This Article has been posted by CA PRASHANT DOSHI. He can be reached at below mention email id:
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TDS Rate for A.Y 2013-14
This Article has been posted by CA PRASHANT DOSHI. He can be reached at below mention email id:
prashantdoshi22@gmail.com
Second Quarter Review of Monetary Policy 2012-13
| "First of all, on behalf of the Reserve Bank, I want to welcome you all to this Second Quarter Review of Monetary Policy for 2012-13. 2. A short while ago, we put out the Second Quarter Review. Based on an assessment of the current macroeconomic situation, we have decided to:
4. Consequently, the reverse repo rate under the liquidity adjustment facility (LAF), determined with a spread of 100 basis points below the repo rate, will continue at 7.0 per cent, and the marginal standing facility (MSF) rate, determined with a spread of 100 bps above the repo rate, at 9.0 per cent. |
RBI Cuts CRR by 25 bps to 4.25%
Circular 715 Section 194C-Dated 08-08-1995
Payments to munshis in bidi industry - In the bidi manufacturing
industry, the provisions of section 194C would apply in respect of payments
made to munshis. By the very nature of the functions performed by the munshis,
there is an implied contract between the manufacturer and the munshis and
consequently the munshis are contractors even though there is no written
contract or agreement.—Circular : No. 433 [F.No.
275/30/82-IT(B)], dated 25-9-1985.
The
deductions under section 194C to be made from the payments to munshis need not
include payments to such home workers as are employed through the medium of
agency such as munshis but the workers bring bidi to the factory for quality
check and for getting their payments.—Circular :
No. 487 [F.No. 275/34/86-IT(B)], dated 8-6-1987.
Works executed under NREP and RLEGP - The provisions of section
194C are not attracted in the case of payments made in respect of works
executed under the National Rural Employment Programme (NREP) and Rural
Landless Employment Guarantee Programme (RLEGP)—Circular:
No. 502 [F. No. 385/49/86-IT(B)], dated 27-1-1988.
Payments to RTCs - Section 194C can be applied
qua payments made by a State Road Transport Corporation to private bus
owners, from whom buses are hired for plying on specified routes.—Circular : No. 558, dated 28-3-1990.
Guidelines pursuant to Supreme Court decision - In view of the Supreme
Court decision in Associated Cement Co. Ltd. v. CIT [1993] 201
ITR 435, the CBDT has issued the following guidelines in regard to the
applicability of the provisions of section 194C :—
(i) The provisions of
section 194C shall apply to all types of contracts for carrying out any work
including, transport contracts, service contracts, advertisement contracts,
broadcasting contracts, telecasting contracts, labour contracts, material
contracts and works contracts.
(ii) No deduction at
source under section 194C shall be required to be made in the consideration for
the contract does not exceed the prescribed amount which at present is Rs.
10,000.
(iii) The provisions of
section 194C would not apply in relation to payments made for hiring or renting
of equipments, etc.
(iv) The provisions of
section 194C would not apply in relation to payments made to banks for
discounting bills collecting/receiving payments through cheques/drafts, opening
and negotiating Letters of Credit and transactions in negotiable instruments.
(v) Service contracts
would be covered by the provisions of this section since service means doing
any work as explained above.
(vi) The provisions of
this section will not cover contracts for sale of goods:
(a) Since contracts
for the construction, repair, renovation or alteration of buildings or dams or
laying of roads or airfields or railway lines or erection or installation of
plant and machinery are in the nature of contracts for work and labour,
income-tax will have to be deducted from payments made in respect of such
contracts. Similarly, contracts granted for processing of goods supplied by
Government or any other specified person, where the ownership of such goods
remains at all times with the Government or such person, will also fall within
the purview of this section. The same position will obtain in respect of
contracts for fabrication of any article or thing where materials are supplied
by the Government or any other specified person and the fabrication work is
done by a contractor.
(b) Where, however,
the contractor, undertakes to supply any article or thing fabricated according
to the specifications given by Government or any other specified person and the
property in such article or thing passes to the Government or such person only
after such article or thing is delivered, the contract will be a contract for
sale and as such outside the purview of this section.
(c) In State of
Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC
474, the Supreme Court observed that where the principal objective of work
undertaken by the payee of the price is not the transfer of a chattel qua
chattel, contract is of work and labour. The test is whether or not the work
and labour bestowed end in anything that can properly become the subject of
sale; neither the ownership of the materials nor the value of skill and labour
as compared with the value of the materials is conclusive although such matters
may be taken into consideration in determining, in the circumstances of a
particular case, whether the contract is, in substance, one of work and labour
or one for the sale of a chattel. A building contract or a contract under which
a movable is fixed to another chattel or on the land, where the intention
plainly is not to sell the article but to improve the land or the chattel and
the consideration is not for the transfer of the chattel, but for the labour
and work done and the material furnished, the contract will be one of work and
labour. In case of doubt whether a particular contract is a contract for work
and labour or for sale, the matter should be decided in the light of the
principles laid down by the Supreme Court in the above-mentioned case.
(vii) The provisions of
this section would apply in relation to payments made to persons who arrange
advertisement, broadcasting, telecasting, etc.
(viii) The
provisions are wide enough to cover not only written contracts but also oral
contracts.
(ix) Where the total
payment under the contract is likely to exceed Rs. 10,000 (now Rs. 20,000) for
the entire period during which the contract will remain in force, income-tax
will have to be deducted at source. In a case where, at the time when the
contract was entered into, it was expected that the total payment thereunder
would not exceed Rs. 10,000 but later on it is found that the payment exceeds
that amount, deduction should be made in respect of earlier payments as well.
