MISSIVE

Volume XXXV

April 2014

Topics Page

No

Direct Tax 1

Transfer Pricing 6

Service Tax 8

Value Added Tax 8

Customs 9

Case Law 10

FEMA 11

Company Law 12

Transactions that made

headlines

17

Never hold your head high with pride or ego, even the winner of a gold

medal gets his medal only when he puts his head down!!!

Index

Dear Patron

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Knowledge Management Team

1

DIRECT TAX

CIRCULAR NO. 8/2014 DATED 31-3-2014

CLARIFICATION ON INTERPRETATION OF

PROVISIONS OF SECTION 10(2A) IN CASES

WHERE INCOME OF FIRM IS EXEMPT

Tax Authorities has been denying the

exemption to partners on share of profit in

cases where firm is not liable to tax by virtue of

some exemption or deduction based on the

following grounds:

1. Exemption to partners is applicable

only when the firm has suffered tax on

such income.

2. The term ‘total income’ signifies

taxable income, since, exempt income

does not form part of the total income

of the firm, and hence, partner is not

eligible to exemption in respect of its

share in the exempt income of the firm.

3. Share of profit in the hands of the

partner can be exempt only to the

extent such profits are taxed in the

hands of the firm.

The above circular brings an end to the much

debated issue by clarifying the fact that 'total

income' of the firm for sub section (2A) of

section 10 of the Act, as interpreted

contextually, includes income which is exempt

or deductible under various provisions of the

Act. It is, therefore, further clarified that the

income of a firm is to be taxed in the hands of

the firm only and the same can under no

circumstances be taxed in the hands of its

partners. Accordingly, the entire profit credited

to the partners' accounts in the firm would be

exempt from tax in the hands of such partners,

even if the income chargeable to tax

becomes NIL in the hands of the firm on

account of any exemption or deduction as

per the provisions of the Act.

Union of India v/s Tata Chemical Ltd.

[2014]43 taxmann.com 240(SC)

The Supreme Court held that interest is

payable to a tax deductor on refund of

excess tax withheld

Facts

In the recent precedent of Tata Chemical

Ltd.(‘assessee/ taxpayer/ Company’) the

Hon’ble Supreme Court dealt with the issue

that whether the taxpayer, who is entitled to

refund of excess taxes withheld by it under the

provisions of the Income tax Act, 1961 (‘the

Act’), is also entitled to refund thereon.

The taxpayer withheld taxes on the amount

credited to two technicians from a foreign

company for services of the technicians and

reimbursement of expenditure. The rate of

taxes withheld under Section 195(2) of the Act

was in pursuance to the Special Order passed

by Assessing Officer (‘AO’) directing the

taxpayer to deduct tax at the rate of 20

percent before remitting the aforesaid

amount, i.e., total amount credited including

the amount of reimbursements, to the foreign

company.

After such deposit, the taxpayer appealed

CIT(A) against AO’s Special Order, wherein,

while allowing the appeal concluded that the

reimbursement of expenses was not part of the

Income, and accordingly directed refund of

2

tax deducted at source on such

reimbursements along with interest thereon as

provided under Section 244A(1) of the Act.

The AO held that Section 244A provides for

interest only on refunds due to taxpayer and

not to the deductor and declined the claim of

the Company.

Held

Aggrieved from the decision, the Company

appealed the matter to higher authorities. The

Supreme Court’s ruling was in favour of the

assessee and Hon’ble Supreme Court opined

as under:-

As held by the Courts, while awarding

interest, it is a kind of compensation of use

and retention of the money collected by

the tax department. When the collection is

illegal there is corresponding obligation on

the tax department to refund such amount

with interest for the period they have

retained the money deposited.

Refund due and payable to the taxpayer is

debt- owned and payable by the tax

department. There being no express

statutory provision for payment of interest

on the refund of excess amount/ tax

collected by the tax department, the

Government cannot shrug off its apparent

obligation to reimburse the deductor’s

lawful monies with the accrued interest or

the period of undue retention of such

monies.

The present case does not fall either under

Section 244A(1)(a) or (b) of the Act.

Therefore, in such a case, the opening

words of Section 244A(1)(b) specifically

referred to ‘as in any other case’ the

interest is payable from the date of

payment of tax.

Alkaben B Patel vs. Income Tax Officer

(Ahmedabad ITAT – Special Bench)

Time limit of 'six months' in sec 54EC

means 'six British Calendar months' in view

of the General Clauses Act, 1897

Facts

Assessee claimed exemption u/s 54EC from

Long term capital gains on account that the

sale consideration was utilized in the purchase

of ‘specified asset’ i.e. NHAI bonds within six

months from the date on which the transfer

took place. Revenue contended that no

exemption was available since the asset was

transferred on 10th June 2008 whereas the

investment was made on 17th December 2008

(date on which amount stands withdrawn from

the relevant bank account), thereby alleging

that the investment was made after the expiry

of the specified period. ITAT Special Bench

interpreted the meaning of phrase “six

months” and held in the favour of the

Assessee.

Held

The ITAT Special Bench held as follows:

1. The term 'month' is not defined in The

Income Tax Act, therefore seeking the

help of an another statute ; hence,

examined the term "month" as per

3

section 3(35) of General Clauses Act,

1897 which says "month" shall mean a

month reckoned according to the

British calendar i.e. last day of the

month.

