Corporate Updates – 08-08-2014

Employees Provident Fund

Employees Provident Fund Organisation (EPFO) has observed that many employers split the total wages payable to their employees into several allowances which are excluded from the final computation of wages as per Section 2(b) of the Employees Provident Fund & Miscellaneous Provisions Act, 1952. It has been decided to have inspection of all those establishments where the employers have deducted PF contribution on 50% of total wages paid to their employees. All officers have been instructed to complete the inspection by 31-08-2014 and to submit the report in the prescribed performa by 07-09-2014.

Income Tax

The Finance (No.2) Bill, 2014 as placed by the Hon’ble Finance Minister in Parliament on 10-07-2014 is assented by the President of India on August 6, 2014 and now enacted into Finance (No.2) Act, 2014.

Corporate Updates 8 July 2014


Income Tax Authorities have come out with an innovative idea to have authenticated contact details in e-Filing of Income Tax Returns for the financial year 2013-2014. Now every assessee has to share their email-id and mobile phone number with the tax department at the time of filing of their I-T returns this year. The new step has been taken in order to communicate directly with the taxpayer with regard to any issues arising after the returns are filed. One mobile number or email ID can be used for a maximum of 10 user accounts as the Primary Contact- Mobile Number and Email ID in e-Filing. This is to ensure that family members (not exceeding 10 separate users) not having personal email or mobile can be covered under a common email or mobile, but in general taxpayers should have their own unique email ID and Mobile registered with the Department. The new measures have been implemented both for e-filers and manual filers of I-T returns.


The Securities and Exchange Board of India has introduced new framework on 07-01-2014 to strengthen the supervisory and monitoring role of depositors and their participants for issuance and processing of Delivery Instruction Slips (DIS). However, on the request of the depositors and the depository participants (DPs), the same is deferred for 3 months and now will come into force form October. A DIS is used by seller of securities to instruct their depository participants to debit their Demat account.

Corporate Updates 19 June 2014


MCA has issued Clarifications for filing Form INC 27 for conversion of Company from Public to Private under the provisions of the Section 14(1) new Act. As the said Section is yet to be notified, MCA clarifies that the power for conversion of Public Limited to Private Limited shall remains with the ROC as was delegated in the Section 31 of the earlier Act (1956) till the remaining provisions came into effect. Applications for such conversions, therefore, have to be filed & disposed as the earlier provisions.

Income Tax: 

Central Government vide Notification No. 31/2014 dated 11th June, 2014, has notified “1024” as Cost Inflation Index for Financial Year 2014-15. This Cost Inflation Index is required for the purpose of computation of Capital Gains while providing benefit to the assessee for the cost incurred in the previous years.

Corporate Updates 14 June 2014

Case Law:

Whether pendency of appellate proceedings relating to an assessment was a bar for initiation of prosecution proceedings under section 276CC of the Income Tax Act, 1961 (“I.T Act”) ?

The Hon’ble Supreme Court in the matter of Sasi Enterprises v/s. Assistant CIT has upheld the order passed by the Hon’ble Madras High Court. As Per section 276CC of the I.T Act, once a taxpayer has committed a default in filing a Return of income (ROI) by the due date, prosecution proceedings under section 276CC of the Act could be initiated, and pendency of appellate proceedings was no bar for initiation of the prosecution proceedings.

Facts of the Case

1. The taxpayer Sasi Enterprises, a registered partnership firm, did not file its ROI for Assessment Year (AY) 1991-92 and AY 1992-93 by the relevant due dates under section 139(1) of the Act, nor did it file a belated ROI under section 139(4) of the Act within the prescribed time limit.

2. A survey was conducted on the taxpayer, and consequently a notice under section 148 of the Act was served on the taxpayer directing it to file its ROI. The taxpayer still did not file its ROI in response to this notice. Therefore, the Tax Officer (TO) concluded a best judgement assessment under section 144 of the Act, and determined the tax demand for both the above AYs.

3. The partners in their individual ROIs for AY 1991-92 and 1992-93 had disclosed the fact that the accounts of the taxpayer were not finalised and its ROIs not filed.

4. Similarly, the two partners of the taxpayer-firm did not file their individual ROIs for AY 1993-94 under sections 139(1) and (4) of the Act or even in response to a notice under section 142(1)(i) of the Act, and, accordingly, the TO concluded a best judgement assessment under section 144 of the Act, and determined the tax demand for the said AY.

