MCA notifies The Companies (Winding Up) Rules 2020

The New Ministry of Corporate Affairs (MCA) through a notification dated January 24, 2020, notifies the Companies (Winding Up) Rules, 2020 will be effective from April 1, 2020, which consists of Rule 1 to 191 and Forms WIN 1 to WIN 95, which pertains to the winding up of a company under the Companies Act, 2020. The word ‘winding up’ is a process in which the dissolution of a company is brought about in which its assets are applied in the payment of its debts. After the payment of the debts, if in case any amount remains then that is paid to the members in proportion to the share or share capital held by them. Basically, the Companies (Winding Up) Rules, 2020 provides the rules for prominent ways pertaining to winding up of a company namely Winding up by Tribunal; Liquidators; Winding up Order; application for the stay of suits, etc. on winding up order; report by Company Liquidator under Section 281; settlement of list of contributors; Advisory Committee, meeting of creditors and contributors and their proxies; registration and book of account to be maintained by the companies liquidators; investments of surplus funds; filing and audit of Company Liquidator’s account; winding up by tribunal debts and claims against the company other than summary winding up; attendance and appearance of the creditors and contributories; collection and distribution of assets, calls in winding up by the tribunal; examination under Section 299 and 300; application against the directors or promoters or officers; compromise of claims; sale by company liquidators; dividends and returns of capital in winding up by the tribunal; termination of winding up; payments of unclaimed dividends and the summary procedure for liquidation. The Companies (Winding Up) Rules, 2020 elaborate on the procedure in which the winding up of a company can be commenced.

A functionality has been enabled in the e-filing login of the taxpayers whose business turnover exceeds Rs.50 crores to provide the prescribed mode of electronic acceptance of payment made available to the customers

Government blocks Rs 40,000 crore GST claims on returns mismatch 

Delhi : The Central Board of Indirect Taxes and Customs (CBIC) has frozen tax credits of around Rs 40,000 crore as the returns did not match, exposing alleged fraud by close to 2,000 entities, apart from cases where returns were not filed. Last week, the indirect tax wing of the revenue department blocked the credits within four hours, CBIC chairman John Joseph said at an event on Monday. Companies are entitled to credits on tax paid on inputs in the production chain so that there is no cascading effect of taxes. But major discrepancies in returns and instances of a large number of frauds prompted the government to crack the whip. There have been multiple ways in which frauds have been taken place. Sources said, the department had collected data on mismatch of over 20% in the initial GSTR-1 filing for the month and the final GSTR-3B returns. Subsequently, the bar was lowered to a difference of 10% and the government used various red flags to then identify companies, while completely relying on data instead of sending tax inspectors to premises to check for books.REPORT THIS AD

India likely to raise import duties on more than 50 items in Budget

Delhi : India plans to increase import duties on more than 50 items including electronics, electrical goods, chemicals and handicrafts, targeting about $56 billion worth of imports from China and elsewhere, officials and industry sources said. Finance Minister Nirmala Sitharaman could make the announcement when she presents her annual budget for 2020/21 on Feb. 1, along with other stimulus measures to revive sagging economic growth, one of the government officials said. Higher customs duties are likely to hit goods such as mobile phone chargers, industrial chemicals, lamps, wooden furniture, candles, jewellery and handicraft items, two government sources with direct knowledge of the matter said. The move could hit smartphone manufacturers that still import chargers or other components such as vibrator motors and ringers, along with retailers such as giant IKEA that is in the process of expanding its footprint in India. IKEA had previously flagged higher Indian customs duties as a challenge. The government had identified items and decided to increase import tariffs by 5%-10% as recommended by a panel of trade and finance ministry officials, among others, the second government official said.

Govt likely to allow Indian companies list their equity shares overseas

Delhi : The government is likely to soon decide on permitting Indian companies to list their equity shares overseas, according to an official. Apart from providing an additional fund raising avenue for the corporates looking to expand and boost their business activities, overseas listing of shares would also help in bringing more capital into the country. The official said many companies are interested in listing their equity shares in foreign countries. Currently, quite a few Indian companies have American Depository Receipts (ADRs) that are traded in the US. Some other corporates have their Global Depository Receipts (GDRs). The official said the corporate affairs ministry and markets regulator Sebi are in favour of allowing Indian companies to list their equity shares in foreign countries. Other departments and regulators are also expected to be on board, the official added.

