Blue and White Modern Finance Presentation (6)

COMPANY LIQUIDATOR – APPOINTMENT, REMOVAL & REPLACEMENT

by with No Comment News

.

COMPANY LIQUIDATOR – APPOINTMENT, REMOVAL & REPLACEMENT

COMPANY LIQUIDATOR AND THEIR APPOINTMENT: [SECTION 275]

POINTS

EXPLANATION

1. Appointment of official liquidator:
.

For the purposes of winding up of a company by the Tribunal, the Tribunal at the time of the passing of the order of winding up, shall appoint an Official Liquidator or a liquidator from the panel maintained (i.e. under the Insolvency Professional registered under Insolvency and Bankruptcy Code, 2016) as the Company Liquidator.

2. Appointment of Provisional Liquidator or the Company Liquidator by Tribunal:
.

The provisional liquidator or the Company Liquidator, as the case may, shall be appointed by the Tribunal from amongst the insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016.

3. Tribunal may restrict the powers of a Provisional Liquidator:

Where a provisional liquidator is appointed by the Tribunal, the Tribunal may limit and restrict his powers by the order appointing him or it or by a subsequent order, but otherwise he shall have the same powers as a liquidator.

4. Tribunal to specify the terms and conditions of appointment of Provisional Liquidator:
.

The terms and conditions of appointment of a provisional liquidator or Company Liquidator and the fee payable to him or it shall be specified by the Tribunal on the basis of task required to be performed, experience, qualification of such liquidator and size of the company.

5. Filing of Declaration by Liquidator on Appointment:

On appointment as provisional liquidator or Company Liquidator, as the case may be, such liquidator shall file a declaration within seven days from the date of appointment in the prescribed form disclosing conflict of interest or lack of independence in respect of his appointment, if any, with the Tribunal and such obligation shall continue throughout the term of his appointment.

6. Appointment of Provisional Liquidator as the Company Liquidator

While passing a winding up order, the Tribunal may appoint a provisional liquidator, if any, appointed under clause (c) of sub-section (1) of Section 273, as the Company Liquidator for the conduct of the proceedings for the winding up of the company.

REMOVAL AND REPLACEMENT OF LIQUIDATOR: [SECTOR 276]

.

POINTS

EXPLANATION

1. Removal of Provisional Liquidator or the Company Liquidator:
.

The Tribunal may, on a reasonable cause being shown and for reasons to be recorded in writing, remove the provisional liquidator (PL) or the Company Liquidator (CL), as the case may be, as liquidator of the company on any of the following grounds, namely:

a)Misconduct.
b)Fraud or misfeasance.
c)Professional incompetence or failure to exercise due care and diligence in performance of the powers and functions.
d)Inability to act as provisional liquidator or as the case may be, Company Liquidator.
e)Conflict of interest or lack of independence during the term of his appointment that would justify removal.

2. Transfer of work of Liquidator:

In the event of death, resignation, or removal of the provisional liquidator or as the case may be, Company Liquidator, the Tribunal may transfer the work assigned to him or it to another Company Liquidator for reasons to be recorded in writing.

3. Recovery of loss or damage from Liquidator:
.

Where the Tribunal is of the opinion that any liquidator is responsible for causing any loss or damage to the company due to fraud or misconduct, misfeasance or failure due to exercise due care and diligence in the performance of his or its powers and functions, the tribunal may recover or cause to be recovered such loss or damage from the liquidator and pass such other orders as it may think fit.

4. Reasonable opportunity of being heard to be given the Provisional Liquidator:

The Tribunal shall, before passing any order under this section, provide a reasonable opportunity of being heard to the provisional liquidator or, as the case may be, Company Liquidator.

.

Blue and White Modern Finance Presentation (5)

SECTION 277: INTIMATION TO COMPANY LIQUIDATOR, PROVISIONAL LIQUIDATOR AND REGISTRAR

by with No Comment News

.

SECTION 277: INTIMATION TO COMPANY LIQUIDATOR, PROVISIONAL LIQUIDATOR AND REGISTRAR

The intimation to company liquidator, provisional liquidator and registrar will be as follows:

POINTS

EXPLANATION

1. Tribunal to cause intimation of its order:
.

Where the Tribunal makes an order for appointment of provisional liquidator or for the winding up of a company, it shall, within a period not exceeding seven days from the date of passing of the order, cause intimation thereof to be sent to the Company Liquidator or provisional liquidator, as the case may be, and the Registrar.

2. Registrar to notify the order of Tribunal in Official Gazette:
.

With respect to all companies – On receipt of the copy of order of appointment of provisional liquidator or winding up order, the Registrar shall make an endorsement to that effect in his records relating to the company and notify in the Official Gazette that such an order has been made, and

In the case of a listed company, the Registrar shall intimate about such appointment or order, as the case may be, to the stock exchange or exchanges where the securities of the company are listed.

3. Winding up order to be deemed to be notice of discharge:

The winding up order shall be deemed to be a notice of discharge to the officers, employees and workmen of the company, except when the business of the company is continued.

4. Constitution of winding up committee to monitor liquidation proceedings:

Within 3 weeks from the date of passing of winding up order, the Company Liquidator shall make an application to the Tribunal for constitution of a winding up committee to assist and monitor the progress of liquidation proceedings by the Company Liquidator in carrying out the function as provided in sub-section (5) and such winding up committee shall comprise of the following persons, namely:

i.Official Liquidator attached to the Tribunal.
ii.nominee of secured creditors; and
iii.a professional nominated by the Tribunal.

