News & UpdatesSection 115BAA of the Income-tax Act, 1961 allowing option to follow concessional tax regime for domestic companies – Central Board of Direct Taxes (CBDT) condones delay in filing of Form 10-IC for Assessment Year (AY) 2021-22, till 31 January 2024

Executive Summary

Income Tax

• Section 115BAA of the Income-tax Act, 1961 allows the option to follow-concessional tax regime for domestic companies – Central Board of Direct Taxes(CBDT) condones delay in filing of Form 10-IC for Assessment Year (AY) 2021-22, till 31 January 2024.
•  Direct Tax collections up to 9th October 2023 show gross collections are at. 11.07 lakh crore is 17.95% higher than the gross collections for the comparable period of last year.
• Angel tax under section 56(2) (vii) of the Act shall not apply to Startup companies that have been recognized by the DPIIT.
• CBDT amended 11UA rules for the valuation of equity shares and compulsory convertible preference shares (CCPS)
• An audit report in the case of a fund or trust or institution or any university or other educational institution or any hospital or other medical institution, under clause (b)of the tenth proviso to clause (23C) of section 10, is required to be furnished inForm No. 10B / Form No. 10BB.
• CBDT relaxed the timeframe prescribed in the second proviso to sub-section (1) of Section 143 of the Income Tax Act 1962.
• Amendment in Income-tax Rules relating to obtaining & quoting PermanentAccount Number (PAN).
• New reporting requirement (quarterly) in Form 15CD prescribed for outbound remittances to be made by the Unit of an International Financial Services Centre.
• CBDT prescribes Form 10-IFA be submitted by taxpayers before the due date of filing Income-tax Return (ITR) u/s 115BAE by New Domestic manufacturing companies.

Goods & Services Tax (GST) & Customs

• Addition of Supplies under section 15 of CGST Act,2017.
• Special procedure for registration of Online Money Gaming Providers under GST.
• Special drive against malpractices of claiming fake ITC.
• Addition of services included in Exempt Services.
• Restriction on refund of Unutilized ITC.
• Changes in the definition of E-Commerce Operators.
• Revision in prescribed GST rates.

Companies Act 2013/ Other Laws

• Every Co. must designate a person to furnish information to ROC w.r.t beneficial interest in shares of the company.
• MCA mandates Private Cos. except Small Cos. to issue securities only in De-platform within 18 months from Mar 31, 2023.
• MCA amends LLP norms; mandates declaration of beneficial interest and keeping of register for partners.
• Companies (Prospectus and Allotment of Securities) Second Amendment Rules,2023.
• Ministry of Corporate Affairs notifies Companies (Incorporation) Third Amendment Rules, 2023.
• Integration of MCA with National Single Window System.
• RBI mandates private banks to have 2 whole-time directors, including MD & CEO, on their Boards.
• RBI issues Master Direction on Interest Rate on Deposits.
• SEBI extends the suspension of derivatives trade in 7 agro commodities by one more year i.e. till Dec 20, 2024.
• IBBI issues a discussion paper on Strengthening the liquidation process.
• Delhi Minimum Wages Notification (October 2023)

Income Tax

• Section 115BAA of the Income-tax Act, 1961 allows the option to follow the concessional tax regime for domestic companies – Central Board of Direct Taxes (CBDT) condones delay in filing of Form 10- IC for Assessment Year (AY) 2021-22, till 31 January 2024

On consideration of the matter, to avoid genuine hardship for the domestic companies in exercising the option u/s 115BAA of the Act, CBDT in exercise of the powers conferred under section 119(2)(b) of the Act, hereby directs that:-

The delay in filing Form No. 10-IC as per Rule 21AE of the Rules for the previous year relevant to A.Y. 2021-22 is condoned in cases where the following conditions are satisfied:

(I) The return of income for the relevant assessment year has been filed on or before the due date specified under section 139(1) of the Act;

(ii) The assessee company has opted for taxation u/s 115BAA of the Act in item (e) of “Filing Status” in “Part A-GEN” of the Form of Return of Income ITR-6; and

(iii) Form No. 10-IC is filed electronically on or before 31.01.2024 or 3 months from the end of the month in which this Circular is issued, whichever is later.

