Concurrent Auditor and Family Doctor

As concurrent audit is a continues function it will always be called as extended arm of management function, a tool to reduce the gap between the transaction and audit of the same, a part of Internal control and so on.   

 

In spite of being there in the auditee place near to the transaction, it may be possible that the concurrent audit not able to detect the frauds or non adherence to the banking functions by the auditee. How this will happen, to my mind this reflects the similarities in the work between a family doctor and  a con current  auditor.    

   

Approach:

   

We never go to the family doctor without cause, the cause will be a regular one, small in nature, troubling for a short period, in anticipation that the cause may turn worse if not attended. When we go to the doctor we tell them the symptoms we observe  and let the family doctor to decide the future course of action. The basic is symptoms, correct information of the  symptoms, and guiding the  doctor for forming the judgment that is his diagnosis.The family doctor has knowledge of our body as he is  regularly treating us, he knows which medicine suits us and hence  after his diagnosis he provide us the medicine and in most of the cases the problem get solved in three days to one week. In few cases if the problem is not cure he refer us to a specialist for further treatment.     

   

The approach to the concurrent auditor by the auditee will be the  same,An auditor expects the auditee to come with information about the symptoms if any, discuss the  history of the  auditee, form the judgment about the problem, provide for solutions, provide the tools as medicine for a  period, auditee has to adhere to the solutions or methods given for the cure, and the problem will be solved in majority of the cases, in case of major issue the auditor ask the auditee to  refer the matter to higher authority that is a specialist.   

   

Providing information:    

   

We never go to  family doctor and without telling him the symptoms ask him being a doctor find out what happen to me. We also not  approach by not giving or hiding , or misguiding him about the  symptoms. If we do the same we know  we have everything  to loose and family doctor has nothing to loose. We have also never have approach to blame him for whatever happen to us and have no tendency to put the losses on his head.

   

In the same way, a concurrent auditor expects the auditee, to come with symptoms if noticed by auditee ,he  has approach to add and inform  the auditee if any symptoms noticed by him during the course of his audit. Both together have to find out the solutions i.e. medicine, and the auditee has to adhere to the solutions. The purpose of  the concurrent auditor as in house family doctor will be fulfilled if the approach remains  the same. 

   

Guidance Function:    

   

The family doctor, guide us giving the reasons why the illness happens and  also how to avoid the same in future. It is simple as not taking cold drink if you have cough and cold. We generally have tendency to adhere his instructions atleast with in the treatment period and some days after the treatment till we forget the illness.     

   

The concurrent auditor has also try to guide the auditee, during  the interactions to avoid or  give more attention to some functions which may cause of  illness short or long term. He also expects the auditee to remember the same at least during the course of  correction and after till he forget the same in routine.    

   

Respect the Views:    

   

The family doctor knows the epidemic in a particular area and for particular period. If the symptoms are nearly similar in nature he may conclude the decease and provide us the medicine. Whatever he decides we respects his views and act on his instructions without objecting the same. We also allow him the correction when he says take normal pills for  some period and if not cure he gives us antibiotic. We may try to suggest him about the decease but ultimately his views are  final. 

   

The concurrent auditor has also expect that his views  should be considered and given more weight age. He also expect that sometime he will be allowed to do correction. after due discussion he expects his views as final and auditee has respect his views, as the same is beneficial to both. When we  approach our family doctor we never think he has no knowledge and doing time pass in his dispensary. 

   

Fees:

   

A family doctor never ask for the fees, when the discussion is over and he write down the prescription,  we ask the doctor about what fees to be paid and we pay immediately. We never negotiate with our family doctor nor we say the same will be paid after the decease is cured.   

   

The concurrect auditor has also does not want to ask for  the fees time and again. He expects the fees comes to him at a point he provide medicine and writedown the pescription in the form of report.

   

Conclusion:    

   

To my mind the functions of the con current auditor and a family doctor are  the same. The parties have to  behave in the same manner in both the cases.    

 

Over and above:

 

No body asked who was a  family doctor when the patient died.The people only discuss about the causes of the death and precautions he  not taken by the patient to avoide the death.  

   

CA.Satish C. Badve.    

B.Com.F.C.A.D.C.M.D.I.S.A.    

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Why is Maharashtra States Businessmen's mood off? It's due to issues of MVAT setoff

Why is Maharashtra States Businessmen's mood OFF? It's due to issues of MVAT SETOFF.

 

Arjuna (Fictional Character): Krishna, businessmen of Maharashtra State are facing a question, whether they should purchase goods from Maharashtra or not? It seems that due to provisions of MVAT Setoff carrying out business in Maharashtra has become difficult. Dear Krishna, please tell, what is this "SETOFF"?