2. Being an incentive provision, the same

should be interpreted liberally (CBDT

Circular No. 791 dated 02.06.2000). In

the present case, the intention is to

attract investment to be used for the

development of infrastructure etc. The

question as to whether a statute is

mandatory or directory, depends upon

the intent of the legislator and not

upon the language in which it is

clothed. The meaning and intention of

the legislator is to be judged by the

language, but these are to be

considered not only from phraseology

of the provision, but also by considering

its nature, its design, and the

consequences which would follow from

construing it the one way or the other.

3. After scrutinizing few more sections of

the Act it is evident that on some

occasion the Legislature had not used

the terms "Month" but used the number

of days to prescribe a specific period.

For example in Section 254(2A) First

Proviso it is prescribed that the Tribunal

may pass an order granting stay but for

a period not exceeding one hundred

and eighty days. This is an important

distinction made in this statute while

subscribing the limitation/ period. This

distinction thus resolves the present

controversy by itself.

Indus Towers Ltd. vs. Commissioner of

Income Tax (2014) 44 taxmann 3 [Delhi

High Court]

Receipts from provision of passive

infrastructure services to the mobile

operators amount to renting and would

attract lower TDS deduction under section

194-I and not under section 194C

Facts

The petitioner, Indus Towers Ltd., provided

passive infrastructure services to the mobile

operators ('customers'), which, inter-alia,

included, tower, shelter, diesel generator sets,

batteries, air conditioners, etc. It applied for

issue of a lower deduction certificate at rate of

0.5% on its project receipts under Sec. 194C of

the IT Act, but AO issued lower deduction

certificate at rate of 2.5% under Sec. 194-I of

the IT Act. Writ was filed to challenge the

revisionary order of CIT who affirmed the

decision of AO. The issue before the High Court

was whether the activity, i.e., provision of

passive infrastructure services by petitioner to

the mobile operator would constitute renting

within the extended definition under

Explanation to Section 194-I or whether the

activity was service without any element of

hiring or letting out of premises?

Held

The High Court held in the favour of Revenue

contending that TDS was deductible u/s 194I

but not on account of renting of land but for

use of plant and equipment @ 2% based on

the following grounds:

1. The definition of "renting" has to be

viewed in perspective. What strikes

instantly is that the definition is clear as

to the nature of transactions it covers

4

("means"). Secondly, it is expansive in

sweep ("any other…arrangement for

the use, (either separately or together)"

any land, building, machinery or plant

irrespective of ownership of the payee

is covered. The Parliamentary intent

was clear that transactions - the

consideration for which otherwise may

not be covered by rent - also ought to

be within Section 194-I, by use of the

expression "other … arrangement for

the use". Whilst there is no doubt that

the intention of the parties in the

present case was to ensure that the use

of technical and specialized

equipment maintained by Indus should

be resorted to; at the same time, there

is no escape from the fact that the

infrastructure is given access to, and in

that sense, it is given for the "use" of the

mobile operators. The towers in a sense

are the neutral platform without which

mobile operators cannot operate.

2. If one goes back in time each mobile

operator - which is now Indus' customer

- used to carry out this activity, by

necessarily renting premises and

installing the same equipment. Of

course, the rent paid then to the

owner, whenever such transactions

were leases, were business expenses.

Yet leases or such like arrangement

had to be resorted to. That situation has

remained unchanged; now instead of

the mobile operator performing the

task, it is done exclusively by Indus. The

dominant intention however, in these

transactions - between Indus and its

customers - is the use of the equipment

or plant or machinery. The "operative

intention" here, to borrow the phrase

from Rajbir Kaur v. S. Chokesiri and Co.,

AIR 1988 SC 1845 , was the use of the

equipment. The use of the premises

was incidental; in that sense there is an

inseparability to the transaction as spelt

out in Sultan Brothers (P) Ltd. v

Commissioner of Income Tax, 1964 (51)

ITR 353 .

Gulshan Malik v/s Commissioner of

Income-tax [2014] 43 taxmann.com 200

(Delhi)

36 months period under Section 2(42A) for

booking rights should be counted from

date of buyer's agreement with builders

High Court of Delhi manifested its comments

over taxability of capital gains on sale of

immovable property as long term or short term.

The issue under consideration is that whether

the date of booking the rights in an apartment

should be considered or the date of signing

buyer’s agreement with the builder should be

taken into consideration.

The 36 months period under Section 2(42A) of

the Act for deciding whether booking rights

are short-term capital asset or long-term

capital asset should be counted from date of

buyer's agreement and not from the date of

booking/date of allotment application/

confirmation letter where the allotment

application/confirmation letter states clearly

that no right to provisional or final allotment

accrues until Buyer's agreement is signed and

returned to the builder.

5

Vikas Lok Sewa Smiti v/s Commissioner of

Income-tax -II, Agra (ITAT Agra Bench)

The assessee was engaged in educational

activities, merely because it engaged Z, a

commercial venture for setting up of

school or to provide educational programs

to school of assessee, it would not make

assessee disentitled for registration

Facts

The assessee was an educational society

registered under the Societies Registration Act.

It engaged ‘Z’ for providing educational

contents and producing or procuring

educational software and providing guidance

for setting up schools and conducting classes

for vocational courses. It filed application for

grant of registration under Section 12AA of the

Act.