• Direct Tax collections up to 9th October 2023 show that gross collections are at Rs. 11.07 lakh crore which is 17.95% higher than the gross collections for the comparable period of last year.

Direct Tax collection, net of refunds, stands at Rs. 9.57 lakh crore which is 21.82% higher than the net collections for the comparable period of last year. This collection is 52.50% of the total Budget Estimates of Direct Taxes for FY 2023-24.

• Angel tax under section 56(2) (vii) of the Act shall not apply to Startup Companies that have been recognized by the DPIIT and fulfill some mentioned conditions

Central Board of Direct Taxes (CBDT) issued a notification notifying that the provisions of clause (vii) of sub-section (2) of section 56 of the Act shall not apply to consideration received by a company for the issue of shares that exceed the face value of such shares, if the said consideration has been received from a person, being a resident, by a company which fulfills the following conditions

(i) Where The case of such a Startup Company is selected under scrutiny on the single issue of applicability of section 56 (2) (vii) of the Act, with no verification on such issues shall be done by the Assessing Officers during the proceedings u/s 143(2) or u/s 147/143(2) of the Act and contention of such recognized Startup Companies on the issue will be summarily accepted.

(ii) Where The case of such a Startup Company is selected under scrutiny with multiple issues including the issue u/s 56 (2) (vii) of the Act, the issue of applicability of section 56(2) (vii) of the Act shall not be pursued during the assessment proceedings of such a Startup Company. Due procedure be followed about other issues for which the case has been selected.

• CBDT amended 11UA rules for the valuation of equity shares and compulsory Convertible preference shares (CCPS)

CBDT has notified the new Rule 11UA with the following significant changes viz-a-viz the draft amendment issued in May 2023 for public comments:

Bringing parity between the valuation of unlisted equity shares and CCPS (except for the NAV method which applies only to unlisted equity shares).

Clarifying the ambiguity on the window period of 90 days for the price matching facility There is no change in the safe harbor tolerance limit of 10% proposed in May 2023.

The new Rule 11UA is applicable from 25 September 2023 onwards. Applicability of the new Rule on shares issued between 1 April 2023 to 24 September 2023 may be disputed. Further, the new Rule may be disputed on some other grounds as well, such as why the 5 new methods of valuation are restricted to investment by non-residents only. This may create practical challenges and discrimination for resident investors even if the issue price is the same for both categories of investors.

• Audit report in the case of a fund or trust or institution or any university or other educational institution or any hospital or other medical institution,  under clause (b) of the tenth proviso to clause (23C) of section 10, is required to be furnished in Form No. 10B / Form No. 10BB.

Representations have been received regarding difficulties in filling details of persons who have made a ‘substantial contribution to the trust or institution’ by examining this matter it is hereby stated that for the purposes of providing details in (i) Form No. 10B in the Annexure, in row 41; and (ii) Form No. 10BB in the Annexure, in row 28, for the assessment year 2023-24:

(i) The aforesaid details (that is, of persons making substantial contributions) may be given for those persons whose total contribution during the previous year exceeds fifty thousand rupees;

(ii) details of relatives of such person, as referred to in (a) above may be provided, if available.

(iii) details of concerns in which such person, as referred to in (a) above, has substantial interest may be provided, if available.