(x) The percentage
deduction prescribed in law is with reference to the amount of payment and not
income comprised in the payment. The person responsible for making payment,
therefore, is not required to estimate the income comprised in the payment.
(xi) In a case where
advance payments are made during the execution of a contract and such payments
are to be adjusted at the time of final settlement of accounts, tax will have
to be deducted at the time of making advance payments if the total payment is
likely to exceed Rs. 10,000.
(xii) Where any
contractor is the recipient of any amount under a contract but the income of
the recipient is not subject to income-tax, such contractor may obtain a
certificate from his Assessing Officer under section 194C(4) for receiving
payment without deduction of tax at source.
(xiii) Every
contractor, other than an individual or a HUF, who is responsible for paying
any sum to any sub-contractor (who is resident in India), in pursuance of a
contract with such sub-contractor for carrying out or for the supply of labour
for carrying out, wholly or in part, of the work undertaken by the contractor
or for supplying whether wholly or partly any labour which the contractor had
undertaken to supply, will be required to deduct income-tax at the rate of 1
per cent of such sum.
It may be
noted that—
(i) The term ‘service
contracts’ would include services rendered by such persons as lawyers,
physicians, surgeons, engineers, accountants, architects, consultants, etc.
However, ser-vices rendered for which payment is in the nature of salaries
which is chargeable under the head of income “A. Salaries” in Chapter IV of the
Income-tax Act, 1961 shall not be covered by section 194C.
(ii) The term
‘transport contracts’ would, in addition to contracts for transportation and
loading/unloading of goods, also cover contracts for plying of buses, ferries,
etc., along with staff (e.g., driver, conductor, cleaner, etc.).
Reference in this regard is also invited to Board’s Circular
No. 558, dated the 28th March, 1990.
(iii) The term
‘materials contracts’ in the context of section 194C would mean contracts for
supply of materials where the principal contract is for work and labour and not
a contract for sale of materials.
Board’s Circular No. 86, dated 29-5-1972 and No. 93, dated 26-9-1972 and para 11 of Circular No. 108, dated 20-3-1973 are hereby
withdrawn. Board’s Circular No. 558, dated
28-3-1990 is reiterated.
This
circular explaining the provisions of section 194C will apply with effect from
1st of April, 1994. Tax deductions made in accordance with Circular Nos. 86, 93
and 108 upto 31st March, 1994 will be regarded as compliance of the provisions
of section 194C—Circular : No. 681, dated
8-3-1994.
Contract for fabrication of articles or things as per specification
given by assessee - Applicability of TDS provisions of section 194C on contract
for fabrication of article or thing as per specifications given by the assessee
- Contradiction between two Circulars of CBDT - Resolution thereof - Representations have been received in the Board seeking clarification
on the applicability of section 194C on such transactions, where the assessee
has outsourced certain work relating to fabrication or manufacturing of article
or thing in accordance with the specifications given by the assessee. Circular
No. 681, dated 8-3-1994 of the Board clarifies in para 7(vi) that the
provisions of section 194C would not apply to contracts for sale of goods and
further clarifies that where the property in the article or thing so fabricated
passes from the fabricator-contractor to the assessee only after such article
or thing is delivered to the assessee, such contract would be a contract for
sale and so outside the purview of section 194C. However, in reply to question
No. 15 in Circular No. 715, dated 8-8-1995 on the subject of applicability of
section 194C, in respect of contract for supply of printed material as per
prescribed specifications, it has been said that such contracts would also be
covered under section 194C. It has been represented that the views expressed
in these two circulars, to the extent as pointed out above, are in
contradiction to each other.
The matter has been examined by the Board and it is considered that
exclusive reliance on Question/Answer No. 15 of Circular No. 715, without
taking into account the principles laid down in Circular No. 681 is not
justified. Before taking a decision on the applicability of TDS under section
194C on a contract, it would have to be examined whether the contract in
question is a ‘contract for work’ or a ‘contract for sale’ and TDS shall be
applicable only where it is a ‘contract for work’.
It is, therefore, clarified that the provisions of section 194C would
apply in respect of a contract for supply of any article or thing as per
prescribed specifications only if it is a contract for work and not a contract
for sale as per the principles in this regard laid down in para 7(vi)
of Circular No. 681, dated 8-3-1994—Circular :
No. 13/2006, dated 13-12-2006.
Payments to airlines/travel agents - The provisions of section 194C do not apply to the payments made to
the airlines or the travel agents for purchase of tickets for air travel of
individuals. The provisions shall however apply when payments are made for
chartering an aircraft for carriage of passengers or goods. This clarification
will apply mutatis mutandis to the tickets for travel of individual by
any other mode of transport also—Circular : No.
713, dated 2-8-1995.
The
payments made to a travel agent or an airline for purchase of a ticket for
travel would not be subjected to tax deduction at source as the privity of the
contract is between the individual passenger and the airline/travel agent,
notwithstanding the fact that the payment is made by an entity mentioned in
section 194C(1). The provisions of section 194C shall however apply when a
plane or a bus or any other mode of transport is chartered by one of the
entities mentioned in section 194C—Circular :
No. 715, dated 8-8-1995.