The Commissioner, on perusal of the

documents, found that school was being

projected as an upper end educational

experience where boarding and lodging

facility would be available, once the

construction would be completed; and that 'Z'

was a company, which was being run as

commercial venture and was not having any

registration under Section 12A of the Act and

exemption under Section 10(23). The

Commissioner held that only for the reason

that the society would be running a school, it

could not be said that the society was carrying

charitable activities. The Commissioner,

accordingly, found that the assessee would

run a commercial venture and, hence,

registration claim was denied.

Held

Ongoing through the definition of 'charitable

purpose', it is clear that the education per se is

charitable activity. The Commissioner did not

dispute that the aims and objects of the

society are educational only and as such

charitable in nature. Moreover, merely

because the assessee had engaged 'Z', a

commercial venture, the assessee would not

be disentitled for registration. Ultimately, it is the

society who has to run educational school for

achieving its objects.

Further, at the stage of grant of registration

genuineness of the objects has to be tested.

Thus, there was enough of documentation to

prove that the assessee was engaged in

educational activities and had the same aims

and objects and, as such, satisfied the

requirement of Section 12AA of the Act for

grant of registration. In view of the above, the

impugned order was set aside and the

Commissioner was directed to grant

registration to the assessee under Section 12AA

of the Act from the date of filing of application

before him as per law.

6

TRANSFER PRICING

Whirlpool of India Ltd. Vs. DCIT I.T.A .No.-

426/Del/2013 (ASSESSMENT YEAR-2008-09)

Expenses in nature of discount are outside

purview of total composition of AMP

expenses for purposes of determination of

their ALP

The assessee incurred certain amount of

advertisement expenses and claimed

exclusion of certain sum described by it as

'Pricing adjustment' from AMP expenses for

purpose of determination of ALP in that regard.

It claimed that such 'Pricing adjustment' was

nothing but a leverage in the maximum retail

price of the products sold to the dealers and

distributors of the assessee-company as a profit

mark-up in the form of extra trade discount.

The TPO did not accept the Assessee's

contention for the elimination of this amount

from the total AMP expenses by opining that it

was a tool employed by the assessee to

create the brand loyalty amongst its dealers.

The DRP and, in turn, the Assessing Officer

accepted the TPO's point of view on this

aspect.

The Special Bench of the Tribunal in the case of

LG Electronics India (P.) Ltd. has held that 'the

expense in connection with the sales which do

not lead to brand promotion cannot be

brought within ambit of 'AMP expenses' for

determining the cost/value of international

transactions'. It has further been held that the

logic in the exercise of finding out the AMP

expenses towards creation of marketing

intangible for the foreign AE starts with

identifying the expenses which are otherwise in

the nature of AMP. If an expenditure itself is not

in the nature of AMP, that ought to be

excluded at the very threshold. From the

above observations of the Special Bench on

this issue, it is manifest that the expenses, which

are in the nature of discount, are outside the

purview of total composition of AMP expenses

for the purposes of determination of their ALP.

The TPO duly accepted the nature of the

amount as discount and incentives to the

Assessee's dealers and distributors. He

proceeded to include this amount in the total

AMP expenses by holding that it was a tool

employed by the assessee to create this brand

loyalty among the dealers. Thus, it is patent

that the nature of the amount in question is

undisputed, as being discount given to dealers

on the sales made. Once it is held that a

particular amount is discount and is not in the

nature of direct advertisement expenses, the

same stands expelled from the qualifying

amount which undergoes the process of

determination of ALP of the AMP expenses.

Bharti Airtel Limited Vs. Additional

Commissioner of Income Tax

I.T.A. No.: 5816/Del/2012 Assessment year:

2008-09

A transaction (such as a corporate

guarantee) which has no bearing on

profits, incomes, losses or assets of the

enterprise is not an ‘international

transaction’ u/s 92B(1) and not subject to

transfer pricing

The assessee issued a corporate guarantee to

Deutsche Bank on behalf of its associated

enterprise, Bharti Airtel (Lanka), whereby it

guaranteed repayment for working capital

facility. The assessee claimed that since it had

not incurred any cost on account of issue of

such guarantee, and the guarantee was

issued as a part of the shareholder activity, no

transfer pricing adjustment could be made.

However, the TPO held that as the AE had

benefited, the ALP had to be computed on

CUP method. This was upheld by the DRP by

relying on the retrospective amendment to s.

92B which specifically included guarantees in

7

the definition of “international transaction”. On

appeal by the assessee to the Tribunal HELD

allowing the appeal:

(i) A transaction between two enterprises

constitutes an “international transaction” u/s

92B only if it has a bearing on profits, incomes,

losses, or assets of such enterprises”. Even the

transactions referred to in the Explanation to s.

92 B, which was inserted with retrospective

effect (which includes giving of guarantees

under clauses (c)), should also be such as to

have a bearing on profits, incomes, losses or

assets of such enterprise;

(ii) The onus is on the revenue to demonstrate

that the transaction has a bearing on profits,

income, losses or assets of the enterprise. The

said impact has to be on real basis, even if in

present or in future, and not on contingent or

hypothetical basis. There has to be some

material on record to indicate, even if not to

establish it to hilt, that an intra AE international

transaction has some impact on profits,

income, losses or assets;

(iii) When an assessee extends assistance to

the AE, which does not cost anything to the

assessee and particularly for which the

assessee could not have realized money by

giving it to someone else during the course of

its normal business, such an assistance or

accommodation does not have any bearing

on its profits, income, losses or assets, and,

therefore, it is outside the ambit of international

transaction u/s 92B (1).

