Advance Tax- “Pay as you Earn Scheme”

Anjali Garg
-
0
Advance Tax- “Pay as you Earn Scheme”

Benjamin Franklin once said, “In this world nothing is certain but death and taxes”. So Why is that, When is that, What is that, Who is that and How. Okay, here’s the answer to this- Advance Tax. This article will give you a good view of it.

Section 207

Accordingly, as the name implies, advance tax is the tax that one pays in advance. It is therefore the provisions of Section 207 of the Income Tax Act, that states that every Assessee shall estimate his Income and Tax Liability for any previous year and Income Tax so estimated shall be paid in advance in accordance with the manner given u/s 211 of the Income Tax Act,1961. It makes it obligatory for every individual, self-employed professional, businessman and corporate to pay Advance Tax, on any income on which TDS(Tax Deducted at Source) is not paid.

Who will pay Advance Tax- Section 208

A Person shall be liable to pay advance tax only if Tax Liability exceeds Rs. 10,000 i.e. a person shall be exempt from payment of Advance Tax if Tax Liability does not exceed Rs. 10,000.00. The Education Cess and Secondary Higher Education cess shall also be considered for the purpose of calculating the Tax Liability.

Both individuals, as well as Corporate Tax Payers, need to pay this tax. This applies to individuals particularly when they have income other than income from salary.  If the sole income of an individual is his salary, then you need not pay advance tax as the employer deducts it at source, known as TDS (tax deducted at source). But when there is revenue from other sources such as: interest earned (on saving bank account), capital gains, lottery wins, from house property or from business, then you needs to pay advance tax on all income after adjusting expenses or losses.

Who doesn’t have to pay Advance Tax?

Advance Tax is NOT applicable when;

  1. A taxpayer opts for the scheme of computing business income under Section 44AD or u/s 44ADA i.e on Presumptive Taxation Scheme for business or Profession,
  2. A senior citizen (resident individual who is 60 years or more) who does not have any income from Business & Profession.

 

How is advance Tax Calculated?

Advance tax is based on income that may be received by an individual during the year; in that sense it is estimated income. The tax is determined using the rates applicable in that financial year. Also if, the real income rose after the payment of first installment of tax on the estimated income, which was increased due to some shares/mutual funds that were sold, then in the next payment we will have to change our revenue and pay the difference accordingly.

The steps for calculating advance tax are described below:

  • Determine the Income: Determine the income you earn other than your salary. It is necessary to include any existing income which could be paid out later on.
  • Minus the Expenses: Deduct the expenses from income. You should exclude work-related expenses such as office leases, accommodation expense, internet and phone charges.
  • Compute the Net Total Income: Add other income that is received in the form of rent, interest income, etc. Deduct the TDS from the salaried income.
  • Compute Advance Tax: On the above net total income, estimate Advance Tax.If the tax due is more than Rs.10,000 then you would have to pay advance tax.

When should advance tax be paid?

The dates and percentages for both individuals and corporate taxpayers are listed below:

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax
On or before 15th December 75% of advance tax
On or before 15th March 100% of advance tax

Points to Note

  1. Tax payers who have opted for Presumptive taxation scheme under Section 44AD or 44ADA have to pay the whole of their advance tax liability in one installment on or before 15 March.
  2. When the last day for payment of advance tax happens to be a bank holiday, it can be paid on the next day without any interest charges.
  3. Pay Advance tax either electronically or physically using Challan no./ ITNS 280 by visiting https://www.tin-nsdl.com or following the link given on the Income Tax website. Note that taxpayer’s PAN is mandatory in the Challan and quoting of the wrong PAN may attract a penalty of  Rs,10,000/-.
  4. After the tax is paid, it will get reflected on the taxpayer’s Form 26AS within 3-4 working days of making the payment. Check Form 26AS for confirmation of details.

What if advance tax is not paid?

When an individual is liable to pay advance tax and if he does not pay the same or less than the stipulated tax, he will be penalized and would have to pay extra (interest) in compliance with Sections 234B and 234C. However it is to be noted that Tax paid till 31st March of the financial year shall be treated as Advance tax.

Under Section 234B, when the cumulative amount of advance tax charged in accordance together with the amount of TDS is less than 90% of the overall tax obligation then interest is calculated at 1% per month or part of a month from 1st April of Assessment Year to the date of determination of income u/s 143(1) or date of regular assessment if such assessment is made.

Under Section 234C, for shortfall/ failure to pay advance tax or Deferment of advance interest is levied under this section. There are three components; for the first installment, the shortfall is calculated for 3 months @1% p.m. Similarly, for second and third installment and for the last and final installment it is calculated for 1 month only @1%.

Under Section 273, if advance tax payable by assessee is untrue and the Assessing Officer had reasons to believe or has failed to furnish a statement of the advance tax payable by him, then AO may direct such person to pay by way of penalty which shall not be less than ten per cent but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year falls short of

  • seventy-five per cent of the assessed tax or
  • the amount which would have been payable by way of advance tax if the assessee had furnished a correct and complete statement

whichever is less.

Why Pay Advance Tax?

Advance tax is one of the Government’s most effective tools to collect tax from the assessee all over India. This prepaid form of tax is structured in such a way as to make an assessee pay Government tax in a ‘Pay as You Earn Scheme’. This specifically aims to reduce the last moment’s burden for an assessee to pay tax obligation that can be due to either lack of time or resources.

Amendments due to Covid-19

No change in timeline for payment of tax, however for delay of deposit of Advance Tax, reduced interest rate 9% per annum or say, 0.75% per month  thereof would be applicable instead of 12% per annum or say, 1% at present for payment of all taxes falling between 20th March 2020 to 30thJune 2020. Due Date of Last Installment is 15th March which can be paid upto 31st march with one month of reduced Interest Rate.

Analysis of newly inserted Section 194O

Khushi Surana
-
0
Analysis of newly inserted Section 194O

The Union Budget brought about an insertion of Section 194O in the Income Tax Act,1961 effective from 1st October,2020 which warranted a tax deduction of 1% of the gross amount of goods, services, or both by the E-Commerce Operator while making payment to E-commerce participant.  