5. The taxpayer and its partners litigated the best judgement assessments and the matters were finally settled at the Income-tax Appellate Tribunal (Tribunal) in the years 2004 to 2008.

6. In the meantime, prosecution proceedings under section 276CC of the Act were initiated against the taxpayer and its partners in the year 1997, the continuance of which was upheld by the High Court.

7. Consequently, the taxpayer and its partners took up these matters before the Supreme Court.


On the taxpayer’s primary contention that initiation of prosecution proceedings under section 276CC of the Act were ex facie without jurisdiction, the Supreme Court held that prosecution proceedings under section 276CC of Act may be initiated where an taxpayer had failed to file an ROI by the due date as required under sections 139(1), 142(1)(i) or 148 of the Act.

The language of section 276CC of the Act was clear once a taxpayer has committed a default in filing an ROI by the due date, prosecution proceedings under section 276CC of the Act could be initiated, and pendency of appellate proceedings was no bar for initiation of the prosecution proceedings.

Further, disclosure by the partners in their individual ROIs of the fact that the taxpayer was carrying on business and had income but had not filed its ROI pending finalisation of accounts did not obliterate the default in filing ROI so as to create a bar for initiation of prosecution proceedings under section 276CC of the Act. Section 276CC applies to situations where an assessee has failed to file a return of income as required under Section 139 of the Act or in response to notices issued to the assessee under Section 142 or Section 148 of the Act. The proviso to Section 276CC gives some relief to genuine assesses. The proviso to Section 276CC gives further time till the end of the assessment year to furnish return to avoid prosecution.


Benefit of proviso is available only to voluntary filing of return as required under Section 139(1) and would not apply after detection of the failure to file the return and after a notice under Section 142(1) (i) or 148 is issued calling for filing of the return of income and therefore, envisages the filing of even belated return before the detection or discovery of the failure and issuance of notices under Section 142 or 148. Offence under Section 276CC is attracted on failure to comply with the provisions of Section 139(1) or failure to respond to the notice issued under Section 142 or Section 148 of the Act within the time limit specified therein.

Corporate Updates 05 June 2014


The Hon’ble Allahabad High Court held that if Income Tax Authorities have denied refunding the TDS on the ground that the refund would only be granted when the TDS matches with the details mentioned in Form 26AS and since the mismatching is not attributable to the assessee and the fault solely lay with the deductor. The Court further finds that the assessing officer was under a duty to verify whether or not the deductor had made the payment of the T.D.S. in the government account. The petitioner has suffered a tax deduction at source, but has not been given due credit inspite of the fact that he has been issued a TDS certificate by a government department. We find that a case has been made out for grant of a mandamus for refund of the TDS amount & interest due thereon.


RBI has introduced the Liberalised Remittance Scheme (LRS) for resident individuals by increasing in the limit from USD 75,000 to USD 125,000 per financial year, under the Scheme, for any permitted current or capital account transaction or a combination of both. Further, the Scheme should not be used for making remittances for any prohibited or illegal activities such as margin trading, lottery, etc.. All other terms and conditions shall remain unchanged.

Corporate Updates 03 June 2014


CBDT mandates e-filing of reports prescribed under Sections 10AA, 44DA, 50B and 115VW w.e.f April 1, 2014 and notification and notified the Income-Tax (Sixth Amendment) Rules, 2014. Further new versions of Income Tax Return Forms like Form ITR-3, Form ITR-4, Form ITR-5, Form ITR-6 and Form ITR-7 for different assessee’s are also substituted and made available for filing of Income Tax Returns for the Assessment Year 2014-2015.


RBI has observed that a few Urban Cooperative Banks (UCBs) have been sanctioning high value loans to Public Sector Undertakings (PSUs) by admitting them as nominal members or otherwise. However the objective of UCBs are primarily to meet the credit needs of the society by providing loans and advances to low/middle income groups (small borrowers) and Grant of high value loans to PSUs is not consistent with the co-operative principles and dilutes the cooperative character of UCBs. All UCBs are advised, as a matter of principle, generally not to grant large value loans to Public Sector/Government Undertakings.