Maersk Global Centres (India) Private

Limited, Vs. Asst. Commissioner of Income

Tax

I.T.A. No.7466/Mum/2012 Assessment Year:

2008-2009

The Special Bench of the Mumbai ITAT

considering two issues held as under:

Whether BPO companies can be

compared with KPO entities

The Tribunal held that IT enabled services

cannot be further dissected into BPO and

KPO services for the purposes of

comparability analysis inter-alia in view of

the following:

i. Due to a broad range of activities

in the ITeS sector and significant

overlap between such services, no

strict line of distinction can be

drawn between low end BPO or

high end KPO activities;

ii. The upward shift of BPO industry in

the value chain has resulted in

emergence of KPOs and due to the

mixed nature of both services, the

artificial segregation or creation of

a third ‘in-between’ category is not

possible.

Companies earning abnormally high profit

margins as comparable companies:

(i) Indian TP regulations deviate from

the OECD guidelines by adopting

the arithmetic mean instead of

quartile range suggested by the

OECD, which excludes outliers.

(ii) Potential comparables cannot be

excluded merely on the ground of

abnormally high profits.

(iii) Such abnormal margins should

trigger further investigation and

analysis to inter-alia ascertain

whether such high profits reflect a

normal business condition or arise

from some abnormal conditions

during the year; are there any

differences in functions and if all

comparability conditions are met

by such potential comparables.

8

SERVICE TAX

Department cannot enforce demand in

respect of reimbursement of expenses

In case of Intercontinental Consultants and

Technocrats Pvt. Ltd. v. Union of India, 2013

Honorable Delhi High Court has held that

service tax is not applicable on reimbursement

of expenses incurred by Service Provider.

Thereafter, department has filed appeal

before Apex Court (C.A. No.2013/2014). Till

date the issue related to taxability of

reimbursements is pending before Apex Court

however department is proceeding further in

terms of Show Cause Notices as well as

enforcing demand against service providers.

Recently, aggrieved by various show cause

notices issued by the Service Tax Department

in terms of Section 67 of the Finance Act, 1994

read with Rule 5 (1) of the Service Tax

(Determination of Value) Rules, 2004;

petitioners has filed writ petitions before

Honorable Delhi High Court (M/s. Balaji Mariline

Pvt. Ltd. Versus Joint Commissioner, Service

Tax, Commissioner of Service Tax 2014).

In this case, referring the judgment of Delhi

High Court in case of Intercontinental

Consultants and Technocrats Pvt. Ltd. v. Union

of India, 2013, honorable Delhi High Court has

directed Service Tax Department not to

proceed further in terms of the impugned show

cause notices or draw or enforce any demand

against the petitioner. The court has also

clarified that the Service Tax Department

would, however, be at liberty to initiate

proceedings in the event of and having

regard to the final orders of the Supreme Court

in the pending appeal.

VALUE ADDED TAX

Central Sales Tax (Delhi) [Amendment]

Rules,2014

Reconciliation Return

Rule 4 of CST (Delhi) Rules has been amended.

In addition to the returns required under Rule 3,

every dealer shall also furnish to the

Commissioner, a Reconciliation Return for a

year in Form 9 relating to receipt of

declarations/certificates within a period of 6

months from the end of the year to which it

relates. The return shall be filed electronically.

The return may be revised by the end of the

financial year next to which it relates.

Amendment and Cancellation of Registration

Certificate

In the said rules, after Rule 10, Rule 10A has

been inserted which provides that the

application for cancellation of registration can

be filed in Form 10 and application for

amendment of registration can be filed in

Form 11.

Notification No.F.3(27)Fin.(Rev-I)2013-

14/DSVI/292 dated 5.03.2014

Online filing of information/return by using

digital signature

To facilitate the dealer/person to submit

information/return etc. online by using digital

signatures, the provisions contained In the

Information Technology Act, 2000 and the rules

made and directions given under the

Information Technology Act. 2000 have been

extended to the procedures under the Delhi

Value Added Tax Act, 2004 and Delhi Value

Added Tax Rules, 2005.

Notification No.F.3(21)Fin/(Rev-

I)/2013/DSVI/347 dated 26.03.2014

9

Appropriate Government Treasury for

collection of tax, interest, penalty or any

other amount due under the Act

The following banks located in the National

Capital Territory of Delhi have been notified as

the ‘Appropriate Government Treasury’ for

collection of tax, interest, penalty or any other

amount due under the Act or Central Sales Tax

Act, 1956 from the dealers registered or liable

to be registered under the Act, casual traders

and contractees (TAN holders):

1. Allahabad Bank 2. Axis Bank 3. Bank of

Baroda 4. Bank of Maharashtra 5. Canara

Bank 6. Central Bank of India 7.

Corporation Bank 8. HDFC Bank 9. ICICI Bank

10. IDBI Bank 11. Indian Bank 12. Indian

Overseas Bank 13. Kotak Mahindra Bank 14.