5. Areas in which winding up committee to assist and monitor liquidation functions:

The Company Liquidator shall be the convener of the meetings of the winding up committee which shall assist and monitor the liquidation proceedings in following areas of liquidation functions, namely:

i.taking over assets.
ii.examination of the statement of affairs.
iii.recovery of property, cash or any other assets of the company including benefits derived there from.
iv.review of audit reports and accounts of the company.
v.sale of assets.
vi.finalization of list of creditors and contributories.
vii.compromise, abandonment and settlement of claims.
viii.payment of dividends, if any.
ix.any other function, as the Tribunal may direct from time to time.

6. Submission of report and minutes of meetings of the committee before Tribunal on monthly basis:

The Company Liquidator shall place before the Tribunal a report along with minutes of the meetings of the committee on monthly basis duly signed by the members present in the meeting for consideration till the final report for dissolution of the company is submitted before the Tribunal.

7. Company liquidator to prepare draft final report:

The Company Liquidator shall prepare the draft final report for consideration and approval of the winding up committee.

8. Submission of approved final report before the Tribunal for passing of dissolution order:

The final report so approved by the winding up committee shall be submitted by the Company Liquidator before the Tribunal for passing of a dissolution order in respect of the company.

.

Blue and White Modern Finance Presentation (4)

SUBMISSION OF REPORT BY COMPANY LIQUIDATOR AND DIRECTION OF TRIBUNAL ON SUCH REPOST [SECTION 281 & 282]

by with No Comment News

.

SUBMISSION OF REPORT BY COMPANY LIQUIDATOR AND DIRECTION OF TRIBUNAL ON SUCH REPOST [SECTION 281 & 282]

SUBIMISSION OF REPORT BY COMPANY LIQUIDATOR [SECTION 281]

POINTS

EXPLANATION

1. Particulars to be mentioned in the Report of Company Liquidator:

Where the Tribunal has made a winding up order or appointed a Company Liquidator, such liquidator shall, within sixty days from the order, submit to the Tribunal, a report containing the following particulars, namely:

Contents of Liquidator’s Report

• The nature and details of the assets of the company including their location and value, stating separately the cash balance in hand and in the bank, if any, and the negotiable securities, if any, held by the company. The valuation of the assets shall be obtained from registered valuers for this purpose.
• Amount of capital issued, subscribed and paid-up.
• The existing and contingent liabilities of the company including names, addresses and occupations of its creditors, stating separately the amount of secured and unsecured debts, and in the case of secured debts, particulars of the securities given,
whether by the company or an officer thereof, their value and the dates on which they were given.
• The debts due to the company and the names, addresses and occupations of the persons from whom they are due and the amount likely to be realized on account thereof.
• Guarantees, if any, extended by the company
• List of contributories and dues, if any, payable by them and details of any unpaid call.
• Details of trademarks and intellectual properties, if any, owned by the company
• Details of subsisting contracts, joint ventures and collaborations, if any
• Details of holding and subsidiary companies, if any
• Details of legal cases filed by or against the company
• Any other information which the Tribunal may direct or the Company Liquidator may consider necessary to include

2. Company Liquidator to include in his Report manner of formation of company and
commission of any fraud in formation, etc.:

The Company Liquidator shall include in his report the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation or by any officer of the company in relation to the company since the formation thereof and any other matters which, in his opinion, it is desirable to bring to the notice of the Tribunal.

3. Report on viability of business of the company:

The Company Liquidator shall also make a report on the viability of the business of the company or the steps which, in his opinion, are necessary for maximizing the value of the assets of the company.

4. Permission to make additional reports:

The Company Liquidator may also, if he thinks fit, make any further report or reports.

5. Inspection of report by a creditor or contributory:

Any person describing himself in writing to be a creditor or a contributory of the company shall be entitled by himself or by his agent at all reasonable times to inspect the report submitted in accordance with this section and take copies thereof or extracts therefrom on payment of the prescribed fees.

.

DIRECTION OF TRIBUNAL ON REPORT OF COMPANY LIQUIDATOR [SECTION 282]:

POINTS

EXPLANATION

1. Fixation of Time limit for completion of proceedings and dissolution:

The Tribunal shall, on consideration of the report of the Company Liquidator, fix a time limit within which the entire proceedings shall be completed and the company be dissolved.

Revision of time limit: The Tribunal may, if it is of the opinion, at any stage of the proceedings, or on examination of the reports submitted to it by the Company Liquidator and after hearing the Company Liquidator, creditors or contributories or any other interested person, that it will not be advantageous or economical to continue the proceedings, revise the time limit within which the entire proceedings shall be completed and the company be dissolved.

2. Order of Tribunal:

The Tribunal may, on examination of the reports submitted to it by the
Company Liquidator and after hearing the Company Liquidator, creditors or contributories or any other interested person, order sale of the company as a going concern or its assets or part thereof.

The Tribunal may, where it considers fit, appoint a sale committee comprising such creditors, promoters and officers of the company as the Tribunal may decide to assist the Company Liquidator in sale under this sub-section.

3. Tribunal may order for investigation against the company in respect of commission of fraud:

Where a report is received from the Company Liquidator or the Central Government or any person that a fraud has been committed in respect of the company, the Tribunal shall, without prejudice to the process of winding up, order for investigation under section 210, and on consideration of the report of such investigation it may pass order and give directions under sections 339 to 342 or direct the Company Liquidator to file a criminal complaint against persons who were involved in the commission of fraud.