E-Commerce Operators and E-commerce Participants  

As per the provisions of Section 194O,  

“e-commerce operator” means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce and is responsible for paying to e-commerce participant” and  

 “e-commerce participant” means a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce” 

Interpretation: E-commerce participant (say ABC Creation Ltd.), required to be a Resident in India, can be any person selling its goods or services or both through a digital platform provided by an E-commerce Operator (say, Amazon). Now if a consumer like you and me, make a purchase on Amazon, Amazon being an E-commerce operator will further make the payment to ABC creation Ltd. for the purchase so made.  

Incidence, Rate and Amount on which TDS is to be deducted under Section 194O 

The E-commerce Operator should deduct TDS @ 1% on the gross amount of such sales or service or both 

  1. at the time of credit of amount of sale or services or both to the account of an e-commerce participant or; 
  2. at the time of payment thereof to such e-commerce participant by any mode,  

whichever is earlier. 

Any payment made by a purchaser of goods or recipient of services directly to an E-commerce participant shall be deemed to be amount credited or paid by the E-commerce Operator to the E-commerce participant and shall be included in the gross amount of such sales or services for the purpose of deduction of income-tax. 

Illustration:  Continuing with the above illustration, Suppose Amazon credited Rs.1,00,000/- to ABC Creation Ltd. On 31.01.2020 for the sale of products during the month of January and further made payment to ABC Creation Ltd. on 05.02.2020. Further if any consumer, let say X made a purchase on 28.01.2020 of Rs.5,000/- and paid directly to the E-commerce participant (ABC Creation Ltd. in this case) via the payment gateway facilitated by the E-commerce Operator i.e. Amazon, then the following scenario will be there 

  1. Amazon has to deduct TDS as per Section 194O being an E-commerce Operator. 
  2. TDS shall be deducted on date of payment i.e. 31.01.2020 being earlier.
  3. TDS shall be deducted on gross amount being Rs.1,05,000/- (Rs.1,00,000/- + Rs.5,000/-) It will be deemed that Amazon has made payment to ABC Creation Ltd for the amount of Rs.5,000/-  credited directly by the consumer X to the ABC Creation Ltd., hence included in the gross amount of such sale. 

 

Exceptions/Exemptions under 194O  

There are 2 cases where the E-commerce participant will not be required to deduct TDS: 

  1. E-commerce participant being a Resident Individual or HUF : If an Individual or HUF, who are a Resident in India have a gross receipt of amount on sales of goods, services or both, but such amount does not exceed five lakh rupees in the previous year then the E-commerce Operator is not required to deduct TDS on such amount. 

Condition: E-commerce participant should have furnished its Permanent Account Number (PAN) or Aadhaar number to the E-commerce Operator. 

Analysis: The limit of Rs.5,00,000/- is simply because income tax upto Rs.5,00,000/- is NIL due to rebate provided u/s 87A. 

Note: If the E-commerce participant does not furnish his PAN or Aadhaar number, TDS must be deducted at the rate of 5%, as per amended provisions of Section 206AA. 

2. E-commerce participant being a Non-Resident : The provisions of section 194O is only attracted if the E-commerce participant is a Resident. No tax deduction is required to be made if the E-commerce participant is a non-resident. 

Miscellaneous provisions under this Section 

  1. A transaction in respect of which TDS has been deducted under this section or which is not liable to deduction under the exemption, there shall not be further liability on that transaction for TDS under any other provision of Chapter XVII-B of the Act. This is to provide clarity so that same transaction is not subjected to TDS more than once.
  2. However, it has been clarified that the above exemption will not apply to any amount received or receivable by an E-commerce Operator for hosting advertisements or providing any other services which are not in connection with the sale of goods or services referred to in sub-section (1) of the proposed section.
  3. “services” is defined to include fees for technical services and fees for professional services, as defined in section 194J.
  4. E-commerce Operator means any person and there is no distinction has been made for resident or non-resident for E-commerce Operator. 
  5. Whether sales include tax such as GST is yet to be clarified. 

Conclusion 

Central Government in order to widen and deepen the tax net by bringing participants of E-commerce within the ambit of tax, has inserted this section. The government’s objective of identifying the whole range of sellers who are engaged as E-commerce participants and keeping a tab of all the transactions undertaken by them in the course of business will be fulfilled. This will further bring the E-commerce participant within the tax net i.e. there will be transparency on the income earned by seller of goods/provider of service through digital platforms. It will also help the government to collect revenue easily. 

 

 

Instant PAN through Aadhaar based e-KYC

CA Yash Kapadia
-
0
Instant PAN through Aadhaar based e-KYC

General Scheme of PAN Allotment:

A new facility of instant e-PAN through Aadhaar based e-KYC has been introduced by the Honourable FM in Budget 2020.

Electronically issued and Digitally signed e-PAN is now a valid mode of issue of Permanent Account Number (PAN).

This facility is for allotment of Instant e-PAN (on near-real time basis) for those applicants who possess a valid Aadhaar Number and no requirement of submitting detailed application form. PAN will be issued in PDF format to applicants free of cost.

Applicants are required to enter his/her Aadhaar Number and validate the application with the OTP generated on their registered mobile number as available in Aadhaar database of UIDAI. A 15-digit acknowledgement number will be generated once the validation process is complete.

Applicants can check the status of their application by entering their Aadhaar Number. If the PAN is already issued, the applicant can download the PAN in PDF format. Also, a copy of the PAN will be sent to the applicant’s registered email id.

The Salient Features of this Instant e-PAN Facility:

Applicant must possess a valid Aadhaar Number which has never been linked to another PAN before.

Aadhaar Number must be linked to the registered mobile number.

Applicants will not be required to submit or upload any KYC documents.

The applicant who is already holding PAN should not use this facility as the possession of more than one PAN will result in penalty of Rs. 10,000/- under section 272B(1) of Income-Tax Act, 1961.

e-PAN also contains enhanced QR code having demographic (Name, DOB) as well as biometric (scanned photo and signatures) information of the PAN holders which can be accessed and used for PAN verification purposes in off-line mode.

How to Apply for Instant PAN:

Step 1: Visit the official e-filing home page of the IT department. (https://www.incometaxindiaefiling.gov.in/home).

Step 2: Click on the ‘Instant PAN through Aadhaar’ option under the ‘Quick Links’ section of the homepage to redirect you to the instant PAN allotment webpage.

Step 3: Click on the ‘Get New PAN’ button to redirect you to the instant PAN request webpage.

Step 4: Enter your Aadhaar Number for PAN allotment along with the captcha code. Cross-check the core requisites mentioned before confirming your request. Click on the ‘Generate Aadhar OTP’ to receive the OTP on your registered mobile number.

