In recent months, the Growpital Platform has gained attention for its promises of lucrative investment opportunities in the agricultural sector, boasting tax-free assured returns for investors. But behind the allure of guaranteed profits lies a tale of regulatory scrutiny and investor concern. Let’s dive deeper into the intricate details uncovered by SEBI’s investigation and its implications for investors and regulatory compliance.
UNRAVELING THE SCHEME
SEBI’s investigation into Growpital Platform reveals a sophisticated operation facilitated through multiple Limited Liability Partnerships (LLPs). These LLPs, prefixed with the “ZF Project,” act as vehicles for pooling funds from investors. Now, Growpital promises fixed returns to investors based on profit generated from agricultural projects.
THE FOLLOWING INVESTMENT PLANS ARE OFFERED ON GROWPITAL
Name of Plan
Unit Investment
Return on investment (per annum)
Tenure / Lockin period
Leafy Eleven
11,000 /-
11%
1 year
Ever Green Returns
20,000 /-
12%
1 year
Harvest Bloom
2,00,000 /-
14%
1 year
Delving deeper into the documents sourced from the Ministry of Corporate Affairs database, it becomes evident that entities like Yotta Agro Ventures Private Limited and Farm Silo Tech LLP play pivotal roles within this intricate framework. These entities, collectively referred to as “Growpital” in supplementary agreements, serve as conduits for investor funds and oversee investment activities. Through these interwoven entities, Growpital presents itself as a gateway to lucrative investment opportunities in the agricultural sector, enticing investors with the prospect of steady returns.
KEY OBSERVATIONS:
SEBI’s preliminary examination raises several red flags regarding Growpital’s operations. The platform’s structure allows for easy entry and exit of partners, with minimal capital contributions required. The LLPs’ management decisions exert minimal influence over investors despite labelling them as partners.
REGULATORY IMPLICATIONS:
SEBI’s scrutiny suggests that Growpital’s scheme meets the criteria of a Collective Investment Scheme (CIS) under Section 11AA of the SEBI Act without obtaining any certificate of registration from SEBI. SEBI’s order emphasizes securities law violations by Growpital, underscoring the need for further investigation to safeguard investor interests.
ISSUANCE OF AN INTERIM ORDER
In response to its findings, SEBI issues an ad interim ex-parte order against Growpital and associated entities. Moreover, the order encompasses directives to cease CIS operations, refrain from soliciting funds, provide a full inventory of assets, and freeze bank accounts and demat accounts. These measures aim to safeguard investor interests and maintain the integrity of the securities market.
CONCLUSION:
SEBI’s investigation into the Growpital Platform sheds light on the complexities of the alternative investment scheme emphasizing the crucial role of regulatory compliance in safeguarding investor interests. As the investigation unfolds, investors are advised to exercise caution while opting for such alternative investments and stay informed about the developments. SEBI remains vigilant in its efforts to uphold market integrity and protect the interests of all stakeholders involved
The Enforcement Directorate (ED) had set the stage for a high-profile showdown, summoning Bollywood’s elite, including Ranbir Kapoor, Shraddha Kapoor, and other luminaries, to unravel the mystery behind the Mahadev betting scandal. With the Mahadev Satta App at the epicenter of the storm, the spotlight is firmly fixed on the glamorous yet shadowy world of celebrity involvement in online betting.
The Modus Operandi:
Sourabh Chandrakar, a former juice vendor, and his partner Ravi Uppal the Masterminds originating from Bhilai have been operating their illegal operation out of Dubai’s shadows for the last four years.
Headquartered in the UAE, the business has a franchising concept, with affiliates sharing revenues 70:30 ratio. In addition, Dixit Kothari was a crucial link, allegedly he acquired the domain with fake ID and managed the website, and he also had contact with bookies and punters.
The Mahadev Gaming app offers a lucrative opportunity for players to engage in live gambling. This firm, which operates secretly within closed groups on instant messaging networks, is said to generate an astounding Rs. 200 croresper day.
Revealing a web of deception with offenders tempting people with contact numbers placed on websites, particularly through platforms such as WhatsApp. Upon contact, consumers are given two different numbers—one for making deposits and accruing points and another for cashing out.
