Income tax department eyes over Rs 100 bn from ‘struck off’ firms

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The income-tax (I-T) department is estimating tax recovery of over Rs 100 billion from companies that have been struck off from records of the Registrar of Companies (RoC) last year.

The tax department is in the process of filing a petition before the National Company Law Tribunal (NCLT) for restoration of registration in as many as 50,000 such companies.

The RoCs had struck off 300,000 companies after it was found they had not filed their statutory returns. Directors of these companies have been prohibited from holding directorships in any other company.
The move follows Central Board of Direct Taxes’ (CBDT) directive to identify, process and file petition to restore these companies by August 31. The board also asked the Ministry of Corporate Affairs (MCA) not to oppose the restoration application in the tribunal, as such a move would refrain them from launching tax recovery proceedings against these firms.
“Several of these companies are restricted to operate their bank accounts and movable and immovable properties until they are restored. The restoration will compel these firms to make relevant disclosures of credentials under Companies Act, and then accordingly tax proceeding will be initiated for tax recovery,” said an I-T official.

Tax industry experts, too, believe that restoration is essential to recover taxes due from these firms.

“The tax department is contesting the strike off of so-called companies as in several cases there would be pending tax demands that cannot be recovered if the company is not active. Also, even in cases where genuine companies have been struck off, with the best intentions, the companies would not be able to pay the tax dues as all their assets including bank accounts would be non-operational,” said Amit Maheshwari, partner at Ashok Maheshwary & Associates LLP.

The I-T department is of the view that these companies abused their corporate structure by creating multi-layering during  demonetisation for cash deposits. I-T probe also reveals that many individuals have used these firms for siphoning money or converting undisclosed cash to legitimate money post the note ban.

Official data say that 35,000 companies deposited and withdrew cash worth over Rs 170 billion after the note ban, through about 60,000 bank accounts.

It was noticed that the accounts that had negligible balance on November 8, 2016, have seen significant cash deposits and withdrawal during this period.

According to people with knowledge of the matter, along with restoration, the I-T department will also start issuing notices to these firms under Section 179 of the I-T Act, which makes the company’s directors/promoters liable to pay dues on behalf of the firm, without adjudication by the court.

Further, tax recovery officers have been asked to conduct survey operations on select firms where the tax demand is high. In cases where assets or bank accounts are lying abroad, the department will seek the foreign tax authority’s assistance to recover tax claims with the provisions in the relevant treaty, said another senior official.

Sources said that in a meeting of a task force on shell companies set up by the Prime Minister’s Office, on November 30 last year, the director general of corporate affairs (DGCoA) had suggested that the tax department approach RoCs for taking up the matter of reviving these companies. It was also suggested that revenue considerations should weigh in favour of restoring them.

Apart from these companies, another set of above 200,000 firms have been sent notices and action will soon be taken against them. However, the tax department wants MCA to keep them posted before striking off any company, since there could be tax dues.

 Taxing Affair
  • I-T pursuing restoration of 50,000 struck-off companies
  • RoCs had struck off 300,000 companies, prohibited their directors from holding directorship in other firms
  • Tax industry experts believe that restoration is essential for recovery of taxes from these firms
  • Restoration will allow companies to operate bank account, assets
  • After restoration, I-T to issue notices under Section 179 of I-T Act
  • Directors/promoters would be liable to pay tax dues
  • These firms abused corporate structure to facilitate significant cash transactions post note ban

Source: Business Standard

GST annual return due date extended till 31 August 2019 for FY 2017-18

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35th GST Council Meeting Highlights

35th GST Council Meeting was held on 21 June 2019 at New Delhi, after a gap of more than three months, chaired by Union Finance Minister, Mrs Nirmala Sitharaman.

This GST Council meeting has been called at a time when the countdown to upcoming Union Budget 2019 is less than a month away. A lot of expectations piled up over months concerning various indirect tax issues will be addressed in this meeting.

Highlights of 35th GST Council Meeting

The 35th GST Council meeting concluded with consensus on the following matters

  1. GST annual return due date extended till 31 August 2019 for FY 2017-18

The due date for filing GSTR-9, GSTR-9A, and GSTR-9C for the FY 2017-18 has been extended by two months, till 31 August 2019. Official notification can be made anytime soon.