Oriental Bank of Commerce 15. Punjab & Sind

Bank 16. Punjab National Bank 17. State Bank

of India 18. Syndicate Bank 19. UCO Bank 20.

Union Bank of India 21. United Bank of India 22.

Vijaya Bank.

Notification No.F.7(400)/Policy/VAT/2014/1387-

1398 dated 28.03.2014

CUSTOMS

Conversion Rate for Foreign Exchange

Rate of exchange of conversion of each of the

following foreign currency into Indian currency

or vice versa shall, with effect from 21st March,

2014 be the rate mentioned against it in the

given tables:

SCHEDULE-I

S.

No.

Foreign

Currency

Rate of exchange of

one unit of foreign

currency equivalent to

Indian rupees

(For

Imported

Goods)

(For Export

Goods)

1. Australian

Dollar

56.85 54.50

2. Bahrain Dinar 167.10 157.90

3. Canadian

Dollar

55.10 53.75

4. Danish Kroner 11.55 11.15

5. EURO 85.65 83.65

6. Hong Kong

Dollar

7.95 7.80

7. Kuwait Dinar 223.75 211.35

8. New Zealand

Dollar

52.95 51.45

9. Norwegian

Kroner

10.25 9.95

10. Pound

Sterling

102.45 100.20

11. Singapore

Dollar

48.60 47.55

12. South African

Rand

5.80 5.45

13. Saudi Arabian

Riyal

16.80 15.90

14. Swedish

Kroner

9.70 9.40

15. Swiss France 70.35 68.60

16. UAE Dirham 17.15 16.20

17. US Dollar 61.75 60.75

SCHEDULE-II

S. No. Foreign

Currency

Rate of exchange of 100 units of foreign

currency equivalent to Indian rupees

(For Imported

Goods)

(For Export Goods)

1. Japanese

Yen

60.55 59.10

2. Kenya Shilling 73.00 68.85

10

Notification No.24/2014-Customs (N.T.) dated

20th March, 2014

CASE LAWS

Commissioner of Central Excise,

Aurangabad v. Komal Enterprises,

(2014)

Credit allowed even if vendor has charged

duty wrongly

Recently, the CESTAT, MUMBAI BENCH in the

case of Commissioner of Central Excise,

Aurangabad v. Komal Enterprises, (2014) held

that buyer is eligible to avail CENVAT Credit of

duty charged by supplier irrespective of the

fact that activity carried on by supplier does

not amount to manufacture of goods.

The assessee in the cited case was engaged in

manufacture of springs and press pans for

which he procured S.S.Wires from supplier. The

supplier has paid duty on such wires and the

appellant took credit of the duty paid.

Department argued that supplier's process of

drawing wire from wire rods did not amount to

manufacture and, therefore, no duty was

payable by supplier and, accordingly, no

credit could be taken by assessee. Honorable

Tribunal held that the supplier issued

CENVATable invoices and paid duty thus as

per rule 9 of CENVAT Credit Rules, 2004,

assessee was entitled credit of duty paid.

CCE Salem vs. Salem Starch & Mfr’s

Service Indl. Co-op. Society Ltd., 2014

Clearing & Forwarding Agent Services

The assessee society was receiving the goods

from its member-manufacturers at its doorstep

for auction sale to member merchants. It

stored the products, tested its quality, provided

a finance facility for the manufacturers by way

of advances, sold the products on auction

whereafter the buyer took delivery of the

goods. The Court held that in absence of any

responsibility to collect the goods from the

manufacturer’s premises nor to arrange for

dispatch to the buyer, the assessee cannot be

held to be a clearing and forwarding agency.

B. G. Shirke Construction Technology

Pvt. Ltd. vs. CCE, 2014

Commercial or Industrial Construction service

Sports Complex Stadium constructed for the

purpose of holding games which was allowed

to be used by the public later on, on payment

of user charges is a public facility for the

recreation of the public and it does not come

under the category of commercial or industrial

construction merely because some amount is

charged for using the facility. Hence

construction of sports stadium being a non-

commercial construction is not liable for

service tax under the category of

“Commercial or Industrial Construction

service”.

Tandus Flooring India Pvt. Ltd. vs. CST

2014

Export of Service / Place of provision of service

Where the applicant proposed to engage

itself in providing Marketing and Sales Support

Services to a US and Chinese companies for

sale of their products in India, for which it was

to receive monies in convertible foreign

11

exchange, the Authority on Advance Ruling

held that the place of provision service to be

provided by the applicant would be outside

India since the location of the service recipient

is in China and US respectively (vide rule 3 of

the Place of Provision Rules, 2012). Further,

since the case met with the requirements of

Rule 6A of Service Tax Rules, 1994, the

applicants service would also be considered

as “export” of service.

FEMA

A.P. (DIR Series) Circular No. 113 dated

March 26, 2014

External Commercial Borrowings (ECB) for

Civil Aviation Sector

Vide A.P. (DIR Series) Circular No. 113 dated

April 24, 2012, External Commercial Borrowings

(ECB) can be raised by airline companies for

working capital as a permissible end-use,

under the approval route, subject to the

conditions stipulated in the said Circular. The

scheme was extended till December 31, 2013

vide A.P. (DIR Series) Circular No. 116 dated

June 25, 2013.

On a review and subject to all other conditions

stipulated in aforesaid Circular dated April 24,

2012, remaining unchanged, it has been

decided, vide this Circular, that this scheme of

raising ECB for working capital for Civil Aviation

Sector will continue till March 31, 2015.