• CBDT relaxed the timeframe prescribed in the second proviso to sub-section (1) of Section 143 of the Income Tax Act 1962

Central Board of Direct Taxes (Board) vide its order under section 119 of the Income-tax Act, 1961 directed that all validly filed returns up to Assessment Year 2017-18 with refund claims, which could not be processed under sub-section (1) of the Section 143 of the Act and which had become time-barred, should be processed by 30-11-2021. The matter has been re-considered by the Board in view of pending taxpayer grievances related to issue of refund. To mitigate the genuine hardship being faced by the taxpayers on this issue,  Board, by virtue of its power under section 119 of the Act and in partial modification of its earlier order under section 119 of the Act hereby further extends the time frame dated 30-9-2021 till 31-1-2024 in respect of returns of income validly filed electronically.

• Amendment in Income-tax Rules relating to obtaining & quoting Permanent Account Number (PAN)

The following amendment have been made in Prescribed rules -:

(i) Rule 114B of Income tax Rules, 1962 -:

(a) A company or partnership firm (including limited liability partnership) is not required to submit Form 60

(b) A foreign company who, does not have any income chargeable to tax in India; and does not have a permanent account number, and enters into any transaction referred to at Sl. No. 2 or 12 of the Table, in an IFSC banking unit, shall make a declaration in Form No. 60

(ii) In the principal rules, in rule 114BA, the rule lists following additional situations in which a person is not required to obtain PAN:

(a) where the person, making the deposit or withdrawal of an amount otherwise than by way of cash,

(b) Opening a current account not being a cash credit account as per clause of this rule, is a non-resident (not being a company) or a foreign company;

(c) the transaction is entered into with an IFSC banking unit; and

(d) such non-resident (not being a company) or the foreign company does not have any income chargeable to tax in India.

(iii) In the principal rules, in rule 114BB, after the proviso, the following shall be inserted, namely: – “Provided further that the provisions of this sub-rule shall not apply in a case

(a) where the person, making the deposit or withdrawal of an amount otherwise than by way of cash or opening a current account not being a cash credit account, is a non-resident (not being a company) or a foreign company;

(b) the transaction is entered into with an IFSC banking unit, and such non-resident (not being a company) or the foreign company does not have any income chargeable to tax in India.

• New reporting requirement (quarterly) in Form 15CD prescribed for outbound remittances to be made by Unit of an International Financial Services Centre

With effect from 1 January 2024 onwards Unit in an IFSC is;

(a) Exempted from the requirement to submit Form 15CA (Part D) if the payment is not taxable in India.

(b) Required to submit information in new Form 15CD online every quarter in respect of outbound remittances to non-residents.

(c) Form 15CD has been duly prescribed by CBDT and contains details such as PAN, Tax Deduction Account No. (TAN), status of the Unit, contact details, details of the remittance, etc.

• CBDT prescribes Form 10-IFA to be submitted by taxpayer before due date of filing Income-tax Return (ITR) u/s 115BAE by New Domestic Manufacturing Companies.

CBDT has prescribed Form 10-IFA being the application form required to be submitted by a co-operative society electronically, in order to be entitled for the lower tax rate prescribed u/s 115BAE.

Goods & Services Tax

As per Notification No.11/2023 Dated  29/09/2023  CG on the recommendation of the council hereby makes the further amendment in Notification No. 1/2017, Dated 28/06/2023

• In Schedule IV, S.No.227A defines “Specified Actionable claims “in section 2(102A) of the CGST Act, 2017 means the actionable claim involved in or by way of—

(i) betting;

(ii) casinos;

(iii) gambling;

(iv) horse racing;

(v) lottery; or

(vi) online money gaming;

• S.no. 228 and 229 and entries related to them shall be omitted.

2. This notification shall come into force on the 1st day of October, 2023.

As per Notification No. 49/2023 Dated 29-09-2023

The Central Government, on the recommendations of the Council, notifies the

following supplies under section 15(5) of the Central Goods and Services Tax Act,

2017namely: —

• supply of online money gaming;
• supply of online gaming, other than online money gaming; and
• supply of actionable claims in casinos.

This notification shall come into force on the 1st day of October, 2023.

