News Letter

JAYA sHArMA & AssOCIAtes

PrACtCING COMPANY seCretArIes

Issue for the month of August 2016 - I

Our office is presently situated at - Our email address is 2101, 21st Floor, Sai Akashdeep CHSL, jaya@jsa-cs.com, Saibaba Park, Evershine Nagar, jaya.jscs@gmail.com Malad (West), Mumbai – 400 064. Contacts: +91 9819501557 Tele Fax: +91 22 28818135

DIsCLAIMer This News Letter provides general information available at the time of preparation. The News Letter is intended as a news update and Jaya Sharma & Associates neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this News Letter. It is recommended that professional advice be taken based on the specific facts and circumstances. This News Letter does not substitute the need to refer to the original pronouncements.

Legal Updates

Links of important Notification & Circulars:

Authority Dated Notification & Circulars Name of Link IT - S.O. 2705(E) August 12,

2016 In exercise of the powers conferred by sub-section (1) and sub-section (2) of section 199 of the Finance Act, 2016 (28 of 2016), the Central Board of Direct Taxes, makes the rules further to amend the Income Declaration Scheme Rules, 2016

http://www.incometaxindia.gov.in

SEBI/HO/CDMRD/DEICE/CIR/P/2016/70

August 11, 2016

Annual System Audit of Stock Brokers / Trading Members of National Commodity Derivatives Exchanges

http://www.sebi.gov.in

CIR/IMD/DF1/69/2016

August 10, 2016

Revised Formats for Financial Results and Implementation of Ind AS by listed entities which have listed their debt securities and/or non-cumulative redeemable preference shares

http://www.sebi.gov.in

SEBI/HO/IMD/DF2/CIR/P/2016/68

August 10, 2016 Circular on Mutual Funds http://www.sebi.gov.in

IT - S.O. 2670(E) August 09, 2016

Notification regarding Sub-Section (1B) of Section 139 of Income Tax Act, 1961

http://www.mca.gov.in

IT - S.O. 2616(E) August 05, 2016

Notification regarding section 194A of the Income-tax Act, 1961 http://www.mca.gov.in

SEBI/HO/IMD/FPIC/CIR/P/2016/67

August 04, 2016

Foreign Investment in Rupee denominated bonds issued overseas by Indian Corporates.

http://www.sebi.gov.in

MCA - General Circular No: 09/2016

August 03, 2016

Issuance of rupee bonds to overseas investors by Indian Companies – clarification regarding applicability of provisions of Chepter III of the Companies Act, 2013.

http://www.mca.gov.in

Case Laws: 1. There is no impediment in law sanctioning reduction of the share capital held by public

shareholders:

Delhi High Court in case of ‘Meena Steels Ltd., In Re.’ decided on March 29, 2016:

Gist of the Case: There is no impediment in law sanctioning reduction of the share capital held by public shareholders. Where reduction is by way of cancellation of shares held by public shareholders, and preferential allotment of shares is made to an investor who infused funds to pay off secured and unsecured

creditors of the company to come out of winding up proceedings, which resulted in value of shares turning positive on account of preferential allotment whereby shareholders gained by return of capital, and percentage of public shareholding got reduced from 56.32 per cent to 5.47 per cent on account of preferential allotment of shares, and articles of association of the company had the necessary power for reduction in share capital, there was no legal impediment to grant sanction to the resolution for reduction of share capital held by the public shareholders. The High Court of Delhi has disposed of petition sanctioning resolution for reduction of share capital. The High Court has also held that in view of the fact that the petitioner company has no secured and unsecured creditors, it is exempted from using the expression ‘and reduced’ as a suffix against its name.

2. Where appellant had not made out any case to show that respondents had contravened any law, the appeal was liable to be dismissed and action under section 111A could not be an option: Bombay High Court in Case of Industrial Development Bank Of India Ltd. Vs. Parmeshwari Fabrics (P.) Ltd. decided on February 26, 2016: Gist of the Case: Where appellant had not made out any case to show that respondents had contravened any law, the appeal was liable to be dismissed and action under section 111A could not be an option. Sub-section (3) of section 111A does not cover a situation of transfer of shares in violation of a private agreement. Where a company amalgamated with the appellant that filed a petition under sub-section (3) of section 111A alleging that the respondents had transferred and pledged shares of the company in contravention of articles of agreement entered into between the respondents and the company, the Company Law Board rightly dismissed the petition, because breach or contravention of an agreement was a violation of a contractual obligation and that could not be stretched to say that it was the same as contravention of any law. The High Court has dismissed an appeal against the order of the Company Law Board dismissing a petition under section 111A while holding that sub-section (3) of that section does not cover a situation of transfer of shares in violation of a private agreement, simultaneously making it clear that dismissal of petition would not bar the appellant from availing any other remedy as may be available in law.

