Tuesday, September 30, 2014

POST INCORPORATION WORKS UNDER COMPANIES ACT


 POST INCORPORATION WORKS 
GOYAL DIVESH & ASSOCIATES, PRACTICING COMPANY SECRETARY, SERIES NO- 17 


In our earlier article (Series-16) – Incorporation of Companies & Table of Procedure of Incorporation of Company under Companies Act-2013, we explained detailed procedure for incorporation of company. After Incorporation many works are required to be done by companies on time to time.

As soon as a company is incorporated, whether public or private limited, it becomes a juristic person. It has its own name and property. It is a separate legal entity distinct from its members who incorporate it.


A company does its business through its Directors. The directors are also called the ears, eyes and hands of the company. The directors of a company are in fiduciary position. On the one hand they run the company as its owner (Policy maker) and on the other hand they are merely a servant of the company and take remuneration. They are entitled to do any work on behalf of the company, what a company can do in ordinary course of business. Any action done by the directors in the ordinary course of business are treated as done by the Company. But wrong done by the Directors (criminal action) are the responsibility of the Directors and not the responsibility of the Company. 


Works are divided into three Categories:-

1. Works require to be done in the first Board after incorporation.

2. Works required to be done regularly.(Will provide in Series- 18)

3. Works required to be done periodically. (Will provide in Series- 18)


WORKS REQUIRE TO BE DONE IN THE FIRST BOARD MEETING OF COMPANY

STEPS-I: CALL BOARD MEETING OF COMPANY:

[Within 30 days of Incorporation of company- Section- 173(1)]

· Issue Notice of Meeting. (At least 7 days before the meeting- As per Section- 173(3), attach agenda of Meeting in Notice.

· Call First Board Meeting within 30 days of Incorporation of Company. First Directors are named in the articles; they conduct the first board of Meeting.

STEPS-II:

HOLD BOARD MEETING:

Ensure that proper quorum is present. [1/3 of total strength of Directors or 2 directors, whichever is higher. Section- 174(1)]
  • Read out the Agenda of Meeting.
  •  Business to be Transacted in First Board Meeting within thirty days of Incorporation
S. NO.
PARTIULAR
1.      
Elect the Chairman of Meeting.
2.      
To keep in Safe Custody Certificate of Incorporation.
3.      
Maintain copy of Incorporation Documents:
ü The company shall maintain and preserve at its registered office copies of all documents and information as originally filed on incorporation till the dissolution of the Company. [Section-7(4)]
4.      
Confirmation of appointment of first Director of Company.
ü The person whose name will be mentioned in Articles of Association will be First Director of Company, in case of absence of name in Article of Association, subscribers of Memorandum of Association will be first Director of Company.
5.      
Maintain a Registered Office
ü As per Section -12(1) company shall, on and from the 15 (fifteenth) day of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it.
ü Practically company should have registered office at the time of incorporation of company.
6.      
Appointment of First Auditor of Company.
ü As per Section- 139(6) - The First auditor of company shall be appointed by the Board of Directors within 30 (thirty) days from the date of registration of the company.
7.      
Issue Share Certificate to Subscribers of Memorandum.
ü As per Section- 56(4)(a) – Every company shall issue Share Certificate within a period of 2 (two) month from the date of incorporation
8.      
Adopt Letter Head of Company.
ü As per Section- 3(c) – on letter head of Company following things should be mentioned:
Ø Name of Company.
Ø The address of Registered Office of Company.
Ø Corporate Identification Number.
Ø Telephone No.
Ø Fax No., if any
Ø E-email ID, if any
9.      
Adopt and Affix Board outside the Registered office.
ü As per Section- 3(c) - on Board of Company following things should be mentioned:
Ø Name of Company.
Ø Registered office address of company.
Ø Affix it outside of every office or place in which its business is carried on.
10.                        
Adoption of Common Seal of Company.
ü As per Section- 3(b) – The Company have its name engraved in legible characters on its seal.
11.                        
Authorize Director to maintain of Books and Registers.
12.                        
Authorize Director to maintain of Minute Books.
ü As per Section-118(1) – Every Company shall prepare minutes of every meeting with in 30 (Thirty) days of the conclusion of every such meeting.
13.                        
Open Current Account of Company.
ü Company should open Bank account of Company before issue of shares. Because as per Section-11 director require to give declaration that company have received amount of shares from the subscribers.
14.                        
Adopt rubber stamps.
ü Prepare two rubber stamps.
Ø One round stamp in the name of company.
Ø Second one in the name of Director.
15.                        
Obtain Permanent Account Number (PAN) of Company.
ü As per Form No. 49A of Income Tax Act.
16.                        
Obtain TAN No.
17.                        
If Company in Service Industry- Apply for Service Tax Number.
18.                        
If company is engage in transaction of Sale and Purchase- apply for Sales Tax Registration No.
19.                        
Apply for Certificate of Commencement of Business.
ü Before commencing any business or exercising Borrowing Powers a declaration has to be filed by a director in e-Form No.21 and duly verified by a certifying Professional, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him and the paid-up share capital of the company is not less than five lakh rupees in case of a public company and not less than one lakh rupees in case of a private company on the date of making of this declaration
20.                        
The ROC will issue certificate of Commencement of Business after filling of Form-21.
21.                        
Suggestion- List of Stationary Items to get
ü Printed copy of Memorandum of Association and Article of Association.
ü Minutes Loose Leaf (100 pages) & Minutes Binder (optional).
ü Printed Share Certificates (Minimum 50 share certificates) (Optional).
ü Statutory Books and Registers which a company should maintain- List of registers are given in other Article (Series-18).


