Legal Updates July 2019 Edition

Income Tax

• It is mandatory to quote Aadhaar on every return of income filed for the AY 2019-20. CBDT has extended the last date of linkage of Aadhaar & PAN to 30-09-2019 from 31-03-2019.
• Central Board of Direct Taxes vide Circular No. 13/2019 dated 24 June, 2019, has clarified that the income tax exemption available to all members of Armed Forces who have been invalided for naval, military or air force service on account of bodily disability attributable to or aggravated by such service would be available to all armed forces personnel (irrespective of rank) who have been invalided for such service on account of bodily disability attributable to or aggravated by such service.
• Central Board of Direct Taxes vide Circular No. 14/2019 dated 3 July, 2019, has clarified that any income in the hands of the non-resident investor from off-shore investments routed through the Category I or Category II AIF, being a deemed direct investment outside India by the non-resident investor, is not taxable in India under section 5(2)of the Act
• CBDT vide Circular No. 15/2019 dated 11.07.2019 issues clarification on certain procedural issues under section 195 of the income disclosure scheme, 2016. As per clarification electronic payments on 01.10.2017 to 03.10.2017 are treated as paid on 30.09.2017 subject to their clearance till 05.10.2017.
• Union Budget Post election presented on 05.07.2019, has been passed by Loksabha on 18.07.2019 with some modification and now presented to President for assent.
• CBDT vide Press Release dated 23 July 2019, the due date for filing of Income Tax Returns for Assessment Year 2019-has been extended from 31st July, 2019 to 31st August, 2019.

 

International Taxation

• On June 25th, 2019 India has signed & deposited the Multilateral Instrument (MLI) which will be come in to force from October 1st, 2019 and will be effective from Financial Year 2020-21. The Convention will modify India’s Tax treaties in order to curb revenue loss through treaty abuse and BEPS strategies by ensuring that profits are taxed where substantive economic activities generating the profits are carried out and where value is created. India has signed protocol for amending India-China double tax avoidance agreement on dated 17.07.2019 to incorporate MLI amendments

GST

The 36th GST Council Meeting was held on 27^th July,2019 at New Delhi, 12 Agenda items were discussed during the Council meeting, covering following topics:

• The GST rate on all electric vehicles be reduced from 12% to 5% w.e.f. 1^st August, 2019
• The GST rate on charger or charging stations for Electric vehicles be reduced from 18% to 5% w.e.f. 1^st August, 2019
• Hiring of electric buses (of carrying capacity of more than 12 passengers) by local authorities be exempted from GST w.e.f. 1^st August, 2019.
• Last date for filing of intimation, in FORM GST CMP-02, for availing the option of payment of tax under notification No. 2/2019-Central Tax (Rate) to be extended from 31.07.2019 to 30.09.2019
• The last date for furnishing statement containing the details of the self-assessed tax in FORM GST CMP-08 for the quarter April, 2019 to June, 2019 (by taxpayers under composition scheme), to be extended from 31.07.2019 to 31.08.2019.

 Companies Act, 2013

 

• MCA has notified new versions of e-FormsCHG-1 {Application for registration of creation, modification of charge (other than those related to debentures)}, Form CHG-8 (Application to Central Government for extension of time for filing particulars of registration of creation / modification / satisfaction of charge OR for rectification of omission or misstatement of any particular in respect of creation/ modification/ satisfaction of charge), Form CHG-9 (Application for registration of creation or modification of charge for debentures or rectification of particulars filed in respect of creation or modification of charge for debentures), and Form AOC-4 XBRL (Form for filing XBRL document in respect of financial statement and other documents with the Registrar) are revised and available on Company Form Download page at MCA website. Stakeholders may kindly take note and are advised to check the latest version before filing.

 

• MCA has notified the Companies (Appointment and Qualification of Directors) Third Amendment Rules, 2019 which shall come into force on the date of their publication in the Official Gazette i.e 25th July 2019.MCA has notified the e-form DIR-3-KYC-WEB which shall be required to be filed by every holder of DIN by 30^thSeptember 2019. Further, as per the said notification, e-Form DIR-3 KYC is to be filed by an individual who holds DIN and is filing his KYC details for the first time or by the DIN holder who has already filed his KYC once in e-form DIR-3 KYC but wants to update his details and Web service DIR-3-KYC-WEB is to be used by the DIN holder who has submitted DIR-3 KYC e-form in the previous financial year and no update is required in his details. Necessary amendments are also carried out to capture the fee for filing of e-Form DIR – 3KYC-WEB upto 30^th September 2019 and after the said date.

