Right of persons other than retiring directors to stand for directorship & Refund of deposit
General Circular No. 38/2014
No. 1/22/2013-CL-V
Dated: 14th October, 2014
Subject: Right of persons other than retiring directors to stand for directorship - Refund of deposit under section 160 of the Companies Act, 2013 in certain cases.
Clarity has been sought by companies registered under section 8 of the Companies Act, 2013 (corresponding to section 25 of Companies Act, 1956) about the manner in which the amount of deposit of rupees one lakh received by them under sub-section (1) of section 160 of the Companies Act, 2013 (Act) is to be handled if the depositor fails to secure more than twenty five per cent of the total valid votes. It has been noted that the relevant provision is silent on such issue.
2. The matter has been examined in the Ministry and it is clarified that in such cases, the Board of directors of a 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.
3. This issues with the approval of the competent authority.
Yours faithfully
(KMS Narayanan)
Assistant Director (Policy)
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Exemption from applicability of Companies (Accounts) Rules, 2014 to certain Companies Posted In Income Tax | Notifications | No Comments » <!-- google_ad_client = "ca-pub-4758308089404121"; /* 336x280, Tax Guru created 1/1/09 */ google_ad_slot = "2487820938"; google_ad_width = 336; google_ad_height = 280; google_ad_region="test"; //-->GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, the 14th October, 2014 G.S R…. (E). — In exercise of the powers conferred by sub-sections (1) and (3) of section 128, sub-section (3) of section 129, section 133, section 134, subsection (4) of section 135, sub-section (1) of section 136, section 137 and section 138 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules to amend the Companies (Accounts) Rules, 2014, namely:- 1. (1) These rules may be called the Companies (Accounts) Amendment Rules, (2) They shall come into force on the date of their publication in the Official Gazette. 2. In the Companies (Accounts) Rules, 2014, in rule 6, after the existing proviso, the following provisos shall be inserted, namely:- "Provided further that nothing in this rule 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: Provided also that nothing contained in this rule shall, subject to any other law or regulation, apply for the financial year commencing from the 1st day of April, 2014 and ending on the 31st March, 2015, 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, as the case may be. " [F. No. 1/19/2013-CL-V-Part] AMARDEEP SINGH BHATIA , Jt. Secy. Note .- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 239(E), dated the 31st March, 2014. - See more at: Exemption from applicability of Companies (Accounts) Rules, 2014 to certain Companies
Auditor report shall state about existence of adequate internal financial controls system and its operating effectiveness
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 14th October, 2014
G.S.R……(E). — In exercise of powers conferred by sub-sections (1), (2) and (4) of section 139, sub-sections (1) and (2) of section 140, sub-section (3) of section 141, sub-sections (2), (3), (8) and (12) of section 143, sub-section (3) of section 148 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules to amend the Companies (Audit and Auditors) Rules, 2014, namely:-
1. (1) These rules may be called the Companies (Audit and Auditors) Amendment Rules, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Companies (Audit and Auditors) Rules, 2014, after rule 10, the following shall be inserted, namely:-
"10A. 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:
Provided that auditor of a company may voluntarily include the statement referred to in this rule for the financial year commencing on or after 1st April, 2014 and ending on or before 31st March, 2015."
[F. No. 1/33/2013-CL-V-Part]
AMARDEEP SINGH BHATIA, JT. Secy.
Note The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (1), vide number G.S.R. 246(E), dated the 315' March, 2014.
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AHMEDABAD, OCT 15, 2014: THE issue before the Bench is - Whether interest payment towards delay in paying sale consideration after slump sale is effected and plant is in operation, is to be treated as revenue in nature. YES is the answer.
Facts of the case
A) The assessee concern is a joint venture company formed by Sandvik AB Sweden and M/s. Chokshi Tubes Company Limited. The company was incorporated on 20th October 1996 with the share holding of 51% by Sandvik AB and 49% by M/s. Chokshi Tubes Company Limited.M/s. Chokshi Tubes Company Limited was previously having EMD undertaking at Rajpur of Mehsana doing extrusion of stainless steel pipes and tubes. The joint venture company acquired the EMD undertaking of M/s. Chokshi Tubes Company Limited, situated at Rajpur, Mehsana as a going concern on "as is where is basis" and an agreement was made on 4th December 1996 between Sanvik Chokshi Limited and M/s. Chokshi Tubes Company Limitedfor transfer of EMD undertaking as a going concern at a slump price of Rs.100 Crores. Such amount was paid for acquisition, which included fixed assets, current assets, raw materials, advances, cash and bank balance, liabilities, etc., without bifurcating specifically in the agreement, any asset, raw materials or advances and no separate value for different assets also were determined. The assessee attributed a sum of Rs. 89.34 Crores to the various depreciable assets and claimed depreciation accordingly. For the AY 1997-98, in the return of income, the assessee had claimed depreciation. However, AO noted that there was no amount mentioned in the agreement against each of the above items, and therefore, it was not possible to ascertain the value of the items. The AO was of the opinion that the plant and machinery installed could not be included in the actual cost and adopted the actual cost of the various assets as per the WDV shown in the books of account of the CTC Limited and against the depreciation claimed of Rs.10.78 Crores, an amount of Rs. 9.82 Crores had been disallowed.
On appeal, CIT(A) held that the action of AO in invoking Explanation 3 to sub-section (1) of Section 43 was not justified in as much as the plant and machinery; land and building forming part of the EMD undertaking had been valued by the approved valuer and the same had been duly recorded in the books of account, and therefore, the onus was on the part of the Revenue to prove that the valuation was incorrect by providing another valuation report, which was not done in the instant case. CIT [A] was actuated by the fact that even after allowing the lower rate of depreciation as per the WDV of the assets in the books of M/s. Chokshi Tubes Company Limited, there was no profit in the succeeding years. CIT [A] accordingly directed AO to allow the depreciation at Rs.10.79 Crores to the assessee. On further appeal by Revenue, Tribunal noted the fact that after allowing the lower depreciation as per the WDV in the books of account of the transferor company, no profit in the hands of the assessee in the succeeding AYs could be noticed and on cumulative consideration of the entire materials, it held in favour of the assessee concurring with the findings of the CIT [A].