(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com) 

CONTACT ON BELOW MENTIONS EMAIL ID FOR ANY QUERY OR QUESTION OR SUGGESTIONS:

Regards,
CS Divesh Goyal
GOYAL DIVESH & ASSOCIATE
Mob: +91-8130757966 csdiveshgoyal@gmail.com

Monday, September 29, 2014

less TDS certificate shall be directly issued to Deductor Form 13 revised


INCOME-TAX (NINTH AMENDMENT) RULES, 2014 - AMENDMENT IN RULE 28AA AND SUBSTITUTION OF FORM NO. 13

NOTIFICATION NO. 46/2014[F.NO.133/10/2014-TPL]/SO 2487(E), DATED 24-9-2014

In exercise of the powers conferred by section 295 read with section 197 of the Income ‐tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income‐tax Rules, 1962, namely:—

1. (1) These rules may be called the Income-tax (9thAmendment) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962,—
(a) in rule 28AA, for sub-rule (4) and sub-rule (5), the following sub-rules shall be substituted, namely:—
"(4) The certificate for no deduction of tax shall be valid only with regard to the person responsible for deducting the tax and named therein.
(5) The certificate referred to in sub-rule (4) shall be issued direct to the person responsible for deducting the tax under advice to the person who made an application for issue of such certificate.
(6) The certificate for deduction of tax at lower rate shall be issued to the person who made an application for issue of such certificate, authorising him to receive income or sum after deduction of tax at lower rate.";
(b) in Appendix-II, for Form No.13, the following Form shall be substituted, namely:—



Form No.13(right click & select "save target as" "Save link as")

[See rules 28 and 37G]

Application by a person for a certificate under sections 197

and/or 206C(9) of the Income-tax Act, 1961, for no


*deduction/collection of tax or *deduction/collection of tax at a lower rate


Saturday, September 27, 2014

Income Tax treatment-exemption on Gratuity


Gratuity 

Tax treatment of gratuity can be classified as follows: 


(A) Gratuity received by Government employees and employees of local authority [Section 10(10)(i)] 

In case of a Government employee, any death-cum-retirement gratuity received is wholly exempt under section 10(10)(i). It should be noted that employees of statutory corporation will not fall under this category. 

Illustration (Government employee) 

Mr. Kishan is a Central Government employee. He retired from his service in December 2014 and received gratuity of Rs. 8,40,000. In this case, entire amount of gratuity will be exempt from tax. 