 

Krishna (Fictional Character): Arjuna, Sales tax department grants set off, if goods are purchased from Maharashtra by registered dealers of the state. For e.g. If registered dealer Mr. "A" (Purchasing Dealer) has purchased goods from Mr. "B" (Selling dealer) then "A" can avail set off of Sale Tax paid on purchases. If B has sold goods worth Rs. 1,00,000/- and levied sales tax @ 12.5% of Rs. 12,500/- and Tax Invoice of Rs. 1,12,500/- is given then "A" can avail the set off of Rs. 12,500/-. If "A" further sales these goods for Rs. 1,50,000/- then it levies sales tax @12.5% of Rs. 18,750/- on it. While paying sales tax, "A" will reduce Rs. 12,500 from Rs. 18,750/- and will pay net tax liability of Rs. 6,250/- to the state government. Thereby "A" and "B" both carry the business in the State. It's so simple, then what is problem in it?

 

Arjuna: Krishna, availing setoff has become difficult due to the other provisions of sales tax law as interpreted by the sales tax department.

 

Krishna: Arjuna, as give in above example, "A" has made the payment of purchases to "B". As per MVAT provisions, afterwards "A" will have to mention TIN and other details in the return and in Annexure J 2 for purchases made from "B". Similarly "B" will have to mention TIN and other details in the return and in Annexure J 1 of the sales made to "A". If these and other provisions are followed then set off can be availed.

 

Arjuna: Krishna, as stated in above example if "B" does not pay taxes or makes errors, then set off availed by "A" is disallowed without any mistake of "A" and he is required to pay taxes, interest and penalty also? Which is absurd.

 

Krishna: Arjuna, you asked correct question. "A"(buyer) and "B" (seller) are registered with sales tax department. Therefore responsibility of proper implementation, administration of the tax laws and final assessment of tax of dealers is of the department. If "A" and "B" decided to enter into bogus purchases and sale transactions, then set off of "A" may be disallowed and tax is collected from him, if tax is not collected from "B". However this is may be correct in bogus transactions only, to safe guard the revenue of state government.

 

Arjuna: Krishna, now if, sales tax department has collected taxes from "A" without granting set off and also collected taxes from "B" then department is collecting taxes two times on one transaction. Is this not a contradiction or illegal?

 

Krishna: Arjuna, Sales tax department in the Bombay High Court has filed a affidavit in the case of Mahalaxmi Cotton Ginning, that if taxes are collected from both parties then "A" will be given refund. Further Honorable State Finance Minister while delivering 2014 budget speech, has stated that in such cases, refund will be given faster. However, it is also true that, how "A" will come to know that "B" has paid the taxes or not. As per today's computerized system of Sales tax department, the dealer has not been provided with such a mechanism.

 

Arjuna: It seems that in such cases as per law, taxes should have been collected from "B" first.

 

Krishna: Arjuna, correctly said. Sales tax department cannot collect taxes on same thing twice. In these cases taxes should be collected from "B" first and "B" should be assessed and asked to pay taxes forcefully. If all the recovery proceedings fails then, at the end if taxes were not collected from "B" then only it should be collected from "A". This seems to be logical.

 

Arjuna: Krishna, this may be correct for bogus purchases. But now if "B" made any technical error then also set off of "A" is disallowed and taxes are collected from "A". What are these circumstances or parameters issued by department of disallowance of setoff?

 

Krishna: Arjuna, for disallowing set off department is using following parameters:

 

1. If TIN of "B" (Seller) is not seen in the computer system of sales tax department

 

2. If TIN of "B" is cancelled

 

3. If "B" has not filed returns

 

4. If "B" is a specific composition dealer.

 

5. If "B" has shown all tax free sales in the return.

 

6. If "B" has given wrong incorrect information in Annexure J 1, etc.

 

Due to these technical mistakes of "B"( seller) the "A" (Buyer) should not be penalized. Sales tax department should get rectified the mistakes from "B" and collect taxes from "B" subject to compliance of laws as discussed earlier.

 

Arjuna: It means responsibility of following tax laws by seller should not be given to purchaser.

 

Krishna: Due to this if, goods are purchased from Maharashtra State, then after some years if, seller have made mistake then purchaser is penalized. This is not correct. Mistake of one and other have to suffer for it. It seems that it's beneficial to purchase from other states, instead of purchasing from Maharashtra State. Because on the goods purchased from Maharashtra, when the "atom bomb" of set off of goods purchased will explode no one knows. No one takes the guarantee of following tax laws by seller, while purchasing goods in business world. In business there is no guarantee of many goods, then how one should obtain the guarantee of seller.

 

Arjuna: Krishna, on one hand there are strict laws for availing set off and afterwards refund is not received. In these situations how businessman in Maharashtra should do his business?