ED’s Trailblazing Investigation:
Following Chandrakar’s lavish Rs. 250 crore wedding celebration in Ras Al-Khaimah, United Arab Emirates, allowing travel of relatives in luxury planes from Nagpur. This extravagant celebration exposed alleged hawala operations and ties with Pakistan and the UAE, which prompted the ED to investigate. Chandrakar has created a prosperous empire in the UAE with Ravi Uppal, ostentatiously showing off his newfound fortune.
From Glitz to Grit:
Further Investigation revealed a web of 32 individuals including entrepreneurs Saurabh Chandrakar and Ravi Uppal were engaged in a hawala ring worth Rs. 5,000 crore operating in Pakistan and UAE, with connections to Dawood Ibrahim’s network to develop a similar app for Pakistan.
Raids led to the seizure of assets worth Rs. 417 crores from the suspected money laundering activities of Chandrakar and associates through 70 Shell companies and offshore accounts.
Interpol Red Notices Targeted the masterminds, while Investigations were carried out on M/s Rapid Travels, which managed the app’s ticketing and Vikash Chhaparia, the main participant in money laundering.
Dixit Kothari’s arrest followed by Chandrakar and Uppal’s detention in Dubai signify a critical point in the fight against the multi-billion rupee betting scam.
In retaliation, 22 illicit betting applications and websites are banned by the Indian authorities.
Stars in the Spotlight:
Bollywood celebs, including Ranbir Kapoor, Shraddha Kapoor, Boman Irani, Hina Khan, and Kapil Sharma, had been summoned in by the ED owing to their involvement with events thrown by Saurabh Chandrakar.
Indicating a wider network of involvement, the ED broadens its probe to include notable people namely, Mohit and Gaurav Burman of the Dabur Group.
A political quarrel emerges as the Congress and BJP level allegations about Chhattisgarh Chief Minister Bhupesh Baghel’s purported receipt of Rs. 508 crore from Asim Das (The alleged cash courier) sent from UAE.
In a Nutshell:
The Mahadev Betting Scam serves as a cautionary tale about the perils of corruption and greed. Behind the allure of Quick money lies a dark underworld of deceit and exploitation. By illuminating this scandal, Urge is to strive to remain vigilant against the allure of quick riches and to uphold the integrity of India’s legal and regulatory framework.
On 1st February, Finance Minister Nirmala Sitharaman introduced the Interim Budget 2024 in Parliament. An important feature is the deadline for the incorporation of Startup LLP/Company to qualify for the Section 80IAC exemption under the Income Tax Act 1961, extended by an additional year. It means that startup companies established by the year 31st March 2025 will be eligible to avail the exemption u/s 80 IAC.
This extension creates a one-year opportunity for recently formed startups. They can take advantage of the tax relief, potentially fostering additional entrepreneurship and business development within the specified timeframe.
80IAC of the Income Tax Act 1961 is the provision that allows recognized startups to get 100% tax exemption for 3 consecutive financial years out of 10 years of its incorporation. This is, indeed, one of the most important benefit of startup India registration.
CRITERIA FOR AVAILING EXEMPTION U/S 80IAC
The entity should be DPIIT recognized startup
Only a private limited or a limited liability partnership is eligible for tax exemption.
The startup should have been incorporated on or after 1st April 2016 but before 31st March 2025.
Turnover should be less than INR 100 crores in any of the previous financial years.
Tax exemption under Section 80IAC is a significant benefit for startups in India. It helps them to reduce their tax liability and reinvest the savings into their business. However, it is important to note that the approval for tax exemption is discretionary. It is based on the evaluation of the startup’s concept, innovativeness, scalability, and potential for growth and employment generation. Therefore, it is crucial for startups to put together a compelling pitch deck and video that highlights their strengths and potential to get the exemption U/S 80IAC.
India’s IPO market is booming. With about 220+ IPOs in 2023 and 22 IPOs in the first month of 2024 alone, boils down to roughly one debut every single day on the exchanges. Among these, the ones grabbing the most eyeballs are the SME IPOs. The massive listing gains as a result of heavy oversubscription have lured the retail investors to bet big on these small- ticket offerings. This handbook seeks to provide investors with the knowledge and resources they need to make successful SME IPO investments.
Understanding the SME IPO Boom:
The surge of SME IPOs can be linked to various factors:
Dedicated and tailor-made platforms such as BSE SME and NSE EMERGE have facilitated in providing a favorable environment for the small companies to go public.
Increased investor interest and participation have fueled the SME IPOs market.