4. Tribunal to take measures to safeguard the assets of the company:

The Tribunal may order for taking such steps and measures, as may be necessary, to protect, preserve or enhance the value of the assets of the company.

5. Tribunal may pass such other order / directions as it may consider fit:

The Tribunal may pass such other order or give such other directions as it considers fit.

.

.

Blue and White Modern Finance Presentation (3)

SECTION 290: POWERS AND DUTIES OF COMPANY LIQUIDATOR

by with No Comment News

.

SECTION 290: POWERS AND DUTIES OF COMPANY LIQUIDATOR

Power of a Company Liquidator is as follows:

POINTS

EXPLANTION

1. Powers of Company Liquidator:

Subject to directions by the Tribunal, if any, in this regard, the Company Liquidator, in a winding up of a company by the Tribunal, shall have the power:

a)to carry on the business of the company so far as may be necessary for the beneficial winding up of the company.
b)to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and other documents, and for that purpose, to use, when necessary, the company’s seal.
c)to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels.
d)to sell the whole of the undertaking of the company as a going concern.
e)to raise any money required on the security of the assets of the company.
f)to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company.
g)to invite and settle claim of creditors, employees or any other claimant and distribute sale proceeds in accordance with priorities established under this Act.
h)to inspect the records and returns of the company on the files of the Registrar or any other authority.
i)to prove rank and claim in the insolvency of any contributory for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors.
j)to draw, accept, make and endorse any negotiable instruments including cheque, bill of exchange, hundi or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if such instruments had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business.
k)to take out, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the Company Liquidator to take out the letters of administration or recover the money, be deemed to be due to the Company Liquidator himself.
l)to obtain any professional assistance from any person or appoint any professional, in discharge of his duties, obligations and responsibilities and for protection of the assets of the company, appoint an agent to do any business which the Company Liquidator is unable to do himself.
m)to take all such actions, steps, or to sign, execute and verify any paper, deed, document, application, petition, affidavit, bond or instrument as may be necessary.
• for winding up of the company
• for distribution of assets
• in discharge of his duties and obligations and functions as Company Liquidator; and
n)to apply to the Tribunal for such orders or directions as may be necessary for the winding up of the company.

2. Powers of Liquidator under overall control of Tribunal:

The exercise of powers by the Company Liquidator shall be subject to the overall control of the tribunal.

3. Other duties:

The Company Liquidator shall perform such other duties as the Tribunal may specify in this behalf.

.

Blue and White Modern Finance Presentation (2)

SECTION 292, 293 & 294 OF COMPANIES ACT

by with No Comment News

.

SECTION 292, 293 & 294 OF COMPANIES ACT

EXERCISE AND CONTROL OF COMPANY’S LIQUIDATOR’S POWERS: SECTION 292

POINTS

EXPLANATION

1. Company Liquidator to follow directions in administration and distribution of assets:

The Company Liquidator shall, in the administration of the assets of the company and the distribution thereof among its creditors, have regard to any directions which may be given by:

• the resolution of the creditors or contributories at any general meeting, or
• by the advisory committee.

2. Directions given by creditors or contributories to override directions of Advisory Committee:

Any directions given by the creditors or contributories at any general meeting shall, in case of conflict, be deemed to override any directions given by the advisory committee.

3. Summons from Company Liquidator:

The Company Liquidator:

a)may summon meetings of the creditors or contributories, whenever he thinks fit, for the purpose of ascertaining their wishes; and
b)shall summon such meetings at such times, as the creditors or contributories, as the case may be, may, by resolution, direct, or whenever requested in writing to do so by not less than one-tenth in value of the creditors or contributories, as the case may be.

4. Aggrieved person to apply to Tribunal against the decision of Company Liquidator

Any person aggrieved by any act or decision of the Company Liquidator may apply to the Tribunal, and the Tribunal may confirm, reverse, or modify the act or decision complained of and make such further order as it thinks just and proper in the circumstances.

.

BOOKS TO BE KEPT BY COMPANY LIQUIDATOR: SECTION 293

POINTS

EXPLANATION

1. Company liquidator to maintain proper books for recording entries or minutes:

The Company Liquidator shall keep proper books in such manner, as may be prescribed, in which he shall cause entries or minutes to be made of proceedings at meetings and of such other matters as may be prescribed.

2. Inspection of books:

Any creditor or contributory may, subject to the control of the Tribunal, inspect any such books, personally or through his agent.

.

AUDIT OF COMPANY LIQUIDATOR’S ACCOUNTS: SECTION 294

POINTS

EXPLANATION

1. Maintenance of books of accounts:

The Company Liquidator shall maintain proper and regular books of account including accounts of receipts and payments made by him in such form and manner as may be prescribed.

2. Presentation of account of receipts and payments to the Tribunal:

The Company Liquidator shall, at such times as may be prescribed but not less than twice in each year during his tenure of office, present to the Tribunal an account of the receipts and payments as such liquidator in the prescribed form in duplicate, which shall be verified by a declaration in such form and manner as may be prescribed.

3. Audit of accounts:

The Tribunal shall cause the accounts to be audited in such manner
as it thinks fit, and for the purpose of the audit, the Company Liquidator shall furnish to the Tribunal with such vouchers and information as the Tribunal may require, and the Tribunal may, at any time, require the production of, and inspect, any books of account kept by the Company Liquidator.

4. Filing of copy of audited accounts with Tribunal and Registrar:

When the accounts of the company have been audited, one copy thereof shall be filed by the Company Liquidator with the Tribunal, and the other copy shall be delivered to the Registrar which shall be open to inspection by any creditor, contributory or person interested.