Goods & Services Tax`

As per Notification No. 50/2023 Dated 29-09-2023

The Central Government, on the recommendations of the Council makes the following amendment in Notification no. 66/2017 -Central Tax, Dated 15/11/2017 –

In the section 148 of the Central Goods and Services Tax Act, 2017, with effect from the 1st October, 2023, after the words and figures “composition levy under section 10 of the said Act”, the words and figures “, other than the registered person making supply of specified actionable claims as defined in clause (102A) of section 2 of the said Act,” shall be inserted.

As per Notification No. 51/2023 Dated 29-09-2023

The following amendments have been made in prescribed rules under CGST rules 2017-

• Every registered person either providing online money gaming from a place outside India to a person in India, shall file return in FORM GSTR-5A on or before the twentieth day of the month succeeding the calendar month or part thereof.

• Form GST REG-10, shall be filled by “Application for registration of person supplying online money gaming from a place outside India to a person in India or for registration of person supplying online information and database access or retrieval services from a place outside India to a non-taxable online recipient in India.”

• . The registration shall be granted in Form GST REG-06, subject to prescribed conditions and restrictions—

• The value of supply includes-Supply of online money gaming and supply of online information and database access or retrieval services, or both.

• In online money gaming, the tax invoice issued by the registered person to an unregistered person shall contain name of the State which shall be considered as the address on record of the recipient.

• A person supplying online money gaming from a place outside India to a person in India may make the deposit in electronic cash ledger through international money transfer through Society for Worldwide Inter-bank

Financial Telecommunication payment network.`

As per Circular No. 24/2023 Dated 30-09-2023

It has been notified that all goods or services may be exported on payment of integrated tax on which the supplier of such goods or services may claim the refund of tax so paid. To implement above restrictions imposed on export of goods or services on payment of IGST, DG Systems CBIC has developed a backend functionality to restrict IGST refund route for the goods, changes have been made in the system of filing of shipping bills and during amendment, with respect to the commodities mentioned in the said notification. Since IGST refund is paid at shipping bills level, the checks have been enabled at shipping bill level.

As Per Notification No. 12/2023 Dated 19-10-2023 The CG on the recommendation of council makes the following further amendments in No. 11/2017-Central Tax (Rate), Dated 28-06-2017,

• In the said notification, — “Provided further that where the supplier of input service in the same line of business charges central tax at a rate higher than 2.5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5%, shall not be taken. The words “totalisator or a license to”, the words “licensing a” shall be substituted;

This notification shall come into force with effect from the 20th day of October, 2023.

As per Notification No. 13/2023 Dated 19-10-2023 The CG on recommendation of the council makes the following further amendments in power to grant exemption from tax – CGST exempt services amendment in notification no. 12/2017-central tax, dated 28-6-2017, define–

• Services provided to a Governmental Authority by way of —

(a) water supply;

(b) public health;

(c) sanitation conservancy;

(d) solid waste management; and

(e) slum improvement and upgradation.

• against serial number 6,7,8,9 in column (3), after the words “Department of Posts”, the words and brackets “and the Ministry of Railways (Indian Railways)” shall be inserted;

This notification shall come into force with effect from the 20th day of October, 2023

As per Notification No. 14/2023 Dated 19-10-2023 The CG on recommendation of the council makes the further amendment in levy and collection of tax – reverse charge on certain specified supplies of services – amendment in notification no. 13/2017-central tax (rate), dated 28-6-2017,

• In the said notification, “Department of Posts” – “and the Ministry of Railways (Indian Railways)” and the words “Services supplied by the Central Government”, “[excluding the Ministry of Railways (Indian Railways)]” shall be inserted.

This notification shall come into force with effect from the20th October, 2023.

As per Notification No. 15/2023 Dated 19-10-2023 The CG on the recommendation of the council makes the following amendments in Notification No. 15/2017-Central Tax (Rate), dated 28-06-2017,

• The refund of unutilized ITC now restricted to only those construction services of complex, building or a part thereof, which are intended for sale to a buyer and where the amount charged includes the value of land or undivided share in land.