The overall economic conditions and the recent Bull Run have led many small enterprises to raise funds through the IPO route.
SEBI has eased the IPO norms for SMEs. Due to which such companies can have an accessible pathway for market entry.
Nowadays, we see most of the SME IPOs having a stellar debut. But what about holding it for a longer horizon? Will the buy-and-hold strategy work in SME stocks? Let’s crunch some numbers!
Since the launch of the SME indices in 2012, over one-third of the SME stocks have had negative returns to date. In 2021, for instance, 25% of SME IPOs are in the red, with losses reaching up to 94%. Up to 30% of SMEs that were listed in 2022 have seen their returns to date decline. In 2023, that figure is twenty-four percent.
“So, dear IPO Frenzies, not everything that glitters is gold. Don’t get lured by the returns and always have a look at the other side of the coin. Don’t let the FOMO (fear of missing out) of making quick money overrule your mind.” Below mentioned are a few tips which an investor may consider 🙂
Things to keep in mind by the investors before applying in SME IPOs:
Perform Due Diligence: Always check the promoter’s background (They must not be engaged in any kind of corporate wrongdoings)
Analyse Financials: Have a look at the financials of the company and its future growth prospects before applying for any IPO
Assess Liquidity: It is important for investors to be aware that in smaller offerings, if they are allotted shares, there may be liquidity problems that prevent them from selling their shares right away after listing
Assess Market Conditions: Consider the prevailing market sentiment and economic conditions. Assess whether the market environment is conducive to IPO investments
Beware of Promoter Offloading: Be cautious if promoters are offloading their entire stake, as it may signal lack of confidence in the company’s future.
Grey Market Caution: The IPO grey market provides unofficial indications of listing prices and can be volatile. However, investors should not base their investment decisions solely on grey market prices
Evaluate Valuations: Investors should also examine the company’s valuations. The offer price may be undervalued or overvalued depending on the company’s sector and its financial metrics.
Study Competitor Performance: Analyse the performance of the company’s competitors to gauge its standing within the industry.
With careful analysis and strategic planning, SME IPO investments might prove to be small but mighty chances for investors to diversify their portfolios and attain financial prosperity.
Prime Minister Narendra Modi launched the ambitious Make in India campaign in 2014, envisioning the transformation of the country into a global manufacturing powerhouse. This initiative aims to boost employment, foster innovation, enhance skill development, and propel overall economic growth by supporting domestic manufacturing and output.
To encourage the ‘Make in India’ initiative, the Government issued the Public Procurement (Preference to Make in India) [PPP-MII] Order 2017, under the Department for Promotion of Industry and Internal Trade (DPIIT) Order No.P-45021/2/2017-B.E.-II dated 15.06.2017.
Here is a step-by-step guide on how to apply for the Make in India Certificate:
Eligibility Criteria:
You must be an Indian or foreign company with manufacturing or service operations based in India.
The products must undergo a minimum of 20% value addition in India.
Class-I Local Supplier: A supplier or service provider with local content equal to or more than 50%.
Class-II Local Supplier: A supplier or service provider with local content more than 20% but less than 50%.
(Note: Only ‘Class-I local supplier’ and ‘Class-II local supplier’ are eligible to bid for procurement with an estimated value of purchases less than Rs. 200 crore.)
Documents Required:
Company registration and incorporation documents (GST Registration Certificate, Certificate of Incorporation).
GeM Bid Document.
List of products manufactured in India, along with the percentage of local value addition.
Raw Material and Service Cost break up.
Details and address of your manufacturing facilities in India.
Purchase Bill of machines, tools, and equipment used.
Purchase bill from the supplier.
By adhering to these steps and providing the necessary documents, companies, across all industry sectors can obtain the Make in India Certificate, facilitating their participation in government procurement processes and contributing to the vision of a self-reliant and globally competitive India.
In a world where business dynamics are continuously changing, recent amendments to Section 43B of the Income Tax Act are sending shock waves through the channels of trading.
Picture this: As a business owner relying on micro and small enterprises for crucial supplies, you’re facing a ticking time bomb with delayed payments threatening to dent your pocket.
Double-Trouble Alert!
Until recently, enterprises were able to breathe easily, claiming deductions even if payments to MSMEs were paid slightly after the due date but before the filing deadline. Not anymore! The recent amendment in section 43B is here to disrupt the game.