Corporate Updates 22 May 2014


RBI has made changes in the Regulation for Overseas Direct Investments and notified Limited Liability Partnership (LLP), registered under the Limited Liability Partnership Act as an “Indian Party” under clause (k) of Regulation 2 of the Notification ibid. Accordingly, an LLP, may henceforth undertake financial commitment to / on behalf of a JV / WOS abroad in terms of the extant FEMA provisions under Regulation 6 (and regulation 7, if applicable) of the Notification ibid. The AD banks shall report the financial commitment/s undertaken by an LLP in Form ODI Part I and II and also other reporting (APR, disinvestments, etc.) as per the extant reporting requirements.


CBDT has revised PAN Application Form 49A and 49AA w.e.f from 16.05.2014 vide its Notification. Revised Form 49A and 49AA provides option to get printed Mothers Name on PAN card. So those applying for New PAN card or for revised PAN card have the option to get printed on their PAN card printed the name of his / her mother. But applicant can select only one option, he /she cannot have the name of both mother and father printed on PAN card. In case Applicant do not exercise his/her option than by default Father’s name will get printed on PAN card.

Corporate Updates 28 April 2014


RBI through its Notification allows use of transaction based reporting format for cross border wire transfer and every reporting entity is required to maintain the record of all transactions including the record of all cross border wire transfers of more than Rs. 5 lakh or its equivalent in foreign currency, where either the origin or destination of the fund is in India. FIU-IND has advised that the information of all such transactions may be furnished to Director, FIU-IND by 15th of the succeeding month. The information may be furnished electronically in the FIN-Net module developed by FIU-IND.


NSDL has developed software called e-TDS/TCS Return Preparation Utility (RPU) to facilitate preparation of e-TDS/ TCS returns. This is a freely downloadable VB based utility. Separate utilities are available for preparation of each type of return. File Validation Utility (FVU) version 2.138 (for statements pertaining to FY 2007-08 to FY 2009-10) and FVU version 4.2 (for statements pertaining to FY 2010-11 onwards) are available for download from TIN website and the same is mandatory with effect from April 26, 2014 and e-TDS/TCS RPU (Version 3.9) for Statements from FY 2007-08 is available for download from TIN website (applicable from April 26, 2014).

Corporate Updates 09 April 2014


In exercise of the powers conferred by Section 295 of the Income-Tax Act, 1961, the CBDT amended the Income-tax Rules, 1962, to notify the Forms SAHAJ (ITR-1), ITR-2, SUGAM (ITR-4S) and ITR-V for filing of Income Tax Returns (ITR) for the Assessment Year 2014-15. To view & download all such forms, please Click Here.


RBI has issued directions under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 to encourage longer term flows, foreign investment by all eligible investors including RFPIs shall henceforth be permitted only in Government dated securities having residual maturity of one year and above and existing investments in T-bills and Government dated securities of less than one year residual maturity shall be allowed to taper off on maturity/ sale. The present limit for investment in Government Securities by SEBI registered FIIs, QFIs, long term investors and FPIs registered in accordance with SEBI guidelines stands at USD 30 billion. Necessary operational guidelines in this regard will be issued by SEBI.

Corporate Updates 08 April 2014


RBI has clarified that while arriving at the Net Owned Fund (NOF) figure, investment made by an NBFC in entities of the same group concerns shall be treated alike, whether the investment is made directly or through an AIF / VCF, and when the funds in the VCF have come from the NBFC to the extent of 50% or more; or where the beneficial owner, in the case of Trusts is the NBFC, if 50% of the funds in the Trusts are from the concerned NBFC. All NBFCs are also advised to keep this principle in mind, always, while calculating their NOF. For this purpose, “beneficial ownership” would mean holding the power to make or influence decisions in the Trust and being the recipient of benefits arising out of the activities of the Trust. Click Notification to view and download the same.

Income Tax: 

CBDT has issued a Clarification w.r.t Interpretation of Provisions of Section 10(2A) of the Income tax Act, 1961 that the income of a firm is to be taxed in the hands of the firm only and the same can under no circumstances be taxed in the hands of its partners. Accordingly, the entire profit credited to the partners accounts in the firm would be exempt from tax in the hands of such partners, even if the income chargeable to tax becomes NIL in the hands of the firm on account of any exemption or deduction as per the provisions of the Act.