Step 5: Enter the Aadhaar OTP received on your registered mobile number and click on the ‘Validate Aadhaar OTP and Continue’ button once you have agreed to validate your Aadhaar details with UIDAI.

Step 6: You will be redirected to the PAN request submission page where you will be required to validate your Aadhaar details and accept the terms and conditions. Click on the ‘Submit PAN Request’ button.

Step 7: You will be given an Acknowledgement Number once you have submitted your Aadhaar details for validation. You can view the PAN allotment status by entering your Aadhaar Number.

Other Important Facts:

Foreign citizens cannot apply for instant PAN using this facility and they have to submit the detailed application.

The OTP for completing the procedure can be generated any number of times.

Aadhaar authentication may get rejected due to wrong OTP. The problem can be resolved by entering the correct OTP. If it still gets rejected, you have to contact the UIDAI.

Address as registered in Aadhaar database can only be used for PAN application and applicant cannot use different address.

The applicant will not get printed copy of PAN and if applicant wish to get the printed copy, he/she can get it by submitting PAN on these following 2 links:

https://www.onlineservices.nsdl.com/paam/ReprintEPan.html

https://www.utiitsl.com/UTIITSL_SITE/mainform.html

For any query relating to e-PAN, you may reach out at [email protected]

Why Donation for Fight against Coronavirus to third party NGOs is not a good idea?

Mehul Shah
-
0
Why Donation for Fight against Coronavirus to third party NGOs is not a good idea?

Earlier, the trusts were formed by affluent people of same community who infused corpus money out of their own savings and carried out charitable activities in the nature of relief for the poor, education or advancement of any other object of general public utility. However recently, there is huge trend of Sophisticated Trusts ( they prefer to call it NGOs) who would operate on a National level and lure the consumers into donation for a cause through various techniques not limited to but includes

  1. Social Media Ads – For a normal businessmen, the ads on Facebook or Linkedin is very costly but these NGOs have enough money for Ad Campaigns may be because it provides good conversion into donation money.
  2. Opt-out facility during e-commerce application – When you buy a movie ticket or a flight ticket, there is a separate check-box for Donation and it is already ticked by default and 80% of Indians because of our emotional nature and pettiness of the amount, fail to untick it.
  3. Phones through Call Centres – They get the database of Dayavan people and would call you citing a particular case whereas if not for your timely contribution, the patient will die shortly. Many a times, they dont even change the name of the patient as they go by the script!

Some of these volunteers have literally abused the prospective donors and some of the horrendeous experience can be found at https://www.quora.com/What-are-some-fraud-NGOs-in-India

In the RTI reply by AIIMS, it is clearly mentioned that AIIMS has no association with these NGOs viz. RELIEF INDIA TRUST, MSSION HEAL, A GIGGLES WELFARE ORGANISATION  and complaints have already been received from various places that these three NGOs are involved in illegally collecting money for poor patients admitted at AIIMS. AIIMS have advised not to donate to these NGOs.

It is not that every NGO is a Black sheep and it shall be extremely wrong on my part to derive any conclusions as every help counts but the million dollar question is
In situation like a worldwide pandemic like Coronavirus, should you donate money to a third party NGO just because you received an email through change.org or some online community starts a fundraising campaign ?

For coronavirus, the spread of the disease is so dreadful, that undisputedly the control has to be from the Top. The Central Government, State Government as well as Local authorities has been working in coordination till date to tackle the situation. The Corona Warriors mainly hail from Police Department and Government hospitals employees and hence when there is a dedicated Charity Fund for COVID19 called “PM CARES” monitored by Honourable Prime Minister himself and when each Chief Minister has a separate Relief Fund, I see no reason why a citizen needs to give donation to a private NGO.

No doubt, the migrant workers are affected the most and some NGOs are doing appreciable work in spearing awareness and providing help to these poorer section of the society and one such NGO, I came across is “Give India” which claims to be “India’s largest and most trustworthy giving platform for donors”. I tried to do my due diligence, to the best of my knowledge so I paid Rs. 100/- to MCA and downloaded their Audit Report for last 3 years. The Company Name is Give Foundation. My subsequent observations and fact findings are not to undermine the efforts of the NGOs including “Give India” who might be doing an incredible job but it is to provide a reply to the pseudo liberals who are encouraging citizens to give donations to such Private Funds against the PM Care Fund or Chief Minister Relief Fund.

  1. Supporters claim that Facebook has also tied up with Give India and there is no middlemen, but “Give India” is ONLY a middlemen! It does not do any charitable activity on its own! They state in their Financial statements that “It is an online donation platform and it helps raise funds and contributions from individuals across India and the world and then disburses these donations to credible Indian NGOs” Infact, looking at their audited financial statements, it seems that 10% of the total donation raised for a cause goes on to Company to fund their salaries assuming that it receives no cut from its associated NGOs.
  2. As per the latest audit report, the credit in the Profit and Loss account shows that the “Total Donation retained for covering administrative cost” is Rs. 5.09 Crore out of which the salary is paid to its employees of Rs. 4.39 Crore. The salary of its one Director is as high as Rs. 50+ lakhs pa which is funded out of your donations.
  3. The Income tax Department has also denied to consider Give India as charitable organisation and denied any exemption u/s 11 of the Income Tax Act. The litigation went till Income tax Tribunal and the Company lost at the forum of highest fact finding authority wherein the Court observed as under:

    “We find that the entire expenses incurred by the assessee are for providing advisory services to the affluent corporate and high net worth individuals who desire to make donations to public welfare trust or institution. Thus it is observed that the actual activity of the assessee during the year under consideration was confined to provide professional services to corporate and other persons who desire to do charity by advising them or by way of identifying genuine charitable institutions for them. The assessee for this service also charged fee from the donor corporate or other persons and such fee amounted to Rs.1,08,57,115/- during the year. Thus we find that no income of the assessee was utilised for providing educational activity medical relief, relief of poor and preservation of Environment (including watersheds, forests and wildlife). The entire expenses of the assessee were directed towards providing services to donors who are affluent section of the society and wish to make donation for charitable purposes. The above activity of the assessee of providing services to affluent section of the society cannot be, in our considered view held as activity of general public utility also. Thus we find that no part of the income of the assessee company was actually utilised for any charitable activity during the year”

    The Full copy of the Judgement can be downloaded at https://www.itatorders.in/appeal/ita-1465-ahd-2013-14-give-foundation-ahmedabad-the-jt-director-of-income-tax-exemp-ahmedabad
  4. Even in subsequent years also, the Income tax Department has denied its operation as a charitable Trust and the contingent liability reported out of such tax liability is Rs. 2.23 Crore ( Pg 17 of Audited Financials ) and they have paid only Rs. 86 lakhs in protest and no provision has been made in the books which is certified by Big 4 firm.
  5. The website Contact Us Page or About Us Page does not mention even the address of Registered Office ! Why would anyone do that ?