B) The second issue concerns disallowance of Rs. 1.57 Crores [rounded off] on account of interest expenditure on unpaid purchase consideration. The Assessing Officer found that the amount of interest claimed by the assessee concern the delay in payment of sale consideration to CCTC and therefore, he concluded that the interest was a part of total consideration paid by the respondent-assessee for acquiring the EMD undertaking. Therefore, such interest amount was to be treated not as a revenue expenditure relatable to the cost of acquisition. The assessee had challenged such issue before the CIT [A] and the CIT [A], after considering Explanation 8 to Section 43 of the Act and applying the same to the facts of the case concluded in favour of the assessee and against the Revenue. It can be noticed that a detailed working is made by the CIT [A] while concluding such an issue. Revenue when challenged the issue before the Tribunal, it relied upon discussion made in the order of the CIT [A] to concur with the CIT [A].
Held that,
A) ++ in the instant case, we notice that the issue with regard to the slump sale and the consideration as a result of the sale for a lumpsum consideration of Rs. 100 crores has not been a matter of dispute. However, against individual asset sale, since there was no bifurcation of the consideration, the Assessing Officer had questioned and doubted the claim made by the assessee for the purpose of depreciation. The Assessing Officer also had made verification from the income tax records of the transferor company and it was noticed that there also there is no bifurcation made of the consideration of Rs. 100 crores against the individual assets sold by it. This being essentially the question of fact – both the CIT [A] and the Tribunal have extensively dealt with the entire factual matrix and have also applied the relevant provisions of law to these facts to conclude that the assessee arrived at a price of Rs. 100 Crores on slump sale basis for transfer of a running business of EMD undertaking, and therefore, factum of assessee not having paid consideration for acquiring individual assets cannot be construed as illusory or colorable. Explanation-3 can be invoked if the Assessing Officer is satisfied that the main purpose of the transfer of assets, direct or indirectly to the assessee, was the reduction of a liability of income tax by claiming depreciation with reference to an enhanced cost. In such circumstances, the actual cost to the assessee can be determined by the Assessing Officer having regard to all the circumstances of the case, with the previous approval of the Joint Commissioner. It can be noted from the record that at the time of transfer of the assets, the assessee had no income for it to reduce its tax liabilities by way of such transfer, and therefore, both the CIT [A] and the Tribunal had rightly concluded that the Assessing Officer was in error in invoking Explanation 3 to Section 43 for determining actual cost in the said deal. For the reasons mentioned hereinabove, we see no mistake in CIT [A] as well as Tribunal in concluding that Explanation 3 to Section 43 of the Act was not required to be invoked. The first issue need no consideration therefore as no substantial question of law has arisen;
B) ++ it can be noticed that such explanation is brought on the statute book by the Finance Act, 1986, w.e.f 1st April 1974, which explains that where an amount is paid or is payable as interest in connection with acquisition of asset, so much of such amount which is relatable to any period after such asset is first put to use shall not be included and shall be deemed to have been included in the actual cost of such asset. The Bombay High Court in case of CIT v. Rajaram Bandekar, reported in 202 ITR 514 was considering Explanation 8 to Section 143 (1) wherein, it is held that the said explanation was added with an object of removing doubts with regard to the includibility of interest relatable to any period after the asset has first been put to use, in the computation of its actual cost. By this Explanation, it has been declared by Parliament that, "where any amount is paid or is payable as interest" in connection with the acquisition of an asset, "so much of such amount as is relatable to any period after such asset is first put to use shall not be included, and shall be deemed never to have been included," in the actual cost of such assets. Parliament, in the above Explanation, has taken full care to couch the Explanation in the widest possible terms to avoid any further controversy in regard to the very same issue on the basis of the manner of payment of interest or time of payment thereof. This has been done by the use of expression "where any amount is paid or is payable as interest". In the matter on hand, CIT [A] as well as the Tribunal have noticed that in view of introduction of Explanation 8 to Section 43 (1) which was held retrospective in nature, the interest cannot be capitalized which was paid after the slump sale was effected and the factory was in operation, and therefore, such expenses were revenue in nature. The directions given to the Assessing Officer to allow the amount of interest of Rs.1.57 Crores is in accordance with the provision of law. No question of law much less substantial question of law arises. The present Tax Appeal resultantly fails and the same is dismissed in limine.
(See Taxindiaonline.com)
Income Tax
Whether if it is found that assessee has made purchases at abnormally high prices from a party that is not traceable, Revenue will have all legitimacy to reject books and tax gross profit on estimate basis - YES: ITAT
ASSESSEE is a registered firm engaged in the business as a wholesale dealer in Iron and Steel. During the course of assessment proceedings the AO observed that as against gross turnover of Rs. 44.89 crores the assessee had declared gross profit of Rs. 1.31 crores only which worked out to 2.93%. Since the gross profit disclosed by the assessee was very low, the AO made enquiries to ascertain the genuineness of claim of purchases. From the addresses of all the suppliers given by the assessee, the AO called for information u/s 133(6) from 34 suppliers.
THE issue before the Bench is - Whether if it is found that the assessee has made purchases at abnormally high prices from a party that is not traceable, the Revenue will have all the legitimacy to reject the books and tax the gross profit on estimate basis. And the verdict goes against the assessee.
Service Tax
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