 

Krishna: Yes Arjuna, firstly refund is not received from years. Refund means excess set off remained after adjusting sales tax collected. As refund is not issued, it is as good as benefit of set off is not given to dealer. Further, disallowing set off means punishment for purchasing goods from Maharashtra. If businessman purchases goods from other states, then set off will not be allowed of Central Sales Tax, and there will not be refund to such dealer. Even if CST is cost to dealer, the Cost of disallowance of setoff or refund is unbearable. But he will be relieved from the unnecessary responsibility casted on him under MVAT as discussed above.

 

Arjuna: On one side state government gives incentives to business to come in Maharashtra and on other side there such problems for businesses. It's not a business friendly?

 

Krishna: In Maharashtra, if facilities are given to business, then only financial growth will take place. Further the Honorable State Finance Minister considering the above situation has given a statement in the budget speech of 2014.

 

While reducing VAT on cotton from 5% to 2% he stated that, "the funds of the businessman preparing yarn from the cotton is blocked in the refund, further purchase of cotton from other states is increasing, therefore they are reducing tax rate on cotton." Government should collect taxes smoothly like "Honey bee", it collects honey from the flower without hurting to flowers. However due to such tax provisions, it seems that government in putting honest taxpayer in trouble. In the Tax policy of government, tax follower should not be penalized, rather he should be saved. In the recent case of TCS Company, Honorable Supreme Court has also stated that "government should collect taxes with interest and should give refund with interest. No one's money should not be misused, it may be of government or taxpayer. All citizens of country should follow tax laws and pay taxes, they should not do transaction, by which government's revenue suffer. Tax policies of Governments, should be equal to all tax payers as well as to tax authorities. Dear readers, your comments please, they are very precious.

---

Source : Also published in Lokmat times 

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New company law settlement scheme, 2014

Dear professional Colleagues,

 

Keeping in view the fact that large percentage of Companies have not filed their statutory documents like Annual Accounts and other annual filing related documents like Annual return thereby making themselves liable for heavy penalties and prosecution, Ministry of Corporate Affairs (MCA) launched Company Law Settlement Scheme, 2014, through issue of General Circular No. 34/2014 dated August 12, 2014. Through Company Law Settlement Scheme, 2014 all pending annual filing related documents can be filed with ROC at a reduced additional fees of 25% of the actual additional fees payable as per section 403 read with Companies (Registration offices and fees) Rules 2014. This article deals with details of the CLSS 2014, advantages, disadvantages etc. I hope that this article would be of some help.

 

GOVERNING LAW

 

Ministry of Corporate Affairs (MCA), Central Government, in exercise of powers given by section 403 and 460 of Companies Act 2013, has launched Company Law Settlement Scheme, 2014, through issue of General Circular No. 34/2014 dated August 12, 2014, in order to provide an opportunity to all the Stakeholders to file their pending Annual filing related documents at reduced additional fees. You may download this General Circular No. 34/2014 dated August 12, 2014, from the link given below:

http://www.mca.gov.in/Ministry/pdf/circular_34_13082014.pdf

 

MAIN FEATURES OF COMPANY LAW SETTLEMENT SCHEME, 2014

 

1. This Company Law Settlement Scheme, 2014 shall remain in force from August 15, 2014 to October 15, 2014.

 

2. Defaulting companies who have not filed their annual filing documents pertaining to previous years are allowed to file belated documents which were due for filing till June 30, 2014.

 

3. Defaulting companies can file their old documents with Normal filing fees along with additional fees of 25% of the actual additional fees payable on the date of filing.

 

4. This scheme given an opportunity to inactive companies to get their companies declared as "Dormant Company" under section 455 of the Companies Act, 2013 by filing a simple application at reduced fees.

 

5. This scheme shall apply on the belated filing of the following documents:

 

a. Form 20B for filing Annual Return by a company having Share Capital. 

b. Form 21A for filing Annual Return by a company not having Share Capital.

c. Form 23AC, 23ACA, 23AC XBRL and 23ACA XBRL- Forms for filing Balance Sheet and Profit and Loss Account.

d. Form 66- Form for filing Compliance Certificate with the ROC

e. Form 23B- Form for intimation for Appointment of Auditor

 

SCHEME FOR INACTIVE COMPANIES

 

The defaulting inactive companies while filing documents under CLSS 2014 can simultaneously apply:

 

a. to get themselves declared as dormant company under section 455 of the Companies Act 2013 by filing E-form MCS-1 at 25% of the prescribed fee.

 

b. For striking off the name of the Company by filing E-form FTE at 25% of the fee payable on FTE.

 

FORM FOR FILING UNDER SETTLEMENT SCHEME

 

The application for seeking immunity in respect of belated documents filed under the scheme may be made through filing of form CLSS-2014 after the documents taken on record or approved by the ROC. This form CLSS-2014 for filing application for obtaining immunity certificate will be available on MCA Site from September 01, 2014 and may be filed thereafter but not later than 3 month from the date of closure of scheme. No fees prescribed for this form.