In view of the above, in my personal opinion, at least for the fight against Coronavirus, the donation, if any should directly go to National or State Fund and if someone is not comfortable to donate there just because he or she is Modi-Hater ( thats the only word which pops in my mind when I see people on social media making fun of PM Care Fund when they have a choice to remain silent! ), then at the best, they should try to provide financial help to their own domestic helpers and office staff or factory workers. Infact, a better option is when you look around, you will find a lot of noble souls who runs an NGO and whose efforts are clearly visible as how they are helping the daily wagers and donation may be made to them. And still if you are making donation to the third party NGOs, of course, “its your choice” but not at the cost of undermining the efforts of Central Government.

PS : When a businessmen pays Rs. 1,00,000/- to PM Care Fund, he gets 100% tax deduction of such amount but when he makes donation of same amount to Private NGOs, he may only get 50% tax deduction from his income. I have come across many businessmen who are nagging at the present Government to provide them tax soaps but dear, you just missed a blanket benefit which was before your eyes but you chose to ignore !

Details of PM Cares Fund

Name of the Account: PM CARES

Account Number: 2121PM20202

IFSC Code: SBIN0000691

SWIFT Code: SBININBB104

Name of Bank & Branch: State Bank of India

UPI ID: pmcares@sbi

Section 115 BAB – New Corporate tax rate for new manufacturing companies

Khushi Surana
-
0
Section 115 BAB – New Corporate tax rate for new manufacturing companies

The Government, via Taxation Laws (Amendment) Ordinance, 2019 passed on 20 September 2019, has introduced a favorable new corporate tax rate for new manufacturing companies.  It has inserted Section 115BAB offering a low corporate taxrate of 15% (plus Surcharge and Health and Education Cess) making an effective rate of 17.16% to new manufacturing companies.

It has inserted Section 115BAB offering a low tax rate of 15% (plus Surcharge and Health and Education Cess) making an effective rate of 17.16% to new manufacturing companies.

ELIGIBILITY FOR NEW CORPORATE TAX BENEFITS UNDER SECTION 115BAB

The benefit of this section can only be utilized by Domestic companies and no other entity. However, there are some conditions attached which are explained below: 

  • The domestic company should have been set-up and registered on or after the 1st October 2019, and has commenced manufacturing or production of any article or thing on or before the 31st March 2023. 

Analysis: The government has introduced this section with an intention to favor the economic growth of the country.

The Secondary sector growth is vital for boosting the GDP growth and hence it is beneficial for both the economy and the corporates giving them a much-needed incentive to open up units of production and manufacturing. 

  • The business should not be formed by splitting up, or the reconstruction, of a business already in existence (not applicable to a business referred in Sec 33B of I.T Act,1961) 

Analysis: Splitted-up or Reconstructed businesses would not necessarily mean an addition to the existing production value being generated by the Company.

A newly set up entity would, on the contrary, mean that there is a supplementary production taking place in the country adding to the GDP growth.

The company should not use any machinery or plant previously used for any purpose. However, there are few exceptions to this condition which are as follows: 

  • Any Plant or machinery which has been imported to India from anywhere outside the country and the same is not used in India prior to the date on installation. 
  • Plant and machinery or part thereof which has been used before but the value of which, does not exceed 20% of the total value of the machinery or plant used by the company.
  • The deduction should not have been allowed on account of depreciation in respect of the plant or machinery at any previous time before installation  

Analysis: The intension behind attaching this particular condition is that the Government intends and expects companies to invest more and capitalize in the form of Plant and Machinery and other fixed assets. 

  • The company cannot use any building previously used as a hotel or a convention center, as the case may be, in respect of which deduction under Section 80-ID of I.T Act,1961 has been claimed and allowed. 

As per the definition in Section 80-ID “hotel” and “convention center” as been defined respectively: 
“hotel” means a hotel of two-star, three-star or four-star category as classified by the Central Government; 
“convention center” means a building of a prescribed area comprising of convention halls to be used for the purpose of holding conferences and seminars, being of such size and number and having such other facilities and amenities, as may be prescribed; 

  • The company should not be engaged in any business other than: 
  • The business of manufacture or production of any article or thing  
  • Research in relation to the manufacturing or production of article or thing 
  • Distribution of such article or thing 

UNDER THIS NEWLY INSERTED SECTION 115BAB BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING DOES NOT INCLUDE THE FOLLOWING BUSINESS: 

  • development of computer software in any form or in any media
  • mining
  • conversion of marble blocks or similar items into slabs
  • bottling of gas into the cylinder
  • printing of books or production of a cinematograph film; or 
  • any other business as may be notified by the Central Government in this behalf; 

Analysis: By inserting this condition it is clarified that the section is only meant to benefit the manufacturing and production industry and activities carried on for facilitating the research and distribution of the same.

It has also listed out businesses that may create confusion regarding their status as to whether they would qualify and be eligible for this section.  

THE INCOME TAX OF THE COMPANY SHOULD BE COMPUTED WITHOUT CLAIMING FOLLOWING TAX EXEMPTIONS AND DEDUCTIONS:

  • Section 10AA: Deduction for units in Special Economic Zone 
  • Section 32: Deduction for additional depreciation under and investment allowance under section 32AD towards new plant and machinery made in notified backward areas in the states of Andhra Pradesh, Bihar, Telangana, and West Bengal 
  • Section 33AB: Deduction for tea, coffee and rubber manufacturing companies 
  • Section 33ABA: Deduction towards deposits made towards site restoration fund by companies engaged in extraction or production of petroleum or natural gas or both in India 
  • Section 35:Deduction for expenditure made for scientific research  
  • Section 35AD: Deduction for the capital expenditure incurred by any specified business  
  • Section 35CCC: Deduction for the expenditure incurred on an agriculture extension project   
  • Section 35CCD: Deduction on a skill development project  
  • Deduction under Chapter VI-A in respect to certain incomes, which are allowed under section 80IA, 80IAB, 80IAC, 80IB and so on, except deduction under section 80JJAA and 80M (amendment brought in by Finance Bill 2020) 

Analysis: A few deductions and exemptions have been retracted by the government as the company is already benefitting from the concessional tax rate and to avoid double benefits to the company the necessary condition has been inserted.