(B) Gratuity received by non-Government employees : 

This category will further be classified as follows : 

  • (1) Exemption in respect of gratuity in case of employees covered by the Payment of  Gratuity Act, 1972. 
  • (2) Exemption in respect of gratuity in case of employees not covered by the Payment of Gratuity Act, 1972. 

The detailed discussion in this regard is as follows : 

(1) Exemption in respect of gratuity in case of employees covered by the Payment of  Gratuity Act, 1972 [Section 10(10)(ii)] 

Exemption in this case will be lower of the following amounts : 

  1. 15 days’ salary (*) × years of service 
  2.  Maximum amount specified by the Central Government, i.e., Rs. 10,00,000. 
  3.  Gratuity actually received. 
(*) Following points should be kept in mind : 

  • 7 days instead of 15 days in case of employees of a seasonal establishment 
  • 15 days’ salary = Salary last drawn × 15/26 
  • Salary for this purpose will include basic salary and dearness allowance only. 

Illustration: If Mr. Keshav’s monthly salary at the time of his retirement is Rs. 8,484 and basic, Rs. 2,526 as dearness allowance, Rs. 1,848 as commission and Rs. 1,252 as bonus, then salary for aforesaid exemption will be Rs. 6,352, computed as follows: 

Rs. 11,010 (Basic + DA) × 15/26 = Rs. 6,352 (rounded off) 

· In case of piece rated employee, 15 days’ salary will be computed on the basis of average of total wages (excluding overtime wages) received for a period of three months immediately preceding the termination of his service. 

Illustration: If in the above Illustration, Mr. Keshav is a piece-rated worker and salary drawn by him in three months preceding the retirement is Rs. 11,010 including Rs. 2,526 overtime (OT) wages, then salary for the aforesaid exemption will be Rs. 1,632 computed as follows: 

Step 1 - Computation of three months’ salary 

Three months’ salary will be Rs. 8,484 (Rs. 11,010– Rs. 2,526 being OT wages) 

Step 2 - Computation of monthly salary 

One month salary will be Rs. 2,828 (i.e., 8,484/3) 

Step 3 - Computation of salary 

Salary will be Rs. 1,632 (rounded off) (i.e., 2,828 × 15/26) 

  • · Part of the year, in excess of 6 months, shall be taken as one full year. 
Illustration: If the period of service is 18 years and 8 months, then 19 years will be taken as duration of service. If the period of service is 18 years and 5 months, then duration of service will be taken as 18 years. 

(2) Exemption in respect of gratuity in case of employees not covered by the Payment of Gratuity Act, 1972 [Section 10(10)(iii)] 

In case of employees not covered by the Payment of Gratuity Act, 1972 exemption in respect of gratuity will be least of the following : 

  1.  Half month’s average salary for each completed year of service, i.e., [Average monthly salary × ½] × Completed years of service. (*). 
  2. Maximum amount specified by the Central Government, i.e., Rs. 10,00,000 
  3. Gratuity actually received. 
(*) Following points should be kept in mind : 

  • · Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month (not the day) of retirement. 
Illustration: Mr. Keshav retires from service on 8-4-2010. In this case, average salary will be computed on the basis of salary for the period of 1-6-09 to 31-3-10 (i.e., 10 months preceding the month of retirement). 

  • Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee. 
  • While computing year of service, any fraction of year is to be ignored. 
Illustration: If duration of service is 18 years and 11 months, then 18 years will be considered for computation. 

Illustration (Non- Government employee) 

Mr. Kaushal retired from A Ltd. on 15-2-3015, after serving for a period of 25 years and 9 months. Following are other details: 

  1. Basic salary per month during 10 months preceding the month of retirement (i.e., monthly salary from 1-4-12 to 31-1-13) : Rs. 60,000. 
  2. Dearness allowance per month during 10 months preceding the month of retirement (i.e., monthly DA from 1-4-12 to 31-1-13) 
    1. (a) Forming part of salary for computing retirement benefits : Rs. 60,000 
    2. (b) Not forming part of salary for computing retirement benefits : Rs. 10,000 
  3. Gratuity received at the time of retirement Rs. 25,20,000. 