 

• MCA has Revised version of the e-Form BEN- 2 (Return to the Registrar in respect of declaration under Section 90) effective from today i.e 17th July, 2019, and shall be available on MCA21 Company Forms Download page. The MCA notifies Companies (Significant Beneficial Owners) second Amendment Rules, 2019 and also notified revised FORM NO. BEN-2 w.e.f 01-07-2019. E-form BEN-2 is required to be filed pursuant to Section 90(4) of the Companies Act, 2013and Rule 4 of the Companies (Significant Beneficial Owners) Rules 2018. Every company shall file a return of significant beneficial owners of the company and changes therein with the Registrar containing names, addresses and other details as may be prescribed within 30 days, in BEN – 2 with the respective Registrar of Companies. Stakeholders are advised to check the latest version before filing.

 

• MCA has extended the last date for filing of Form NFRA-1 for all bodies corporate governed by NFRA Rule 3(2) and 3(3), on the basis of the representations received from stakeholders.The revised time limit for filing Form NFRA-1 will be 30 days from the date of deployment of form NFRA-1 on the MCA/ NFRA website i.e 31-07-2019. Entities that are required to inform the details of the appointment of their Auditor to the Authority in Form NFRA-1 includes Companies whose securities are listed on any stock exchange in India or outside India; Unlisted public companieshaving paid-up capital of not less than Rs. 500 crores or having an annual turnover of not less than Rs. 1000 crores or having, in the aggregate, outstanding loans, debentures and deposits of not less than Rs. 500 crores, as on the 31st March of immediately preceding Financial Year: Insurance companies, banking companies, companies engaged in the generation or supply of electricity companies governed by any special Act. If a company or any officer of a company or an auditor or any other person contravenes any of the provisions of these rules, the company and every officer of the company who is in default or the auditor or such other person shall be punishable as per the provisions of section 450 of the Act.

 

• The Ministry of Corporate affairs has received several representations regarding extension of last date for filing of e-Form No. BEN-2 without additional fees on account of Companies (Significant Beneficial Owners) Second Amendment Rules, 2019 notified vide G.S.SR NO. 446 E dated 01.07.2019. The matter has been examined and it is hereby informed that time limit for filing e-Form BEN-2 is extended upto 30.09.2019 without the payment of additional fees and thereafter fee and additional fee shall be payable.

 

• MCA has revised the version of the eForm Addendum to FiLLiP(Details in respect of designated partners and partners of Limited Liability Partnership), Form 4 LLP(Notice of appointment, cessation, change in name/ address/designation of a designated partner or partner. and consent to become a partner/designated partner) and Form 4A LLP (Notice of appointment, cessation, change in particulars of a partners) are likely to be revised on MCA21 and shall be available on LLP Form Download page w.e.f 26-07-2019. Stakeholders may kindly take note and are advised to check the latest version before filing.

 

• The Union Cabinet approved the proposal to introduce a Bill in the Parliament to carry out 08 amendments to the Insolvency and Bankruptcy Code, 2016.The amendments aim to fill critical gaps in the corporate insolvency resolution framework as enshrined in the Code, while simultaneously maximizing value from the Corporate Insolvency Resolution Process (CIRP). The Government intends to ensure the maximization of the value of a corporate debtor as a going concern while simultaneously adhering to strict timelines. The changes are expected to lead to timely admission of applications and timely completion of the Corporate Insolvency Resolution Process, greater clarity on permissibility of corporate restructuring schemes, manner of distribution of amounts amongst financial and operational creditors, clarity on rights and duties of authorized representatives of voters and applicability of the resolution plan on all statutory authorities. The proposal is in line with the overall objective of the government to achieve the outcomes envisioned in the Insolvency and Bankruptcy Code and seeks to ensure speedier resolution of cases involving corporate debtors.

