Notification relating to Companies(Cost Records and Audit) Rules

The Ministry has issued notification relating to the Companies (Cost Records and Audit) Rules, 2014 under section 148 of the Companies Act, 2013. The last date for filing application for appointment of cost auditor under earlier rules was 30th June, 2014. Keeping this in view the new rules have been notified today. These rules supersede eight sets of rules notified under the Companies Act, 1956. The new rules specify four classes of companies which shall be required to maintain cost records and who will be subject to cost audit. Relevant e-Forms would be made available on the MCA portal shortly.
The Notification is available on the Ministry’s website at www.mca.gov.in

Due Date for Filing DPT-4 extended to 31st August 2014

This Ministry has received reference regarding filing of Form DPT4 under the provisions of the Companies Act, 2013. As per section 74(1)(a) of the Companies Act, 2013 and the companies (Acceptance of Deposits) Rules, 2014 made there under, companies are required to file a statement regarding deposits existing as on date of commencement of the Act within a period of 3 months from such commencement. The time for filing of said statement is expiring on 30-06-2014.;  After considering the reference, it has been decided to grant extension of time for the period of 2 months i.e. up to 31-08-2014 without any additional fee in terms of section 403 of the Act to enable the companies for filing of statement under Form DPT4 with the Registrar.

Service Tax Exemption to Factory Canteens

Under Entry No. 19Aof ExemptionNotification No. 25/2012-ST dated 20.06.2012, Air Conditioned or Air-heated Canteen maintained in a Factory are exempt from Service Tax w.e.f. 22.10.2013.

Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948, having the facility of air-conditioning or central air-heating at any time during the year are exempt from Service Tax vide Notification No. 14/2013-ST dated 22.10.2013. The meaning of the word “factory” is same as defined in Factory Act, 1948. 

According to section 2(m) of the Factories Act, 1948, ‘factory’ means any premises including the precincts thereof –

(i)      Where ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or

(ii)     Where twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on.

The term “Manufacturing Process” is defined in Section 2(k) of the Factories Act, 1948 and accordingly, “Manufacturing Process” means any process for-

(i)            Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use sale, transport, delivery or  disposal, or

(ii)           Pumping oil, water, sewage or any other substance; or

(iii)          Generating, transforming or transmitting power; or

(iv)         Compositing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding;

(v)          Constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels;

(vi)         Preserving or storing any article in cold storage;

It may be noted that canteen is a statutory requirement under the provisions of section 46 of the Factories Act, 1948 where the factory is employing more than 250 employees.

Therefore, any factory canteen which is air-conditioned or air-heated provides services in relation to serving of food or beverages are out of service tax net w.e.f. 22.10.2013.

A factory can provide and maintain a canteen in any of the following ways: -

a)      a canteen can be run by the factory, directly, by forming a managing committee, which includes representation of workers also.

b)      a canteen can be run by a co-operative society, formed for the purpose of providing subsidized food to the employees, by forming a managing committee including the elected representatives of the workers.

c)      The organization can engage canteen contractors of providing canteen facilities and giving subsidized food to the employees.

The facility of air –conditioning or air-heating if available in the part of the year, even then such exemption is available to such factory canteen. Such exemption is not applicable to the canteen run in an office or any other place. This exemption should be applicable both to an employer who is maintaining the canteen on its own as well as to those who are getting the services from an outdoor caterer.

On combined reading of entry 19 and 19A of the exemption notification, it can be said that it has been the intention of the Government to grant exemption from Service Tax in relation to services provided for serving of food and / or beverages by a canteen maintained in a factory which is covered under or governed to the Factories Act, 1948, whether or not having the facility of air-conditioning or air-heating at any point of time in a year. While entry 19 uses the word eating joint (which is much wider in scope), entry 19A is specific to canteen only. The services provided by a canteen maintained in a factory, whether air-conditioned or not, would be exempt under entry 19A.

Clarification on applicability of requirement for resident director

General Circular no. 25/2014, Dated: 26^th June, 2014

Subject: Clarification on applicability of requirement for resident director.

Section 149(3) of the Companies Act, 2013 (Act) requires every company to have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year. Government has received requests from stakeholders for clarification with regard to applicability of these provisions in the current calendar/financial year.

