S R Corporate Services

Salaried individuals with taxable income of less than Rs 5 lakh will not have to file income-tax returns in the current assessment year. Individuals with total taxable salary income of less than Rs 5 lakh in FY 2010-11, after allowing all deductions, will be exempt from filing tax returns this year.

 

However, the entire income must accrue from a single employer. That is, if an individual has a taxable salary income of less than Rs 5 lakh but had switched jobs in the middle of 2010-11, then he would have to file tax returns, clubbing income from all the employers.  The exemption will also not be available to individuals who have interest income of more than 10,000 in their savings deposits. Those with interest income of less than 10,000 will need to declare such income to their employer and have tax deducted on it to avail of the exemption.

As per the amendments in the income tax rules, coming into effect from July 1, quoting PAN (Permanent Account Number) will be mandatory for any payment of Rs five lakh or more for purchase of bullion or jewellery.

High-value purchase of jewellery, among valuables, have often been feared to be a much favoured route for circulation of black money and quoting of PAN would help the tax authorities in tracking such transactions.

Recently, RBI had also asked the banks to consider the jewellers and bullion dealers as high-risk customers and to keep an enhanced vigil on their transactions.

The business transactions of jewellers and bullion dealers are highly cash intensive in nature and it is feared that they could be used for flow of black money into the system.

In order to check any possible money laundering, the banking sector regulator in January wrote to banks and financial institutions to treat the accounts of entities dealing in the jewellery and bullion trade as ‘high-risk’.

Point of Taxation rule has become a defining event by the Government towards GST. Below is the analysis on certain aspects of the new rule.

 

Transition rule:

Point of Taxation Rules effective from 1st April 2011 determining point of tax will not apply where-

• Provision of service is complete prior to 1st April 2011: or
• Invoice is issued prior to 1st April 2011.

An option has been provided to the tax payer to continue to pay service tax on receipt of payment where-

• Provision of service is complete on or before 30 June 2011 or
• Invoice is issued on or before 30 June 201

General rule:

General rule to determine point of taxation shall be earlier of-

• Issuance of invoice; or
• Receipt of payment, including advance; or
• The date of completion of service, where invoice is not issued within 14 days of completion of service

The rule determining point of tax in case of “change of rate of tax” has been amended to mean “change in

effective rate of tax”. It is further provided that such change shall also include a change in taxable value under a notification.

• Individuals, proprietary firms or partnership firms providing taxable services of Architect, Interior Decorator, Chartered accountant, cost accountant, company secretary scientific or technical consulting and legal services.

This rule will have overriding effect over the other rules determining point of tax.

Associated enterprises

For services received from associated enterprise located outside India, the point of tax shall be earlier of-

• Payment date; or
• Date of credit in the books of account of service recipient

Cenvat credit rules 2004

Point of Cenvat credit

Cenvat credit will be allowed on “receipt of invoice” as against on “payment of value of taxable service along with service tax”. It is also provided that if payment of value of input service and service tax thereon remains unpaid for 3 months from the Invoice date, the amount of credit initially availed needs to be paid. The amount so paid will be subsequently available as credit upon payment of value of input service and service tax thereon.

Where  service tax is payable under reverse charge, the Cenvat credit will be allowed only upon payment of value of input service and service tax thereon.

As a transition provision, for invoices  issued prior to 1 April 2011, Cenvat credit will continue to be available upon payment of value of input service and service tax thereon.

Various amendments have been made in Cenvat Credit Rules, 2004 vide Union Budget 2011. Definitions of the terms like ‘inputs’, ‘input services’, ‘exempt services’, etc. have been amended. Also, amendments have been made in the methodology prescribed for credit reversal in case an assessee is engaged in both taxable and non taxable activities.

The purpose of this document is to summarize some of the key clarifications issued vide the Circular (Circular No. 943/04/20 1 1-CX dated 29 April 2011 ) and possible action points on the part of the companies pursuant to these clarifications.

Maintaining of Cost records forms the major function of the Company. With the recent amendments, the scope of Cost audit and Cost record maintenance has been widened under the Companies Act.

 

Produced below are the Order issued by the Government. Highlighted Portion of the same gives the insight into the applicability Cost record and cost audit maintenance.