  1. Aadhaar-enabled GST Registration introduced:

In order to ease the current process of GST registration and reduce the paperwork involved, GST Council has given a go-ahead to a new system for verification of taxpayers registering themselves under GST.  Aadhaar number shall be linked to the GSTIN while generation.

  1. NAA tenure extended by two years

Tenure of National Anti-profiteering Authority (NAA) was due to end by 30 November 2019. GST Council has further extended this tenure by two years, to enable it to take up all the pending cases. Hence, the authority can take up new cases in future due to rate cut issues, indicating that the GST Council has plans for further rationalisation of GST rates.

  1. 10% penalty to apply for any delay in depositing profiteered amount

GST Council has approved a levy of 10% penalty for delay in depositing the profiteered amount by more than 30 days. This is a fair measure that would encourage timely compliance by the taxpayer.

  1. E-invoicing to start from January 2020

The new system for raising all the tax invoices on the GST portal has received in-principle approval for implementation from 1 January 2020. This applies to only B2B invoicing. By this system, no separate e-way bill will be required in case of e-invoice. Returns to be framed from these e-invoices. A phased implementation is being worked out.
Earlier, the government had fixed Rs 50 crore as the limit for the applicability of e-invoicing.

  1. E-ticketing made mandatory for multiplexes

Among other major decisions, the GST Council approved the electronic ticketing system, for multiplexes, having multi-screens. This will help curb cases of tax evasion and the use of black tickets that have been prevalent.

  1. Rate cut decision on electric vehicles, chargers & leasing thereof deferred; Committee to submit its report

The decision to cut GST rates for electric vehicles and electric chargers have been postponed to the next Council meeting. The matter has been referred to the Fitment Committee for checking the feasibility of the rate cut. At present, the GST rates for electric vehicles and electric chargers are 12% and 28% respectively.

Likewise, the valuation rules for goods and services pertaining to solar power generating systems and wind turbines will be placed before the next Fitment Committee. The suggestions made by this Committee will be placed before the next GST Council meeting.

  1. Rate cut for lottery put on hold; Matter to be referred before an Attorney General

The previous council meet had not tabled the rate cut matter for lotteries. The 35th GST Council meeting discussed the matter at length and also brought to light two pending cases on this matter before the high court and supreme court respectively. Although the courts had referred the matter back to GST Council, the Council has decided to consult the Attorney General of India.

  1. GSTAT to be GST Appellate Tribunal.

The GST council also definitively stated the Goods and Service Tax Appellate Tribunal will be the appellate authority and will adjudicate on appeals arising from central and state tax authorities’ in-house dispute resolution system. The states will decide the number of GSTAT required by them as a result of which there can be two tribunals in a single state.

  1. Other Due date extensions
Form New due date
ITC-04 for July 2017- June 2019 31 August 2019
CMP-02 for opting into the composition scheme for service providers under Notification 2/2019-CT rate 31 July 2019
  1. For non-filing of GST returns, E-way bills to be blocked

The law stated that where the GST returns in GSTR-3B/ GSTR-4 is not filed for two consecutive tax periods, e-way bill generation for such taxpayers would be disabled. This will be brought into effect from 21 August 2019, instead of the earlier notified date of 21st June 2019.

MCA sees Rs 2.8 lakh cr recovery from IBC-led resolution process

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Section 12 (A) of IBC allows for a withdrawal of an insolvency application if 90% of the creditors’ committee (CoC) by voting share approving it.

Terming the current insolvency process and its outcomes as ‘super success, Ministry of Corporate Affairs sees total recovery amount touching Rs 2.8 lakh crore through resolutions with the settlement of two key accounts, including some others — Essar Steel, where financial creditors have approved the resolution and Bhushan SteelNSE 5.27 % and Power.

“The 100 cases that have been settled through resolution accounts, Rs 1.8 lakh crore have been netted which is not a small amount and the accounts sitting on margin (Bhushan Steel and Power & Essar Steel), another Rs 1 lakh crore along with some other mid-sized resolutions can come, so Rs 2.8 lakh crore out of Rs 10 lakh crore of NPA that time is not a small amount, IBC is a super success”, says MCA senior officials on the insolvency processes

In case of Essar Steel, the CoC has approved the resolution process but the process got stuck after operational creditor Standard Chartered moved NCLAT for higher share from the funds. The debt-ridden steel firm had Rs 42,000 crore coming from the resolution plan of global steel major ArcelorMittal.

