News Letter

JAYA sHArMA & AssOCIAtes

PrACtCING COMPANY seCretArIes

Issue for the month of July

Our office is presently situated at - Our email address is 2101, 21st Floor, Sai Akashdeep CHSL, jaya@jsa-cs.com, Saibaba Park, Evershine Nagar, jaya.jscs@gmail.com Malad (West), Mumbai – 400 064. Contacts: +91 9819501557 Tele Fax: +91 22 28818135

DIsCLAIMer This News Letter provides general information available at the time of preparation. The News Letter is intended as a news update and Jaya Sharma & Associates neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this News Letter. It is recommended that professional advice be taken based on the specific facts and circumstances. This News Letter does not substitute the need to refer to the original pronouncements.

Legal Updates

Links of important Notification & Circulars:

Authority Dated Notification & Circulars Name of Link MCA (GSR…(E)) July 14, 2016 Companies (Cost records and

Audit) Amendments Rules, 2016 www.mca.gov.in

RBI RBI/2016-2017/16

July 01, 2016 Policy Guidelines on Issuance and Operation of Pre-paid Payment Instruments in India

www.rbi.org.in

SEBI CIR/MRD/DRMNP/65/2016

July 15, 2016 Acceptance of Fixed Deposit Receipts (FDRs) by Clearing Corporations

www.sebi.gov.in

SEBI CIR/CFD/FAC/62/2016

July 05, 2016 Revised Formats for Financial Results and Implementation of Ind-AS by Listed Entities

www.sebi.gov.in

Case Laws: 1. S. 2(42A)/ 45: An agreement to purchase property merely creates a right to seek specific

performance. The asset cannot be considered to be "held" from the date of the agreement so as to constitute long-term capital gains: Bombay High Court in Bindiya H. malkani Vs. CIT decided on July 12, 2016: Gist of the Case: The appellant entered into an agreement on 18th May, 1980 with M/s. Shubhada Prints Pvt. Ltd. for acquiring leasehold rights of immovable property (said land) situated at Majas Village, Jogeshwari (E), Mumbai, for consideration set out therein. The appellant purchaser was required to file a Suit in this Court being Suit No.1077 of 1981 against the vendor Shubhada Prints Pvt. Ltd., inter alia, seeking specific performance of the agreement to assign the leasehold rights in the said land. An earnest money of Rs.25,000/- had been paid at the time of execution of the agreement. During the pendency of the Suit, the parties arrived at Consent Terms on 11th March, 1988 pursuant to which the defendant – vendor agreed to assign the leasehold rights in the said land at a lump sum of Rs.4,50,000/- instead the lower consideration originally payable under the suit agreement. The appellant thereafter sold the said land to one M/s. Associated Estate and Investment Corporation vide agreement dated 29th November, 1988 for a price of Rs.37,70,000/- resulting in capital gain to him. According to the appellant, he was holding the said land since 1980 i.e. from the date of the agreement dated 18th May, 1980 and hence the gain was long term in nature. The Assessing Officer and Tribunal, however, found that the appellant came into possession only pursuant to the Consent Terms and therefore the amount of consideration received on sale by the appellant is to be treated as short term capital gain and he was assessed accordingly.

2. Business expenditure, Corporate Social Responsibility – Retrospective Amendment: ITAT Raipur in ACIT Vs. Jindal Power Limited decided on June 23, 2016 Gist of the Case:

S. 37(1): The amendment in the scheme of Section 37(1), which has been introduced with effect from 1st April 2015, cannot be construed as to disadvantage to the assessee in the period prior to this amendment. This disabling provision, as set out in Explanation 2 to Section 37(1), refers only to such corporate social responsibility expenses as under Section 135 of the Companies Act, 2013, and, as such, it cannot have any application for the period not covered by this statutory provision which itself came into existence in 2013. Explanation 2 to Section 37(1) is, therefore, inherently incapable of retrospective application any further. In any event, as held by Hon’ble Supreme Court’s five judge constitutional bench’s landmark judgment, in the case of CIT Vs Vatika Townships Pvt Ltd [(2014) 367 ITR 466 (SC)], the legal position in this regard has been very succinctly summed up by observing that “Of the various rules guiding how legislation has to be interpreted, one established rule is that unless a contrary intention appears, legislation is presumed not to be intended to have a retrospective operation.

3. TDS deduction, TDS disallowance: ITAT Raipur in R K P Company Vs. ITO decided on June 24, 2016 Gist of the Case: S. 40(a)(ia): When there are conflicting judgements of non-jurisdiction High Courts, the Tribunal is not permitted to choose based on its perception of what the correct law is because it will amount to sitting in judgement over the High Courts’ views. Instead, it has to follow the view which is in favour of the assessee even if it believes that this view is not the correct law. Second proviso to s. 40(a)(ia) inserted by FA 2013 should be treated as retrospectively applicable from 1st April 2005.

4. Matters alien to the area of jurisdiction of the arbitrator have to be adjudicated by the Company Law Board: Company Law Board (CLB) New Delhi in Avigo Pe Investments Limited Vs. Tecpro Engineers Limited decided on March 18, 2016 Gist of the Case: The nature of powers enjoyed by the Company Law Board (Board) is alien to the powers of an arbitrator. Where the petition alleges various acts of oppression and mismanagement which could only be probed by the Board, the same could not fall within the jurisdiction of an arbitrator appointed by the parties. While the scheme of sections 397, 398 and 402 constitute a complete code in itself, yet no arbitrator can possibly give relief to an aggrieved party like the petitioner in terms of sections 402 and 403. In cases filed under sections 397 and 398 seeking reliefs which invite a judgment in rem and some other which invite judgment in personam, it is not permissible to severe one cause of action from the other and disassemble such a petition.

Companies Act, 1956 – Sections 397, 398, 402 and 403 read with section 8 of Arbitration and Conciliation Act, 1996 – Oppression / Mismanagement – Petition for relief against – Matters alien to area of jurisdiction of arbitrator – Have to be adjudicated only by the Company Law Board (Board) - Where the respondent submitted that company petition was a dressed up petition as all disputes arose from share subscription cum shareholders agreement which contained arbitration clause application for reference to arbitration is liable to be dismissed as the matters raised are alien to area of jurisdiction of arbitrator.

NEWS HIGHLIGHTS: 1. CBDT Modifies Format Of Statutory Scrutiny Notice Issued U/s 143(2) Of The Income-Tax

Act: The CBDT has issued a directive dated 11th July 2016 stating that the statutory notice to be issued under section 143(2) of the Income-tax Act has been modified. There will henceforth be three formats of the said notice namely:

• Limited Scrutiny • Complete Scrutiny • Manual Scrutiny

The revised format of 143(2) notice(s) is attached. The CBDT has directed that all scrutiny notices shall henceforth be issued in these revised formats.

2. Declarations Made Under The Income Declaration Scheme 2016 Shall Remain Confidential: Central Government’s Order: The Ministry of Finance has issued an order dated 6th July, 2016 directing, in exercise of the powers conferred by sub-section (2) of section 138 of the Income-tax Act, 1961, that no public servant shall produce before any person or authority any such document or record or any information or computerised data or part thereof as comes into his possession during the discharge of official duties in respect of a valid declaration made under ‘The Income Declaration Scheme, 2016’, contained in Chapter IX of the Finance Act, 2016.