A.P. (DIR Series) Circular No. 114 dated

March 27, 2014

Risk Management and Inter Bank Dealings

Under the extant guidelines of the Foreign

Exchange Management (Foreign Exchange

Derivative Contracts) Regulations, 2000 dated

May 3, 2000 (Notification No. FEMA/25/RB-2000

dated May 3, 2000) as amended from time to

time and A.P. (DIR Series) circular no. 58 dated

December 15, 2011, relating to hedging of

currency risk of probable exposures based on

past performance by residents:

(a) Exporters are allowed to hedge

currency risk on the basis of a

declaration of an exposure up to an

eligible limit computed as the average

of the previous three financial years’

(April to March) actual export turnover

or the previous year’s actual export

turnover, whichever is higher.

(b) Importers are allowed to hedge up to

an eligible limit computed as 25

percent of the average of the previous

three financial years’ actual import

turnover or the previous year’s actual

import turnover, whichever is higher.

(c) All forward contracts booked under this

facility by both exporters and importers

are required to be on fully deliverable

basis. In case of cancellation,

exchange gain, if any, should not be

passed on to the customer.

Vide this circular, in order to provide greater

operational flexibility, it has been decided to

relax the restriction at paragraph (c) above.

Henceforth, contracts booked up to 75

percent of the eligible limit mentioned at

paragraph (a) and (b) above may be

cancelled with the exporter/importer

bearing/being entitled to the loss or gain as

12

the case may be. Contracts booked in excess

of 75 percent of the eligible limit mentioned at

paragraph (a) and (b) above shall be on a

deliverable basis and cannot be cancelled,

implying that in the event of cancellation, the

exporter/importer shall have to bear the loss

but will not be entitled to receive the gain.

A.P. (DIR Series) Circular No. 115 dated

March 28, 2014

Merchanting Trade Transactions – Revised

Guidelines

By A.P. (DIR Series) Circular No. 95 dated

January 17, 2014 the existing guidelines laid out

in A.P. (DIR Series) Circular Nos.106 & 4 dated

June 19, 2003 and July 19, 2003, respectively,

were reviewed, in the light of the

recommendations of the Technical Committee

on Services / Facilities to Exporters under

Chairmanship of Shri G. Padmanabhan, to

further liberalise and simplify the procedure.

In view of suggestions received from

merchanting traders and trade bodies, the

guidelines on merchanting trade transactions

have been further reviewed and revised

guidelines have been issued vide this circular.

COMPANY LAW

Below mentioned Rules have been notified by

the Ministry of Corporate Affairs in relation to

different chapters of the Companies Act, 2013,

effective from 1st April, 2014:

Sl. No.

Respective

Chapter of the

Companies Act,

2013

Subject Matter Date of Notification

01 Chapter

1

The Companies

(Specification of

definition details) Rules,

2014

27th March,

2014

02 Chapter

2

The Companies

(Incorporation) Rules,

2014

30th March,

2014

03 Chapter

3

The Companies

(Prospectus and

Allotment of Securities)

Rules, 2014

27th March,

2014

04 Chapter

4

The Companies (Share

Capital and Debenture)

Rules, 2014

27th March,

2014

05 Chapter

5

The Companies

(Acceptance of

Deposits) Rules, 2014

31st March,

2014

06 Chapter

6

The Companies

(Registration of

Charges) Rules, 2014

27th March,

2014

07 Chapter

7

The Companies

(Management and

Administration) Rules,

2014

27th March,

2014

08 Chapter

8

The Companies

(Declaration and

Payment of Dividend)

Rules, 2014

27th March,

2014

09 Chapter

9

The Companies

(Accounts) Rules, 2014

27th March,

2014

10 Chapter

10

The Companies (Audit

and Auditors) Rules,

2014

31st March,

2014

11 Chapter

11

The Companies

(Appointment and

Qualification of

Directors) Rules, 2014

27th March,

2014

12 Chapter

12

The Companies

(Meeting of Board and

its Powers) Rules, 2014

27th March,

2014

13 Chapter The Companies 31st March,

13

13 (Appointment and

Remuneration of

Managerial Personnel)

Rules, 2014

2014

14 Chapter

14

The Companies

(Inspection,

Investigation and

Enquiry) Rules, 2014

31st March,

2014

15 Chapter

21

The Companies

(Authorised to

Registered) Rules, 2014

31st

March,

2014

16 Chapter

22

The Companies

(Registration of Foreign

Companies) Rules, 2014

31st March,

2014

17 Chapter

24

The Companies

(Registration Offices and

Fees) Rules, 2014

31st March,

2014

18 Chapter

26

The Nidhi Rules, 2014 28th March,

2014

19 Chapter

29I

The Companies

(Adjudication of

Penalties) Rules, 2014

28th March,

2014

20 Chapter

29II

The Companies

(Miscellaneous) Rules,

2014

28th March,

2014

Clarification with regard to section 180 of

the Companies Act, 2013

[General Circular No 4/2014 dated

25/03/2014]

It has been clarified by the Ministry of

Corporate Affairs that the ordinary resolution

passed under section 293 of the Companies

Act, 1956 prior to 12.09.2013 with reference to

borrowings (subject to the limits prescribed)

and / or creation of security on the assets of

the company will be regarded as sufficient

compliance of the requirements of section 180

of the Companies Act, 2013, for a period of

one year from the date of notification of said

section 180.