 

APPLICABILITY AND NON-APPLICABILITY OF COMPANY LAW SETTLEMENT SCHEME, 2014

 

Applicability: This newly launched CLSS 2014 is applicable to all the defaulting Companies registered under Companies Act, 1956 except few companies as listed below.

 

Non-applicability: This newly launched CLSS 2014, shall not apply to the following Companies:

 

a. Company against which action for striking off the name under sub-section (5) of section 560 of Companies Act, 1956 has already been initiated by the Registrar of Companies; or

 

b. Where application has already been filed by the Company for striking off the name with the registrar of Companies; or

 

c. Where application has been filed for obtaining dormant status under section 455 of the Companies Act 2013; or

 

d. Vanishing Companies, entities which have already applied for striking off their names from the Register of Companies and those which have sought dormant status, would not be eligible for the scheme.

 

ADVANTAGES AND DISADVANTAGES OF COMPANY LAW SETTLEMENT SCHEME, 2014

 

Advantages: Main advantages of CLSS 2014 are as follows:

 

1. Waiver of additional fees: Defaulting companies can file their old documents by paying only 25% of the actual additional fees payable on the date of filing. There is a waiver of 75% of Additional Fees by the MCA in favour of stakeholders.

 

2. Defaulting companies can file application for getting immunity from Penalty and Prosecution. This facility is there in CLSS 2014 scheme.

 

3. The defaulting inactive companies can apply to get themselves declared as dormant company under the scheme.

 

4. This is one of the crucial benefits of this scheme. Section 164(2), providing disqualification of a director in case a company has not filed financial statement or annual return for any continuous period of 3 financial years, shall not be applicable, if the company made its default good by filing belated documents under CLSS 2014. In this way CLSS 2014 protects Directors from Disqualification.

 

In other words, if a defaulting company file all belated documents under this scheme, the disqualification under section 162(2)(a) shall apply only for the future defaults, if any, by such company.

 

Dis-advantages: There are no apparent dis-advantages of Company Law Settlement Scheme, 2014.

 

ACTION AGAINST DEFAULTING COMPANIES

 

At the conclusion of this scheme, ROC shall take necessary action under the Companies Act, 1956 or Companies Act, 2013, against the Companies who have not availed this scheme and are in default in filing these documents in a timely manner.

 

Thanks

CS Ankur Garg

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Importance and technique to prepare section in professional exams

Dear Students,

 

One of the important questions from examination point of view is whether quoting sections in Audit, Company Law, Indirect Tax and tax papers can make a difference and help you fetching extra marks in professional exams like CA, CS and CMA. Nobody can give exact answer to this question. Reason being there are no fixed guidelines by the respective institutes in this regard. It is indeed a fact that many students had cleared their exams without quoting any section or case law in exams. Now the question comes why one should take pain to learn sections for examination especially when it is not an easy task to recall them in exam hall. Today I am taking this opportunity to share my experience regarding how to prepare sections in corporate laws. Hope this post would be of some use.

 

Importance to prepare Section in Professional Exams

 

Different people may have different opinion about the importance of quoting section in professional exam. Most of the students tend to avoid learning and quoting section in exam. Reason being they think it is another task for then while they are already busy completing their huge syllabus. Their thinking cannot be rejected entirely that they have to prepare huge syllabus but at the same time no one can deny the important of good writing and presentation skills in professional examination. You must be surprised to hear that I am linking the topics of quoting sections in exam to good writing and presentation skills in professional examination. Yes your thinking is correct as for me quoting sections in exam is very much a part of good writing and presentation skills. If you do not connect a topic with its section, if any, then how can you claim that you have used best writing skills? In other words the term "good writing and presentation skills" carries a bigger meaning than just neat and clean answer sheets.

 

Good Impression on examiner: Especially in papers like Company Law, Business law quoting right section is very useful. Kindly appreciate no one can deny the usefulness of mentioning right section in professional exam. You can definitely fetch some extra marks if you quote right section in corporate law and audit paper. In other words there is no harm in quoting right section. Quoting right section in professional exams creates great impression upon the examiner at the time of valuation of answer books and that good impression helps you to fetch extra marks for sure.

 

An answer supported by right section clearly indicates your level of preparation and commitment. This is a very simple fact and not talking or asking you to learn Rocket Science. As per my personal suggestion student should start writing sections and case laws at the IPCC or CS Executive level itself. I would further suggest you to make it a habit to remember and quoting sections along with case laws as it will surely help you a lot during preparation for CA or CS final or other professional examinations. CA students cannot escape from learning and quoting sections at any stage of their examination.

 

Long term benefit of knowledge of section: Section and case law knowledge is also very important for your professional working. In real time professional working you have to deal with sections on daily basis as professional life is all about making interpretation of Companies Act sections or Income Tax sections. So it is better to develop right attitude from the very beginning. Currently I am having 9 years professional experience and all the above opinions are based on my personal experience.