This notification shall come into force with effect from the 20th day of October, 2023.

As per Notification No. 16/2023 Dated 19-10-2023 The Central Government, on the recommendations of the Council, hereby makes the following further amendments in the Notification No. 17/2017- Central Tax (Rate), dated 28-6-2017

• In the said Notification- the words “omnibus or any other motor vehicle”, the words “or any other motor vehicle except omnibus” shall be substituted; and also inserted- services by way of transportation of passengers by an omnibus except where the person supplying such service through electronic commerce operator is a company.”;

This notification shall come into force with effect from the 20th day of October, 2023`

As per Notification No. 17/2023 Dated 19-10-2023 and Notification no.  18/2023, Dated 19-10-2023

• GST on molasses reduced from 14% to 2.5%
• GST on spirits for industrial use taxable @ 9%
• GST on food preparation of millet flour in powder form containing at least
• 70% millets by weight:
• 2.5% pre-packaged and labelled form
• 0% other than pre-packaged and labelled form

This notification shall come into force with effect from the 20th day of October, 2023.

As per Notification No. 19/2023 Dated 19-10-2023 The Central Government on recommendation of the council makes the following amendment in levy and collection of tax – reverse charge on certain specified supplies of goods – amendment in Notification No. 4/2017-central tax, dated 28-6-2017

The following entry shall be substituted “Central Government [excluding Ministry of Railways (Indian Railways)], State Government, Union territory or a local authority.”

This notification shall come into force with effect from the 20th day of October, 2023.

As per Notification No. 20/2023 Dated 19-10-2023 The Central Government on the recommendation of the council makes the further amendment in notification no. 5/2017-central tax (rate), dated 28-6-2017 refund of tax – notified supplies of goods in respect of which no refund of unutilized input tax credit shall be allowed where rate of tax on input is higher than rate of tax on output supplies. In case of supply of imitation Zari thread or yarn made out of metallized polyester film /plastic film, refund of unutilized ITC due to inverted duty structure shall not be available.

This notification shall come into force with effect from the 20th day of October, 2023.

Companies Act, 2013/LLP Act, 2008

Every Co. must designate a person for furnishing information to ROC w.r.t  beneficial interest in shares of company

The Govt. has notified the Companies (Management and Administration) Second Amendment Rules, 2023. As per the amended norms, every company must designate a person who shall be responsible for furnishing information, and extending cooperation in providing information to the Registrar or any other authorised officer regarding beneficial interest in shares of the company. Further, a company may designate a company secretary (CS), a KMP or every director, if there is no CS or KMP.

• MCA mandates Private Cos. except Small Cos. to issue securities only in Demat form within 18 months from Mar 31, 2023

The Govt. has notified the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023. As per the amended norms, every private co. except small co. must issue the securities only in dematerialised form within 18 months from the closure of the FY i.e., march 31, 2023. Further, the company must facilitate the dematerialisation of all its securities in accordance with the provisions of the Depositories Act. These provisions shall not apply to Government Companies.

• MCA amends LLP norms; mandates declaration of beneficial interest and keeping of register for partners

The Govt. has notified LLP (Third Amendment) Rules, 2023. As per the amended rules, a person whose name is entered in register of partners of LLP but doesn’t hold any beneficial interest in contribution must file a declaration to that effect in Form 4B within 30 days from the date on which his name is entered in the register. Further, every LLP must maintain a register of its partners in Form 4A from the date of its incorporation. The register must be kept at the registered office of LLP.

• Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023

Public companies that issued share warrants before the Companies Act, 2013, and have not yet converted them into shares face new requirements. Within three months of the rules coming into force, these companies must inform the Registrar about the details of these share warrants using Form PAS-7. Within six months, they must ask the bearers of the share warrants to surrender them and have the shares dematerialized in their accounts. The company must notify the bearers via Form PAS-8 on their website and publish the same notice in a vernacular newspaper and an English newspaper. If a bearer fails to surrender the share warrants within the specified time, the company is obligated to convert them into dematerialized form and transfer them to the Investor Education and Protection Fund. This change encourages transparency and ensures that share warrants are brought in line with modern dematerialization practices.