JSW Steel had revised its offer for Bhushan Power & Steel from Rs 11,000 crore to Rs18,000 crore and later to over Rs 19,000 crore which the CoC had approved.

And it is not just resolution process-led recoveries, the official said pre-resolution processes have also yielded results in 6,500 cases netting Rs 3 lakh crore on dead assets.

“6500 cases settled involving claims of close to Rs 3 lakh crore where they have been have settled before admission. And now after 12 (A) has been introduced, another 100 cases which are at stages of 90% CoC approval are moving towards out of court settlements. Both (in and outside resolutions and NCLT) are happening. About 500 cases have got settled through the court process and 6,500 cases settled even before admission”, said the officials.

Section 12 (A) of IBC allows for a withdrawal of an insolvency application if 90% of the creditors’ committee (CoC) by voting share approving it.

MCA officials dismissed the notion of high haircuts through resolution process. They said: “It (IBC) is super success. There should not be any brouhaha over haircuts. Will anybody pay more than what is the value? Suppose an asset is used for 20 years, there is nothing more to it, there is a Rs 50,000 crore loan, liquidation value is Rs 1,000 crore, so you get (the creditors) Rs 1,000 crore only.”

“Wherever a resolution has taken place, creditors are getting 200% of the liquidation value. So definitely value maximisation is the context, demand and supply will fix the value”, the officials said.

Source: Economic Times

MCA brings more clarity on guidelines for reserving the name of the Company

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The MCA has amended the Companies (Incorporation) Rules, 2014. In the revised Rule 8 for reservation of name of a company, the Ministry has elaborated the provision by inserting various illustrations. The Rule has been divided in to 2 parts – Rule 8A and Rule 8B. Rule 8A deals with the undesirable names and Rule 8B limits use of words such as Board, commission, National, Republic etc. only after obtaining previous approval of Government.

MCA has created a dedicated unit Central Registration Centre (CRC) to expedite the incorporation related activities including Name approval. Yet the stakeholders were facing difficulty in getting the name approved due to lack clarity in the Rules for selection of desired name. This amendment may bring relief to the stakeholders while choosing the name of a company. Revised Rules with detailed illustration will serve as ready-made guidance for both practicing professionals and CRC thereby further easing the incorporation process.

The MCA has amended the Companies (Incorporation) Rules, 2014. In the revised Rule 8 for reservation of name of a company, the Ministry has elaborated the provision by inserting various illustrations. The Rule has been divided in to 2 parts – Rule 8A and Rule 8B.

Rule 8A deals with the undesirable names and Rule 8B limits use of words such as Board, commission, National, Republic etc. only after obtaining previous approval of Central Government.

While considering the application related to name approval the following illustrations must be considered otherwise the names shall be considered as undesirable and will not be approved. Some of the illustrations have been discussed hereunder:

1. Name should not be identical to singular or plural form of existing company:

User of plural or singular form of the words will be considered as undesirable and such name wouldn’t be approved by authority on receipt of application for reservation of name of company. This can be better understood with the help of illustration as provided by MCA:

– For e.g. Green Technology Limited shall be considered same as Greens Technology Limited and Greens Technologies Limited.

2. Change in Tense would be considered as Similar Name:

The department will reject the application for reservation of name of the company if someone use different tense in name of the company such as:

– Ascend Solution ltd. is same as Ascended Solutions Ltd and Ascending Solutions Ltd.

3. Different use of phonetic spellings is treated as identical name:

Chemtech Ltd is same as Chemtec Ltd, Chemtek Ltd, Cemtek ltd, Kemtech Ltd and Kemteck Ltd.

4. Change in order of words of name and use of article before proposed name:

The application for reservation of name will not be considered if an applicant just changes the order of words or use of article before any name of the existing company for e.g.:

1. Ravi Builders and Contractors Ltd is same as Ravi Contractors and Builders Ltd

2. Congenial Tours Ltd is same as A Congenial Tours Ltd. and The Congenial Tours Ltd.

5. Variation in spelling of two name:

Name including slightly variation in spelling of existing company name would be considered as resembling name and department will reject the application for reserving a name of the company. For example,

– Color Technologies Ltd is similar as Colour Technologies Ltd.

6. Addition, deletion or modification of exiting name:

Addition, deletion or modification in any existing name of the company is not allowed and the concerned department will spare no time to reject the proposed name of the company. To instance,

1. Salvage Technologies Ltd is an existing name and it is same as Salvage Technologies Delhi Ltd. and Salvage Delhi Technologies Ltd.