 

 

 

ORDER [F. NO. 52/26/CAB-2010], DATED 2-5-2011

In exercise of the powers conferred by sub-section (1) of section 233B of the Companies Act, 1956 (1 of 1956), the Central Government, being of the opinion that it is necessary to do so, hereby directs that all companies to which any of the following rules apply, and wherein, the

 

aggregate value of net worth as on the last date of the immediately preceding financial year exceeds five crores of rupees; or wherein the aggregate value of the turnover made by the company from sale or supply of all products or activities during the immediately preceding financial year exceeds twenty crores of rupees; or wherein the company’s equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India,

 

shall get its cost accounting records, in respect of each of its financial year commencing on or after the 1st day of April, 2011, audited by a cost auditor who shall be, either a cost accountant or a firm of cost accountants, holding valid certificate of practice under the provisions of Cost and Works Accountants Act, 1959 (23 of 1959).

 

(a)  Cost Accounting Records (Bulk Drugs) Rules, 1974

(b)  Cost Accounting Records (Formulations) Rules, 1988

(c)  Cost Accounting Records (Fertilizers) Rules, 1993

(d)  Cost Accounting Records (Sugar) Rules, 1997

(e)  Cost Accounting Records (Industrial Alcohol) Rules, 1997

(f)  Cost Accounting Records (Electricity Industry) Rules, 2001

(g)  Cost Accounting Records (Petroleum Industry) Rules, 2002

(h)  Cost Accounting Records (Telecommunications) Rules, 2002

 

2. Every company to which these orders apply shall follow the revised procedure for appointment of cost auditor as laid down vide Ministry of Corporate Affairs’ General Circular No. 15/2011 [52/5/CAB-2011], dated 11th April, 2011.

 

3. The audit shall be conducted in such manner as will enable the cost auditor to prepare the report in accordance with the Cost Audit (Report) Rules, 2001 as amended from time to time. The report of the cost auditor shall be forwarded to the Central Government in the prescribed format within the time stipulated under the said Rules.

 

4. These orders do not apply to a company which is a body corporate governed by any special Act.

 

5. All companies covered by these orders and wherein cost audit orders have been issued so far in respect of products/activities covered by the above mentioned rules shall continue to comply with the said orders until these orders become applicable on them.

 

6. If a company contravenes any provisions of these orders, the company and every officer thereof who is in default, including the persons referred to in sub-section (6) of section 209 of the Companies Act, 1956, shall be punishable as provided under sub-section (2) of section 642 read with sub-section (11) of section 233B of the Companies Act, 1956 (1 of 1956).



 

ORDER [F. NO. 52/26/CAB-2010], DATED 3-5-2011

 

In exercise of the powers conferred by sub-section (1) of section 233B of the Companies Act, 1956 (1 of 1956), the Central Government, being of the opinion that it is necessary to do so, hereby directs that all companies to which any of the following rules apply, and

 

wherein the aggregate value of the turnover made by the company from sale or supply of all products or activities during the immediately preceding financial year exceeds hundred crores of rupees; or wherein the company’s equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India,

 

shall get its cost accounting records, in respect of each of its financial year commencing on or after the 1st day of April, 2011, audited by a cost auditor who shall be, either a cost accountant or a firm of cost accountants, holding valid certificate of practice under the provisions of Cost and

 

 

 

Works Accountants Act, 1959 (23 of 1959).

 

(a)  Cost Accounting Records (Cement) Rules, 1997

(b)  Cost Accounting Records (Tyres & Tubes) Rules, 1967

(c)  Cost Accounting Records (Steel Plant) Rules, 1990

(d)  Cost Accounting Records (Steel Tubes and Pipes) Rules, 1984

(e)  Cost Accounting Records (Paper) Rules, 1975

(f)  Cost Accounting Records (Insecticides) Rules, 1993

 

2. Every company to which these orders apply shall follow the revised procedure for appointment of cost auditor as laid down vide Ministry of Corporate Affairs’ General Circular No. 15/2011 [52/5/CAB-2011], dated 11th April, 2011.

 

3. The audit shall be conducted in such manner as will enable the cost auditor to prepare the report in accordance with the Cost Audit (Report) Rules, 2001 as amended from time to time. The report of the cost auditor shall be forwarded to the Central Government in the prescribed format within the time stipulated under the said Rules.