Loss suffered during first year of business started with husband’s fund is to be clubbed entirelyUday Gopal Bhaskarwar v. ACIT – [2020] 113 taxmann.com 378 (Pune – Trib.)

Assessee gifted a sum of money his wife, who started business of Futures and Options (F&O) on 18-09-2013. Assessee claimed that she incurred loss in such business, which was clubbed in his hands. Assessing Officer (AO) accepted the primary claim of the assessee, however, he did not accept the assessee’s contention that entire loss to be set off against the assessee’s income as wife also contributed some amount in her business.Considering the mandate of Explanation 3 to section 64(1), the AO held that only that part of the business loss incurred by the assessee’s wife could be set off against the assessee’s income which bears the proportion of amount of investment out of gift on the first day of previous year to the total investment in the business as on the first day of previous year.The Pune ITAT held that In case of newly set up business, the previous year shall be the period beginning with the date of setting up of the business and ending with said financial year. Thus, in the instant case, the amount of assets received by wife as invested in business and total investments in the business including assets received from assessee will be same. Therefore, going by the explanation 3 read in conjunction with section 64(1)(iv), the entire amount of loss resulting is liable to clubbed in hands of assessee

Provisions of section 56(2)(vii)(c) cannot be invoked while computing income under the head ‘capital gain’Ravi Jalan v. ITO – [2020] 113 taxmann.com 414 (Kolkata – Trib.)

The assessee, a sole proprietor, transferred his business to a private company. He filed his return of income claiming the benefit of section 47(xiv) of the Income-tax Act (‘Act’) which provides that where a sole proprietary concern is succeeded by a company and as a result of which the sole proprietary concern sells or otherwise transfers any capital asset or intangible asset to the company then such transfer is not treated as ‘transfer’ for the purpose of computation of capital gain. However, the benefit of section 47(xiv) is allowed subject to certain conditions and one of the condition is that the sole proprietor should not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company.Assessing officer (AO) denied the benefit of Section 47(xiv) to the assessee on the ground that he received consideration in form of money as well as shares of the company. AO determined full value of consideration on basis of amount of money and the value of shares so received by assessee. For determining the value of shares, AO invoked section 56(2)(vii)(c) of the Act and considered the fair market value of shares.On appeal, it was held by the ITAT that the value of the assets taken over by the company should be considered as the full value of consideration for the purpose of computation of capital gains under the Act. However, in the instant case, since cost of acquisition and full value of consideration received on sale were same figure, no capital gains had accrued or were received by assessee. Thus, addition under head capital gains were to be deleted.Further, while computing income under the head capital gains, the provisions of section 56(2)(vii)(c) can’t be invoked. When the assessee had been allotted shares as consideration for transfer of property, question of valuing those shares by invoking section 56(2)(vii)(c) didn’t arise. When a value is fixed for share allotted, it reflects the market value of the shares.

I-T department lets ‘deserving’ assessees to pay up 20% tax demand in parts

Delhi : What does the taxman do when the money market dries up and businesses struggle? It tries to figure out a way to inch towards a punishing tax target that the government has set by giving a little breathing space to companies and businesses — the prime taxpayers. Mumbai, which accounts for the highest contribution to income tax in the country, is trying it out. Amid tight liquidity and a tough business environment, tax commissioners in the financial capital decided on Monday to allow “deserving” assessees pay in instalments the amount they are required to fork out after challenging a tax demand order. After receiving a demand order from the assessing officer of the Income Tax (I-T) department, a tax payer has to pay 20% of the demand within a month once the order is challenged before the Commissioner of Income Tax (Appeals), the first appellate authority. This amount can now be paid in multiple instalments till end March. “However, this will be on a case to case basis and is not part of any rule. Instructions have gone out to commissioners in Mumbai to consider genuine requests from assesses so that don’t have to pay the entire 20% at one go.