Commencement Notification of the

Companies Act, 2013

[Reference No S.O(E) dated 26/03/2014]

In exercise of the powers conferred by sub

section (3) of section 1 of the Companies Act,

2013 (18 of 2013) the Central Government had

notified 183 new sections of the said Act, on

the 26th day of March, 2014, effective from 1st

day of April, 2014.

Investor Education and Protection Fund

(Uploading of information regarding

unpaid and unclaimed amounts lying with

companies) Amendment Rules, 2014

[Reference No G.S.R(E) dated 27/03/2014]

In exercise of the powers conferred by sub-

section (1) of section 642 read with sub-section

(3) of section 205C of the Companies Act, 1956

(1 of1956), the Central Government had made

the Investor Education and Protection Fund

(Uploading of information regarding unpaid

and unclaimed amounts lying with

Companies) Amendments Rules, 2014,

effective from the 31st day of March, 2014.

In order to amend the Investor Education and

Protection Fund (Uploading of information

regarding unpaid and unclaimed amounts

lying with Companies) Rules, 2012 (hereinafter

referred to as the said rules):

1. In rule 2 of the said rule, after clause(a),

the following clause has been inserted

namely:

‘(aa) “corresponding new Bank”

means the corresponding new Bank as

defined in clause (d) of section 2 of the

Banking Companies (Acquisition and

14

Transfer of Undertakings) Act, 1970 (5 of

1970)and clause (b) of section 2 of the

Banking Companies (Acquisition and

Transfer of Undertakings) Act, 1980.

2. In rule 3 of the said rules, after the

words, figures and letter, “section 205C

of the Act”, the following words, figures,

letter and brackets have been inserted

namely:

“and corresponding new Bank shall with in a

period of 90 days from the date of holding

their Annual General Meeting every year,

identify the money transfer to the Unpaid

Dividend Account in pursuance of section 10B

of the Banking Companies (Acquisition and

Transfer of Undertakings) Act, 1970 and section

10B Banking Companies (Acquisition and

Transfer of Undertakings) Act, 1980, which

remains unpaid or unclaimed for a period of

seven years from the date of such transfer.”

3. In Form 5INV annexed to the said rules,

for the word “company” wherever it

occurs, the words “company and

corresponding new Bank” shall be

substituted.

Investor Education and Protection Fund

(awareness and protection of investors)

Amendment Rules 2014

[Reference No G.S.R(E) dated 27/03/2014]

In exercise of the powers conferred by sub-

section (1) of section 642 read with sub-section

(3) of section 205C of the Companies Act, 1956

(1 of1956), the Central Government had made

the Investor Education and Protection Fund

(awareness and protection of investors)

Amendment Rules 2014, effective from the 31st

day of March, 2014.

In order to amend the Investor Education and

Protection Fund (awareness and protection of

investors) Rules, 2001 (hereinafter referred to as

the said rules):

1. In rule 2 of the said rules, after clause

(d), the following clause has been

inserted namely:

‘(da) “corresponding new bank” means the

corresponding new bank as defined in clause

(d) of section 2 of the Banking Companies

(Acquisition and Transfer of Undertakings) Act,

1970 (5 of 1970) and clause (b) of section 2 of

the Banking Companies (Acquisition and

Transfer of Undertakings) Act, 1980(40 of 1980):’

2. In rule 3 of the said rules, in sub-rule (i),

after the words “Any money required to

be credited by the companies to the

fund, as provided in the Act”, the

following shall be inserted, namely:

“and any money transferred to the

Unpaid Dividend Account of a

corresponding new bank in pursuance

of section 10B of Banking Companies

(Acquisition and Transfer of

Undertakings) Act, 1970 and section

10B of Banking Companies (Acquisition

and Transfer of Undertakings) Act, 1980,

which remains unpaid or unclaimed for

a period of seven years from the date

of such transfer”

3. In Form I annexed to said rules, for the

word “company”, wherever it occurs,

the words “company and

15

corresponding new bank” shall be

substituted.

Nomenclature of various forms prescribed

under the provisions of Companies Act,

2013.

[Reference No: S.O(E) dated 27/03/2013]

In order to facilitate easy understanding of the

e-forms being rolled out under the provisions of

Companies Act, 2013 and Rules made

thereunder, the Ministry of Corporate Affairs

had notified the nomenclature of various forms

prescribed under the provisions of Companies

Act, 2013 that are mandatorily numbered

alpha-numeric unlike numbering of various

forms under the Companies Act, 1956. Initial of

forms is to be started with alphabet of two or

three letters based on the subject of the

Chapter, followed by serial number of the

form. This will define the nature of the forms

and would be easy to recognise.

Online payment of stamp duty and court

fee stamp for issue of certified copies

[General Circular No 5/2014 dated

28/03/2014]

With a view to identify and improve the

component causing delay in issue of certified

copies the Ministry has enabled payment of

Stamp Duty as well as Court fee online through

MCA Portal effective from 31st March, 2014.

Amount of Court Fee shall be added to the

MCA fee calculated by the system for getting

Certified Copies based on the State in which

the registered office of the company is

situated.