NOTE-Set-off of loss and Unabsorbed Depreciation cannot be claimed where such loss or depreciation is attributable to the deductions enlisted above while computing Total Income of the company.
NOTE- While computing Total Income of the company, Depreciation under the provision of section 32 can be claimed but Additional Depreciation under clause (iia) of sub-section (1) of the said section cannot be claimed  

WHEN CAN THE COMPANY AVAIL THE BENEFIT OF SECTION 115BAB? 

The company has to exercise the option on or before the due date of filing income tax returns i.e usually 30th September of the assessment year.

Once the company opts for section 115BAB in a particular financial year, it cannot be withdrawn subsequently. 

WHAT DOES THE SECTION SAY REGARDING TRANSFER PRICING AND RELATED PARTY TRANSACTIONS? 

If there appears to the Assessing Officer that there is a close connection between the Company and any other person, and the course of business between them is so arranged that the business transacted between them produces to the person more than the ordinary profits which might be expected to arise in such business, the Assessing Officer shall, in computing the profits and gains of such business for the purposes of this section, take the number of profits as may be reasonably deemed to have been derived therefrom. 

In case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the number of profits from such transaction shall be determined having regard to arm’s length price.  

Conclusion:

It’s a great incentive for the new manufacturing companies provided by the government.

However, one should make an in-depth study in the light of the deductions and exemptions the company would have to forego in order to avail the benefit of the concessional tax rate. 

Disclaimer: This article doesn’t constitute professional advice. The author does not represent that the said information is correct and complete in all regards. The views contained in this article are personal views of the author and may change depending upon underlying facts and circumstances. Judicial and legal authorities may not subscribe to the views of author and can take different view. Readers of this article are advised to take professional advice before taking any course of action or decision. The author does not assume any responsibility or liability in respect of the information contained in this article or for any decision/ course of action readers may take based on information contained in this article

Understanding the Complex Section 14A of the Income Tax Act, 1961.

Sneha Kejriwal
-
0
Understanding the Complex Section 14A of the Income Tax Act, 1961.

Introduction

Section 14A was inserted by Finance Act, 2001 having a retrospective effect from 01.04.1962. To understand the reason behind the insertion of section 14A, the relevant part of memorandum of Finance Act, 2001 is reproduced herewith:

“Certain incomes are not includible while computing the total income as these are exempt under various provisions of the Act. There have been cases where deductions have been claimed in respect of such exempt income. This in effect means that the tax incentive given by way of exemptions to certain categories of income is being used to reduce also the tax payable on the non-exempt income by debiting the expenses incurred to earn the exempt income against taxable income. This is against the basic principles of taxation whereby only the net income, i.e., gross income minus the expenditure, is taxed. On the same analogy, the exemption is also in respect of the net income. Expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income.”

Section 14A reads as under:

(1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.

(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act.

(3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act

Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.

Scope of section 14A

  1. Agricultural income

One of the common source of exempt income is income earned from agricultural activities which is exempted from taxation u/s. 10(1). According to the section 14A the assessee shall not be allowed to deduct any expenditure incurred to earn agricultural income as it is free from tax in the hands of assessee.

  • Income from partnership firm.

An individual earns income from partnership firm in the form of interest, remuneration and profits. All the components, except the profit earned from partnership firm, is taxable in the hands of the assessee. Therefore, section 14A shall apply only to expenditure incurred in order to earn profit.

There might be a circumstance where the assessee, a partner in a firm, may borrow funds and advance it to the firm. Therefore, the interest expense incurred on the said borrowed fund shall fall within the scope of Section 14A and will not be allowed as expense since the profit earned from the partnership firm, to which funds are advanced, is exempt u/s. 10(2A) in the hands of assessee.

However, according to the judgment of High Court of Bombay in the case of CIT vs. Delite Enterprises [I.T.A. No.: 110 of 2009], it is to be noted that if during the assessment year if partnership firm incurs loss then no disallowance of interest expense can be made u/s. 14A as there is no (tax free) profit for the relevant year.

  • Income from investments

A taxable person may earn dividend income, income from mutual funds, long term capital gain, which are exempt under relevant sections of Income Tax Act, 1961 and which shall attract section 14A disallowance.

In relation to the dividend income earned by the assessee, it is held that section 14A shall apply only to those dividends on which tax in the form of DDT is payable by the dividend paying company u/s. 115-O. As the dividend in the hands of the recipient is exempt, it will attract section 14A.

  • Exceptions

There are various other sources from which an assessee earns exempt income and expenditure on which will be disallowed u/s. 14A. However following are the various circumstances which doesn’t attract section 14A:

  • Expenditure incurred for earning of export income which is exempt u/s 80HHC, cannot be held to be income which does not form part of total income. Such expenses cannot be disallowed u/s14A – CIT v. Kings exports 318 ITR 100 (2009) (Punj. & Har.)
  • Section 14A could not be applied to provisions of Chapter VI-A where deductions are to be made in computing the total income and in no way that can be compared with the exempted income which does not form part of the total income- ACIT v. Tamil Nadu Silk Producers Federation Ltd. [2006] 103 TTJ (Chennai) 716]; ACIT vs. Bank of Madura [2011] 007 ITR (Trib) 139 ITAT [Chennai]
  • Deduction of income derived by a co-operative society u/s 80P is not a case of “exempt income” but of “deduction from income”. Therefore provisions of sec.14A are not applicable in this case ‐ACIT Vs. Kribhco 6 ITR 686 (2010) (ITAT‐Del)
  • Section 14A cannot be applied if the interest free funds available are more than the investments made from which the assessee earns exempt income. As held by Honourable ITAT in case of ACIT vs. Torrent Power Ltd.[I.T.A. No.1668/Ahd/2012,
    “The appellant has shown that it has aggregate interest free funds by way of share capital and reserves amounting to Rs.195.10 crores which is more than the investment in shares and mutual funds amounting to Rs.129.8 crores. Thus, the appellant is having enough interest free funds and, therefore, also the disallowance out of interest expenditure could not be made ..”.
    This is also covered in the judgement of High Court of Gujarat in case of CIT vs. Raghuvir Synthetics Ltd [(2013) 354 ITR 222 (Gujarat)] wherein the AO made disallowance of interest expense claimed u/s. 36(1)(iii) on account of interest free advances made to sister concern. It was held that
    “Factually, it found huge funds were available without any interest liability with the assessee and that there was no evidence to hold that the borrowed money was utilized for the purpose of advance to the sister concerns. All these aspects cumulatively led the Tribunal to hold that the disallowance made only on the ground that advances were given out of the borrowed funds, holding the assessee ineligible for allowance of interest by the Assessing Officer of the sum of Rs. 18.66 lakhs was not sustainable”.