Now, with the new amendment of section 43B(h) any delayed payment to micro or small enterprises beyond the due date under the MSME Act means your deduction is deferred until the actual payment is made. Yes, even if it’s just one day after the 45-day window! (in case of agreement else 15-day window) This shift aims to instill discipline in timely payments but could spell double trouble for your cash flows and working capital.
Time to Act!
As a business, navigating this change is crucial. Here’s your survival guide:
Obtain MSME registration details from supplies soon!
Map out payment due dates and set those payment reminders.
Boost liquidity to ensure you meet those deadlines.
Negotiate optimal payment terms in new MSME contracts.
But wait, here’s the kicker:
Conclusion: Prioritize Now or Pay Later!
The key to thriving in this new tax landscape lies in your ability to prioritize timely payments to MSMEs. It’s not just about compliance part but it’s about safeguarding your cash flows and avoiding unnecessary interest charges. By embracing robust payment governance and strategic planning, your business can seamlessly adapt to this tax law change.
On January 31, The Reserve Bank of India (RBI) via its press release note, ordered Paytm Payments Bank (herein thereafter referred to as “the bank”), a wholly-owned subsidiary of fintech major Paytm, to stop accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags and more after February 29 upon persistent non-compliances and continued material supervisory concerns in the bank. Following this news, the Paytm stock fell around 20% on 1st Feb. thus hitting a lower circuit on the stock exchanges.
Let’s take a deep dive into what happened and the previous instances of RBI’s actions against the Paytm Payments Bank: The Central Bank has taken this punitive step under Section 35A of the Banking Regulation Act, 1949. Through this decision, RBI aims to curb certain irregularities and continuous non-compliance by the bank. A top executive of the bank said that the recent move by the central bank will have the maximum impact on the merchant payments given Paytm’s large network of merchants as they would have to shift to other players for their QR code, Point of Sales (POS) machines, sound box, and other requirements. However, this is not the first time where an action has been initiated against the bank by RBI. There are several other instances in the past. Let’s take a quick look at the same: • June 2018: RBI, following an audit, ordered the bank to stop onboarding new customers due to its issues regarding adherence to KYC norms. However, the restriction was later on revoked in January 2019. • October 2021: RBI imposed a huge fine of ₹1 Crore due to the bank’s non-compliance of laws pertaining to payments and settlements. • March 2022: RBI again prohibited the bank from onboarding new customers owing to “certain material supervisory concerns observed in the bank”. • October 2023: The Reserve Bank imposed a fine of ₹5.39 crores for non-compliance with its directions.
What next for the bank’s customers? Generally, when news such as “Bank restricted to carry on its operations” or “Bank shutting down” hits the market, there is a panic among its customers to withdraw their money from it as they fear of losing their money. However, in this case, the customers need not worry much as the RBI via its Press Release: 2023-2024/1774 has clarified that though the bank cannot accept deposits or indulge in credit transactions, the customers are permitted to withdraw or utilize their balance amount without any restrictions.
To address this issue, let us first understand an interplay of Sec 148,148A and 149(1)(b) and the relevant extracts are re-produced below:
Section 148 of the Act- income escaping assessment
Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within 15 [a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee], a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice
On perusal of the above section, it can be seen that the thrust is on the words “income escaping assessment”
Section 148A of the Act
“148A. Conducting inquiry providing opportunity before issue of notice under section 148.- The Assessing Officer shall, before issuing any notice under section 148 –
conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b).
ANALYSIS
The law requires an order to be passed under section 148A(d) of the Act by
conducting an enquiry in the manner provided under section 148A of the Act and
satisfaction to be arrived at on the basis of material available on record that income chargeable to tax has escaped assessment for the relevant assessment year.
But what does ‘material available on record’ mean?
The expression ‘material available on record’, has been consciously used by the legislature to put a fetter on the exercise of power in the manner that an order under section 148A of the Act deciding to issue notice under section 148 of the Act can be based only on the basis of material available on record.
Therefore, the decision in the enquiry as contemplated under section 148A of the Act needs to be based on material available on record. The words ‘material available on record’, in its just, fair and logical interpretation would only mean a tangible material and cannot be interpreted to mean remote likelihood of availability of material, it being taxing statute, requiring strict construction.