5. Action to be taken when accounts relate to a Government Company:

Where an account referred to in sub-section (4) relates to a Government company, the Company Liquidator shall forward a copy thereof:

a)to the Central Government, if that Government is a member of the Government company; or
b)to any State Government, if that Government is a member of the Government company; or
c)to the Central Government and any State Government, if both the Governments are members of the Government company.

6. Summary of accounts to be communicated to every creditor and contributory:

Company Liquidator shall cause the accounts when audited, or a summary thereof, to be printed, and shall send a printed copy of the accounts or summary thereof by post to every creditor and every contributory.

Note: The Tribunal may dispense with the compliance of the provisions of this sub-section in any case it deems fit.

.

Green White Modern Annual Report Finance Presentation

EXEMPT INCOME

by with No Comment News

EXEMPT INCOME

AGRICULTURE INCOME

As per section 10(1) Income is exempt from Tax if its from agriculture land in India.

As per section 2(1A), Agriculture land means-

(a)Rent from agricultural land (used for agriculture purposes).
(b)Income from sale of agriculture produce. (Note 1).
(c)Rent from house (use as dwelling house, store house).
(d)Income from nursery.

Note 1: Rule 7- Sale of agriculture Produce.

Sale in Raw Form – Total agriculture income is exempt under such case.

Sale after optional process-

Agriculture Income (exempt)

.

Particular

Amount (in Rs.)

Fair Market Value of Agricultural Produce for further process

xxx

Less: Cost of Agricultural Produce

xxx

Agriculture Income

xxx

.

PGBP Income (Taxable)

.

Particular

Amount (in Rs.)

Sale of Final Products

xxx

Less: Fair Market Value of Agricultural Produce for further process

xxx

Less: Further Processing Cost

xxx

PGBP

xxx

.

SPECIAL RULES FOR TEA, COFFEE & RUBBER

Rules

Activity

Agri. income

PGBP

8

Growing and Manufacturing of Tea

60%

40%

7B

Growing and Manufacturing of Coffee

.

.

.
(a)Grown & cured

75%

25%

.
(a)Grown, Cured, Roasted & Grounded

60%

40%

7A

Growing & Manufacturing of Rubber

65%

35%

.

Example: Mr. Amar grows sugarcane and uses the same for the purpose of manufacturing in his factory. 40% of sugarcane produce is sold for Rs. 12 Lakhs, and the cost of cultivation of such sugarcane is Rs. 6 Lakhs. The cost of cultivation of the balance sugarcane (60%) is Rs. 15 Lakhs and the market value of the same is Rs. 25 Lakhs. After incurring Rs. 1.5 lakhs in the manufacturing process on the balance sugarcane, the sugar was sold for Rs. 30 lakhs.

Calculate Amar’s business income and agriculture income.

Answer:

COMPUTATION OF BUSINESS AND AGRICULTURE INCOME OF MR. AMAR

PARTICULARS

BUSINESS INCOME

AGRI INCOME

Sale of Sugar Business income

.

.

Sale Proceeds of Sugar

30,00,000

.

Less: Market Value of Scrap (60%)

25,00,000

.

Less: Manufacturing Expenses

1,50,000

.

.

3,50,000

.

Agriculture Income

.

.

Market Value of Sugarcane (60%)

.

25,00,000

Less: Cost of cultivation

.

15,00,000

.

.

10,00,000

Sale of Sugarcane

.

.

Sale proceeds from sugarcane (40%)

.

12,00,000

Less Cost of cultivation

.

6,00,000

.

.

6,00,000

Total Income

3,50,000

16,00,000

.

PARTIAL INTEGRATION IN CASE OF AGRICULTURE INCOME

Agriculture income is exempt from tax but for computation of tax it shall be considered if the following conditions are satisfied: –

.

COMPUTATION OF TAX LIABILITY

PARTICULAR

.

AMOUNT (In Rs.)

Non- Agriculture Income (Total Income)

A

xxx

Agriculture Income

B

xxx

Total

C

xxx

Tax Payable on “C”

D

xxx

Aggregation of “B” and Basic exemption

E

xxx

Tax payable on E

F

xxx

Net Tax Payable (“D-F”)

G

xxx

.

SECTION 14A

For computing total income under the five heads of income, No deduction shall be allowed in respect of expenditure incurred by the assessee in relation to exempt income.

Manner of computation of disallowance: Rule 8D

1.Where A.O is satisfied with the correctness of the claim of expenditure of the assessee – No action is required.
2.Where A.O is not satisfied with the correctness of the claim of expenditure by the assessee – expenses attributed to the exempt income shall be computed with Rule 8D of income tax rules.

Rule 8D: Expenditure relating to Exempt Income

.

S. No.

Particular

Amount
(a)

Amount of expenses directly relating to exempt income

xxx
(a)

Amount equal to 1% of his annual average of the monthly average of the opening & closing balance of investment, income from which is exempt

xxx

.

Total amount disallowable u/s 14A

xxx

.

Notes:

1.Provided that amount referred in (a) and (b) shall not be more than total expenditure claimed by the assessee.
2.Section 14A read along with Rule 8D provides for disallowance of expenditure even where the taxpayer has not earned any exempt income in a particular P.Y.

Kribhco (2012) (Delhi): Section 14A is applicable only if an income is exempt as per Chapter III of the Income Tax Act 1961.