 

Always quote right section: While quoting section in exams students must keep one point in mind that - write the sections and case laws only when you are 100 % sure, otherwise leave it. There is no point quoting wrong section in exam to make it worse situation for you.

 

Strategy/technique to prepare Section in Company Law:

 

As explained above there is no harm in quoting sections in professional exam. Further let me take this opportunity to share my experience, with members and students, of reading and preparing sections in corporate laws. According to the most effective and long term success technique to prepare sections in Company Law is:

 

1. First read and study the Section from Bare Act as bare act contain the pure law passed by legislature (Parliament). Bare act will give you exact content of a particular section and you can straight away understand the intention of law behind the section. You may download the bare act of Companies Act, 2013 from the link given below:

http://www.caclubindia.com/share_files/companies-act-2013-in-word-format-61526.asp#.U_sfXKNqOZQ

 

2. After going through the section from bare act, it is time now to read the same section from the institute study material and the other law book you are referring for exam preparation. (Munish Bhandari for corporate law preparation). From above books you can study different aspects of the law given in section and may also refer different opinions and case laws based on the section.

 

3. Now it is turn of your coaching class notes where you had discussed various interpretations of the section. Read and understand your class noting thoroughly along with notes. These notes will give you readymade analysis of a section through diagrams and class discussions. Here you may discuss the section within your friend circle to understand it in a better way.

 

4. Now it is time to explore and understand practical application of the section. Kindly read and study all the previous exam practical problems based on that particular section from reference book/ institute study material/suggested answers/revision test papers/practice manuals. This will help you to understand the contents and interpretations related to section in practical way. With this exercise you'll be able to understand the section in its entirety.

 

To conclude I would say, if you follow the above 4 steps carefully and honestly while reading a section then you may consider your section finished for life as far as in depth understanding is concerned. So friends that was my way for preparing a section and I hope that you'll find it useful. Please revert in case of any doubt. Another important point is that this method of preparing section in company law can be used to prepare section of any subject like Income tax, Excise or Custom etc.

 

How to remember or recall sections: Till now we had discussed that it is important to quote sections in exam especially in Law paper in professional exam. Now the next problem is how to remember section as their number is high. It is not about 10-15 sections. But that is also not a very tuff task and with some tips and tricks you'll be able to remember and recall sections. Please take note of the points below:

 

a. One of the best methods to remember sections is to develop interest in section based exam preparation. If you try to understand section from the very beginning you'll be able to recall section at the right point of time.

 

b. Follow above mentioned technique for preparing section. Complete understanding of a section will help you to remember section for a long term.

 

c. In order to remember a section you may discuss it within your friend circle. Regular discussion will help you to understand section and will also help you to remember it for a long time.

 

d. You may prepare a note covering all important sections and paste it on the walls of your room. This will help you to revise them on regularly basis.

 

Conclusion

 

Through this exclusive write up we had discussed about the importance of quoting sections in professional exams, Technique to prepare a section in company law or any other law and how to remember or recall a section in exam. In order to conclude this brief write up, I would say one shouldn't ask anybody about the relevance of quoting sections or case laws in Exams. It is off course extremely useful in law subjects especially in CA Exams. Try and quote section in your exams without any hesitation. You may use the strategy mentioned above for remembering sections. If you make it a habit at foundation level itself, it will 100% pay at the time of your final exam preparation. I sincerely hope that this article would be very useful for your exam and professional life success. Kindly share your opinion, if any.

 

Thanks

CS Ankur Garg

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Whether only lawyers can appear before appellate tribunal

According to S. 2(4) of Companies Act 2013, "Appellate Tribunal" means the National Company Law Appellate Tribunal constituted under section 410.

 

According to S. 410 of Companies Act 2013, The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, an Appellate Tribunal to be known as the National Company Law Appellate Tribunal consisting of a chairperson and such number of Judicial and Technical Members, not exceeding eleven, as the Central Government may deem fit, to be appointed by it by notification, for hearing appeals against the orders of the Tribunal.

 

Also, according to S. 2(29) of Companies Act 2013, Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any district court or district courts subordinate to that High Court under sub-clause (ii);

 

(ii) the district court, in cases where the Central Government has, by notification, empowered any district court to exercise all or any of the jurisdictions conferred upon the High Court, within the scope of its jurisdiction in respect of a company whose registered office is situate in the district;

 

(iii) the Court of Session having jurisdiction to try any offence under this Act or under any previous company law;

 

(iv) the Special Court established under section 435;

 

(v) any Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under this Act or under any previous company law;

 

So, to the best of my knowledge, appellate tribunal is not a court. As appellate tribunal is not a court, even persons other than lawyer can appear before it.

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Missed 31st July Deadline for filing Income Tax Return? What Now?