3. S. 132(4): Mere voluntary disclosure of undisclosed income by assessee cannot form basis of addition if no evidence is detected in search. Fact that retraction of statement is late is irrelevant: Gujarat High Court in case Chetnaben J Shah vs. ITO decided on July 14, 2016: Gist of the Case:

S. 132(4): Mere voluntary disclosure of undisclosed income by assessee cannot form basis of addition if no evidence is detected in search. Fact that retraction of statement is late is irrelevant.

CBDT Circular No. F.No.286/2/2003-IT (In) dated 10.03.2003 bars addition on the basis of confession.

It is a normal presumption that statement under section 132(4) is given voluntarily unless it is proved otherwise. There is no evidence on record to show that this statement was given in any coercion. But this statement was subject to variation on either side after verification i.e. assessee could reduce the disclosure made or the Assessing Officer could enhance the same if the facts and evidence so warranted. May be, even if this fact is not mentioned in the statement itself, the point will still remain since it is no body’s case to get say any extra tax then is due. The reality remains that there is no evidence what-so-ever with the department even in consequence of a serious action like search and seizure followed by detailed security which could support the earning of speculation income of Rs.10,50,000/- in this year. In other words, there is no evidence to support the very existence of this income except the so called statement u/s 132(4) of the Act. It defies logic that an assessee will or should admit any income which he had not earned and which the department had not found out.

4. As the words "derived from" are absent, there is no requirement to prove "first degree nexus"

of the receipts with the eligible business: Delhi High Court in case of Pr. CIT vs. Bharat Sanchar Nigam Ltd. decided on August 01, 2016: Gist of the Case: S. 80IA(2A): As the words "derived from" are absent, there is no requirement to prove "first degree nexus" of the receipts with the eligible business. All receipts of the undertaking are eligible for 100% deduction. The legislature having ousted applicability of sub-section (1) and (2) in the opening sentence brought in for the purposes of time line sub-section (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be “derived from”. The requirements of the first degree nexus of the profits from the eligible business has not been brought into play.

5. Where notice has not been given by the landlord for payment of rent due from the lessee under the Rent Act, there can be no eviction on ground of non-payment of rent by the lessee-company in liquidation: Supreme Court of India in case of Jabal C Lashkari & Others Vs. Official Liquidator & Others decided on march 29, 2016: Gist of the Case: Where notice has not been given by the landlord for payment of rent due from the lessee under the Rent Act, there can be no eviction on ground of non-payment of rent by the lessee-company in liquidation and the mere fact that the company has been ordered to be wound up cannot be a ground to direct official liquidator to hand over possession of the land to the owners. The mere fact that the company has been ordered to be wound up cannot be a ground to direct the official liquidator to hand over possession of the land leased to the company to the owners inasmuch as the company in liquidation continues to maintain its corporate existence until it stands dissolved

upon completion of the liquidation proceedings in the manner contemplated by the Act. More so where the revival of company is a live issue pending before the High Court, a fact which cannot be ignored by the Supreme Court in deciding the issue against the appellants. The Supreme Court has dismissed appeal partly affirming the order of the High Court.

NEWS HIGHLIGHTS: 1. SEBI introduces e-payment facility for payment of penalties, disgorgement amounts, etc.:

PR No. 131/2016 SEBI introduces e-payment facility for payment of penalties, disgorgement amounts, etc. In order to enable ease of paying penalties, disgorgement amounts, settlement amounts, legal charges and recovery amounts, SEBI is introducing an option for e-payment of such amounts. Such payments may be remitted to the SEBI accounts.

2. CBDT Issues Standard Operating Procedure (SOP) For Administering Taxpayer Services: The CBDT has issued a letter dated 2nd August 2016 in which it has stated that the Income-tax department is committed to promote voluntary compliance with the direct tax laws through quality tax payer service. To achieve that objective, the CBDT has issued a Standard Operating Procedure (SOP) with regard to several aspects such as the redressal of grievances, resource management, etc. The functions of various directorates in the department are clearly spelt out so as to avoid shirking of responsibility by the field staff.

3. Revised Formats for Financial Results and Implementation of Ind AS by listed entities which have listed their debt securities and/or non-cumulative redeemable preference shares: Revised Formats for Financial Results and Implementation of Ind AS by listed entities which have listed their debt securities and/or non-cumulative redeemable preference shares, had prescribed formats 7 listed entities are advise to comply with the following:

• Formats for disclosure of Financial Results; • Formats for publication of Financial Results; • Implementation of Ind AS; • Clarifications with regard to implementation of Ind AS & other issues.