2. Thunder Services Ltd is same as Thunder11 Services Ltd. and OneThunder Services Ltd.

7. Change in meaning either in Hindi or English:

Complete translation or transliteration or nay part of an existing name either in Hindi or English. For Example:

– National Electricity Corporation Ltd is same as Rashtriya Vidyut Nigam Ltd

8. Use of host name such as ‘www’ or a domain extension such as ‘net’, ‘org’, ‘dot’ or ‘com’ in one or both name: For Example

(i) Ultra Solutions Ltd. is same as Ultrasolutions.com Ltd.

(ii) Supreme Ultra Solutions Ltd. is not the same as Ultrasolutions.com Ltd.

9. Word or expression which can be used only after obtaining previous approval of Central Government are given below:

(a) Board;

(b) Commission;

(c) Authority;

(d) Undertaking;

(e) National;

(f) Union;

(g) Central;

(h) Federal;

(i) Republic;

(j) President;

(k) Rashtrapati;

(l) Small Scale Industries;

(m) Khadi and Village Industries Corporation;

(n) Financial Corporation and the like;

(o) Municipal;

(p) Panchayat;

(q) Development Authority;

(r) Prime Minister or Chief Minister;

(s) Minister;

(t) Nation;

(u) Forest corporation;

(v) Development Scheme;

(w) Statute or Statutory;

(x) Court or Judiciary;

(y) Governor;

(z) the use of word Scheme with the name of Government (s), State, India, Bharat or any Government authority or in any manner resembling with the schemes launched by Central, State or local Governments and authorities; and

(za) Bureau

 

Government releases compliance schedule to ensure MSME payments

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With a spate of corporate irregularities coming to the fore, the Centre has decided to make disclosure norms more stringent. Specified Companies (Furnishing of information about the payment to micro and small enterprise suppliers)
Every specified company shall file in MSME Form I details of all outstanding dues to Micro or small enterprises suppliers (whose payment is due or not paid within 46 days) dealing with MSME shall mandatorily file a return with MCA in e-form MSME-1.

Directors of companies delaying payments for supplies made by small businesses will face imprisonment up to six months or pay fines between Rs 25,000 and Rs 3,00,000.

The Ministry of Corporate Affairs has notified new guidelines to address the concerns of small businesses over delayed payments that not only makes it mandatory for all companies to file half yearly returns detailing outstanding dues to MSME suppliers but also assign reasons if such delays are for more than 45 days.

The new rules have been implemented to put pressure on companies to pay up.

Under the proposed changes, every private and public company will mandatorily file “MSME FORM I” with the the Registrar of Companies (RoC) by February 22 with details of all outstanding dues to MSME suppliers existing on the date of notification of rules on January 22.

In addition, all entities will also have to file a return as per MSME Form I by October 31 for the period from April to September and by April 30 for the period from October to March.

If there are any delays in payments, it has to be mentioned in the returns with the MCA reserving the right to penalise defaulting entities.

In order to ensure adherence to the new rules, MCA has also proposed a fine of up to Rs 25,000 on companies defaulting in filing the information or delaying payments.

The fines for directors, chief financial officer and company secretary of a defaulting company has been specified at not less than Rs 25,000 up to Rs 3,00,000 per person with provision also for imprisonment up to six months.

The new rules will be applicable for every company that received goods or services ‘from’ MSME segment for which payment is due for 45 days or more.

The companies that have no outstanding payments to MSMEs or such outstanding payments are not for more than 45 days are not required to file details in the specified form.

For the purpose of new rules, MSMEs are defined on the basis of capital investment made in plant and machinery, excluding investments in land and building.

Manufacturing units having investment below Rs 25 lakh were termed Micro, those between Rs 25 lakh and Rs 5 crore termed as Small and from Rs 5 crore to Rs 10 crore as Medium.

Similarly, for Service units, corresponding investment thresholds were upto Rs 10 lakh Micro, between Rs 10 lakh to Rs 2 crore Small and between Rs 2 crore to Rs 5 crore Medium.