Most of tax payers comply with 31st July deadline for filing Income tax returns. However many miss out due to other commitment in professional and personal life. Missing the deadline does not mean you cannot file your return.  Infact if you have missed to file your return for last year ended March 2013, you can still file however there is some catch. Read the article to know in detail importance of filing of return by 31 July and and methods to file return after due date.

 

What Section 139(1) Says?

Every person,-

a. being a company; or

b. being a person other than a company, if his/her total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form.

 

31st July is the last date to file tax returns for individuals and those whose accounts are not subject to any audit. The assessee can do himself or call on his chartered accountant who can file the tax returns by just asking for few information.

 

What Section 139(4) says?

 

If a person has not furnished the return of income within the time allowed under section 139 (1), then he may furnish the return of income at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier.

 

What if you have not filed your return by due date? Don't feel dejected. You can still file the returns without paying any penalty until March 31, 2015. However there would be following implications:

 

1. Failure to file Returns within the due date attracts interest @ 1% p.m. on the balance tax payable from the due date to the actual date of filling.

 

2. If a person required to file Return u/s 139(1) fails to file Return before the end of the relevant Assessment Year, i.e 31st March 2015 a penalty of Rs. 5,000 shall be levied. Means you can file return  for March 14 ending till 31st March 2016. Even NRI can take benefit of this provision and claim refund of TDS if any deducted.

 

3. Many a time, tax-payers make mistakes while filing returns and notice the errors much later. In such cases, the option to file revised returns helps. However, this won't be the case if you miss the deadline. You are not allowed to file a revised return if you complete the filing after July 31.

 

4. if you fail to file returns before the due date, you will have to forgo the benefit of carrying forward losses incurred under the head `Capital Gains' and `Business Losses

 

5. Delay in filing could mean having to let go of interest due on tax refund if any

 

Importance of filing Income Tax  return for various reasons:

 

1. While processing for VISA, the embassy of the respective country insists the Income Tax returns for the last 3 years as one of the documents for eligibility.

 

2. For applying bank loan (be it personal loan, housing loan or car loan), Income Tax papers are one of the necessary requirements for eligibility.

 

3. For individuals who are currently employed and would like to become an entrepreneur in the future must file their IT returns regularly. This is because when a company / Partner applies for a bank loan, the IT papers of its directors / Partners are also required

 

Important points to be noted for filing return after due date:

 

If you are filing the income tax returns after July 31 2014, you need to take extra care to ensure your return is error-free. As you will not get an opportunity to rectify your mistakes later, as revised returns cannot be filed. You need to make sure documents like Form-16, bank statements, 80G receipts, bank account details etc are handy. This will help you verify all the details you would be entering in your income tax return form. You need double check your bank account details, as refunds will be credited to directly to account. At last if you have doubt or not sure you can always ratified your Income Tax Return by a Chartered Accountant before submitting it.

 

For any query you can write to Chirag@cachauhan.in. Before making any decisions do consult your Professional / tax advisor.  Author does not take any responsibility for misrepresentation or interpretation of act or rules. Neither the author nor the firm accepts any liability neither for the loss or damage of any kind arising out of information in this document nor for any action taken in reliance there on.

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Amended rules of chapter XII

RELATED PARTY TRANSACTIONS (RPTS) ………….. Went to the operation theatre once again and came back with ………….some additions, some deletions, some clarity and a lot of confusion

 

The Ministry of Corporate Affairs, Government of India has issued the Companies (Meetings of Board and it's Powers) second amendment Rules 2014, on 14/08/2014, which, inter alia, makes a lot of modifications to the provisions of "Related Party Transactions" in the Companies Act 2013.

 

THE NET EFFECT OF THE AFORESAID MODIFICATIONS ARE AS FOLLOWS:

 

The Rule 15(3) of the Companies (Meetings of Board and It's Powers) Rules 2014, which came into effect on 01/04/2013, has been thoroughly revamped, as mentioned below;

 

a. Earlier Rule 15(3)(i) has been deleted, which means that the requirement under first proviso  to section 188(1) read with rules 15(3)(i) that "a Company having paid up capital of Rs 10 crore and above has to necessarily pass a special resolution prior to entering into a contract or arrangement with a related party" has been done away with. As such, on these amended rules coming into effect, the need to pass a special resolution prior to entering into a contract or arrangement would depend on whether or not the prescribed ceilings (as modified) are hit.

 

Observation--  With the aforesaid modification the industry has received a big relief because now onwards, only when the threshold, that is 10% of Turnover or 10% of Net Worth or Rs 100 Crore or Rs 50 Crore, as the case may be are touched, in a year, a company has to prepare to get a prior approval of the members by a special resolution. In fact, with this modification, a specific provision in the Act itself has been made inactive, in the sense that the first proviso to Section 188(1) specifically mentions that "without a prior special resolution a company having a paid up capital of not less than such amount AS MAY BE PRESCRIBED". The MCA first prescribed the said threshold as Rs 10 crore, when the rules were first notified but with this modification this part of the Section has been made ineffective.

