fraud in corporate India have increased in the past two years [1]Respondents said, bribery and money laundering ( 41 per cent), financial reporting fraud ( 24 per cent), tax evasion ( 17 per cent), siphoning of assets/ funds ( 9 per cent) and information theft/ data integrity ( 9 per cent) were the most common frauds in India [1]The survey said that a large proportion of respondents are yet to implement whistleblower policy and appoint compliance personnel Such a lackadaisical approach to fraud detection and deterrence may cost corporate India dear in the coming months. Come October 1, as per Securities and Exchange Board of India's ( Sebi) listing agreement, all listed companies have to put in place a vigil mechanism to report fraud by employees and directors.

The new company law makes it mandatory for all companies, which accept deposits from public and those that have borrowed money from banks and public financial institutions in excess of 50 crore, to have a whistleblower policy. The vigilance mechanism has to be duly displayed on the company website and its activities reported in annual report. Moreover, it has to be backed with adequate safeguards against victimisation of whistleblowers.

Independent directors and the audit committee are mandated to ensure that the vigil mechanism is "adequate" and " functional". Not stopping at that, auditors are dutybound to report instances of fraud to central government within a stipulated time frame. This indirectly makes them responsible for functioning of the vigil mechanism within the company. To dissuade frivolous complaints, however, the Act has authorised companies to take suitable action against repeat offenders. The Whistle Blower Protection Act, 2011 that got the Presidential assent in May applies to corruption, misuse of power, or criminal offence by a public servant. The Act is expected to become effective in course of this year. Till date, the demands for higher level of internal controls have evoked mixed responses from India Inc. Most prefer to man any such vigil mechanism internally. " Indian companies are defensive when it comes to reporting frauds," says Inder Mohan Singh, partner in law firm Amarchand Mangaldas. Even when the management of the vigil mechanism is managed by third- party external agencies, the results have not been very encouraging.

Take for instance, the case of the ethics hotline service managed by KPMG in India for 50- odd Indian clients. Of 600 calls that the Gurgaon- based centre gets in a month, hardly 15- 20 per cent turn out to be genuine. " Around 75 per cent of the complainants want to stay anonymous," says Sandeep Dhupia, partner and head of forensic services at KPMG in India. Many companies ignore these anonymous complaints. Legal experts point out that most of the time employee grievances get mixed up with a company's fraud detection strategy. For any vigil mechanism to be effective, companies need to encourage whistleblowing as a part of corporate culture and work ethic, points out Anand Mehta, Partner with law firm Khaitan & Co. A reward system to encourage whistleblowing and regular external audits of the vigil mechanism would help create confidence in the system.

Among the gaps in the current legislative mechanism, legal experts point out that Indian regulations are limited to employees and directors of the company, leaving out vendors or suppliers. In a representation to the Ministry of Corporate Affairs, industry body CII said that the government must prescribe what constitutes "adequate" safeguards to protect victimisation of whistleblowers.

Currently, the rules leave it to the company to devise their own vigil mechanism.

The effectiveness of any vigil mechanism is tested when frauds get reported. " Proof the pudding is in the eating," says Singh. Its still early days to measure corporate India's whistleblowing track record.

Sebi Listing Agreement

|Mandatory for all listed companies to have a whistleblower policy, under Clause 49 ( by October 1, 2014). |Put in place mechanism for employees and directors to report concerns on unethical behavior, actual or suspected fraud or violation of the company's code of conduct or ethics policy, to management. |Safeguards against victimisation of whistleblowers |Direct access to the chairman of audit committee in exceptional cases. |Display details on the company website

Companies Act, 2013

|As per Section 177 ( 9), read with rule 12.5, a whistleblowing mechanism is mandatory for -All listed companies -companies that accept deposits from public -companies that have borrowed money from banks and public financial institutions in excess of 50 crore. |Independent directors and the audit committee are mandated to ensure that the vigil mechanism is " adequate" and "functional". |It is the duty of auditor to report fraud by employees of the company to the central government within a prescribed time .