• Deductions under Chapter VI-A are different from the exemptions.
• As per section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such income which does not form part of the total income (Exempt Income).

No Disallowance can be made u/s 14A in respect of income included in the total income in respect of which deduction is allowable u/s 80C to 80U.

.

Example: Mr. Kumar invested in securities & expenditure related to such investment is Rs. 2,00,000. Out of above securities, income from some securities is exempt & from other securities it is taxable. Expenditure directly attributed to exempt securities is Rs. 30,000. Investment value in securities from which income is exempt: Rs. 6,00,000 (Monthly Average of opening and closing & after that annual average). Calculate the expenses allowed to exempt income?

Answer: Expenditure related to Exempt Income is as Follows: –

S. No.

Particular

Amount
(i)

Directly related to exempt income

30,000
(i)

1% of Exempt Income (60,00,000 * 1%)

60,000

.

Disallowed Expenditure

90,000

Conclusion: So, in this question Rs. 1,10,000 expenditure is allowed as deduction.

.

.

Blue Gray and White Modern Finance Presentation

FOREIGN TAX CREDIT & CONVERSION RULES

by with No Comment News

.

FOREIGN TAX CREDIT & CONVERSION RULES

WHAT IS FOREIGN TAX CREDIT?

Foreign tax credit (FTC) is tax paid in foreign country on income derived in foreign country by an assessee. It can also be tax deducted at source in the foreign country on the source of income generated by a resident in foreign country. Such amount of tax which is paid/ deducted in foreign country can be claimed as credit against the tax liability in the country of resident. (Section 90, 90A, 91).

IN WHICH YEAR THE CREDIT IS AVAILABLE?

The credit of FTC is available in the year in which the income corresponding to such tax has been offered to tax in India. In case the income corresponding to such tax is offered to tax in India in multiple years, the FTC shall be claimed across these years in the same proportion in which the income is offered to tax.

AGAINST WHICH LIABILITY CREDIT CAN BE CLAIMED?

The FTC can be claimed against the amount of Income Tax, Surcharge and cess liability. It, however, cannot be claimed against any liability on account of interest, fee or penalty payable under the Income Tax Act.

If foreign tax paid is disputed in any manner, the same will be allowed in the year of offering income only if the assessee within 6 months from the end of month in which dispute is settled, furnishes evidence of settlement of dispute, payment of disputed tax.

WHAT IS THE MECHANISM TO COMPUTE THE AMOUNT OF FTC AVAILABLE?

The FTC shall be computed for each source of income arising from each country. The credit allowable shall be lower of tax payable under the Income Tax Act on such income and actual foreign tax paid on such income. In case where the foreign tax paid exceeds the amount of tax payable according to the DTAA, such excess shall be ignored.

WHAT DOCUMENTS ARE REQUIRED TO CLAIM FTC?

A statement of computation of Income of that country outside India and foreign tax deducted or paid on such income in Form No. 67;

A certificate or statement specifying the Nature of Income and the manner of tax deducted therefrom or paid by the assessee from-

• The tax authority of that country or
• The person responsible for deduction of such tax or
• The assessee.

In such case, the assessee also need to provide Acknowledgement of online payment of tax or challan for payment of tax where the payment has been made by the assessee

WHETHER THE FTC CAN BE CLAIMED IF TAX IS PAYABLE UNDER MAT OR AMT?

Yes, FTC shall be allowed against tax payable under MAT/ AMT in the same manner as it is allowable under normal provisions of the Income Tax Act.

However, where the FTC available against tax payable under MAT/ AMT exceeds the tax credit available under normal provisions of the Act, the excess shall be ignored.

WHAT CONVERSION RATE SHOULD BE ADOPTED?

For the purpose of converting foreign currency into Indian Rupees, TTBR of SBI on the last day of the previous month in which the tax has been paid or deducted shall be adopted.

WHAT IS THE TIMELINE TO SUBMIT THE CLAIM OF FTC?

Form No. 67 and a certificate or statement as referred above shall be furnished online up to due date of u/s 139(1).

Provided that where the return has been furnished u/s 139(8A), the statement in Form No. 67 and the certificate or the statement to the extent it relates to the income included in the updated return, shall be furnished on or before the date on which such return is furnished.

CONVERSION OF FOREIGN INCOME INTO INDIAN CURRENCY

Rule 115: Rate of exchange for conversion into rupees of income earned in foreign currency shall be the TTBR as on the specified date.

Specified date means: –

(a)Salary Income – last day of the month immediately preceding the month in which the salary is due or is paid or in arreares.
(b)Interest on securities – last day of the month immediately preceding the month in which the income is due.
(c)Income from house property, PGBP income – (other than point (d)) and IFOS (not being income by way of dividends and Interest on securities) – the last day of the previous year of the assessee.
(d)PGBP in the case of a NR engaged in the business of operation of ships – last day of the month immediately preceding the month in which such income is deemed to accrue or arise in India.
(e)Dividends – last day of the month immediately preceding the month in which dividend is declared, distributed or paid by the company.
(f)Capital gains – the last day of the month immediately preceding the month in which the capital asset is transferred.

Note: Provided that the specified date, in respect of income referred to in (a) to (f) payable in foreign currency and from which tax has been deducted at source under rule 26, shall be the date on which the tax was required to be deducted under TDS chapter.

Rule 26- Rate of exchange for the purpose of TDS at source on income payable in foreign currency

For the purpose of deduction of tax at source on any income payable in foreign currency, the rate of exchange for the calculating of the value in rupees of such income payable –

(i)To an assessee outside India.
(ii)To a unit of IFSC.
(iii)By a unit of IFSC to an assessee in India.