 

b. In case of a contract or arrangement for sale, purchase or supply of goods or material, directly or through agents, the threshold was 25% of Annual Turnover, which has now been reduced to 10% of Turnover and another threshold, that is, Rs 100 crore has been added. Hence the revised threshold is the lower of 10% of Turnover and Rs 100 Crores. As such, Companies with a huge turnover, say Rs. 1,100/- crores will not be able to take the benefit of their huge turnover. Even if, the turnover is huge, say, Rs 1200/ crore and 10% of it is Rs. 120/ crores, the moment the volume of contracts or arrangement in a year exceeds, the threshold of Rs 100 Crores, they will need a prior special resolution. 

 

First Observation --- Calculation of Turnover remains confusing, as under the new definition of Turnover in the Companies Act 2013

 

Second Observation --- The earlier rules specifically mentioned Annual Turnover as the threshold but the amended rules just mention Turnover. We do not know, whether annual or half yearly or quarterly, even though we understand it to be annual turnover.

Third Observation --- For listed companies, there would hardly be any difference, with effect from 01/10/2014

 

c. In cases of contracts and arrangements related to sale, disposal off or buying of property or leasing of property, in addition to the existing threshold 10% of Net Worth, 10% of Turnover etc. another threshold of Rs 100 Crores has been added and the lower would be the threshold. As such, Companies with a huge turnover, or huge net worth, say Rs. 1,200/- crores will not be able to take the benefit of their huge turnover/net worth. Even if, the turnover/networth is huge, say, Rs 1200/ crore and 10% of it is Rs. 120/ crores, the moment the volume of contracts or arrangement in a year exceeds, the threshold of Rs 100 Crores, they will need a prior special resolution. 

 

First Observation --- Calculation of Turnover remains confusing, as under the new definition of Turnover in the Companies Act 2013

 

Second Observation --- The earlier rules specifically mentioned Annual Turnover as the threshold but the amended rules just mention Turnover. We do not know, whether annual or half yearly or quarterly, even though we understand it to be annual turnover.

 

Third Observation --- For listed companies, there would hardly be any difference, with effect from 01/10/2014

 

d. In cases of contracts and arrangements related to rendering or availing of services, in addition to the existing threshold 10% of Turnover, another threshold of Rs 50 Crores has been added and the lower would be the threshold. As such, Companies with a huge turnover, say Rs. 1,200/- crores will not be able to take the benefit of their huge turnover. Even if, the turnover is huge, say, Rs 1200/ crore and 10% of it is Rs. 120/ crores, the moment the volume of contracts or arrangement in a year exceeds, the threshold of Rs 50 Crores, they will need a prior special resolution. 

 

First Observation --- Calculation of Turnover remains confusing, as under the new definition of Turnover in the Companies Act 2013

 

Second Observation --- The earlier rules specifically mentioned Annual Turnover as the threshold but the amended rules just mention Turnover. We do not know, whether annual or half yearly or quarterly, even though we understand it to be annual turnover.

 

Third Observation --- For listed companies, there would hardly be any difference, with effect

 

AS PER THE MCA NOTIFICATION DATED 14/08/2014, THESE AMENDED RULES ARE TO BE EFFECTIVE ON THEIR NOTIFICATION IN THE GAZETTE. BUT THESE AMENDENTS HAVE BEEN MADE UNDER SECTION 469 OF THE COMPANIES ACT 2013 AND AS PER THE SPECIFIC PROVISION OF THE SAID SECTION THESE RULES CAN BE EFFECTIVE ONLY ON APPROVAL BY BOTH THE HOUSES OF THE PARLIAMENT OF INDIA, AFTER IT IS LAID BEFORE THE RESPECTIVE HOUSES WHEN THEY ARE IN SESSION/SESSIONS FOR AN AGGREGATE PERIOD OF THIRTY DAYS.

 

THE UNDERSIGNED DOES NOT HAVE THE KNOWLEDGE OR INFIORMATION, AS TO WHETHER OR NOT THESE AMENDMENTS HAVE BEEN APPROVED BY THE PARLIAMENT OF INDIA.

 

CS ANJAN KUMAR ROY

FCS

PAST CHAIRMAN, ICSI - EIRC

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All about forfeiting

Forfeiting is another way of getting finance against the capital goods exported through purchase of bill by some other person/company, called forfeiter, which purchases all such export bills which shall be due on future dates. The important point in this transaction is that these purchase of bills made by the financier /company is without recourse and in case the bill is returned, the exporter shall  be absolved from any liability and the part of the loss or the entire loss shall be to the account of the forfeiter who has purchased such bills.