Compute the amount of exemption in respect of gratuity under section 10(10)(ii)/(iii), considering : 
  • (i) Mr. X is covered by the Payment of Gratuity Act, 1972 
  • (ii) Mr. X is not covered by the Payment of Gratuity Act, 1972. 
** 

(i) When Mr. X is covered by Payment of Gratuity Act, 1972 

As per section 10(10)(ii), exemption in respect of gratuity received by non-Government employee (covered by the Payment of Gratuity Act, 1972) is least of the following: 

Particulars                                                                                                                            (Rs.) 

1. 15 days’ salary for each completed year of service or part in excess of 
6 months (Note 1)                                                                                                             19,50,000 

2. Maximum amount specified by the Central Government                                                  10,00,000 

3. Actual amount received                                                                                                  25,20,000 

Amount of exemption under section 10(10)(ii) will be Rs. 10,00,000, being least of above. Thus, taxable amount of gratuity will be Rs. 15,20,000 (Rs. 25,20,000 – Rs. 10,00,000) .However person can claim relief under section 89(1).

Note 1: Computation of 15 days’ salary for each completed year of service or part in excess of 6 months: 

Following points should be considered: 

  1. Part of year in excess of six months will be considered as a full year. 
  2. Salary for the aforesaid purpose will be last drawn salary. 
  3. Salary for the aforesaid purpose will include basic salary and any dearness allowance  (i.e., whether or not forming part of salary while computing retirement benefits). 
  4. While computing 15 days’ salary, we will divide monthly salary by 26 days. Based on above, computation will be as follows: 
    1. Monthly salary will be Rs. 1,30,000 (Rs. 60,000 + Rs. 60,000 + Rs. 10,000). 
    2. 15 days’ salary will be Rs. 75,000 (Rs. 1,30,000/26 × 15). 
    3. Duration of service is 25 years and 9 months, i.e., it will be taken as 26 years (for computation of exemption). 
Thus, total amount of salary will be Rs. 19,50,000 (Rs. 75,000 × 26 years). 

(ii) When Mr. X is not covered by the Payment of Gratuity Act, 1972 

As per section 10(10)(iii), exemption in respect of gratuity received by non-Government employee (not covered by the Payment of Gratuity Act, 1972) is least of the following : 

Particulars                                                                                                         (Rs.) 

1. Half month’s salary for each completed year of service (Note 2)                15,00,000 
2. Maximum amount specified by the Central Government                               10,00,000 
3. Actual amount received                                                                                25,20,000 

Amount of exemption under section 10(10)(iii) will be Rs. 10,00,000, being least of above. Thus, taxable amount of gratuity will be Rs. 15,20,000 (Rs. 25,20,000 - Rs. 10,00,000). However person can claim relief under section 89(1).

Note 2: Computation of half month’s salary for each completed year of service : Following points should be considered in this regard: 

  • While computing duration of service, any part of year will be ignored. 
  • Salary for the aforesaid purpose will be average salary for 10 months preceding the month (not the day) of retirement. 
  • Salary for this purpose will include basic salary, dearness allowance forming part of salary while computing retirement benefits and commission based on fixed percentage of turnover achieved by the employee. 
  • Half month’s salary will be computed by dividing average salary by 2. Based on above, salary will be computed as follows: 

Particulars                                                                                                                (Rs.) 

Basic salary per month, for 10 months immediately preceding the month of
 retirement                                                                                                          60,000 

(+) Dearness allowance per month (forming part of salary while computing 
retirement benefits), for 10 months immediately preceding the month of 
retirement                                                                                                             60,000 

Total monthly salary for the purpose of computing exemption                               1,20,000 

There is no need to convert aforesaid monthly salary of Rs. 1,20,000 into average monthly salary, since there is no change in salary during past 10 months. 

Based on above, computation will be as follows: 

· Half month’s salary will be Rs. 60,000 (i.e., Rs. 1,20,000/2). 

· Duration of service will be 25 years (part of year will be ignored). Thus, total amount of salary will be Rs. 15,00,000 (Rs. 60,000 × 25 years). 