Shall be the TTBR of such currency as on the date on which the tax is required to be deducted at source under the TDS chapter by the person responsible for paying such income.

.

.

Blue Modern Elegant Presentation

TONNAGE TAXATION

by with No Comment News

.

TONNAGE TAXATION

If any Indian Company (has place of effective management in India) engaged in business of operating ships can compute its income on the basis of tonnage tax scheme if company owning at least one qualifying ship.

QUALIFYING COMPANY (SECTION 115VC)

1.It is an Indian Company.
2.The place of effective management of the company is in India.
3.They own at least one qualifying ship; and
4.The main object of the company is to carry on the business of operating ships.

QUALIFYING SHIPS (SECTION 115VD)

1.Sea going ships/ vessel of Net tonnage Equal or more than 15.
2.Ship registered under Merchant shipping Act or Licensed obtained from DGS.

EXCLUSION FROM THE DEFINITION OF QUALIFYING SHIPS

1.A sea going ship or vessel if the main purpose for which it is used is the provision of goods or services of a kind normally provided on Land.
2.Fishing vessel.
3.Factory Ship – the ship whose primary use is for the purpose of sport and recreation.
4.Harbour and River ferries.
5.Pleasure craft – the ship whose primary use is for the purpose of sport and recreation.
6.Offshore installations.
7.A qualifying ship used as a fishing vessel for a period of more than thirty days during a previous year.

MANNER OF C0OMPUTATION OF INCOME UNDER TONNAGE TAX SCHEME (SECTION 115VE)

1.The business of operating qualifying ships shall be considered as separate business distinct from all other activities or business carried on by the company.
2.The profit from tonnage taxation shall be computed separately from the profit and gains from any other business and shall be taxable under the head “Profit and gains of Business or Profession”.

COMPUTATION OF TONNAGE INCOME – (SECTION 115VG)

1.The tonnage income of each qualifying ship shall be the daily tonnage income of each such qualifying ship multiply by (a) the number of days in previous year or (b) the number of days in part of the previous year in case the ship is operated by the company as a qualifying ship for only part of the previous year, as the case may be.

.

QUALIFYING SHIP HAVING NET TONNAGE

DAILY TONNAGE INCOME

Up to 1000 tons

Rs. 70 for each 100 tons.

>1000 up to 10,000 tons

Rs. 700 + Rs. 53 for each 100 tons.

>10,000 up to 25,000 tons

Rs. 5470 + Rs. 42 for each 100 tons.

>25,000 tons

Rs. 11,770 + 29 for each 100 tons.

2.For this chapter, the tonnage shall mean the tonnage of a ship indicated in the certificate issued under the Merchant Shipping Act, 1958.
3.The tonnage shall be rounded off to the nearest multiple of hundred tons and for this purpose any tonnage consisting of kilograms shall be ignored.
4.Notwithstanding anything contained in any provision of this Act, no deduction or set off shall be allowed in computing the tonnage income under this chapter.

TRANSFER OF PROFIT TO TONNAGE TAX RESERVE ACCOUNT (SECTION 115VT)

An amount not less than 20% (percent) of the book profit derived from the business of qualifying ships shall be credited to the Tonnage Tax Reserve Account.

Further, please note that, the amount credited to the Tonnage Tax Reserve Account shall be utilized by the company before the expiry of a period of eight years next following the previous year in which the amount was credited: –

(a)For acquiring a new ship for the purposes of the business of the company and
(b)Until the acquisition of a new ship, for the purposes of business of operating qualifying ships other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India.

MINIMUM TRAINING REQUIREMENT FOR TONNAGE TAX COMPANY (SECTION 115VU)

A tonnage tax company shall comply with the minimum training requirement specified by the Director General of Shipping and notified in the official Gazette by the Central Government.

AVOIDANCE OF TAX (SECTION 115VZB)

1.The tonnage tax scheme shall not apply where a tonnage tax company is a party to any transaction or arrangement which amount to an abuse of the tonnage tax scheme.
2.A transaction or arrangement shall be considered an abuse if the entering into or the application of such transaction or arrangement result or resulted, in a tax advantage being obtained for (i) a person other than tonnage company; or (ii) a tonnage tax company in respect of its non-tonnage tax activities.

EXCLUSION FROM TONNAGE SCHEME (SECTION 115VZC)

1.Where a tonnage tax company is a party to any transaction or arrangement referred to in Section VZB, the Assessing officer shall, by an order in writing exclude such company from tonnage tax scheme.

.

Provided that an opportunity shall be given by the Assessing Officer, by serving a notice calling upon such company to show cause, on a date and time to be specified in the notice, why it should not be excluded from the tonnage tax scheme.

.

Provided further that no order shall be passed without the previous approval of the Principal Chief Commissioner/ Chief Commissioner.

.

2.The provision of this section shall not apply where the company shows to the satisfaction of the Assessing Officer that the transaction or arrangement was a bona fide commercial transaction and had not been entered into for the purpose of obtaining tax advantage under this chapter.

.

3.Where an order has been passed by the Assessing Officer excluding the tonnage tax company from the tonnage tax scheme, the option for tonnage tax scheme shall cease to be in force from the first day of the previous year in which the transaction or arrangement was entered into.

.