Source: Business Standard

DIR-3-DIN eKYC annual filing deadline extended to 30th June of next financial year

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MCA extends due date of DIR -3 / E-KYC of Directors

 

 

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, 30th April, 2019

 

MCA has notified that the Deadline for Annual Filing of Form DIR 3 ((KYC of Directors) has been Extended from 30 April to 30 June, of the immediately next financial year, i.e. the due date for filing of DIR 3 (KYC of Directors) for Financial Year 2018-19 has been extended from 30 April 2019 to 30 June 2019.

G.S.R.-(E).- In exercise of the powers conferred by the second proviso to sub-section (1), sub-section (4), clause (f) of sub-section (6) of section 149, sub-sections (3) and (a) of section 150, section 151, sub-section (5) of section 152, section 153, section 154, section 157, section 160, sub-section (1) of section 158 and section 170 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Appointment and Qualification of Directors) Rules, 2014, namely: –

1. (1) These rules may be called the Companies (Appointment and Qualification of Directors) Amendment Rules, 2019.

(2) ‘They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 12A, for the words and figures “on or before 30th, April of immediate next financial year”, the words and figures “on or before 30th June of immediate next financial year” shall be substituted.

[F. N o. 1/22/2013-CL-V]

(K.V.R. Murty)
Joint Secretary to the Government of India

Note: – The principal notification was published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R. 259(E) dated the 31st March, 2014 and subsequently amended vide the following notifications:-

Read the MCA – Notification here

MCA Extends Due date of filing form INC 22A (ACTIVE) till 15th June 2019

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A non-compliant company would not be able to amend its capital structure or carry out any merger or amalgamation.

The Government of India, through the Ministry of Corporate Affairs, has made it mandatory for to file ACTIVE eForm or INC-22A.  The due date for filing INC-22A was 25th April 2019.

There have been representations made to the MCA for Form INC-22A due date extension.

News coming that government has extended the deadline of filing form INC 22A (ACTIVE) to June 15, gives companies more time to comply, with a provision aimed at spotting shell companies.

The disclosure requirement, which came into effect from February, makes it mandatory for registered companies to upload pictures of their business premises and at least one director.

The last date for filing FORM INC 22A (ACTIVE),which was Thursday, April 25 is now extended till 15th June 2019.

Ministry of Corporate Affairs have received many representations from industry associations for Extension of the Due date with many companies yet to comply thereafter Ministry of Corporate Affairs decided to Extend the Due date of form INC 22A.

Startups have, in particular, pointed out that many of them operate out of homes or shared premises or office suites.

The government had launched a crackdown on shell companies as part of the anti-black money drive and these norms were follow-up measures to establish existence of registered entities. Names of thousands of shell companies were struck off as part of this drive.

This new electronic form INC 22A, which is also known as e-Form ACTIVE (Active Company Tagging Identities and Verification), was notified as part of the Companies (Incorporation) Amendment Rules, 2019 in February.

MCA VPD Service

The Ministry of Corporate Affairs on 24/04/2019 has announced the following on their homepage “VPD service will be unavailable from 8:00AM to 08:00PM IST on 24th – 25th Apr 2019 for system maintenance. Stakeholders are requested to plan accordingly.”

VPD Service means View Public Documents Service which can be accessed from http://www.mca.gov.in/mcafoportal/viewPublicDocumentsFilter.do

With VPD Service being taken down on the same last date for filing of INC22A ACTIVE eForm, there are more chances for the due date being extended for INC-22A filing.

Representation from ICSI

The Institute of Companies Secretaries of India has made a representation to the Ministry of Corporate Affairs on 22nd April 2019. In the letter, the Institute explains the difficulty faced by certain stakeholders while filing Form INC22A-ACTIVE as below:

  • The Auditors’ details not getting prefilled in certain cases.
  • Compliance by dormant companies.
  • Companies in management disputes.
  • Issues faced by corporates having a different financial year.

As the difficulties are still unresolved as on 22nd April 2019, the ICSI has requested the MCA to extend the due date for filing of Form INC-22A.

A non-compliant company would not be able to amend its Capital Structure, Change in Directorship or carry out any Merger or Amalgamation, as per the various provisions listed below:

  • Changes in authorized capital (Form SH-07)
  • Changes in paid-up capital (Form PAS-03)
  • Changes in Director (Form DIR-12) (cessation would be allowed).
  • Changes in Registered Office (Form INC-22)
  • Amalgamation or Merger (INC-28)

If the form is filed within the due date, there is no fee, while late filing will attract a fine of Rs 10,000.

Read the Official Notification from MCA