4. These orders do not apply to a company which is a body corporate governed by any special Act.

 

5. All companies covered by these orders and wherein cost audit orders have been issued so far in respect of products/activities covered by the above mentioned rules shall continue to comply with the said orders until these orders become applicable on them.

 

6. If a company contravenes any provisions of these orders, the company and every officer thereof who is in default, including the persons referred to in sub-section (6) of section 209 of the Companies Act, 1956, shall be punishable as provided under sub-section (2) of section 642 read with sub-section (11) of section 233B of the Companies Act, 1956 (1 of 1956).

There are a number of companies, which are inoperative and continue to be registered under the companies Act  , 1956 (the Act). Such companies may be desirous of getting their names strike off from the Register of Companies maintained by Registrar of Companies (ROC) without going through elaborate liquidation procedure. As per section 560 of the Act, ROC may strike off the name of companies on satisfying the conditions therein. As per present practice, a company desirous of getting its name struck off, has to apply to ROC in e-form 61. All pending statutory returns are required to be filed along with e-form 61.In order to give an opportunity for fast track exit by a defunct company for getting its name struck off from the ROC, the Ministry Corporate Affairs (MCA), Government of India (GOI) has on 7 June 2011 decided vide General Circular No.36/2011 to modify the existing route through e-form – 61 and has prescribed the “Fast Track Exit mode Guidelines” (the FTE Guidelines) for defunct companies under section 560 of the Act.

 

Feature of the FTE Guidelines ( Effective from  3 July 2011 )

 

FTE Guidelines are applicable to a defunct company. For the purposes of the FTE Guidelines, any company will be called as “defunct company”, which has nil asset and liability and

 

has not commenced any business activity or operation since incorporation; or

 

is not carrying over any business activity or operation for last 1 year before making application under FTE.

 

Any defunct company which has active status or identified as dormant by the MCA may apply for getting its name struck off from the ROC.

 

The application received by the ROC pursuant to the FTE Guidelines will be processed by ROC and some of the key steps of the process are as under:

 

a) The ROC shall examine the application and if found in order, shall give a notice to the company under section 560(3) of the Act giving time of 30 days stating that unless cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved;

 

b) The name of applicant and date of making the application under the FTE Guidelines shall be displayed on the MCA portal www.mca.gov.in giving time of 30 days for raising objection, if any, by the stakeholders to the concerned ROC;

 

c) In case of company like Non-Banking Financial Company, Collective Investment Management Company which are regulated by other Regulator namely RBI, SEBI, respectively, the ROC, at the end of every week, shall send intimation of such companies availing of the FTE Guidelines during that period to the concerned Regulator and also an intimation in respect of all companies availing of the FTE Guidelines that period to the office of the Income Tax

Department giving time of 30 days for their objection, if any.

 

The FTE Guidelines are not applicable to the following companies:-

i.  listed companies;

 

ii.  companies that have been de-listed due to non-compliance of Listing Agreement or any other statutory Laws;

 

iii. companies registered under section 25 of the Act;

 

iv. vanishing companies i.e. a company, registered under the Act and listed with Stock Exchange which, has failed to file its returns with the ROC and Stock Exchange for a consecutive period of 2 years, and is not maintaining its registered office at the address notified with the ROC or Stock Exchange and none of its Directors are traceable;

v. companies where inspection or investigation is ordered and being carried out or yet to be taken up or where completed prosecutions arising out of such inspection or investigation are pending in the court;

 

vi. companies where order under section 234 of the Act has been issued by the Registrar and reply thereto is pending or where prosecution if any, is pending in the court;

 

vii.  companies against which prosecution for a non-compoundable offence is pending in court;

 

viii. companies accepted public deposits which are either outstanding or the company is in default in repayment of the same;

 

ix. company having secured loan;

 

x. company having management dispute;

 

xi. company in respect of which filing of documents have been stayed by court or Company Law Board (CLB) or Central Government or any other competent authority;

 

xii.  company having dues towards income tax or sales tax or central excise or banks and financial institutions or any other Central Government or State Government Departments or authorities or any local authorities.

 

The FTE Guidelines is an improvement over the previous Easy Exit Scheme (EES) and will provide an opportunity to the defunct companies to exit with minimal compliance.