Scope and meaning of ‘advertising’ - Regarding the scope and
meaning of the term ‘advertising’ used in section 194C(1), it is clarified that
advertising may be in print or electronic media, i.e., in newspapers,
periodicals, radio, television, etc. In such cases, tax will be deducted at the
rate of 1 per cent of the payment made for advertising including production of
programmes for such broadcasting and telecasting to be used in such
advertising. In all other cases of work of broadcasting and telecasting
including production of programmes for such broadcasting and telecasting, where
advertising is not involved, tax will be deducted at the rate of 2 per cent of
the sum—Circular : No. 714, dated 3-8-1995.
Clarifications on advertising contracts - The following
clarifications need be noted :
- As to the scope of an
advertising contract for the purpose of section 194C, the term ‘advertising’
has not been defined in the Act. During the course of consideration of the
Finance Bill, 1995, the Finance Minister clarified on the floor of the House
that the amended provisions of tax deduction at source would apply when a
client makes payment to an advertising agency and not when advertising agency
makes payment to the media, which includes both print and electronic media. The
deduction is required to be made at the rate of 1 per cent. When an
advertising agency makes payments to their models, artists, photographers,
etc., the tax shall be deducted at the rate of 5 per cent as applicable to fees
for professional and technical services under section 194J of the Act.
- If the advertising agencies give
a consolidated bill including charges for art work and other related jobs as
well as payments made by them to media, the deduction will have to be made
under section 194C at the rate of 1 per cent. The advertising agencies shall
have to deduct tax at source at the rate of 5 per cent under section 194J while
making payments to artists, actors, models, etc. If payments are made for
production of programmes for the purpose of broadcasting and telecasting, these
payments will be subject to TDS at 2 per cent. Even if the production of such
programmes is for the purpose of preparing advertisement material, not for immediate
advertising, the payment will be subject to TDS at the rate of 2 per cent.
- The payments made directly to
print and electronic media would be covered under section 194C as these are in
the nature of payments for purpose of advertising. Deduction will have to be
made at the rate of 1 per cent. However, the payments made directly to
Doordarshan may not be subjected to TDS as Doordarshan, being a Government
agency, is not liable to income-tax.
- The contract for putting up a
hoarding is in the nature of advertising contract and provisions of section
194C would be applicable. However, if a person has taken a particular space on
rent and thereafter sublets the same fully or in part for putting up a
hoarding, he would be liable to TDS under section 194-I and not under section
194C. In the case of advertising contracts, tax is to be deducted at the rate
of 1 per cent of the gross amount of the bill (including bill of media), and
not on that portion of commission paid to the person who arranges release of advertisement,
etc.
- In the case of sponsorship for
debates, seminars and other functions held in colleges, schools and
associations with a view to earn publicity through display of banners, etc.,
put up by the organisers, the agreement of sponsorship is in essence an agreement
for carrying out a work of advertisement. Therefore, provisions of section
194C will apply.
- Tax is deductible at source on
payments for costs of advertisements issued in the souvenirs brought out by
various organisations—Circular No. 715, dated
8-8-1995.
Payments to clearing and forwarding agents - Payments made to clearing
and forwarding agents for carriage of goods are subjected to deduction of tax
at source under section 194C, since unlike the travel agents, they are
independent contractors. They would also be liable to deduct tax at source
while making payments to a carrier of goods—Circular
: No. 715, dated 8-8-1995.
Payments to couriers - The carriage of documents,
letters, etc., is in the nature of carriage of goods, and therefore, provisions
of section 194C would be attracted in respect of payments made to the couriers—Circular : No. 715, dated 8-8-1995.
Payments to transporters - In the case of payments to
transporters, each GR can be said to be a separate contract, if the goods are
transported at one time. But if the goods are transported continuously in
pursuance of a contract for a specific period or quantity, each GR will not be
a separate contract and all GRs relating to that period or quantity will be
aggregated for the purpose of TDS. Even when the goods are received on ‘freight
to pay’ basis, the TDS provisions would be applicable, irrespective of the
actual payment—Circular : No. 715, dated 8-8-1995.
Payments to restaurants/cafes - TDS is not required to be
made when payment is made for serving food in a restaurant in the normal course
of running of the restaurant/cafe—Circular : No.
715, dated 8-8-1995.
Payments to recruitment agencies - Payments to recruitment
agencies are in the nature of payments for services rendered and not for
carrying out any work including supply of labour for carrying out any work.
Hence provisions of section 194C will not apply. The payments will however be
subjected to TDS under section 194J. Similar would be the position in respect
of payments made by a company to a share registrar—Circular : No. 715, dated 8-8-1995.
FD commission/brokerage - FD commission and brokerage
are not covered under section 194C—Circular :
No. 715, dated 8-8-1995.
Supply of printed material - Supply of printed material
is covered by section 194C—Circular : No. 715,
dated 8-8-1995.
Procurement of orders - Rendering of services by external
parties for procurement of orders is not covered under section 194C. If
rendering of such services involved payment of fees for professional or
technical services, tax may be deductible under section 194J—Circular : No. 715, dated 8-8-1995.
Electrical contracts - Where the services of a
regular electrician are engaged on a contract basis or the services of an
electrician are provided by a contractor, the payments made to the electrician
or the contractor will be in the nature of payment made in pursuance of a
contract for carrying out any work, and provisions of section 194C will apply
in such cases—Circular : No. 715, dated
8-8-1995.
Maintenance contracts - Routine maintenance
contracts including supply of spares would be covered under section 194C.
However, where technical services are rendered, the provisions of section 194J
will apply in regard to tax deduction at source—Circular
: No. 715, dated 8-8-1995.