FEW OTHER POINTS

1.Deductions, set off any loss shall not be allowed against tonnage income.
2.Tonnage tax shall not be liable to MAT.
3.Where an assessee opts for tonnage tax but wishes to opt out of the same within 10 years from the date on which he exercised option, he shall not be eligible to opt into tonnage tax for a period of 10 years from the date of opting out.
4.Company should not charter in more than 49% of net tonnage of qualifying ship operated by it. It if crossed that limit then in that year this scheme not applicable.
5.Company shall maintain separated books of accounts and obtain a CA report and furnish it before the due date specified u/s 44AB.

.

Blue and White Simple Money Management Presentation

EQUALISATION LEVY

by with No Comment News

EQUALISATION LEVY

SECTION 163: EXTENT, COMMENCEMENT AND APPLICATION

This chapter extends to the whole of India except the state of Jammu & Kashmir.

Note: Provided that the consideration received or receivable for specified services and for e-commerce supply or services shall not include the consideration, which are taxable as royalty or FTS in India under the Income Tax Act, read with the arrangement notified by the CG u/s 90/90A.

.

SECTION 165: CHARGE OF EQUALISATION LEVY ON SPECIFIED SERVICE

Equalisation Levy @ 6% applicable if payment for specified service (ads) received/ receivable by Non – resident from: –

(a)A person resident in India & carrying Business or Profession, or
(b)Non – resident having P.E in India.

Notes:

1.Equalisation Levy not applicable in the following cases: –
• NR having P.E. in India & service connected with such PE (service provider),
• Aggregate amount received by NR from payer is up to Rs. 1,00,000 in P.Y.
• Where the payment for the specified service by the person resident in India, or the PE in India is not for the purpose of carrying out business or profession.
2.Specified services means: –
• Online Advertisement, or
• Any provision of digital advertisement space or any other facility or service for the purpose of online advertisement.

.

SECTION 165A: CHARGE OF EQUALISATION LEVY ON E-COMMERCE SUPPLY OR SERVICES

Equalisation Levy @ 2% applicable of the consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided of facilitated by it: –

(i)To a person resident in India; or
(ii)To a NR in the specified circumstances*; or
(iii)To a person who buys such goods or services or both using IP address located in India.

Equalisation levy not applicable: –

• Where the e-commerce operator making or providing or facilitating e-commerce supply or services has a PE in India and such e-commerce supply or services is effectively connected with such PE;
• Where the equalisation levy is leviable u/s 165; or
• Turnover or gross receipts, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated is less than Rs. 2 Crores during the P.Y.

*Specified Circumstances means: –

• Sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement through IP address located in India; and
• Sale of data, collected from a person who is resident in India or from a person who uses IP address located in India.

Consideration received or receivable from e-commerce supply or services shall include: –

• Consideration for sale of goods whether it is own by e-commerce or not, however, it shall not include sale of goods which are owned by a person resident in India or by a PE in India of NR, and sale of such goods is effectively connected with such PE.
• Consideration for provision of services whether it is provided by e-commerce operator or not, however it shall not include provision of services which are provided by a person resident in India or by PE in India of NR, if provisions of such services is effectively connected with such PE.

.

SECTION 166: COLLECTION AND RECOVERY OF EQUALISATION LEVY ON SPECIFIED SERVICES

Every Resident person carrying on Business or profession or a NR having P.E. in India shall deduct the equalisation levy u/s 165 from the amount paid/ payable to NR @ 6%. If aggregate amount of consideration for specified service is more than Rs. 1,00,000 in P.Y.

Notes:

1.Equalisation levy deducted shall be deposited to Central Government up to 7th of Next Month.
2.If any person fails to deduct equalisation levy, then also, he’s liable to pay levy to the Government.
3.Interest @ 1% per month or part of month (for delay period) shall be applicable on late deposit of levy u/s 165 or 165A.

SECTION 166A: COLLECTION AND RECOVERY OF EQUALISATION LEVY ON E-COMMERCE SUPPLY AND SERVICE

Equalisation levy u/s 165A, shall be paid by every e-commerce operator to the Central Government for the quarter of the F.Y ending within the following time limit:

Date of ending of the quarter of F.Y.

Due Date

30th June

7th July

30Th September

7th October

31st December

7th January

31st March

31st March

.

.

SECTION 171: PENALTY FOR FAILURE TO DEDUCT OR PAY EQUALISATION LEVY

Nature of Default

Penalty

Failure to deduct whole or part of equalisation levy u/s 166

In addition to payment of equalization levy u/s 166(3) and interest u/s 170, penalty equal to the amount of equalisation levy that he failed to deduct would be liable

Failure to deduct whole or part of equalisation levy as required u/s 166A

In addition to equalisation levy u/s 166A and interest u/s 170, penalty equal to the amount of equalisation levy that he failed to pay is leviable.

Failure to remit equalisation levy to the CG on or before 7th of the following month, after deduction of same u/s 165

In addition to paying the equalisation levy on specified services u/s 166 and interest u/s 170, a penalty of Rs. 1000 for every day during which the failure continues is leviable.

However, such penalty shall not exceed the amount of equalisation levy that he failed to pay.

.

SECTION 167: FURNISHING OF STATEMENT

1.Every operator or e-commerce operator has to file return in Form No. 1 on or before 30th June of immediately following financial year.
2.Belated/ revise return: If assessee or e-commerce operator has not furnished the return within time limit or furnished return within time, noticed any mistake, may furnish revised return. Such belated return or revised return has to be furnished within 2 years from the end of F.Y in which specified service was provided, or e-commerce supply or service was made or provided or facilitated.
3.If assessee or e-commerce operator fails to furnish the statement within the prescribed time, the AO may serve a notice upon such assessee requiring him to furnish the statement. If AO issue notice, then assessee has to file return within 30 days from the date of serving of such notice.