In the case of Abdul Masjeed v Income Tax Officer [High Court Of Rajasthan] (447 ITR 698) dated 29.06.2022, it was held that –
“[Para 22] Notice is proposed to be issued under section 148 of the Act after three years have elapsed from the end of the relevant assessment year that there should exist material available on record to reach to conclusion that some income chargeable to tax has escaped assessment, but the amount should be more than Rs. 50,00,000/-. Only on the basis that the cash deposits of Rs. 19,39,000/-chargeable to tax have escaped assessment, without anything more, the authority was not justified in jumping to the conclusion that the assessee may have more bank accounts. If such an interpretation is placed on the provision of section 148A(d) of the Act with reference to expression ‘material available on record’, then in that case, it will open flood gate and even without availability of any material, the authority would be initiating proceedings under section 148 of the Act, which will completely frustrate the object of incorporation of section 148A in the Act. It is well settled principle of interpretation that the taxing statute is required to be construed strictly”
But when can the proceedings be reopened after three years?
So, if this exercise is under taken beyond a period of three years with reference to the concerned assessment year, the proceedings under section 148 of the Act could be initiated only when the total amount of the alleged income represented in the form of asset which is said to have escaped assessment is more than Rs.50 lakhs otherwise such exercise may not lead to proceedings under section 148A of the Act because of statutory impediment under section 149 sub-section 1 clause (b) of the Act.
It is relevant to refer to the provision contained in section 149(1)(b) of theAct, which is reproduced herein as below:—
Section 149(1)(b) of the Act
“149. Time Limit for notice.-(1) No notice under section 148 shall be issued for the relevant assessment year,-
** ** **
if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of-
an asset;
expenditure in respect of a transaction or in relation to an event or occasion; or
an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more.”
What is the difference between “income” and “income chargeable to tax”?
The provisions which deal with computation of business income make it abundantly clear that definition of expression ‘income‘ and ‘income chargeable to tax’ are at variance to each other.
The expression ‘income’ is inclusively defined under section 2(24) whereas ‘income chargeable to tax’ obviously denotes an amount which is less than ‘income’. The ‘income chargeable to tax’ is arrived at after deducting the permissible deductions under IT Act from ‘income’. As such quantum of ‘income’ is invariably more than the income chargeable to tax. Infact, even in common parlance, the words Sales or Turnover and income are totally different.
Example-
MR. A has sold a land for Rs. 55 lakhs in AY 2019-20, with an indexed cost of acquisition of Rs.45 lakhs, so the capital gain chargeable to tax arising out of such sale is Rs.10 lakhs. So, can the said case be re-opened after issuing notice u/s 148 after 31.3.2023 on basis of information for sale?
Answer- In our opinion, the answer is NO!! This is because the amount of income chargeable to tax is Rs.10 lakhs and not the entire sales consideration of Rs.55 lakhs, and if the assesse escapes such gains assessment than section 148A r.w.s 149(1)(b)will not be attracted as the section says that the income chargeable to tax which has escaped assessment should be equal to or more than Rs.50 lakhs , which in this case is Rs.10 lakhs and not Rs.55 lakhs . So such transaction by Mr.A falls outside the purview of the aforesaid sections.
In the case of Nitin Nema v. Principal Chief Commissioner of Income-tax[MP HC] ( 458 ITR 690 ) dated 16.08.2023 it was held that:
“…it may not be out of place to mention that had the revenue arrived at the correct figure of income chargeable to tax instead of the gross receipts/consideration, the possibility of the amount of Rs. 72.05 lakhs coming down to a figure below Rs. 50 lakhs cannot be ruled out. From the aforesaid discussion what comes out loud and clear is that the revenue has failed to understand the fundamental difference between sale consideration on one hand and income chargeable to tax on the other. The revenue despite being assisted by thousands of experts in the field of finance and taxation, has committed such elementary mistake leading to harassment to the assessee who has been compelled to file the present avoidable piece of litigation. More so, this Court has been compelled to decide this frivolous matter wasting its precious time and energy which could have been utilized in more pressing matters. Thus, the revenue deserves to be saddled with exemplary cost and correspondingly the petitioner is entitled to compensatory cost.”