Reimbursement of actual expenses - Section 194C refers to ‘any
sum paid’. Obviously, reimbursement of actual expenses cannot be deducted out
of the bill amount for the purpose of tax deduction at source—Circular : No. 715, dated 8-8-1995.
Applicability to shipping business of non-residents - It is clear from section
194C that the area of operation of TDS is confined to payments made to any
‘resident’. On the other hand, section 172 operates in the area of computation
of profits from shipping business of non-residents. Thus, there is no overlapping
in the areas of operation of these sections. Since the provisions of section
172 override other provisions of the Act, the provisions of section 194C are
not applicable to non-resident shipping business. Even where payments are made
to shipping agents of non-resident ship-owners or charterers for carriage of
passengers, etc., shipped at a port in India, the agent acts on behalf of the
non-resident ship-owner or charterers and thus steps into the shoes of the
principal. Hence, even in such cases, section 194C will not apply—Circular:
No. 723, dated 19-9-1995.
SERVICE TAX RETURN
Service
Tax returns for first six months ,i.e. April to September is to filled till 25th
October of the year after which penalty is attracted which may go upto Rs.20,000 (Twenty Thousand Rupees).
With
change in Service Tax regime w.e.f. 1st July this year by
introduction of negative list approach, there is a change in taxable services,
accounting codes, valuation and exemptions.
This calls for a change in the format of Service Tax returns also. Perhaps,
keeping this in mind, the government has now decided to revise the format of Service Tax return (ST-3 Form) which can be downloaded for April 2012 to
June 2012) from http://www.aces.gov.in/download.jsp However new format as per negative list is
still not released by CBEC. Since the new format has not been made available even till today, the
last date of filing Service Tax returns has been extended from 25th
October to 25th November 2012.
Assessees
may be aware that Service Tax returns are required to be filed for half year
i.e., for April to September in October and for October to March in April
following. Another major change is that the return which is now to be filed is
required to be filed only for one quarter, i.e., April –June 2012. This is
because from 1st July, 2012, law has changed and return for earlier
period may be filed separately.
In
effect, this time only quarterly
return will be filed and for subsequent quarter, return will be required to be
filed in different form which will be notified later.
Further,
returns are now mandatorily required to be filed online. No paper returns can
be filed. As such, new format of return is expected
to be uploaded on the CBEC’s (Central Board of Excise & Customs) web-site
soon after which assessees can file their return before 25th
November, 2012.
In
the current financial year, an assessee would have had to give data with
reference to specific services and the corresponding legal provisions for the
period 1st April to 30th June. The data for the period
from 1st July to 30th September would have been respect
to different services and the corresponding legal provisions. Combination of
these provisions into one return would have made the return complex for the
assessees. Hence this change.
With
these changes, one cannot file the return now and shall have to wait for the
new return format. In such a scenario, assessees will also be required to avail
/ utilize credit of tax or pay Service Tax only in relation to this quarter
only.
STUDYCAFE.IN
Extension of date for filing XBRL
General Circular No. 34/2012, Dated 25.10.2012
Filing of Balance Sheet and Profit and Loss Account in Extensible Business Reporting Language (XBRL) Mode for the financial year commencing on or after 1.4,2011
In continuation of the Ministry’s General Circular No. 16/2012 dated 06.07.2012, on the subject cited above, it is stated that the time limit to file the financial statements in the XBRL ‘mode without any additional fee/ penalty has been extended up to 15th December,2012 or within 30 days from the date of Annual General Meeting of the company whichever is later.
2. All other terms and conditions of the General Circular No. 16/2012 dated 06.07.2012 will remain the same.
Procedure to Incorporate Private Limited Company
To register a company, you need to first apply for a Director Identification
Number (DIN) which can be done by filing eForm for acquiring the DIN. You would
then need to acquire your Digital Certificate and register the same on the
portal. Thereafter, you need to get the company name approved by the Ministry.
Once the company name is approved , you can register the company by filing the
incorporation form depending on the type of company
Step 1 : Application For DIN
The concept of a Director Identification Number (DIN) has been introduced for the first time with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006. As such, all the existing and intending Directors have to obtain DIN within the prescribed time-frame as notified.
You need to file eForm DIN-1 in order to obtain DIN.
Step 1 : Application For DIN
The concept of a Director Identification Number (DIN) has been introduced for the first time with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006. As such, all the existing and intending Directors have to obtain DIN within the prescribed time-frame as notified.
You need to file eForm DIN-1 in order to obtain DIN.
Step 2 : Acquire/ Register DSC
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance programme are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.
Acquire DSC -A licensed Certifying Authority (CA) issues the digital signature. Certifying Authority (CA) means a person who has been granted a license to issue a digital signature certificate under Section 24 of the Indian IT-Act 2000.
Register DSC -Role check for Indian companies is to be implemented in
the MCA application. Role check can be performed only after the signatories
have registered their Digital signature certificates (DSC) with MCA.
Step 3 : New User Registration
To file an eForm or to avail any paid service on MCA portal, you are first required to register yourself as a user in the relevant user category, such as registered and business user.
To file an eForm or to avail any paid service on MCA portal, you are first required to register yourself as a user in the relevant user category, such as registered and business user.
Step 4 : Incorporate a Company
Apply for the name of the company to be registered by filing Form1A for the same. After that depending upon the proposed company type file required incorporation forms listed below.
Apply for the name of the company to be registered by filing Form1A for the same. After that depending upon the proposed company type file required incorporation forms listed below.