Download Free E Book The companies Act 2013 By ICAI (Pages 575)


The Companies Act, 2013 is an important milestone in bringing the glory of Indian Business at par with international community. The Act intends to improve corporate governance and to further strengthen regulations for the companies, keeping in view the changing economic environment as well as the growth of our economy. The Act which was much awaited and deliberated topic for a long period of time has introduced some new concepts like definition of Independent Directors along with the Code for Independent Directors and the Concept of Corporate Social Responsibility in the Indian context which is not only remarkable but also setting a tone for making our Law at par with the best International Standards and Practices. 

The Corporate Laws & Corporate Governance Committee of ICAI has taken the initiative of bringing out a E-Book on Companies Act 2013 for the benefit of the members of the profession. 

The members can access the E-Book as per their convenience through their laptop, i pad, tab, or mobile etc. and refer the provisions of the Act and the Rules thereon whenever required. I commend the Corporate Laws & Corporate Governance Committee in bringing this publication in electronic form which is so essential in our day to today lives now. 


Friday, September 26, 2014

Due date to file Income Tax Return in audit cases extended to 30.11.2014


Due Date for filing of return of Income for Assessment Year 2014-15 Extended from 30th September, 2014 to 30th November, 2014 in Specified Cases 


As per the provisions of the Income-tax Act, 1961 (‘the Act’), for an assessee, who is required to obtain Tax Audit Report (TAR) under section 44AB of the Act, the due date for furnishing his return of income is 30th September of the Assessment Year. 

The Central Board of Direct Taxes (‘the Board’) vide order dated 20th August, 2014 extended the due date for obtaining and furnishing of Tax Audit Report under section 44AB of the Act for Assessment Year 2014-15 from 30th September, 2014 to 30th November, 2014. Subsequently, a number of representations were received in the Board requesting for extension of the due date for furnishing of return of income also. Writ petitions were also filed in various High Courts for directing the Board to extend the due date for furnishing of return of income from 30th September, 2014 to 30th November, 2014 in conformity with the extension of the due date for filing of Tax Audit Report. 

The Gujarat High Court vide judgement dated 22.09.2014 directed the Board to extend the due date for furnishing the return of income to 30th November, 2014, except for the purposes of charging of interest under section 234A of the Act for late filing of return of income. Other High Courts also directed the Board to look into the practical difficulties of the petitioners and take a just and proper decision in this matter. 

In compliance to the judgments of various High Courts and after considering the representations received for extension of the due date, the Board, in exercise of its power conferred by section 119 of the Act, has extended the `due-date’ for furnishing return of income from 30th September, 2014 to 30th November, 2014 for the Assessment Year 2014-15 for all purposes of the Act in the case of an assessee, who is required to file his return of income by 30th September, 2014, and is also required to get his accounts audited under section 44AB of the Act or is a working partner of a firm whose accounts are required to be audited under section 44AB of the Act. 

There shall be no extension of the “due date” for the purposes of charging of interest under section 234A of the Act for late filing of return of income and the assessees shall remain liable for payment of interest as per the provisions of section 234A of the Act. 

For removal of doubt, it is clarified that for an assessee (other than working partner of a firm which is required to obtain and furnish Tax Audit Report), who is required to file its return of income by 30th September, 2014 but not required to obtain and furnish Tax Audit Report under section 44AB, the due date for furnishing of return of income for assessment year 2014-15 remains as 30th September, 2014.

Clarification on Major issues pertaining to refund of Cenvat credit to Exporters


We are sharing with you the recent judicial pronouncement of the Hon’ble Bangalore CESTAT in the case of Apotex Research Pvt. Ltd. & Others Vs. CC, Bangalore-Cus & Others [2014-TIOL-1836-CESTAT-Bang] wherein 56 Appeals were heard together and the Bangalore Bench of the CESTAT passed an interim order on 16 Common/ Legal Issues pertaining to refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 (“the Credit Rules”) for exporters, as mentioned hereunder: 

Thursday, September 25, 2014

Clarification on service tax on Joint ventures (JV)