2. The matter has been examined. It is clarified that the ‘residency requirement’  would be reckoned from the date of commencement of section 149 of the Act i.e. 1^st April, 2014 The first ‘previous calendar year’ for compliance with these provisions would, therefore, be Calendar year 2014. The period to be taken into account for compliance with these provisions will be the remaining period of calendar year 2014 (i.e. 1^st April to 31^st December). Therefore, on a proportionate basis, the number of days for which the director(s) would need to be resident in India. during Calendar year.2014, shall exceed 136 days.

3. Regarding newly incorporated companies it is clarified that companies incorporated between 1.4.2014 to 30.9.2014 should have a resident director either at the incorporation stage itself or within six months of their incorporation. Companies incorporated after 30.9.2014 need to have the resident director from the date of incorporation itself.

This issues with the approval of the competent authority.

No: 1/ 22/13 -CL-V

A summary of Provisions of Related Party under Companies Act 2013

Introduction :

New Companies Act enacted with stricter compliance for related party transactions. The intention of the legislature in having stricter compliance to refrain the corporate world from fraudulent transactions under the cover of sister concerns. With newly enacted provisions the transactions with the related parties will be more transparent and more informed to the shareholders of the company. Let us understand the provisions of related parties in detail.

Definition of relative – Section 2 (77)

Definition of related party – Section 2 (76)

Transactions with related parties covered under the act – section 188

• Consent of BOD is required at board meeting by way of resolution at the meeting
• Following are the transactions which require the consent of BOD

o   Sale, purchase and supply of any goods and materials

o   Selling or otherwise disposing of or buying property of any kind

o   Leasing of property of any kind

o   Availing or rendering of any services

o   Appointment of agent for purchase or sale of goods, materials, services or property

o   Such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company

o   Underwriting the subscription of any securities or debentures thereof of the company

• Prior approval of company by way of special resolution required for the following transactions in case of paid up share capital of the company is Rs. 10 Crores or more

o   Direct or through agent sale, purchase or supply exceeding 25% of annual turnover

o   Direct or through agent selling or otherwise dispose or buying property exceeding 10 % of net worth

o   Leasing of property of any kind exceeding 10 % of net worth or exceeding 10 % of turnover

o   Direct or through agent availing or rendering of services exceeding 10 % of net worth

o   Appointment to any office or place of profit in the company, its subsidiary or associate company at a monthly remuneration exceeding Rs. 2.5 lacs

o   Underwriting remuneration exceeding 1% of Net worth

• - No member should vote if he is related party 
• - Transactions entered by the company in the ordinary course of business at an arm’s length price shall be out of ambit of section 188 
• - Arm’s length transactions means a transaction between two related parties that is conducted as if they are unrelated 
• - Contracts or arrangements with related parties shall be referred to in Board’s report along with justification 
• - Contracts or arrangement entered by director or employee without board’s consent or special resolution in general meeting shall be ratified in three months, if not ratified then such contract or arrangement is voidable at the option of the Board. In case of such transaction is with a related party to director or is authorised by the other director, the concerned directors shall indemnify the company against the loss incurred by it. Company can proceed for recovery of losses from director or employee who has entered into such contract or arrangement 
• - Violations of provisions of this section by a director or by employee shall be punishable with imprisonment up to 1 year with a fine ( Rs. 25,000 to 5,00,000 ) or with both in case of listed company and in case of other company with fine ( Rs. 25,000 to 5,00,000 ).

SEBI provides clarification on employee stock option norms

The Securities and Exchange Board of India, on Friday, said companies were barred from acquiring shares from the secondary market under the employee stock option schemes till the new regulations in this regard were notified.

SEBI has also extended the timeline for companies to align their schemes with that of its guidelines as the watchdog is in the process of preparing new norms.

Earlier this month, the board of SEBI approved certain proposals for framing a new set of regulations concerning the employee stock option scheme (ESOS) and the employee stock purchase scheme (ESPS) dealing in shares of the company. Citing the board’s decision, the market regulator said that timeline had been extended for “aligning existing employee benefit schemes with the SEBI (ESOS and ESPS) Guidelines, 1999, till the new regulations are notified.

it is reiterated that prohibition on acquiring securities from the secondary market shall continue till the existing schemes are aligned with the new regulations to be notified,” SEBI said in a circular. In a circular issued in November last, SEBI had given time till June 30 for alignment of existing employee benefit schemes with the SEBI (ESOS and ESPS) Guidelines, 1999.