Whistle Blower Protection Act, 2011

|The Act seeks to protect whistleblowers, ie, persons making a public interest disclosure related to an act of corruption, misuse of power, or criminal offence by a public servant.

|Any public servant or any other person including a nongovernmental organisation may make such a disclosure to the central or state vigilance commission. | Every complaint has to include the identity of the complainant.

|The vigilance commission shall not disclose the identity of the complainant except to the head of the department if he deems it necessary. The Act penalises any person who has disclosed the identity of the complainant. |The Act prescribes penalties for knowingly making false complaints.

 

BRIEF CASEN [1] M J ANTONY


Consumers can change power supplier

Electricity consumers in Mumbai can change their supplier if they want and Brihanmumbai Electricity Supply & Transport Undertaking ( BEST) cannot prevent it, the Supreme Court has held in the case, BEST vs Maharashtra Electricity Regulatory Commission. Some consumers in the BEST supply area wanted to change to Tata Power Co for power requirement. When they approached BEST, it rejected their request. They moved the Mumbai Electricity Regulatory Commission. Reliance Industries, another supplier, was also made a party to the case. The commission allowed the petitions and held that Tata Power was bound to supply electricity either through BEST wires or its own wires. Dismissing the BEST appeal, the Supreme Court said: "It is difficult to accept the extreme position taken by BEST that if local authority is a distribution licencee in a particular area, there cannot be any other distribution licencee in that area without the permission of such local authority."

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> HPCL's about- turn ' arbitrary'

The Supreme Court has stated that Hindustan Petroleum Corporation Ltd ( HPCL) had acted unfairly in cancelling the dealership of a woman who had fulfilled the conditions set by the government company. Earlier, she was selected on the recommendation of a team which found that she had land in the location selected for retail outlet. Later the appointment was cancelled assuming wrongly that she had no land to set up the outlet. On her appeal, namely, Sunita Gupta vs Union of India, the Supreme Court restored the earlier order of her appointment, observing that the about- turn of the government corporation was " on a flimsy technicality and it has acted in an arbitrary and unfair manner".

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Consumer court regulation upheld

The Supreme Court has upheld the Consumer Protection Regulation under which the National Commission can deal with a review petition without hearing oral arguments of the parties. It also ruled that a ' proxy counsel' cannot argue a case. The law does not recognise the concept of proxy counsel, though it is a normal practice among lawyers to appoint proxy to be present in court when they are otherwise busy. The Supreme Court stated in the case, Surendra Mohan vs HDFC, that " any ' Arzi', ' Farzi' halfbaked lawyer under the label of proxy counsel cannot be allowed to abuse and misuse the process of the court."

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Foreign award enforceable

The Bombay High Court has ruled that the Indian ports. Disputes over payment arose and the agency was terminated, leading to arbitration. The agreement had provided that disputes will be governed by English law and arbitration shall be in London. The award was in favour of the English firm, which was sought to be enforced here. This was resisted by the Mumbai firm. However, the high court rejected its arguments and allowed the English firm to execute the award.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Injunction against trade mark

In a trade mark dispute over Zara' between Spanish firm Industria de Diseno Textil SA and Oriental Cuisine Ltd, the Delhi High Court has allowed the latter to use the composite mark 'Zara Tapas Bar' instead of Zara till further orders. The Spanish firm selling garments and other consumer products had obtained an ex parte injunction last year against the Indian firm, opposing the use of the mark Zara. The order was modified and the composite name was allowed. The foreign firm is stated to have an agreement with Trent Ltd, a Tata enterprise, to develop its Zara stores in India.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> FCI disciplinary action quashed

The Supreme Court has dismissed the appeal of Food Corporation of India against the Gauhati high court judgment setting aside the punishment on a manager, Sarat Chandra, for causing losses to the corporation. 5 lakh was recovered from him apart from censure. The apex court, however, stated that the managing director did not commit anything in writing before taking disciplinary action, did not follow the rules and acted on his own discretion which was " capricious, fanciful and without application of mind."

A weekly selection of key court orders

 

 

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A.Rengarajan

Company  Secretary

Chennai

93810  11200

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