Further in the case of Sanath Kumar Murali v. Income-tax Officer [KARNATAKA HC] (455 ITR 370) dated 24.05.2023 it was held that
“The contention of the revenue that under section 149 what is required to be taken note of, is the ‘income that has escaped assessment’ being the entirety of sale consideration of Rs. 55.77 lakhs cannot be accepted, in light of the express words in the statutory provision ‘……….income chargeable to tax…… which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more’. It cannot be stated that since the stage at which the notice is issued is at a premature stage, the entirety of consideration of Rs.55.77 lakhs ought to be taken note of. A plain reading of section 48 would provide that the entirety of sale consideration does not constitute ‘income’. The memorandum explaining the provisions of Finance Act,2021 does not in any way lead to giving a different interpretation to the words, ‘income chargeable to tax’. The words used under section 149 for the purpose of extended time limit is to be interpreted in terms of the plain wordings of section 149 and cannot be construed differently while relying on any executive instruction.[ para 19]”
CONCLUSION
So, based on the detailed explanation of the above sections and case laws, it can be said that a sale transaction under co-ownership amounting to Rs. 90 lakhs would give rise to a sales consideration of Rs. 45 lakhs to each assesse and it is expected that the Assessing Officer ought to apply his mind on basis of preliminary enquiries and if it comes to his knowledge that the income chargeable to tax escaping assessment is less than 50 lakhs, the re-opening proceedings should be dropped. Even if the sale consideration comes to more than Rs. 50 lakhs as per assessee’s own share of co-ownership, and if the assessee is able to demonstrate in response to notice u/s 148A(b) that after deducting the indexed cost of acquisition or cost of improvement, the resulting capital gain is less than 50 lakhs and three years have lapsed from the end of the assessment year, the re-assessment proceedings is liable to be dropped.
Crafting an interim budget with elections in sight, FM Nirmala Sitharaman unleashed a slew of populist measures. As PM Modi seeks renewal, the government refrained from major changes, focusing instead on agriculture, infrastructure, social schemes, vulnerable communities, entrepreneurship and skilling to take its report card to the polls.
The budget retains income tax slab rates, extends startups’ tax breaks, upgrades 40,000 railway bogies under Vande Bharat, boosts R&D via interest-free loans, and provides 300 free electricity units monthly to 1 crore households through solar rooftops. It claims lifting 25 crore people from poverty.
On education, 7 new IITs and 16 IIITs have been established. To boost infrastructure, tourism projects are planned for islands including Lakshadweep.
Moreover, the budget highlights schemes giving rural homes and MUDRA loans to women entrepreneurs. It claims increased female enrolment in higher education and workforce participation.
While fiscal deficit is pegged at 5.8%, sustainability remains key. An India-Middle East-Europe economic corridor has been proposed to gateway trade.
Hoping to ride back to power, Modi has used the budget to highlight his record on governance and implement strategies to win over India’s sizable youth and countryside community.
Some Key Highlights are as follows:
Free ration eliminates worries about food for 80 crore people
Eligibility criteria for applicants’ incorporation for section 80-IAC Tax Exemption has been extended to one more year to 31 March 2025. Therefore, companies that have been formed in the next one year can apply for a tax break of three years under Section 80-IAC.
Direct Benefit Transfer of Rs 34 lakh crore through PM Jan Dhan Account has resulted in Rs 2.7 lakh crore savings for the government.
78 lakh street vendors have benefited from PM Swanidhi.
11.8 crore farmers are given direct support through PM Kisan. 4 crore farmers are supported through insurance.
30 crore Mudra Yojana Loans have been provided to women entrepreneurs. Governance, Development, and Performance are the new GDP.
Skill India Mission has trained 1.4 crore youth and retrained and up-skilled 54 lakh youth and established 3000 new ITIs.
The country’s capital spending for 2024-25 has been raised 11 percent to ₹11.11 lakh crore, or 3.4 percent of GDP.
The rural social landscape is transforming with 83 lakh SHGs, empowering nearly 1 crore women to become ‘Lakhpati Didis’.
The aviation sector has experienced significant growth, with the number of airports doubling to 149.
Withdrawing direct tax demands: Up to ₹25,000 for the period up to FY 2009-10 and Up to ₹10,000 for FYs 2010-11 to 2014-15.
FDI inflows stood at $596 billion, twice more than 2014-15.
PM Awas Yojana (Grameen): Despite COVID challenges, close to achieving 3 crore house target.
PM SVANIDHI has provided credit assistance to 78 lakh street vendors, from that total, 2.3 lakh have received credit for the third time.