Meanwhile, under the new norms approved by the SEBI board during its meeting on Thursday last, companies would have employee stock option programmes where they could buy their own company shares subject to certain conditions.

The employee stock option is a practice followed the world over and the market regulator has outlined certain safeguards to improve the governance and transparency of the schemes and also address concerns regarding potential market abuse.

Besides, the regulator has decided to classify ESOP Trust as a separate group of shareholding entities.

Some of the safeguards as outlined by SEBI include, requirement of shareholders' approval through special resolution for undertaking secondary market acquisitions; restrictions on sale of shares by trusts; at least six month holding period for shares acquired from secondary market.

Solution to restricted use of email ID for 4 times only on I T E-filing Website

Recently, on www.incometaxindiaefiling.gov.in , assessee is compulsorily required to get its email ID and password registered. Further, maximum permissible usage of each of them is 4 times only. We know that most of the assessees in India do not have email ID. So, nowadays consultants have started to create additional email IDs. This takes substantial time and in future we have to remember those IDs and their passwords.

But the solution is found out. For example, I can use my email ID tejasinvites@gmail.com for thousand of accounts. Let us teach you how we can use Gmail Features to get the benefit of Multiple email accounts with one Gmail account.

Multiple Google Email Addresses – One Gmail Account

Google Gmail is a very slick, free email product. One Gmail feature that you may not be aware of is that multiple Google email addresses can be created from one Gmail account. These bonus email addresses are easy to create and manage and can take a few different forms.

Having multiple Gmail addresses can provide a range of uses including easily separating personal and business email and tracking incoming email from specific subscriptions and mailing list. There are three main methods for expanding the number of usable Google email addresses that you can have from a single Gmail account:

1. Using the @googlemail.com domain.
2. Using the “dot” or period in your email name.
3. Using the plus sign “+” at the end of your name and adding extra characters.

Using the “@googlemail.com” Domain Name

Let’s start with the use of the @googlemail.com domain name. With every Gmail account you actually get a second email address – one is the regular myname@gmail.com address while the second address has @googlemail.com as the domain. So Gmail will actually see myname@gmail.com as the same as myname@googlemail.com. All email messages that are sent to myname@googlemail.com will be delivered to your myname@gmail.com address.

Using a Dot or Period in the Email name

Another interesting facet of Gmail addresses is what is sometimes referred to as “Dot Blindness”. In an interesting twist Gmail does not recognize dots, ”.”or periods as characters in Google email address user names. This means that Gmail “sees” my.name@gmail.com or myna.me@gmail.com as the same address as myname@gmail.com. You can also use multiple “dots” in the username such as my.na.me@gmail.com.

The same “dot blindness” also applies to email addresses using the @googlemail.com domain name with my.name@googlemail.com or my.na.me@googlemail.com being routed to the same Inbox as myname@gmail.com.

If my email ID is tejasinvites@gmail.com, then gmail will consider t.ejasinvites@gmail.com or t.e.jasinvites@gmail.com or t.e.j.a.s.i.n.v.i.t.e.s@gmail.com as the same ID only. But at the same time, www.incometaxindiaefiling.gov.in will consider all these IDs as different IDs, so you can use each of them 4 times.

To cross check, if your email ID is say info@gmail.com and it is already used for 4 times, then you may now write as i.nfo@gmail.com and check your account, you will get the email and now see the “To” address in that mail, it will be i.nfo@gmail.com

But this benefit is available to Gmail users and only those domain users whose domain admin ignore .(dot) in the email ID.

Using the Plus Sign and Additional Characters

The third trick for extending the use of your Gmail account is the ability to add extra characters to the end of your username by inserting a plus sign, “+” after your name. Google does not recognize these characters but Gmail search filters do. The characters after the plus sign can be either letters or numbers. So myname+abcde@gmail.com or myname+abcde@googlemail.com will end up in the same Inbox as myname@gmail.com.