 

• In section 135 of the principal Act,

 

• In sub-section (5), –
• After the words “three immediately preceding financial year” the words or where the company has not completed the period of the three financial year since its incorporation, during such immediately preceding financial years shall be inserted.
• In the second proviso, after the words “reason for not spending amount” occurring at the end, the words, bracket, figures and letter “ and unless the unspent amount relate to any ongoing project referred to in sub-section (6) transfer such unspent amount to a fund specified in Schedule VII, with in the six month from the expiry of the financial year’’ shall be inserted.
• After the sub-section (5), the following sub-section shall be inserted, namely

 

(6) Any amount remaining unspent under the sub-section (5) pursuant to any ongoing project, fulfilling such condition as may be prescribed, undertaken by the company in pursuance of its Corporate Social Responsibility Policy, shall be transfer by the company with in the thirty days from the end of financial year to the special account to be opened by the company in that behalf for the that financial year in any scheduled bank to be called unspent Corporate Social Responsibility  Account and such amount shall be spent by the company in the pursuance of its obligation towards the Corporate Social Responsibility Policy with in the period of three financial year from the date of transfer, falling which, the company shall transfer the same to the fund specified in the schedule VII with in the period of thirty days from the date of completion of the third financial year.

 

(7) If a company contravenes the provision of sub-section (5) or sub-section (6) , the company shall be punishable with the fine which shall not be less then 50,000 rupees but may extend to twenty five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for the term which may extend to the three years or fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or with both.

 

Insolvency and Bankruptcy Code, 2016

• NCLT rules corporate insolvency resolution process can be initiated during the pendency of debts recovery tribunal : In the matter of A.P.I. Industries Pvt. Ltd. (‘Corporate Debtor’) v. State Bank of India (‘Financial Creditor’), the NCLT vide its order dated 19 February 2019 initiated CIRP against the corporate debtor on application filed by its authorised representative u/s 10 of the Insolvency and Bankruptcy Code (IBC).
• Debtor’s cannot take shelter under moratorium provided under IBC for determination of liability under SEBI takeover and Insider Trading Regulations  :In the matter of Castex Technologies Ltd. (Castex), SEBI vide its order dated 24 May 2019 imposed a penalty of INR 24 lakh on Amtek Auto Ltd. (‘Amtek’) for violation of provisions under SEBI (substantial acquisition of shares and takeovers) Regulations, 2011 (‘SEBI Takeover Regulations’) and SEBI (prohibition of insider trading) Regulations 2015 (‘SEBI PIT Regulations’) due to non-disclosures.
• NCLT initiates CIRP against guarantor for default by non-corporate borrowers
  In the case of the Karur Vysya Bank Ltd. (‘Financial Creditor’) v. Maharaja Theme Parks and Resorts Pvt. Ltd. (‘Corporate Debtor’), the NCLT vide its order dated 8 April 2019 admitted insolvency petition filed by financial creditor against corporate debtor, which stood as a guarantor against loans taken by a partnership firm and two proprietary concerns (‘Principal Borrowers’).
• CIRP filed by part-time employee to claim 25 percent shares of corporate debtor without an agreement was to be dismissed :In the matter of Ms. Rohita (‘Operational Creditor/Petitioner’) v. All That Hype Media Pvt. Ltd. (‘Corporate Debtor/Company’), the NCLT vide its order dated 12 March 2019 dismissed the CIRP petition of the operational creditor because of the absence of a legal enforceable contract.
• NCLAT rules that financial service providers are out of purview of IBC :In the case of Housing Development Finance Corporation Ltd. (‘Financial Creditor/HDFC’) v. RHC Holding Pvt. Ltd. (‘RHC Holding’), the NCLAT vide its judgment dated 10 July 2019 dismissed the appeal filed by HDFC and held that financial service provider per section 3(16) of IBC do not come within the meaning of corporate person/corporate debtor and was out of purview of IBC.