Vide Circular no. 179/5/2014-ST dated 24th Sep’14, CBEC has clarified following aspects with respect to service tax applicability on the transactions of Joint Ventures(JV):

1) Whether cash calls(i.e. capital contributions) received by JV from its members are consideration or not , would vary from case to case, therefore, each case needs to be examined in depth;

2) Payments made by JV(out of cash calls received) to members or third party towards taxable service received from them, would fall under ambit of service tax;

3) Support services by member to JV may get squarely covered under definition of consideration

 Circular No. 179/5/2014ST, dated 24092014

Circular No. 179/5/2014ST
F.No.354/187/2013TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise& Customs
Tax Research Unit
North Block, New Delhi
24th September, 2014

To,
Chief Commissioners of Central Excise and Service Tax (All),
Director General (Service Tax), Director General (Audit),
Director General (Central Excise Intelligence),
Commissioners of Service Tax (All),
Commissioners of Central Excise and Service Tax (All).

Madam/Sir,

Subject: Service Tax –Joint Venture – reg.

Certain doubts have been raised regarding the levy of service tax on taxable services provided (i) by the members of the Joint Venture (JV) to the JV and vice versa; and (ii) inter se between the members of the JV. In addition, doubts have also been raised regarding taxation of cash calls or capital contribution made by the members to the JV and also administrative services provided by a member to the JV.

2. The issue has been examined. With effect from 1st July, 2012, under the negative list approach, all services are taxable subject to the definition of the service [available in section 65B (44) of the Finance Act, 1994], other than the services specified in the negative list [section 66D] and exemption notification [Notification No. 25/2012ST].

According to Explanation 3(a) of the definition of service, “an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons”. In accordance with the above explanation, JV and the members of the JV are treated as distinct persons and therefore, taxable services provided for consideration, by the JV to its members or vice versa and between the members of the JV are taxable.

3. In the context of a JV project, cash calls are capital contributions made by the members of JV to the JV. If cash calls are merely a transaction in money, they are excluded from the definition of service provided in section 65B(44) of the Finance Act, 1994. Whether a ‘cash call’ is ‘merely… a transaction in money’ [in terms of section 65B(44) of the Finance Act, 1994] and hence not in the nature of consideration for taxable service, would depend on the terms of the Joint Venture Agreement, which may vary from case to case.

4. Detailed and close scrutiny of the terms of JV agreement may be required in each case, to determine the service tax treatment of cash calls. Some important aspects, by way of illustration, which could be examined in this regard, are:

  • 4.1 Taxable service provided by a JV to its members: Cash calls, sometimes, could be in the nature of advance payments made by members towards taxable services to be received from the JV. For instance, JV which receives the cash call from its members may in return agree to do something of direct benefit either to the member or on the behest of a member to a third party, such as granting of right, reserving production capacity or providing an option on future supplies. 
  • 4.1.1 Taxable services received by a JV from its members or third party:Payments made out of cash calls pooled by a JV, towards taxable services received from a member or a third party is in the nature of consideration and hence attracts service tax.
  • 4.2 Taxable services provided by members to the JV: Usually responsibility of managing the cash calls of the JV is assigned to one or some of the members of the JV, by way of a contractual agreement, for which he/they may receive a consideration either in cash or kind (say, goods or services). A member of JV may provide support services (for example, administrative service in the form of setting up/management of a project office/site office) to the JV for a consideration either in cash or kind (say, goods or services).
5. JV being an unincorporated temporary association constituted for the limited purpose of carrying out a specified project within a time frame, a comprehensive examination of the various JV agreements (at times, there could be number of inter se agreements between members of the JV) holds the key to understanding of the taxation of transactions involving taxable services between the JV and its members or interse between the members of a JV. Therefore officers in the field formations are advised to carefully examine the leviability of service tax with reference to the specific terms/clauses of each JV agreement.

6. All concerned are requested to acknowledge the receipt of this circular.

7. Hindi version to follow.

[Dr. Abhishek Chandra Gupta]
Technical Officer, TRU
Tel. no.: 01123093075