• Ministry of Corporate Affairs notifies Companies (Incorporation) Third  Amendment Rules, 2023

Ministry of Corporate Affairs notifies Companies (Incorporation) Third Amendment Rules, 2023 namely by:

2. Omission of “and may include such order as to costs as it thinks proper” in sub rule (9) of Rule 30.
3. Insertion of Proviso stating “Provided further that where the management of the company has been taken over by new management under a resolution plan approved under section 31 of the Insolvency Bankruptcy Code, 2016 (31 of 2016) and no appeal against the resolution plan is pending in any Court or Tribunal and no inquiry, inspection, investigation is pending or initiated after the approval of the said resolution plan, the shifting of the registered office may be allowed.” They shall come into force with effect from 21st October, 2023.`

• Integration of MCA with National Single Window System

Ministry of Corporate Affairs informs stakeholders that Ministry of Corporate Affairs has integrated with National Single Window System (NSWS) for the Incorporation of Companies and LLPs. Incorporation services can also be availed through NSWS portal.

RBI

• RBI mandates private banks to have 2 whole-time directors, including MD & CEO, on their Boards

Given the growing complexity of the banking sector, it becomes imperative to establish an effective senior management team in the banks to navigate ongoing and emerging challenges. To address the issues and challenges, banks are advised to ensure the presence of at least two Whole Time Directors (WTDs), including the MD&CEO, on their Boards. While ensuring compliance to the above instructions, careful consideration shall also be given to meet the requirements under other applicable statutory/regulatory provisions.

• RBI issues Master Direction on Interest Rate on Deposits

RBI has issued Master Directions on ‘interest rate on deposits’ whereby it has been decided that (i) the minimum amount for offering non-callable TDs may be increased from Rs. 15 lakh to Rs. 1 crore i.e., all domestic term deposits accepted from individuals for amount of Rs. 1crore and below shall have premature-withdrawal-facility and (ii) these instructions shall also be applicable for Non-Resident (External) Rupee (NRE) Deposit / Ordinary Non-Resident (NRO) Deposits.

SEBI

SEBI extends the suspension of derivatives trade in 7 agro commodities by one more year i.e. till Dec 20, 2024

Earlier, SEBI issued directions to stock exchanges having commodity derivatives segment in respect of suspension of trading in derivative contracts in 7 agro commodities for a period of one year. Thereafter, suspension was extended beyond December 20, 2022 i.e. till Dec 20, 2023. Now, SEBI has further extended the suspension of trading in these contracts for one more year i.e. till December 20, 2024.

Labour Laws

Delhi Minimum Wages Notification (October 2023)

The Labour Department of Delhi has issued an order with respect to revision of rates of minimum wages in the specified Scheduled Employments for the following category of workers with effect from October, 2023, namely:

1. Un-skilled
2. Semi-skilled
3. Skilled
4. Clerical and Supervisory Staff

IBBI

IBBI issues a discussion paper on Strengthening the liquidation process

To further strengthen the regulatory framework of the liquidation process in terms of accountability of the liquidator towards stakeholders, the IBBI has issued a discussion paper on “Strengthening the Liquidation Process”. The key proposals include the mandatory holding of a meeting of the Stakeholders Constitution Committee (SCC), mandating the liquidator to place a reason for liquidation costs exceeding estimates of liquidation cost before SCC etc.

Disclaimer: Information in this note is intended to provide only a general update of the subjects covered. It is not intended to be a substitute for detailed research or the exercise of professional judgment. KNM  acceptsno responsibility for loss arising from any action taken or not taken by anyone using this publication. Updates are till the period 26 October 2023.