Test these out for yourself and see what works best for you. All the variations below are from the same 

Google email account and will all end up in the myname@gmail.com Gmail Inbox:

myname@gmail.com

myname@googlemail.com

my.name@gmail.com

my.name@googlemail.com

my.na.me@gmail.com

my.na.me@googlemail.com

myname+abcde@gmail.com

myname+123abc@gmail.com

my.name+abcdefg78@gmail.com

my.name+abcdefg78@googlemail.com

Simplified Google Email Address Management

Having multiple Google email addresses is a useful tool for addressing a number of different email needs. The benefits of having a centralized email account that can easily process a number of different email addresses without having to go out and set up numerous new accounts with additional usernames and passwords can be a real plus. And they are all managed from a single Gmail account.

So, now enjoy the E-filing.

CBDT releases E-filing Utility of ITR-5 for AY 2014-15

After Long Wait CBDT has Finally Released ITR 5 which is applicable for Income Tax Return (ITR) of  firms, AOPs, BOIs and LLPs  for Assessment year 2014-15. CBDT has Released Java Utility of ITR-5 and we expect Excel Utility also to be released soon.

1. Who can use this ITR-5 Return Form?

This Form can be used a person being a firm, LLPs, AOP, BOI, artificial juridical person referred to in section 2(31 )(vii), cooperative society and local authority. However, a person who is required to file return of income under section 139(4A) or 139(4B) or 139(4C) or 139(4D) shall not use this form.

2. Annexure-less Return Form

No document (including TDS certificate) should be attached to this Return Form. All such documents enclosed with this Return Form will be detached and returned to the person filing the return. Tax-payers are advised to match the taxes deducted/collected/paid by or on behalf of them with their Tax Credit Statement (Form 26AS). (Please refer to www.incometaxindia.gov.in)

3. Manner of filing this Return Form

From assessment year 2014-15 onwards this Return Form can be filed with the Income Tax Department in any of the following ways, -

(i)       by furnishing the return electronically under digital signature;

(ii)     by transmitting the data in the return electronically and thereafter submitting the verification of the return in Return Form ITR-V;

However, a firm whose accounts are liable to audit under section 44AB shall compulsorily furnish the return in the manner mentioned at (i) above. Where the Return Form is furnished in the manner mentioned at 3(ii), the assessee should print out two copies of Form ITR-V. One copy of ITR-V, duly signed by the assessee, has to be sent by ordinary post to Post Bag No. 1, Electronic City Office, Bangaluru–560100 (Karnataka). The other copy may be retained by the assessee for his record.

From assessment year 2013-14 onwards in case an assessee who is required to furnish a report of audit under sections 10(23C)(iv), 10(23C)(v), 10(23C)(vi), 10(23C)(via), 10A, 10AA, 12A(1)(b), 44AB, 44DA, 50B, 80-IA, 80- IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB or 115VW he shall file the report electronically on or before the date of filing the return of income. Further, the assessee who is liable to file the above reports electronically shall file the return of income in the manner provided at 3(ii) or 3(iii).

4. Filling out the acknowledgement

Only one copy of this Return Form is required to be filed. Where the Return Form is furnished in the manner mentioned at 3(i), the acknowledgement slip attached with this Return Form should be duly filled.

So far CBDT has released in addition to ITR-5 the following ITRs which can be downloaded from e-Filing Website of Income Tax 

Income Tax Return Utility Downloads for A.Y. 2014-15
ITR	Description	Excel Utility	Java Utility
ITR 1 (SAHAJ)	For Individuals having Income from Salary & Interest.	Yes	Yes
ITR 2	For Individuals & HUFs not having Income from Business or Profession	Yes	Yes
ITR 3	For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship		Yes
ITR 4	For Individuals & HUFs having income from a proprietory business or profession		Yes
ITR 4S (SUGAM)	For Individuals/HUF having income from presumptive business		Yes
ITR 5	For firms, AOPs,BOIs and LLP		Yes