·
Form 1 : Application or declaration for
incorporation of a company
· Form 18 : Notice of situation or change of
situation of registered office
·
Form 32 : Particulars of appointment of
managing director, directors, manager and secretary and the changes among them
or consent of candidate to act as a managing director or director or manager or
secretary of a company and/ or undertaking to take and pay for qualification
shares
Once the form has been approved by the concerned official of the
Ministry, you will receive an email regarding the same and the status of the
form will get changed to Approved.
For further clarification visit directly to MCA Site.
| ANNOUNCEMENT |
| Sub: Peak Filing Preparation 2012 - MCA 21 |
As you are aware it is time of peak filing of Balance Sheet & Annual Return under the Companies Act, 1956.
|
In order to ensure smooth filing and to avoid last minute rush, the Ministry of Corporate Affairs vide its General Circular No.30/2012 dated 28.09.2012, extended the due date of filing of e-forms 23AC (Non-XBRL) and 23ACA (Non XBRL) as per new schedule VI in following manner without any additional fee:
|
We are quite sure that you might have already taken steps in advising corporates to file returns at an early date to facilitate the Ministry in achieving its desired objective under MCA 21.
Further, the Ministry vide General Circular No.31/2012 dated 28.09.2012 has also extended the filing of e]form 23B without any additional fee till 23.12.2012 or due date of filing which ever is later. In order to ensure smooth filing of the forms and to avoid system congestion in MCA21, the Ministry of Corporate Affairs has advised us to request our members to file e-form 23B after 22.11.2012 but positively on or before 23.12.2012 or due date of filing whichever is later to avoid system congestion. Members concerned are earnestly requested to kindly plan their filing accordingly. |
TAXABILTY OF CAR AS PERQUISITE-IF PROVIDED BY EMPLOYER
Perquisite is a part of gross salary of an individual provided by his employer in addition to the basic salary. It is the benefit in addition to the basic salary to which the employee has a right by virtue of his employment. One of the perquisites provided by the employer is motor car facilities. Perquisites in respect of motor car will be taxable in the hands of Employee if the same is provided to him by his Employer (Both in case of Transfer as well as Use).
1. If the Employer transfers (sale) Motor Car to his Employee-
Then, the Perquisite Value will be – Actual cost less depreciation on WDV @ 20% for every completed year.
For instance, Employer purchases a motor car for Rs. 10, 00,000 on 1/05/2008 and the same is sold to the employee for Rs. 6,00,000 on 1/08/2010
Soln: Opening Balance (1/5/2008) 10,00,000
Less: Depreciation 20% 2,00,000
WDV on 1/5/2009 8, 00,000
Less: Depreciation 20% 1, 60,000
WDV on 1/5/2010 6, 40,000
Less: Selling Price 6, 00,000
Therefore, Taxable amount Rs. 40,000
In this way, perquisite will be calculated in case of transfer of a motor car and it will be taxable in the hands of Employee.
2. If the Employer provides Motor Car to his Employee for Use-
Valuation of perquisite depends upon the purpose for which it is provided.
a) Perquisite in case used for exclusively Business purpose- Nothing would be taxable.
b) Perquisite in case used for exclusively Personal purpose – Amount of expenditure incurred by the employer on maintenance and running of motor car + Amount paid to Driver + 10% p.a. of actual cost of motor car.
c) Where the motor car is used partly for performance of duties and partly for private or personal purpose of his own or any member of his household –
Motor Car Owned by or Taken on Hire by
|
Expenses By
|
Value of Perquisite If CC of Car is Up to 1.6 litres
|
Value of Perquisite If CC of Car exceeds 1.6 litres
|
Employer
|
Employer
|
Rs. 1800 p.m.
|
Rs. 2400 p.m.
|
Employer
|
Employee
|
Rs. 600 p.m.
|
Rs. 900 p.m.
|
Employee
|
Employer
|
Rs. 1800 p.m. ‘Or” Actual amount of expenses for official use if proper document are maintained
|
Rs. 2400 p.m. ‘Or” Actual amount of expenses for official use if proper document are maintained
|
Notes:
- In the above cases all the amounts shall be increased by Rs. 900 p.m. for Driver, if any.
- Where more than 1 motor car are owned or hired by the employer and the employee or any member of the household is allowed the use of such motor car, the value of perquisite shall be the amount calculated as if one car has been provided for partly personal use and all other cars are for personal use.
- It is to be noted that while calculating perquisite value only completed months shall be taken into account ignoring part of the month.
- Again in the last case stated above in the table, if proper documents are not maintained then taxable amount will be Rs. 1800 p.m. or Rs. 2400 p.m. respectively.
- It is to be kept in mind that if any payment is reimbursed by the Employee it would not be taxable
SAHARA CASE-MUST READ!!!!!
The Hon'ble Supreme Court of India ("SC") in its recent judgment ("Sahara Judgment") has directed Sahara India Real Estate Corporation Limited ("SIRECL") and Sahara Housing Investment Corporation Limited ("SHICL") (both collectively referred to as the "Appellants") to refund to SEBI the ~USD 3.16 billion they had raised along with an interest of 15% by November 30, 2012, and also to furnish details, along with the application forms etc., of the ~ 6.6million subscribers from whom the Appellants had raised the monies.
The Sahara Judgment while upholding the Securities Exchange Board of India ("SEBI") and Securities Appellate Tribunal ("SAT") order has also clarified ambiguities in certain provisions of law used by India Inc. to raise public monies without intervention from SEBI. We have herein below in this article, discussed and analyzed some of the key issues which have been decided by the SC.