Once the provisions of Section 14A are triggered, w.e.f A.Y 2008-09, the working of disallowance is to be made as per the provisions of Rule 8D. The same is covered in a separate article which can be found at itatorders.in/blog.

Do you need to disallow expense as per Section 14A of Income Tax Act even if you have sufficient interest free funds?

Sneha Kejriwal
-
0
Do you need to disallow expense as per Section 14A of Income Tax Act even if you have sufficient interest free funds?

Judgement of High Court of Gujarat in case of PCIT vs. Sintex Industries Ltd [I.T.A No. 291 of 2017]. Further SLP dismissed by SC.

Facts of the case: In A.Y. 2009-10, the assessee had earned dividend income amounting to Rs. 2.02 crores from the investments made in mutual funds as well as equity shares and had suo moto disallowed expenditure of Rs. 5.10 lakhs in the return of income. During the year under consideration, the assessee was having reserve fund of Rs. 1981.55 crores and made investment of Rs. 144.51 crore. The AO made a disallowance of Rs. 90,97,470/- on account of expenditure incurred to earn exempt income as calculated u/s. 14A Rule 8D and disallowance of Rs. 24,37,500/- towards consultancy charges incurred for foreign exchange gain.

Findings: In this case the Ld CIT(A) confirmed the disallowance of expenditure in respect to interest and administrative expenditure of Rs. 90,97,470/- u/s. 14A and deleted the disallowance of expenditure of Rs. 24,37,500 incurred towards foreign exchange gain. On further appeal, the Honourable Tribunal and High Court of Gujarat deleted the disallowance of Rs. 90,97,470/- and Rs. 24,37,500/- as the assessee was already having its own surplus to the extent of Rs. 1981.55 crores against the investment of Rs. 144.51 crores. In the above judgement of High court it was stated that:

“Considering the aforesaid facts and circumstances, more particularly the fact that the assessee was already having its own surplus fund and that too to the extent of Rs. 1981.55 Crores against which investment was made of Rs. 144.51 Crores, there was no question of making any disallowance of expenditure in respect of interest and administrative expenses under Section 14A of the Act, therefore, there was no question of any estimation of expenditure in respect of interest and administrative expenses of Rs. 24,37,500/- under rule 8D of the Rules. Under the circumstances and in the facts of the case, narrated hereinabove, it cannot be said that the learned Tribunal has committed any error in deleting the disallowance of expenditure of Rs. 90,97,470/- incurred in respect of interest and administrative expenses under Section 14A of the Act. We are in complete agreement with the view taken by the learned Tribunal. At this stage, decision of Division Bench of this Court in the case of Principal Commissioner of Income-tax vs. India Gelatine & Chemicals Limited, reported in [2015] 376 ITR 553 [Gujarat] needs a reference. In the said decision, it is observed and held by the Division Bench of this Court that when the assessee had sufficient interest-free funds out of which concerned investments had been made, disallowance under Section 14A is not justified.”

Therefore, on the observation of the above judgement, it is stated that no disallowance of any expenditure can be made u/s. 14A when the assessee have sufficient interest free funds against the investments made from which exempt income is generated.

The SLP filed by the Department against the above decision was dismissed by Supreme Court in PCIT vs. Sintex Industries Pvt. Ltd. [(2018) 93 taxmann.com 24 (SC)]

Relying on the said judgement, The Honourable Ahmedabad ITAT Bench deleted the addition in case of RG Faith Creation Pvt Ltd vs. DCIT [ITA 2615/AHD/2017] and in case of ACIT vs. Torrent Power Ltd. [I.T.A. No.1668/Ahd/2012].

Conclusions: Where assessee had its surplus fund against which minor investment was made, no question of making any disallowance of expenditure in respect of interest and administrative expenses under section 14A arose and therefore, there was no question of any estimation of expenditure in respect of interest and administrative expenses under rule 8D; SLP filed against said decision dismissed.

RULE 8D of Income Tax Act: Method for determining amount of expenditure in relation to income not includible in total income

Sneha Kejriwal
-
0
RULE 8D of Income Tax Act: Method for determining amount of expenditure in relation to income not includible in total income

What is Rule 8D of Income Tax Act, 1961?

Rule 8D of Income Tax Act reads as follow:

Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with—

(a) the correctness of the claim of expenditure made by the assessee; or

(b) the claim made by the assessee that no expenditure has been incurred,

in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2).

(2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:—

(i) the amount of expenditure directly relating to income which does not form part of total income; and

(ii) an amount equal to one per cent of the annual average of the monthly average of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income :

Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee.

This is an amended provisions applicable now while the estrwhile Rule specifically focussed on disallowance of interest on proportionate basis.

Example

Let us look at an example of calculation of expenditure according to Rule 8D income tax act

During the FY 2016-17, Mr X took a loan of Rs. 10,00,000/- @ 10% p.a. which was utilised for making various investments, from which Mr. X earned dividend income which is exempt from tax.

Monthly closing balances of this investment are as follows:

April- 1,00,000, May- 1,50,000, June-1,50,000, July- 2,00,000, August- 2,10,000, September- 2,40,000, October- 2,50,000, November-2,50,000, December- 2,80,000, January- 3,00,000, February- 3,20,000, March- 3,50,000.