The government is considering a reduction in the ceiling on the number of employees in an establishment eligible to be covered under the Employees' Provident Fund Organisation (EPFO) from 20 to 10, a move that is expected to bring another 50 lakh employees under the EPF net;
In a letter to the labour ministry last week, the EPFO has also recommended that employee, employer and basic wages be redefined under the Employees' Provident Funds and Miscellaneous Provisions (EPF & MP) Act, 1952.&; Social security benefits should be available to everybody in the organised sector at least. Since the organised sector in the country means an establishment of 10 or more employees, we feel there is a need to redefine establishment under the EPF Act," a senior EPFO official told ET &;
An establishment, under the Act, is currently defined as a factory engaged in any industry in which 20 or more persons are employed &; According to the official &;if the proposal to reduce the ceiling from 20 to 10 goes through, there will be another 50 lakh employees who will become eligible for social security benefits from their employers &;"The recommendations submitted to the ministry are part of the comprehensive amendment to the Act being proposed," the official added &;The EPFO is a statutory body under the ministry of labour and employment. It oversees the retirement savings of over eight crore members, 24% of whose ;salaries up to the ceiling are mandatorily deducted and parked with it &;The latest amendments proposed to the EPF & MP Act, 1952 are part of the series of amendments that the labour ministry has proposed over the past month as the new government at the Centre has sought to address labour issues in the country.

Government Extends Duty Concessions on Various Items for A Period of Six Months Beyond 30th June, 2014 i.e. till 31st December 2014 vide Notification No. 06/2014-Central Excise Dated 25th June 2014.

Government Extends Duty Concessions on Various Items for A Period of Six Months Beyond 30th June, 2014 i.e. till 31st December 2014 vide Notification No. 06/2014-Central Excise Dated 25th June 2014.

In order to provide a fillip to the capital goods and automobile sector, and given its commitment to revive the economic growth, the Government of India has decided today to extend these duty concessions beyond 30th June for a period of six months upto 31st December, 2014. This announcement was made here today by the Union Finance Minister Shri Arun Jaitley while making a Statement before the media.
The Finance Minister Shri Arun Jaitley said that we expect the industry to show positive results in the coming months. The Finance Minister said that we also expect that the benefit of these duty concessions will be passed on to the consumers at large.

In February 2014, the Government had reduced the excuse duty on:
• Small cars, motorcycles, scooters, three wheelers and commercial vehicles from 12% to 8%;
• Mid-segment cars from 24% to 20%;
• Large cars from 27% to 24%; and
• SUVs from 30% to 24%.
This was done in the wake of an unprecedented negative growth in the automobile industry.
Likewise, to stimulate growth in the capital goods and consumer durable sector, excuse duty was reduced from 12% to 10% on all goods falling within Chapters 84 & 85 of the Central Excise Tariff.
However, despite duty cuts, auto-sales have not picked up during March-April, 2014, although some positive signs could be seen from the sales figures of May 2014. Sales of capital goods and consumer goods continue to be sluggish.

companies act updates

Big relief for Private Limited Companies . Proposed Changes in the Companies Act , 2013.

1. Section 43 (Kinds of share capital) & Section 47 (Voting Rights) not to apply to private companies
Section 62 (1) (a) & Section 62 (2) (Further issue of share capital) to be modified for private companies

2. Section 62 (1) (b) to require 'ordinary resolution' for private companies

3. Section 73 (2) conditions (relating to acceptance of Deposits) not be levied on private companies with 50 or less members

4. Sec 101-07 & 109 (relating to management & administration) shall apply to private companies unless articles provide otherwise

5. Section 141 (3)(g) shall not apply in w.r.t appointment of auditors by private companies.(Limit of 20 companies doesn't include private companies)

6. Section 160 (directorships) & 162 (individual vote on appointment of directors) shall not apply to private companies

7. Section 180 (Restrictions on powers of Board) shall not apply to private companies with 50 or less members

8. Section 185 (Loans to Directors, etc) not apply to certain category of private companies

9. Section 188 (Related Party Transactions) not apply to private companies

10. Section 196 (4) & (5) (appointment of MD, WTD) shall not apply to private companies

11. Section 203 (3) (appointment of KMP) shall not apply to private companies

MCA has invited comments on Draft Notification up to July 1st, 2014.

Income Tax updates -
Where assessee claimed deduction on account of payment of huge commission to employees for boosting up sales but it was found that payment was made to an individual, whose role was not clear, claim needed disallowance.