Massive fraud by jewellers during note ban detected by I-T dept

Delhi : Several jewellers have been put under scrutiny by the income tax department in cases of alleged large and disproportionate cash deposits during the demonetisation period (November 9-December 30, 2016). In some cases, some of these jewellers have been found to have deposited nearly 1,000 times as much cash during this period compared to the year-ago period, sources said. Apart from large cash deposit not commensurate with income profile, the department scrutinised cases where taxpayers reported massive increase in unsecured loans during the year or loans fully paid involving huge amounts, the sources said. These jewellers under scrutiny have also not shown the cash so deposited in their return of income for the AY2017-18, which triggered the data analytics system of the department. “A Gujarat-based jeweller was found to have deposited cash of over Rs 4 crore during demonetisation against just over Rs 40,000 a year ago,” a tax official privy to the scrutiny said.

RBI says crypto not banned, but don’t bank on it

Maharashtra : The Reserve Bank of India has said it had not banned cryptocurrencies such as Bitcoin in India, but only ringfenced regulated entities like banks from risks associated with trading of such virtual instruments. The central bank said this in a response to a petition filed by the Internet and Mobile Association of India (IAMAI), which wanted it to reconsider a 2018 circular directing regulated entities not to deal in cryptocurrencies. The IAMAI, whose members include cryptocurrency exchanges, had approached the Supreme Court against the RBI action. In a hearing earlier this month, the association argued that trading in cryptocurrencies, in the absence of a law banning those, was a legitimate business activity but the RBI had effectively banned it by blocking access to banking channels. The next hearing in the case is scheduled for Tuesday. ET has seen a copy of a 30-page affidavit that the RBI had filed in the SC on September 4. “Firstly, the RBI has not prohibited VCs (virtual currencies) in the country.

Revenue dept sets monthly GST target of Rs 1.18L cr in Q4, to clamp down on fraudulent input tax credit to achieve goal

Delhi : The revenue department has set a target of Rs 1.18 lakh crore of average monthly Goods and Services Tax (GST) collection in the remaining three months of the fiscal (January-March) and has asked the indirect tax department to specially focus on fraudulent input tax credit (ITC) claims as revealed in data analytics review. In the first nine months of the fiscal (April-November), GST collection has averaged just a tad over Rs 1 lakh crore per month. Sources said that about 40,000 companies have been red-flagged for excess or fraudulent ITC availment. “Out of 1.2 crore GST registrants, the focus would be on these identified taxpayers.

Government red flags 40,000 businesses for excess tax rebate claims

Delhi : GST authorities have zeroed in on about 40,000 companies for claiming excess or wrongful tax rebates, who will now be pursued for recovery of tax dues, said a government official. If the authorities are not able to recover tax dues from the identified companies with the electronic communication such as emails and text messages, they will be visited by officials and further steps will be taken, said the official quoted above, who spoke on condition of anonymity. The government recently stepped up efforts to mobilise revenue collection by launching a crackdown on tax evaders and those who have claimed rebates in excess of the taxes they have paid on raw materials and services procured.

Courier companies seek relief on GST E-way bill rule

Delhi : Courier companies such as FedEx, DHL and UPS are in a bind over delivering imported goods to customers because of a goods and services tax rule that bars defaulters from issuing e-waybills. The document is mandatory for transport of goods worth over Rs 50,000. On the other hand, the customs department won’t hold such goods in its storage once they’re cleared. The companies, including local ones such as DTDC, Safe Express, Gati and Delhivery, have petitioned the government to seek a way out of the dilemma. The government said it’s examining the issue. GST Rule 138E, which took effect in November, doesn’t allow an entity that hasn’t filed returns for two straight months to generate an e-waybill. While the rule won’t impact direct deliveries to ecommerce customers, business-to-business (B2B) orders from overseas will likely get hit.