How the funds were raised
SIRECL and SHICL (both unlisted public companies), in March 2008 and September 2009, respectively, in their general meeting resolved through a special resolution under Section 81(1A) of the (Indian) Companies Act, 1956 ("Companies Act") to raise funds through unsecured optionally fully convertible debentures ("OFCDs") by way of private placement to friends, associates, group companies, workers/employees and other individuals associated/affiliated or connected in any manner with Sahara group of companies ("Sahara Group").
Later, pursuant to their board resolutions, both, SIRECL and SHICL filed red herring prospectus ("RHP") under Section 60B of the Companies Act with registrar of companies ("ROC"), Kanpur and Mumbai, respectively, both of which got registered.
The RHPs provided that the Appellants did not intend to get their securities listed on any recognized stock exchange, and that only those persons to whom the information memorandum ("'IM") was circulated and/or those associated with Sahara Group, would be eligible to apply. The RHPs also provided that the funds raised would be utilised for financing the acquisition of townships, residential apartments, shopping complexes etc. and to undertake construction and infrastructure activities.
Post registration of the RHPs, the Appellants circulated the IMs along with application forms to persons allegedly associated with the Sahara Group through their network of around 2900 branch offices and 10 lakh agents, and raised monies under an open ended scheme. The IMs stated that the issue of the OFCDs was purely on a private placement basis and the OFCD’s were not intended to be listed on any stock exchange.
SEBI and SAT ruling
SEBI became aware of the large scale collection of monies from the public by the Appellants while processing the draft RHP submitted by Sahara Prime City Limited (another Sahara Group company) in respect of its proposed initial public offering dated September 30, 2009, and also from two complaints received by it from investors. On further investigation and multiple correspondences later, SEBI passed an order on June 23, 2011 ("SEBI Order") holding the Appellants to be in violation of various provisions of the corporate and securities laws, dealt with later in this article. An appeal was then filed by the Appellants against the SEBI Order in the SAT, which was decided in favour of SEBI vide an order dated October 18, 2011 ("SAT Order"). A further appeal was then filed by the Appellants against the SAT Order in the SC.
Issues
Following are the key issues which were debated and decided upon by the SC:
1. Jurisdiction of SEBI:
What companies does the SEBI have the jurisdiction to administer so far as it relates to issue and transfer of securities?
Section 55A of the Companies Act delegates certain powers relating to issue and transfer of securities to SEBI. It reads as follows:
"55A. Powers of Securities and Exchange Board of India –
The provisions contained in Sections 55 to 58, 59 to 81 (including sections 206, 206A and 207, so far as they relate to issue and transfer of securities and non-payment of dividend shall, --
(a) in case of listed companies;
(b) in case of those public companies which intend to get their securities listed on any recognized stock exchange in India, be administered by the Securities and Exchange Board of India; and
(c) in any other case, be administered by the Central Government.
Explanation – For the removal of doubts, it is hereby declared that all powers relating to all other matters including the matters relating to prospectus, statement in lieu of prospectus, return of allotment, issue of shares and redemption of irredeemable preference shares shall be exercised by the Central Government, Tribunal or the Registrar of Companies, as the case may be."
From the aforementioned it can be gathered that (i) listed companies and (ii) those intending to get listed are companies subject to the jurisdiction of SEBI. What would tantamount to 'intending to get listed' was a question before the SC. The SC while answering this question described in great detail the role of SEBI as an institution to promote orderly and healthy growth of the securities market and for investors’ protection. Against this backdrop, the SC analyzed the contentions of the Appellants and the relevant laws.”
The Appellants argued that they never intended to list the OFCDs, and hence the issuance fell outside the purview of SEBI. This contention was rejected by the SC. The SC in analyzing this aspect went by the conduct of the Appellants and stated that a ‘company's option, choice, election, interest or design does not matter, it is the conduct and action that matters and that is what the law demands’. Since, in this instant case, the issue of OFCDs was held to be a public issue, which entailed a listing, the SC held that the Appellants were seen to have intended to get their securities listed. This rationale of the SC for holding the issue of the OFCDs to be a public issue has been discussed below.
2.
Public issue versus private placement: Whether Section 67 of the Companies Act implies that a company’s offer of shares or debentures to 50 or more persons would ipso facto become a public issue, subject to certain exceptions provided therein?
As stated above, only if the Applicants issue of OFCDs was held to be a 'public issue' would the same be subject to SEBI jurisdiction. It was not in dispute that there were more than 50 offerees or subscribers to the issue of OFCDs by the Appellants. The contention of the Appellants was that the number of allottees or offerees was immaterial in determining whether an offer was a public issue – it was the intention that mattered. The intention to offer to a select or identified group would make the offer a private placement. To support their argument the Appellants relied on the Unlisted Public Companies (Preferential Allotment) Rules, 2003 which do not stipulate a limit to the number of persons that a preferential allotment may be made.
Section 67 of the Companies Act is an aid to interpreting what ‘offering shares or debentures to the public’ means. Section 67 (1) and (2) provides that an offer to public is one that is offered to any section of the public. Section 67(3) however excludes from the definition of ‘offer to the public’, an offer or invitation that is (i) not being calculated to result directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation, or (ii) otherwise as being a domestic concern of the persons making and receiving the offer or invitations; except if made to 50 persons or more.