PM Mudra Yojana has sanctioned 43 crore loans aggregating to Rs 22.5 lakh crore for the entrepreneurial aspirations of our youth.
The country received its highest-ever medal tally in the Asian Games and Asian Para Games in 2023.
Chess prodigy and our No. 1 ranked player Praggnanandhaa put up a stiff fight against world champion Magnus Carlsen in 2023, today, India has over 80 chess grandmasters compared to little over 20 in 2010.
Healthcare cover under the Ayushman Bharat Scheme will be extended to all Asha workers, all Anganwadi workers, and helpers.
Free cervical Cancer vaccines for girls from 9-14 years.
Application of Nano DAP on various crops will be expanded in all agro-climatic zones, similar to nano-urea.
GIFT IFSC and Unified Regulatory Authority IFSCA are creating a robust gateway for global capital and financial resources.
Implementation of Pradhan Mantri Matsya Sampada Yojana (PMMSY) will be stepped up to enhance aquaculture productivity from existing 3 to 5 tonnes per hectare, double exports to 1 lakh crore, and generate 55 lakh employment opportunities in the future.
To promote timely payments to micro and small enterprises, payments made to such enterprises have been included within the ambit of section 43B of the Act vide FA 2023. A new clause (h) has been inserted in section 43B of the Act to provide that any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006 shall be allowed as deduction only on actual payment. However, it has also been provided that the proviso to section 43B of the Act shall not apply to such payments.
Section 15 of the MSMED Act mandates payments to micro and small enterprises within the time as per the written agreement, which cannot be more than 45 days. If there is no such written agreement, the section mandates that the payment shall be made within 15 days. Thus, this amendment to section 43B of the Act allows the payment as a deduction only on a payment basis. It can be allowed on an accrual basis only if the payment is within the time mandated under section 15 of the MSMED Act.
Frequently Asked Questions (FAQs) on the amendment of Section 43B to get more clarity on the practical applicability of this amendment:
Q-1: From which Financial Year this amendment is applicable?
A-1. This amendment is made applicable from AY 2024-25 i.e. FY 2023-24.
Q-2: Which entities can be categorised as MSMEs?
A-2: Entity can be categorised as MSME – Micro, Small& Medium Enterprises
Particular
Micro
Small
Medium
Investment in Plant & Machinery or equipment
Upto Rs.1.00 Crores
Upto Rs. 10.00 Crores
Upto Rs. 50.00 Crores
AND
Turnover (excluding export turnover
Upto Rs.5.00 Crores
UptoRs. 50.00 Crores
Upto Rs. 250.00 Crores
Note that this amendment applies to only Small and Micro Enterprises and does not apply to Medium Enterprises.
Q-3: Whether this amendment can be made applicable for an amount outstanding to micro and small enterprise as on 31/03/2023?
A-3. This amendment is made applicable from AY 2024-25 i.e. FY 2023-24. Hence, this amendment is not applicable for an amount outstanding to micro and small enterprises as of 31/03/2023. It will apply to the transactions from 1st April 2024.
Q-4: To attract the disallowance u/s 43B(h), is it mandatory that supplier should have registration under the MSMED Act?
A-4:From the combined reading of section 8 and section 2(n) of the MSMED Act, 2006, it casts responsibility on MSME units to file a memorandum with the notified Authorities. However, that does not mean that Micro / Small Enterprise, which have not obtained Udyam Registration/filed memorandum are not be considered as Micro / Small Enterprise Creditor for Section 43B(h).An Enterprise, which is not registeredunder MSME but has merely furnished the Declaration in writing clarifying their Type of Enterprise viz. “Micro / Small” are required to be considered as such for all purposes of Section 43B(h) as Micro / Small Enterprise.
Reference is invited to the case below
Case Name: M/s Ramky Infrastructure Private Limited Vs Micro And Small Enterprises Facilitation Council & ANR (Delhi High Court) Appeal Number: W.P.(C) 5004/2017 & CM No. 21615/2017 Date of Judgement/Order: 04.07.18
However, this is a subjective issue and for the purpose of interpretation in Income Tax, the client may take a decision based on professional advice.
Q-5: How to verify whether a supplier is registered under the MSMED act or not?
A-5.: After the amendment in section 43B(h) in Budget 2023, many suppliers have started to include their MSME registration numbers on their invoices. Through the MSME Portal, one can verify MSME registration and the type of enterprise (Micro/ Small/ Medium) using the registration number. By this way, one can find that whether supplier is registered under MSMED act or not.