GSTR-1 amnesty scheme due date extended to Jan 17

Delhi : The Finance Ministry on Friday extended the due date for amnesty scheme for filing of GSTR-1 by seven days. The scheme was to end on Friday, but it will now be open till January 17. The scheme intends to facilitate filing of all pending FORM GSTR-1 from July 2017 to November 2018 without any late fee. The Ministry said the response to the waiver has been very encouraging and since the announcement on December 18, 54 lakh GSTR-1 were filed till January 9. On an average, only about 25 lakh monthly GSTR-1 get filed. In view of the huge response, which would lead reduction in unmatched credit, it has been decided to extend the last date for the scheme. GSTR-1 is a monthly or quarterly return that should be filed by every registered dealer. It contains details of all outward supplies i.e sales. The return has a total of 13 sections. The due dates for GSTR-1 are based on turnover. Businesses with sales of up to ? 1.5 crore will file quarterly returns.

RBI introduces video-based identification process for KYC

Delhi : The RBI on Thursday amended the KYC norms allowing banks and other lending institutions regulated by it to use Video based Customer Identification Process (V-CIP), a move which will help them onboard customers remotely. The V-CIP, which will be consent-based, will make it easier for banks and other regulated entities to adhere to the RBI’s Know Your Customer (KYC) norms by leveraging the digital technology. “… with a view to leveraging the digital channels for Customer Identification Process (CIP) by Regulated Entities (REs), the Reserve Bank has decided to permit V-CIP as a consent based alternate method of establishing the customer’s identity, for customer onboarding,” the RBI said in a circular

Sabka Vishwas tax amnesty scheme: Rs 35,000 crore tax to be paid, may be accounted for in FY20
Delhi : With the deadline looming for the Sabka Vishwas dispute resolution scheme, about 87% of eligible taxpayers have opted for the scheme and committed to pay about Rs 35,000 crore as taxes to the government, officials said. This has come as a relief to the government, which is grappling with a huge shortfall in tax revenue this fiscal. Sabka Vishwas, Sabka Vishwas tax, Sabka Vishwas tax amnesty scheme, money However, about 23,000 (about 12.5% of the total) eligible taxpayers have not yet opted for the scheme. These are mainly large taxpayers and in 7,100 such cases, a total tax amount of Rs 1.7 lakh crore is under litigation, they added.

Prize money won in lucky draw wouldn’t amount to lottery income: ITAT
Rajmohan V.V., Kumbalappalli v. ITO – [2019] 110 taxmann.com 169 (Cochin – Trib.)
The assessee had made purchases of cloth from a shop. The purchase was above the specified monetary limit and due to this, he received certain number of price coupons. He did not pay any consideration for the price coupons. He won 1 Kg. gold in lucky draw, out of which he was issued 600 grams of gold coins and balance was deducted as TDS under section 194B.
During the scrutiny proceedings, the Assessing Officer (AO) held that the said prize was nothing but winning from lottery which was chargeable to tax as per the rates provided in the section 115BB. Thus, he concluded that the TDS had been rightly deducted. The order of AO was also confirmed by the CIT(A).
On Appeal, the ITAT held that before a scheme can be regarded as a lottery, there must be an element of distribution of prizes which should be by chance or lot and such distribution should be among those who had paid a price for participating in the scheme.
Mere gratuitous distribution without any price having been paid by the participants for acquiring the chance and receiving a price that is ultimately distributed, would not amount to a lottery. The essential ingredients of ‘lottery’ are absent in the facts and circumstances of the case and same can’t be taxed as a ‘lottery’.

Assessee eligible to claim sec. 54F exemption if new house is purchased up to due date of filing of belated ITR
Smt. Vatsala Asthana v. ITO – [2019] 110 taxmann.com 173 (Delhi – Trib.)
The assessee transferred a plot of land and purchased a new residential house. He claimed deduction under section 54F in respect of the amount invested in purchase of new residential house. AO allowed the assessee’s claim to the extent the payment was made for purchase of new asset till the due date of filing of return of income under section 139(1).
Assessee raised a plea that the provisions of section 54F are beneficial provisions for promoting construction of the residential house. Therefore, the due date of return filing should be considered as per section 139(4), i.e., due date for filing of belated return. The CIT(A) rejected the assessee’s plea and upheld the order passed by the AO.
The Delhi Tribunal held that the assessee’s due date for filing of return under section 139(1) was 31.07.2012 and as per section 139(4) was 31.03.2014. In view of the various earlier decided cases, it could be said that the payment made by the assessee up to the due date prescribed under section 139(4), i.e., 31.03.2014 was allowable while considering the deduction under section 54F.