Opening balance as on March 2016 is Rs. 50,000

Calculation of disallowance

ParticularsAmount (in Rs)
Any amount of expenditure which is directly relating to exempt income (10,00,000*10%)1,00,000
Amount equal to 1% of annual average of monthly average of opening and closing balances of value of investment whose income is or shall be exempt – 1% of Rs 2,27,500 (See computation below)

Monthly average of Investment
April-( 50000+100000)/2                                                          1,00,000
May-(100000+150000)/2                                                          1,75,000
June-(150000+150000)/2                                                          1,50,000
July- (150000+200000)/2                                                          1,75,000 August-(200000+210000)/2                                                      2,05,000 September- (210000+240000)/2                                               2,25,000 October- (240000+250000)/2                                                    2,45,000 November-(250000+250000)/2                                                 2,50,000 December-(250000+280000)/2                                                 2,65,000 January-(280000+300000)/2                                                     2,90,000 February-(300000+320000)/2                                                   3,10,000 March-(320000+350000)/2                                                       3,40,000 Total                                                                                     27,30,000 Period                                                                                      12 months
Annual average (2730000/12)                                2,27,500                            		2,275
Total disallowance under Section 14A read with Rule 8D1,02,275

Analysis of section 14A rule 8D

  1. Recording Satisfaction– It is to be noted that as per the clause (2) of the section 14A, AO shall disallow expenditure in relation to the income which does not form part of the total income only after recording dissatisfaction of the correctness of the claim of expenditure made by the assessee in relation to the exempt income. According to the judgement of the High Court of Delhi in the case of PCIT vs. Vedanta Ltd. [2019] [102 taxmann.com 95], referring to the decision of Apex Court in Godrej & Boyce Manufacturing Company Ltd. has held that
    “Rule 8D of income tax act cannot be invoked and applied unless AO records his dissatisfaction regarding the correctness of claim made by assessee in relation to expenditure incurred to earn exempt income.”
    Further, in the judgement of Honourable ITAT [Ahd Bench] in case of Alidhara Textool Engineers P. Ltd vs. DCIT[I.T. A. No. 2738/AHD/2011] for A.Y. 2008-09 dated 04.04.2016, wherein it was held that: “In  our  view,  Rule  8D  comes  into  operation  where  the  Assessing Officer is not satisfied in relation to income which does not form part of  the  total  income  under  this  Act  and  thereafter  if  the  Assessing Officer  is  unable  to  determine  the  amount  of  such  expenditure incurred in relation to the income which does not form part of the total income then he may resort to the method with prescribed in Rule 8D of  the  IT  Rules,  1962.  In  the  case  of  assessee  no  such  satisfaction has  been  recorded by  the  Assessing Officer  about the incorrectness of  the  claim  of  assessee  towards  expenditure  incurred  for  earning exempt  income.”

    Therefore, recording dissatisfaction by the AO is a necessary prerequisite for imposing Rule 8D.

  2. Rule 8D does not have any retrospective application– As per the judgement of Supreme Court in case of Commissioner of Income-tax v. Essar Teleholdings Ltd. (2018) 401 ITR 445 (SC), Rule 8D does not have any retrospective application and it is applicable prospectively from A.Y. 2008-09. As a result, till AY 2008-09, disallowance cannot be made in accordance with Rule 8D but can be done as per the best judgment of the AO in accordance with the section 14A which has application from 1961.
  3. Disallowance cannot exceed exempt income: In the judgement of Honourable ITAT [Ahd Bench] in case of CLP India Pvt Ltd. Vs. DCIT[I.T.A No.: 1163 &1186/AHD/2018] it was held that assessee’s total dividend income is Rs. 50,000/-  so there cannot be disallowance of Rupees more than 50,000/-

    Further, as per the decision of High Court in case of CIT vs. Vision Finstock Ltd [I.T.A. No. 486 of 2017], it was held that “the assessee had earned exempt income of Rs. 55,604/-. As against that, the Assessing Officer had worked out the disallowance of expenditure under section 14A of the Act read with Rule 8D to Rs. 1,02,82,049/-. The Tribunal, while restricting the disallowance to Rs. 55,604/-, relied on the decision of Delhi High Court in case of Joint Investments (P) Ltd vs. CIT reported in 372 ITR 694 holding that disallowance of expenditure in terms of section 14A read with Rule 8D cannot exceed the exempt income itself.”

“LLP Settlement Scheme 2020”- File all pending returns with reduced additional fees- One time benefit for LLPs

CA Richa Agarwal
-
0
“LLP Settlement Scheme 2020”- File all pending returns with reduced additional fees- One time benefit for LLPs

The Ministry of Corporate Affairs, Government of India has introduced the “LLP Settlement Scheme 2020” vide General Circular No. 06/2020 dated 04.03.2020 and modified the same further vide General Circular No. 13/2020 dated 30.03.2020.

What is LLP Settlement Scheme 2020?

The objective of introducing this Scheme is to promote ease of doing business and hence Central Government has decided to give a Onetime relaxation in additional fees to the defaulting LLPs to make good their default by filing pending documents and to serve as a compliant LLP in future.

The New LLP Settlement Scheme is effective from 1st April 2020 and shall continue until 30th September 2020.

LLP Settlement Scheme 2020 Applicability

Any Defaulting LLP is permitted to file belated documents, which are due for filing till 31st August 2020 in accordance with the provisions of this Scheme.

Payment of Fees

As per original LLP Settlement Scheme 2020, the defaulting LLPs may avail of the scheme for filing documents which have not been filed or registered in time on payment of additional fee Rs 10/- per day (instead of Rs.100/- for each day of such delay) maximum upto Rs.5,000 per document for delay in addition to the normal statutory filing fees prescribed under LLP Act and Rules thereunder.

However as per the modified Scheme, The defaulting LLPs may file forms till 30th September,2020, till then NO ADDITIONAL FEES will be charged to file forms.

Immunity from Prosecution

Defaulting LLPs which files pending documents till 30th September 2020 and makes good the default under the scheme will not be subjected to such prosecution.