Stamp Duty for obtaining certified true copy

would also be paid electronically through the

system as per the existing process, which will

be calculated based on document, number of

copies requested and the State in which the

registered office of the Company is situated.

Roll out plan of various forms under the

Companies Act, 2013 and continuance of

forms under the provisions of Companies

Act, 1956

[General Circular No 6/2014 dated

28/03/2014]

In order to facilitate the completion of notified

sections the Ministry has planned a staggered

roll out of various forms. It has been decided to

waive fees for all event based filing whose due

date falls between 01/04/2014 to 30/04/2014.

For the same, a separate Circular will be being

issued by the Policy Cell of this Ministry.

From 01/04/2014 to 14/04/2014 except existing

e-forms mentioned in Table given herein below

no other e-forms will be available for filing.

Other Front office portal services will continue.

From 01/04/2014 to 13/04/2014 the period will

be used for clearing pending e-forms already

filed under the provisions of Companies Act,

1956.

Sl

No.

Old

form

Purpose of form

01 66 Form for submission of

compliance

certificate with the

Registrar

02 14LLP Form for intimating to

Registrar of

Companies of

conversion of the

company into limited

liability partnership

(LLP).

03 20B Form for filing annual

return by a company

having a share capital

with the Registrar

16

04 21A Particulars of annual

return for the

company not having

share capital

05 23AC Form for filing balance

sheet and other

documents with the

Registrar

06 23ACA Form for filing Profit

and Loss account and

other documents with

the Registrar

07 23ACA-

XBRL

Form for filing XBRL

document in respect

of Profit and Loss

account and other

documents with the

Registrar

08 23AC-XBRL Form for filing XBRL

document in respect

of balance sheet and

other documents with

the Registrar

09 23C Form of application to

the Central

Government for

appointment of cost

auditor

10 23D Form for Information

by Cost Auditor to

Central Government

11 35A Information to be

furnished in relation to

any offer of a scheme

or contract involving

the transfer of shares

or any class of shares

in the transferor

company to the

transferee company

12 A-XBRL Form for filing XBRL

document in respect

of compliance report

and other documents

with the Central

Government

13 FTE Application for striking

off the name of

company under the

Fast Track Exit(FTE)

Mode

14 I-XBRL Form for filing XBRL

document in respect

of cost audit report

and other documents

with the Central

Government

15 5-INV Transfer unpaid

dividend amount to

IEPF

16 21 Order of the

court/authority till

14/04/2014

17 Refund Application for

requesting refund of

fees paid

18 Bank ACC Application for

simplifying bank

account opening

process as user shall

not be required to

submit any physical

application form.

19 Investor

Complaint

Form

Form for filing

complaint(s) against

the company

Table of Fees: Fee for filings etc. under

section 403 of the Companies Act, 2013

[Circular dated 01/04/2014]

Pursuant to rule 12 of the Companies

(Registration of Offices and Fees) Rules, 2014

the Ministry of Corporate Affairs had notified a

Table of fees for the documents required to be

submitted, filed, registered or recorded or for

any fact or information required or authorized

to be registered under the Act, within the time

specified in the relevant provision on payment

of such fee as provided in the said Table.

Commencement of provisions of the

Companies Act, 2013 with regard to

maintenance of books of accounts and

preparations/adoption/filing of financial

statements, auditors report, Boards report

17

and attachments to such statements and

reports- Applicability with regard to

relevant financial year

[General Circular dated 08/2014 dated

04/04/2014]

Pursuant to the receipt of various requests for

clarification with regard to the relevant

financial year with effect from which such

provisions of the new Act relating to

maintenance of books of account,

preparation, adoption and filing of financial

statements (and attachments thereto),

auditors report and Board's report will be

applicable, the Ministry of Corporate Affairs

had clarified that the financial statements

(and documents required to be attached

thereto), auditors report and Board report in

respect of financial years that commenced

earlier than 1st April, 2014 shall be governed by

the relevant provisions/ Schedules/ rules of the

Companies Act, 1956 and that in respect of

financial years commencing on or after 1st

April, 2014, the provisions of the new Act shall

apply.

TRANSACTIONS THAT

MADE HEADLINES

Diageo makes fresh open offer to buy

majority stake in United Spirits for up to

$1.9B

Tata Steel selling Kiwi distribution arm

for around $24M

OnMobile set to sell Voxmobili for up to

$26M

Sun Pharma to buy Ranbaxy in $3.2B

all-stock deal

Japan's Meidensha Corp buys 23%

stake in Prime Electric

KEC sells its Thane land asset to Tata

Housing for $35M

UPL sells entire stake in Brazilian

agrochemical JV for $59M

Deal of the month: Taqa buying

Jaypee Group’s two hydro power

assets for $1.6B

Facebook to buy virtual reality goggles

maker for $2B

Oberoi Realty to buy land in Mumbai

from Tata Steel for $190M

www.spnagrath.com

A-380, Defence Colony, New Delhi – 110024, India.

This publication is intended as a service to clients and associates

and to provide them with details of the important Transaction

updates. It has been prepared for the general guidance on

matters of interest only, and does not constitute professional

advice. No person shall act upon the information contained in this

publication without obtaining specific professional advice. Due

care has been taken while compiling the information, however, no

representation (express or implied) is given as to the accuracy or

completeness of the information contained in this publication