New Year Surprise: Govt. notifies Form ITR 1 and ITR 4 for Assessment Year 2020-21
Notification No. 01/2020, dated 03-01-2020
The CBDT has notified Form ITR-1 and ITR-4 for the Assessment Year 2020-21. Possibly the Department has for the first time notified the ITR forms before the relevant assessment year begins. It must be noted that only the ITR Forms have been notified without the corresponding return filing utility.
In order to ensure that individuals, entering into certain high value transactions, furnish the Income- tax return, seventh proviso to section 139 was inserted by the Finance (no. 2) Act, 2019 to provide that, a person who doesn’t have total income exceeding maximum amount not chargeable to tax, shall be mandatorily required to file his return of income, if during the previous year:
1. He has deposited an amount (or aggregate of amount) in excess of Rs. 1 crore in one or more current account maintained with a bank or a co-operative bank
2. He has incurred expenditure in excess of Rs. 2 lakh for himself or any other person for travel to a foreign country
3. He has incurred expenditure in excess of Rs. 1 lakh towards payment of electricity bill.
4. He fulfils such other conditions as may be prescribed
Rule 12 of the I-T Rules has been amended to provide that a resident individual can’t furnish return of income in ITR-1 if he is required to furnish ITR under seventh proviso to sub-section (1) of section 139. Further, a person holding house property jointly with 2 or more persons can’t filed return in ITR-1 & ITR-4.

Simple ITR-1 form not for those paying Rs 1 lakh in electricity bill, owning house jointly
Delhi : In significant changes in income tax return filing forms, individual taxpayers owning house property in joint ownership and those who have paid Rs 1 lakh in electricity bills in a year or incurred Rs 2 lakh expense on foreign travel cannot file their annual income return using the simple ITR-1 form. The government, which usually notifies forms for filing income tax returns by individuals in April every year, on January 3 notified tax return forms for assessment year 2020-21 (income earning year April 1, 2019 to March 31, 2020). Returns in ITR-1 Sahaj can be filed by an ordinarily resident individual whose total income does not exceed Rs 50 lakh, while Form ITR-4 Sugam is meant for resident individuals, HUFs and firms (other than LLP) having a total income of up to Rs 50 lakh and having presumptive income from business and profession. According to the notification, two major changes in the ITR forms have been effected.

The Ministry of Corporate Affairs (MCA) has come up with notification which amends ‘Rule 8A – Appointment of Company Secretaries’ and ‘Rule 9- Secretarial Audit Report’ of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The amendments seeks to hike threshold limit of paid up capital for companies to appoint whole time Company Secretary, amendment also seeks to expand scope of Secretarial Audit.

The notification will be effective from 01.04.2020. The amendments are summarized as under:

Hike in threshold limit for appointing a CS:

The MCA has amended the Rule 8 A which changes the threshold limit for appointment of whole time Company Secretary in a private company. Now, companies having paid up share capital of 10 crore of more must have whole time CS in a board otherwise penalty will be imposed on such companies. At present, threshold limit of paid up share capital is 5 crore or more.

Expansion of scope of Secretarial Audit for private Companies:

The Government has expanded the scope of Secretarial Audit by including the Private Companies having outstanding loans/borrowing from banks/public financial institutions/public for an amount Rs. 100 or more under the ambit of Secretarial Audit.

Under the extant norms, Private companies are outside purview of Secretarial Audit irrespective of the Paid up capital, Turnover or Outstanding Loan amount limits. Currently, the Secretarial Audit is restricted to listed companies and public companies having a paid-up share capital of Rs. 50 Crore or more and having a turnover of Rs. 250 crore or more.