LLP Forms and Documents Covered

The LLP Settlement Scheme 2020 is applicable for filing the following delayed documents from the LLP 2020 Act:

    1. Form-3  Information with regards to LLP agreement and its changes, if any, made therein.
    2. Form-4 Notice of cessation, appointment, changes in name, address, consent to become a partner or designated partner and designation of a partner or designated partner.
    3. Form-8 Statement of Account and Solvency either annual or interim.
    4. Form-11 Annual Return of Limited Liability Partnership (LLP).
    5. Form-15 Notice for change of place of registered office.
    6. Form-5 Notice for Change of Name.
    7. Form-12 Form for intimating other address for Service of Documents.
    8. Form-22 Notice of intimation of Order of Court/ Tribunal/CLB/ Central Government to the Registrar
    9. Form-31 Application for Compounding of an offence.
    10. Form-23 Application for direction to Limited Liability Partnership (LLP) to change its name to the Registrar.
    11. Form-29 Notice of (A) alteration in the certificate of incorporation or registration; (B) alteration in names and addresses of any of the persons authorized to accept service on behalf of a foreign limited liability partnership (FLLP) (C) alteration in the principal place of business in India of FLLP (D) cessation to have a place of business in India

Also Read:

1. Filing Annual Returns for LLP in Form11

2. Form 15CA and Form 15CB Return Filing

Non-Applicability of LLP Settlement Scheme 2020

If an LLP has made an application for striking-off its name to the Registrar as per the provisions of Rule 37(1), then such LLP cannot avail benefit under this scheme.

Conclusion-
On the conclusion of the Scheme, the Registrar shall take necessary action under the LLP Act, 2008 against the LLPs which have not availed this Scheme and are in default in filing of documents as required under the provisions of LLP Act, 2008 in a timely manner. Hence all defaulting LLPs has this one time opportunity to avoid penalties and reap the maximum benefit of reduced additional fees by availing this Scheme.

Disclaimer: This article doesn’t constitute professional advice. The author does not represent that the said information is correct and complete in all regards. The views contained in this article are personal views of the author and may change depending upon underlying facts and circumstances. Judicial and legal authorities may not subscribe to the views of author and can take different view. Readers of this article are advised to take professional advice before taking any course of action or decision. The author does not assume any responsibility or liability in respect of the information contained in this article or for any decision/ course of action readers may take based on information contained in this article.

Companies Fresh Start Scheme, 2020- One time opportunity for Companies to clear defaults

CA Richa Agarwal
-
0
Companies Fresh Start Scheme, 2020- One time opportunity for Companies to clear defaults

The Ministry of Corporate Affairs has introduced Companies Fresh Start Scheme,2020 (‘CFSS Scheme’) vide circular no. 12/2020 dated March 30, 2020 under Section 460 of the Companies Act, 2013 (“Act”) read with Section 403.This is in furtherance of the Ministry’s Circular No. 11/2020, dated 24th March. 2020 and in order to facilitate the companies registered in India to make a fresh start on a clean slate, this Ministry has decided to take certain alleviative measures for the benefit of all companies. Salient Features of the Scheme is as follows.

ENFORCEMENT- The scheme shall come into force on 1st April, 2020 and shall remain in force till 30th September, 2020 (both days inclusive).

APPLICABILITY- Any ‘defaulting company’ is permitted to file belated documents which were due for filing on any given date in accordance with the provisions of this Scheme.

MANNER OF PAYMENT- Every defaulting company shall be required to pay normal fees as prescribed on the date of filing of each belated document without payment of any additional fees on account of delay.

FORM CFSS 2020-The Form CFSS-2020 is entirely self-declaration-based form to be made electronically.

IMMUNITY- Immunity from the launch of prosecution or proceedings for imposing penalty shall be provided only to the extent such prosecution/proceedings for imposing penalty under the Act pertains to any delay associated with the filings of belated documents. Any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person qua the company or its directors or key managerial personnel would not be covered by such Immunity, meaning not against any substantive violation of law.

IMMUNITY CERTIFICATE- An application for seeking immunity may be filed after documents are filed, taken on record and approved by the the designated Authority (i.e. Registrar of Companies having jurisdiction over the registered office of the company) but maximum within a period of 6 months from the closure of the scheme i.e. maximum by 31st March, 2021. Based on this immunity certificate shall be issued by the concerned ROC.

EFFECT OF IMMUNITY- The designated authority shall withdraw the prosecutions before any courts and proceedings pending before adjudicating authority in respect of which the immunity has been granted by the designated authority.

WITHDRAWAL OF EXISTING APPEAL AND FURNISHING OF PROOF- If defaulting company has filed any appeal against any notice, complaint, order passed by court or by an adjudicating authority, it can file application under this scheme for immunity certificate only after withdrawing such appeal and furnish proof of such withdrawal with the application (CFSS-2020).

SPECIAL CIRCUMSTANCES WITH ORDER OF ADJUDICATING OFFICER WHERE APPEAL COULD NOT BE FILED- Where due to delay of filing any document with the registrar, Order of penalties were imposed by adjudicating officer and no appeal has been filled as on today then:

      • If last date for filing the appeal falls between March 01 to May 31, 2020, additional 120 days shall be allowed for filing the appeal, and
      • During this additional period no prosecution shall be initiated against the company or its officers, insofar as it relates to delay in filing.

EXCLUSIONS FROM THE SCHEME- CFSS 2020 will not apply to the following:

      1. Where action for striking-off has already been initiated by the Designated Authority or STK-2 for strike off of Company with ROC has been filed by the companies;
      2. Companies which have amalgamated;
      3. Companies which has already filed application for obtaining dormant status;
      4. To Vanishing Companies;
      5. Where any increase in authorized capital is involved (Form SH-7) and all charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9);
      6. In the matter of any appeal pending before the court of law and in case of management disputes of the company pending before any court of law or tribunal;
      7. In case any court has ordered conviction in any matter or an order imposing penalty has been passed by an adjudicating authority under the Act and no appeal has been preferred.

FOR INACTIVE COMPANIES- The scheme gives an opportunity to defaulting inactive companies while filling application under Form CFSS-2020,

      • To get their companies declared as Dormant Company under section 455 of the Companies Act, 2013 by filing e-form MSC-1 at a normal fee on said form; or
      • File e-form STK-2 for striking off the name of the company by paying the fee payable on form STK-2.

CONCLUSION-The MCA has earlier introduced Company Settlement Schemes in the year 2010, 2011, 2014, 2018 and now 2020. The Ministry has uploaded the list of 76 “Eligible Forms” in the public domain which waives off additional fees for belated filings which comprises of eforms under the Companies Act 2013, Companies Act 1956 and LLP’s. Once the Scheme is over, the Designated Authority have power to initiate all necessary action against companies who have not availed this scheme and are still in default in filing of required documents as per the provisions. Hence, the current CFSS Scheme is a one-time opportunity to clear all the belated defaults without additional fees.

1...181920...23Page 19 of 23