The SC rejected the arguments of the Appellants and relied on Section 67 to conclude that an offer to 50 or more persons constitutes a public issue, and hence the issuance of OFCDs by the Appellants was a public issue. To arrive at this conclusion, the SC also lifted the veil to examine the conduct and method adopted by the Appellants and placed reliance on inter-alia the following to determine that even in spirit the issuance by the Appellants was a public issue:
- In the IM circulated by the Appellants, it was stated that if the number of interested parties to the OFCD issue exceeded 50 they would approach the ROC to file RHP as per Section 67(3) of the Companies Act;
- The Appellants made disclosures that the issue was being made on a private placement basis and that OFCDs would be offered only to such persons to whom IM would be circulated. But the fact remains that it was circulated to more than three crore people inviting them to subscribe;
- Although contended, the Appellants could not substantiate their claim that the investors were friends, associated group companies, workers/employees and other individuals who were associated/affiliated or connected with Sahara Group.
3. Listing in case of public issue:
In terms of Section 73, is every company making an offer of securities to 50 or more persons required to apply for listing of its securities on a stock exchange?
The SC stated that Section 73(1) of the Companies Act casts an obligation on every company intending to offer shares or debentures to the public to apply on a stock exchange for listing of its securities. Such companies have no option or choice but to list their securities on a recognized stock exchange, once they invite subscription from over 49 investors from the public. If an unlisted company expresses its intention, by conduct or otherwise, to offer its securities to the public by the issue of a prospectus, the legal obligation to make an application on a recognized stock exchange for listing starts.
The Appellants had argued that since they did not intend to offer the OFCDs to the public, this provision should not apply. However, as mentioned above, the SC on the basis of the conduct of the Appellants concluded that they intended to offer the OFCDs to the public and hence they were obligated to apply for listing of OFCDs.
4. Securities include hybrid:
Are hybrid instruments also with the ambit of the SEBI to regulate?
The Appellants had contended that whereas pursuant to the Companies Amendment Act the definition of the term 'securities' was modified to include a "hybrid" instrument Section 67 of the Companies Act was not amended to include ‘hybrids’ and continued to refer only to offer of shares or debentures. Therefore, since OFCDs are hybrids, they should be outside the purview of Section 67 of the Companies Act.
The Appellants also pointed the difference between the definition of the term 'securities' in the Companies Act and the Securities Contracts (Regulation) Act, 1956 ("SCR Act") in that the term 'hybrid' had only been inserted in the definition of "securities" in the Companies Act and not the SCR Act, and consequently not in the SEBI Act as well (which draws its definition of 'securities' from the SCR Act). Consequently, the Appellants contended that SEBI does not have jurisdiction over OFCDs issued by the Appellants which are hybrids.
However, the SC rejected the above contentions. It stated that the OFCDs issued by the Appellants undoubtedly were unsecured debentures by name and nature. Though, they have the dual characteristics of shares and debentures, as defined by the term "hybrids", however, they continue to remain debentures till the time they are converted. In other words, OFCDs issued by the Appellants are debentures in presenti and become shares in futuro. Further, the SC also stated that the definition of "debentures" in Companies Act includes 'any other securities', and noted that the Appellants have treated OFCDs only as debentures in the IM, RHP, application forms and also in their balance sheet.
Further, on the contention of SEBI’s jurisdiction over OFCDs, the SC stated that the definition of "securities" in the SCR Act is an inclusive definition and not exhaustive. Further, the definition of “securities” in the SCR Act includes any "other marketable securities of like nature". The SC stated that any security which is capable of being freely transferable is marketable. Since, the OFCDs issued by the Appellants were freely transferable, therefore, they fall within the purview of "securities" in the SCR Act.
The SC also stated as Section 55A of the Companies Act, which deals with delegation of powers to SEBI refers to "securities", and the definition of "securities" in Companies Act includes "hybrids", therefore, SEBI has jurisdiction over hybrids like OFCDs issued by the Appellants.
5. Convertible bonds:
Whether OFCDs issued by the Appellants are convertible bonds falling within the scope of Section 28(1)(b) of the SCR Act, and therefore, not "securities" or, at any rate, not listable under the provisions of SCR Act?
Section 28(1)(b) of the SCR Act provides that the provision of the SCR Act shall not apply to 'any convertible bond or share warrant or any option or right in relation thereto, insofar as it entitles the person in whose favour any of the foregoing has been issued to obtain at his option from the company or other body corporate, issuing the same or from any of its shareholders or duly appointed agents' shares of the company or other body corporate, whether by conversion of the bond or warrant or otherwise, on the basis of the price agreed upon when the same was issued.'
It was contended by the Appellants that the OFCDs issued were convertible bonds falling within the scope of Section 28(1)(b) of SCR Act and hence were excluded from the purview of the SCR Act. However, the SC rejected this contention and stated that Section 28(1)(b) makes it clear that the SCR Act will not apply to the 'entitlement' of the buyer, inherent in the convertible bond. Entitlement may be severable, but does not itself qualify as a security that can be administered by the SCR Act, unless it is issued in a detachable format. Therefore, the inapplicability of SCR Act, as contemplated in Section 28(1)(b), is not to the convertible bonds, but to the entitlement of a person to whom such share, warrant or convertible bond has been issued, to have shares at his option. The expression "insofar as it entitles the person" clearly indicates that it was not intended to exclude convertible bonds as a class.
Analysis
1. End of road for Sahara?:
This SC judgment may not be the end of road for Sahara Group. A judgment of the SC can be reviewed by a review petition, and on dismissal of a review petition, further by a curative petition. However, the grounds for admitting such petitions are very limited, like for admitting a review petition, there should be a discovery of new and important matter of evidence, or some mistake or error apparent on the face of the record; similarly, for a curative petition, which is ought to be treated as a rarity, there should be a gross miscarriage of justice resulting from violation of principles of natural justice as mentioned in another SC case of Rupa Hurra vs. Ashok Hurra & Another, AIR 2002 SC 177, or the judgment should adversely affect a person and he should not be a party to the dispute, or if he was a party, he should not have been served with notice of the proceedings and the matter should have proceeded as if he had notice.