Q-6: What if a supplier has not intimated his registration under MSME in any manner to buyer?
A-6.: It is the responsibility of the supplier to intimate its registration to the buyer. If in any case, the supplier has not in any manner intimated his MSME registration, then in the absence of availability of information, no disallowance can be made under section 43B(h).
Q-7: Whether section 43B(h) is applicable for dues outstanding to traders having MSME registration?
A-7: As per section 2(e) of MSMED act, 2006 – “enterprise” means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951) or engaged in providing or rendering of any service or services. Hence, the definition of enterprise does not include traders.
The Ministry of Micro, Small and Medium Enterprises vide Office Memorandum (OM) No. 5/2(2)/2021-E/P & G/Policy dated July 2, 2021, has allowed Udyam registration for retail and wholesale trade. However, benefits to Retail and Wholesale trade MSMEs are restricted to Priority Sector Lending only. Hence, other benefits available under the MSMED act do not apply to traders. Resultantly benefit of section 15 of the MSMED act is not available to traders and hence 43B(h) cannot be made applicable to dues outstanding to traders.
It is advisable to yearly examine the classification of creditors.
Q-8: If a supplier is engaged in both i.e. trading as well as manufacturing/services, in that situation whether section 43B(h) apply for dues outstanding to that supplier?
A-8.: In such a situation, section 43B(h) can be made applicable for dues outstanding to such suppliers.
Q-9: Can disallowance be attracted under section 43B(h) for dues outstanding in relation to capital expenditure?
A-9.: Section 43B reads as – “Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of……” It is clear from above that 43B can be made applicable only to those deductions which is otherwise available under the Income Tax Act. Capital expenditure is not an allowable expense under the Income Tax Act. Hence, no disallowance will be attracted under section 43B(h) for dues outstanding to capital expenditure.
Q-10: How year-end provisions will be dealt with for disallowance under 43B(h)?
A-10.: As mentioned above, as per section 15 and section 2(b) of MSMED Act, 2006 payment must be made within 15/45 days from the actual delivery of goods or services. Hence, for any provision made for which actual delivery of goods or services does not take place till the end of the year, no disallowance can be made under section 43B(h).
Q-11: what if the buyer makes payment to the supplier after 15/45 days, but before the end of the financial year?
A-11.: In such a situation, a deduction can be claimed in a same financial year as payment is made in the same year.
Q-12: What if the buyer makes payment to the supplier after 15/45 days, but before filing the return of income for that financial year?
A-12.: As per the amendment made in the first proviso to section 43B, the benefit of the first proviso will not be available for due to micro and small enterprises, Hence, though payment is made before filing a return of income, the deduction can only be claimed in the year in which actual payment is made and not in the year of accrual.
Q-13: Disallowance under 43B(h) can be attracted for assessee opting presumptive taxation i.e., 44AD/44ADA/44AE etc.?
A-13: Section 43B does not apply to the assessee opting for presumptive taxation. Hence, no disallowance can be made in such cases.
Q-14: Chargeability of interest on delayed payments to MSME entities:
A-14: In case of failure to pay within the time limit specified in section 15 of the MSME Act, Section 16 charges liability to pay compound interest with monthly rests (i.e. interest will be calculated on the closing balance of the previous month) to the supplier @ Three times of bank rate notified by the Reserve Bank for the period of delay. The amount of interest payable or paid by the buyer shall not be allowed as a deduction under the Income Tax Act, 1961 as per provisions of section 23 of the MSME Act, 2006.
Q-15: Goods reaches late than how to compute the number of days?
A-15: Let us understand the question with the help of an illustration: X Dealt with an MSME where he received an invoice dated 16 March 2024 with respect to the supply of goods delivered on the same day. E having an issue with regards to the quality of goods supplied, communicated the same to the MSME vendor on 18 March 2024. Both the parties concluded with regards to the dispute on 30 April 2024 and accordingly E made a payment on 31 May 2024.
In this scenario, as a dispute with regards to the invoice was communicated within 15 days of the date of delivery therefore time limit under section 15 of the MSMED Act 2006 is applicable from the date on which dispute is resolved. And accordingly as the payment is made within 45 days from the date on which the dispute was resolved, E will be eligible for deduction of the said payment in the financial year 2023-24 when the expenses accrued.
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