.

Blue and Yellow Modern Business Accounting Presentation

DOUBLE TAXATION RELIEF (DTAA)

by with No Comment News

DOUBLE TAXATION RELIEF (DTAA)

.

Double Taxation means the same income is getting taxed twice in hands of the assessee. Any country taxes income on the basis of two rules i.e. Residence Rule & Source Rule. Double taxation is possible when assessee is Resident of one country and derives income from another country.

.

Suppose Mr. Kamal is Resident of India and deriving income from U.S, then India will tax such income on the basis of Residence Rule and U.S will tax such income on the basis of Source Rule.

.

There are two types of Double taxation relief:

1.Unilateral Relief – No DTAA u/s 91.
2.Bilateral Relief – DTAA u/s 90 & 90A. (Tax exemption method & tax credit method).

Under Tax exemption method, income is taxed in only source country and exempted in the residency country. Under Tax credit method Income is taxable in both countries in accordance with their respective tax laws read with double taxation avoidance agreement. The country of residence of tax payer, allows him credit for the tax charged thereon in the country of source. India follows credit method in majority of its DTAAs.

.

SECTION 90: AGREEMENT WITH FOREIGN COUNTRIES (DTAA):

Central Government, may enter into agreements with Governments of foreign countries or specified territory outside India:

(a)For granting relief for Doubly Taxed Income, without creating opportunities for nontaxation or reduced taxation through tax evasion or avoidance (including through treaty- shopping arrangements aimed at obtaining reliefs provided in the said agreement for the indirect benefit to residents of any country or territory).
(b)Exchange of information with each other for prevention of tax evasion transaction, investigation of such cases & co-operation with each other for recovery of taxes.

Notes:

1.Provisions of DTAA or Income Tax Act whichever is more beneficial to the assessee shall apply (Section 90(2)). However, provisions of GAAR shall apply even if such provisions are not beneficial to the assessee.
2.The charge of tax in respect of a foreign company at a higher rate than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company.
3.Non resident to whom DTAA applies, shall not be entitled to claim any relief under DTAA unless TRC (Tax Residence Certificate) of his being resident in any foreign country is obtained by him from Foreign Government (Section 90(4)).

.

TRC produced by a resident of a contracting state will be accepted as evidence that he is a resident of that contracting state and IT authorities in India will not go behind the TRC question his residential status.

.

In addition to TRC the assessee would be required to provide such other documents & information as may be prescribed for claiming the treaty benefit: –

• Status of assessee
• Pan of the assessee (if allotted)
• Nationality (in case of Individual)
• Country or specified territory for Incorporation or registration (In case of others)
• Assessee’s Tax identification number in the country of specified territory of residence & in case there in no such number the unique number on the basis of which the person is identified by the government or specified territory of which the assessee claims to be resident.
• Period for which the residential status, as mentioned in the certificate.
• Address of the assessee in the county or specified territory outside India.

However, the assessee may not be required to provide the information or any part thereof, if the information or any part thereof, as the case may be, is already contained in the TRC.

4.As per Section 90A “Specified Association” of India can enter into an agreement with “Specified Association” of foreign county. Central Government may adopt or implement such agreement. “Specified Association” means any association functioning under any law (E.g. RBI).

.

Section 91: DOUBLE TAXATION RELIEF IF THERE IS NO DTAA

(a)Assessee is Resident in India.
(b)Income derived from Foreign Country & income not deemed to be accrued or arise in India.
(c)Tax should have been deducted or paid in foreign country.
(d)There should be NO DTAA.

.

Amount of Relief:

Step 1: Compute Net Taxable Income (Indian plus foreign income).

.

Step 2: Find out Gross Tax (before claiming TDS/ TCS, MAT/ AMT credit, Advance tax but after adding surcharge & HEC).

.

Step 3: Find out “Average rate of tax” on NTI.

Average rate of tax = (Gross Tax * 100)/NTI.

.

Step 4: Find out rate at which tax paid/ deducted in foreign country

.

Step 5: Find out lower rate from step 3 & 4

.

Step 6: Relief u/s 91 = Foreign income * rate in step 5

.

TAXATION OF BUSINESS PROCESS OUTSOURCING (BPO) UNITS IN INDIA (CBDT CIRCULAR NO. 5/2004)

(a)A NR entity may outsource certain services to a resident Indian entity. If there is no business connection between the two, the resident may not be a PE of NR entity, and the resident entity would have to be assessed to income tax as a separate entity.
(b)However, it is possible that the NR entity may have business connection with the resident Indian entity. In such a case, the resident Indian entity could be treated as the PE of the NR entity.
(c)NR entity or the foreign company will be liable to tax in India only if the IT enable BPO unit in India constitutes its PE.
(d)NR or a foreign company is treated as having a PE in India if the said NR or foreign company carries on business in India through a branch, sales office etc. or through a agent who habitually exercises an authority to conclude contracts or regularly delivers goods or merchandise or habitually secures orders on behalf of the NR principal. In such a case, the profits of the NR or foreign company attributable to the business activities carried out in India by the PE becomes taxable in India.
(e)If BPO unit becomes PE in India, then profit attributed to such PE shall be taxable in India. Profit of PE shall be computed as if it were a distinct and separate entity. Transaction between PE and HO shall be computed on the basis of arm’s length price.

.

.