2. Jurisdiction of SEBI versus ROC:
This judgment is a very crucial one for SEBI as it not only affirms its jurisdiction and power to administer various provisions of the Companies Act, but also clarifies that even unlisted companies (whether private or public) which intend to (by conduct or otherwise) get their securities listed on any stock exchange now fall within the radar of SEBI. Thus, the general perception that SEBI can only monitor listed companies and it does not have jurisdiction over unlisted companies may not be entirely correct. Also, the role of ROC in such cases may now be limited.
3. Public issue vs. private placement debate:
By clarifying that offer of security to 50 or more persons would qualify as a public issue, the SC has brought some clarity to this long standing debate. Earlier, there was an ambiguity as to whether an offer of security to more than 49 persons would ipso facto become a public issue or not. Though the Statement of Objects and Reasons for the Companies (Amendment) Act, 2000 provided that 'any offer of shares or debentures to more than 50 persons shall be treated as a public issue with suitable modification in the case of public financial institutions and non-banking financial companies’, however, the Section 67 of the Companies Act does not expressly mention so.
Having said the above, there is still an ambiguity as to whether multiple offers of security by any company at reasonable intervals of time, with each offer being to less than 49 persons but in aggregate more than 49 persons, would qualify as public issue or not.
Also, so far the emphasis has always been on an 'offer' to 50 or more persons. What constitutes 'offer' has not been addressed by the SC in the Sahara Judgement. For instance, does just addressing a gathering of persons constitute an offer / invitation, or is it the actual act of distributing an IM which constitutes an offer / invitation. Further, it is not clear as to what happens when a company does not make an offer or invitation to the public, but only issues its securities to more than 49 persons at their instance. Though unlikely, but whether such cases would fall outside the purview of public issue is yet to be seen.
4. Transferable means marketable:
Though, not a ratio decidendi in this case, however, the SC has stated that any security which is capable of being freely transferable is marketable. This may have some implications, especially, in case of stamp duty. For instance, the Indian Stamp Act, 1899 defines the term 'marketable' as 'security of such a description as to be capable of being sold in any stock market in India or in the United Kingdom’. Sans the above statement from the SC, one possible interpretation could be that unless the security is not listed, it cannot be sold in any stock market, and hence only listed securities should fall within the purview of marketable securities. However, as per the statement of the SC, the moment a security is a transferable, it becomes marketable. Hence, there arises an ambiguity as to whether an unlisted transferable security would also be considered 'capable of being sold in a stock market' and hence 'marketable' for the purpose of the stamp duty.
5. Criminal sanctions:
No criminal sanction has been imposed on the Appellants or the promoters / directors in the instant case. However, the SC has directed the Appellants to furnish details with supporting documents to SEBI on the subscribers and the refunds which have been made to the subscribers, by September 10, 2012. SEBI has been asked to ascertain the genuineness of the subscribers with the help of investigating officers / experts in finance and accounts. If the event, SEBI suspects the genuineness of the subscribers, they are required to give the Appellants a hearing. However, the SC has directed that the decision of SEBI (WTM) in this behalf shall be final and binding on the Appellants as well as the subscribers.
Under the SEBI Act, SEBI has inter-alia been granted with powers to impose imprisonment up to 10 years. Though, this power is used sparingly by SEBI, however, they have not been shy when the case demands. For instance, in the past, SEBI has imposed criminal sanctions against the managing director of VR Mathur Mass Communications Limited under Sections 63 and 68 of Companies Act for material misstatements in the prospectus of the company during its public issue of shares. It has also in case of Goldstar Teak Forest India Ltd. & others, as well as Angel Green Forest Ltd. & others, imposed rigorous imprisonment of 6 months on the accused for violation under the SEBI (Collective Investment Schemes) Regulations, 1999.
If SEBI finds the information submitted by the Appellants about the applicants or refunds already made, to be fictitious or concocted, SEBI may be at liberty to use its powers to impose sanctions as it may deem fit.
Conclusion
The SC judgment has once again reaffirmed the role and object of SEBI as a securities market regulator and emphasized upon the inherent jurisdiction of SEBI to oversee matters concerning the public investors at large. By clarifying that SEBI has jurisdiction over OFCDs, it may have in a sense indicated that usage of structured financial instruments which are not expressly mentioned in the definition of 'security' in the SCR Act to avoid the jurisdiction of SEBI, may not work, if monies are being raised from the public at large.
Further, ruling that an offer of security to 50 or more persons would tantamount to public issue, has to some extent clarified this issue which has loomed over the industry since long. Questions of what tantamounts to 'offer' and whether an issuance to more than 50 persons without an offer would still qualify as a public issue are issues that still need to be clarified.
The Sahara Judgement has also reaffirmed the fact that a public issue would mandatorily entail an application for listing on a stock exchange. With this clarity, the market players may now be able to manage their fund raising affairs with more certainty. At the same time, this ruling has also given the ammunition to SEBI to crackdown on those companies which have offered their securities to more than 49 persons without applying for listing and following other requirements. Thus, we may get to see stricter enforcement of these laws now. Having said that, to discover such instances, unless an investor complains or a public filing is made, would still be a challenge.
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