RBI

RBI, in view of the recent change in reporting platform for submission of FLA return, the last date for filing the FLA return for 2018-19 has been extended to July 31, 2019, for the convenience of reporting this year. Recently RBI has migrated the filing of Annual Return on Foreign Liabilities and Assets (FLA) on Foreign Liabilities and Assets Information Reporting (Flair) System. Further, RBI allows for revision in the current year. It also allows for the submission of FLA returns of the previous year(s) with the prior approval of RBI by following the process. Annual return on Foreign Liabilities and Assets has been notified under FEMA 1999 and it is required to be submitted by all the India-resident companies which have received FDI and/ or made an overseas investment in any of the previous year(s), including current year by July 15 every year. Non-filing of the return before the due date will be treated as a violation of FEMA and the penalty clause may be invoked for violation of FEMA.

 

RBI has notified the Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), FALLCR against credit disbursed to NBFCs and HFCs. RBI has earlier permitted banks to reckon, in a phased manner, an additional 2 percent of government securities held by them under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) within the mandatory SLR requirement, as Level 1 HQLA for the purpose of computing Liquidity Coverage Ratio (LCR). RBI has decided that, with immediate effect, banks will be permitted to reckon this increase in FALLCR of 1.0 per cent of the bank’s NDTL as Level 1 HQLA for computing LCR, to the extent of incremental outstanding credit to NBFCs and Housing Finance Companies (HFCs) over and above the amount of credit to NBFCs/HFCs outstanding on their books as on date. The front-loading of FALLCR of one percent, exclusively meant for incremental exposure to NBFCs/HFCs, will form part of general FALLCR as and when the increase in FALLCR takes place as per original schedule on August 1 and December 1, 2019. All other instructions as per our circular ibid remain unchanged.

 

RBI has notified the decision of allowing one Asset Reconstruction Company to acquire financial assets from other Asset Reconstruction Companies (ARCs). The decision has been taken in view of amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, it has been decided to permit ARCs to acquire financial asset from other ARCs provided that the transaction is settled on cash basis, Price discovery for such transaction shall not be prejudicial to the interest of Security Receipt holders, the selling ARC will utilize the proceeds so received for the redemption of underlying Security Receipts and the date of redemption of underlying Security Receipts and total period of realisation shall not extend beyond eight years from the date of acquisition of the financial asset by the first ARC.

 

The Reserve Bank with effect from June 29, 2019, will replace the email-based annual reporting of Foreign Liabilities and Assets (FLA) by direct investment companies, with web-based Foreign Liabilities and Assets Information Reporting (FLAIR) system. The web-portal would also contain the user manual and FAQs in this regard. The move is consistent with the enhanced information security policy and is expected to further improve the quality of data. The form will seek investor-wise direct investment and other financial details on a fiscal year basis as hitherto, where all reporting entities are required to provide information on FATS related variables (it was mandatory only for subsidiary companies earlier). In addition, the revised form seeks information on the first year of receipt of FDI/ODI and disinvestment. Reporting entities will get system-generated acknowledgment receipt upon successful submission of the form. They can revise the data, if required, and view/download the information submitted. Entities can submit FLA information for earlier year/s after receiving RBI confirmation on their request email. The existing mechanism of email-based submission of FLA forms will be discontinued. Indian entities not complying with above, will be treated as non-compliant with Foreign Exchange Management Act, 1999 and regulations made thereunder.

The Reserve Bank of India (RBI) relaxed norms for the end-use of money raised through External Commercial Borrowings (ECBs). The ECB’s with a minimum average maturity period of seven years can be availed for repayment of rupee loans availed domestically for capital expenditure as also by NBFCs for on-lending for the same purpose. The ECB’s with a minimum average maturity period of 10 years can be used for working capital purposes and general corporate purposes and borrowing by NBFCs for the above maturity for on lending for the above purposes is also permitted. It has been decided to permit eligible corporate borrowers to avail ECB for repayment of rupee loans availed domestically for capital expenditure in the manufacturing and infrastructure sector if classified as SMA-2 or NPA, under any one-time settlement with lenders. Lenders are also permitted to sell, through assignment, such loans to eligible ECB lenders, except foreign branches or overseas subsidiaries of Indian banks, provided, the resultant external commercial borrowing complies with all-in-cost, minimum average maturity period and other relevant norms of the ECB framework.