In order to determine the applicability for Secretarial Audit, the paid up share capital, turnover, or outstanding loans or borrowings as the case may be, existing on the last date of latest audited financial statement shall be taken into account

E-commerce cos may get to upload GST e-invoice for vendors
Delhi : In a significant relaxation for the ecommerce sector, the government could allow online platforms such as Amazon and Flipkart to upload e-invoice for vendors under the goods and services tax (GST) framework. As part of ongoing trials of e-invoicing, a detailed set of clarifications in the form of frequently asked questions have been issued. “Ecommerce operator can request for e-invoice on behalf of supplier,” the clarification said. The matter has been taken up by the government and could be allowed once the trial period is over, a government official told ET. “Trials are now on…It will require an amendment… The issue has been taken up.” The GST Network has issued a detailed set of FAQs.
IRDA

Branch office entitled to avail full ITC of tax paid by H.O. where payments are netted off against receivables: AAAR

Sanghvi Movers Ltd., In re – [2020] 113 taxmann.com 24 (AAAR – TAMILNADU)

The SML is providing medium-sized heavy-duty cranes on rental/lease/ hire basis to its clients. SML has pan-India presence and cranes are deployed across India as per customers’ requirements. SML Maharashtra, i.e., H.O., transports the crane and its components to the customer’s location on instructions of the applicant for which it raises invoice upon the applicant. SML H.O. discharges IGST on the value of hire charges recovered from applicant treating the same as inter-state supply of service. The applicant avails of credit of IGST on the value of hire charges charged on the invoice by SML H.O. The applicant has sought an advance ruling to determine ITC admissibility of the IGST paid by SML H.O.REPORT THIS AD

The Authority for Advance Ruling held that applicant is not entitled to claim full ITC is where payments are netted off against receivables. The applicant filed an appeal before the Appellate Authority for Advance Ruling.

The Appellate Authority for Advance Ruling observed that the supply between SML H.O. and the applicant is taxable, being supply between distinct persons made in the course or furtherance of business, even if made without consideration as per deeming provision of Schedule I of the GST Act. The receivables/ payables between H.O. and branch office are calculated on entity level which are set off as shown in the tax invoice raised by SML HO. The ultimate customer is directed to make payment in the Bank account of H.O. and therefore, the entire consideration of value raised by the SML H.O. on the applicant stands paid.

The AAR has restricted the ITC to the amount of value netted-off, i.e., ITC is available only to the extent of payment made by the applicant to their H.O., thereby, denying full ITC to the applicant. The AAAR finds no reason to restrict the ITC of tax paid by H.O. in the hands of the applicant as the ‘consideration’ stands paid to the SML H.O. either by customer of the applicant or by setting-off against payables of the applicant to SML H.O., in respect of lease/hire of cranes.

The AAAR modified AAR’s ruling and held that the applicant is eligible to avail full ITC of the tax paid by SML H.O. on lease/hire of cranes to it being used for furtherance of business.

GST evaders set to face stricter scans
https://economictimes.indiatimes.com/news/economy/policy/gst-evaders-set-to-face-stricter-scans/articleshow/73065230.cms

Ghost of demonetisation haunts traders of Zaveri Bazaar

Maharashtra : The ghost of demonetisation returned to haunt Zaveri Bazaar, India’s gold and jewellery hub, on New Year’s Eve. In the past few days, the Income tax department has spurned claims of bullion traders that there were huge jewellery sales on the night of November 8, 2016, when the Modi government banned currency notes of Rs 500 and Rs 1,000 denominations. Dealers in the congested Zaveri Bazaar remember the night when panic-struck cash hoarders and the well-heeled with unexplained money dumped currency bills to buy gold till early morning — temporarily driving up the price of the yellow metal.

Courier companies seek relief on GST E-way bill rule
Delhi : Courier companies such as FedEx, DHL and UPS are in a bind over delivering imported goods to customers because of a goods and services tax rule that bars defaulters from issuing e-waybills. The document is mandatory for transport of goods worth over Rs 50,000. On the other hand, the customs department won’t hold such goods in its storage once they’re cleared. The companies, including local ones such as DTDC, Safe Express, Gati and Delhivery, have petitioned the government to seek a way out of the dilemma. The government said it’s examining the issue. GST Rule 138E, which took effect in November, doesn’t allow an entity that hasn’t filed returns for two straight months to generate an e-waybill. While the rule won’t impact direct deliveries to ecommerce customers, business-to-business (B2B) orders from overseas will likely get hit.