 

Further, initially, the exporter approaches the forfeiter who stipulates a period under which the capital goods are to be manufactured and delivered for shipping and prepares all documents including bill of exchange, invoice, bill of lading, bank guarantee etc. meant for presentation to the forfeiter.

 

The responsibility of the exporter is to manufacture the goods as per order and export these goods to the importer as per agreed terms and conditions which creates a legal /valid payment obligation of the importer. This payment obligation of the importer is guaranteed by the reputed bank of the importer on due date.

 

However, the forfeiter besides commission, risks (political, commercial, country, currency exchange etc), deducts the interest for the entire period in advance from the total proceeds of the bill and makes the payment of the balance to the exporter. Thus exporter gets the immediate payment from the forfeiter without any present or future risk which is taken care of by the forfeiter.

 

We can summarise the advantages to the exporter and the forfeiter as under:

 

Advantages:

 

a. RISK FREE OPTION

Exporter get risk free option for exports as all the transactions under the forfeiting are without recourse.

 

b. IMPROVED LIQUIDITY:

Since the exporter gets the money of the exported goods immediately, it gives liquidity to the exporter and there are no bill receivables in the balance sheet, thus it improves liquidity and current ratio as well.

 

c. CONVERT CREDIT SALES INTO SALES:

Since the payment is received immediately by the exporter from the forfeiter, the credit sales are converted in to cash sales, the process improves the liquidity of the firm or the exporter.

 

d. CREDIT LIMIT DOES NOT GET BLOCKED

Since the exporter gets money immediately and the bill receivables are not appearing in  the balance sheet, the exporter can avail the credit limits available to him on account of further exports bills if does not want to go for forfeiting arrangement due to any reason.

 

e. FREE FROM POLITICAL RISKS (COUNTRY RISK)

Since the bills are negotiated without recourse under the forfeiting arrangements, all risks like political risk, currency risk, insurance risk, commercial risk and interest rate risk are to the account of the forfeiter and the exporter is free from all such risks.

 

BENEFITS TO FORFEITING AGENCY (FORFEITER) 

 

Forfeiting agency purchases receivables at a discount, get interest in advance  from an exporter on a without recourse basis and thus utilises his cash resources more efficiently and effectively. Since these bills are covered by guarantee of the bank of the importer, insurance cover is already done; there are rare chances for dishonour of the bill. However, if there is a country risk, the forfeiter has to suffer for the same and therefore, if the forfeiter envisages any such risk, either he does not involve himself in transactions relating to such countries or charge a huge discount which is a business risk with certain element of speculation in any of the trade/ business.

 

Generally, this type of facility is being availed for the export of medium term facility where the repayment is to be received in 3-5 years in instalments. The exporter cannot wait for such a long period and bank also does not want to make finance for such medium terms, the forfeiter comes int he process and takes all responsibility for the medium term and after acceptance of the bill by the importer and guarantee by the bank of the importer, the forfeiter make the finance available to the exporter entirely at his own risk. The exporter is relieved from any risk in export of such medium term repayment obligations.

 

DIFFERENCE BETWEEN FACTORING AND FORFEITING

 

Nature of difference	FACTORING	FORFEITING
Period	Generally the period of credit in factoring is between 90 days to 180 days	Generally the period of credit is between few months to long 10 years
Nature of goods	Factoring deals in current assets like book receivables	Forfeiting deals in capital goods exported, the repayment of which is to be made by the importer within medium term to long term
Risk coverage	Generally, the business risk is covered	Besides business risk, other risks like country risk, currency risk, interest rate risk, political risk are also covered.
Types	Factoring may be with recourse or without recourse.	Forfeiting is without recourse only

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Agenda for First Board Meeting of Private Limited Companies

As per New Company Law, gap between two board meetings can't exceed 120 Days. If last board meeting of company was held on 31st March 2014 then next board meeting can be held upto 28th July, 2014 (April 30 days + May 31 Days + June 30 days +July 29 days = 120 Days).

 

As all of us aware that there are some Resolutions {Mention under Section 179(3)} which company required to file with ROC in form MGT-14 within 30 days of passing of resolution. {In my earlier Article mentioned list of Resolution which we require to file with ROC).

 

Companies, who still not held First Board Meeting, require holding meeting in coming month. So in this article am trying to help you by providing the following:

 

1. Draft Detailed Agenda for Private Companies under Companies Act- 2013, by covering maximum resolution (which will help Companies to *save cost of Filling of e-form MGT-14 on different-2 time in future).

2. Draft Minutes for According to given Agenda.

3. Draft CTC of Resolutions.

4. Draft Notice Calling Meeting.

5. Draft Attendance Sheet of meeting.

6. Draft MBP-1 (Disclosure of Interest of Director).

7. Consent of Director who is in default.

 

Now the question is! How This Agenda will help to save the Cost:

 

1. Company has to file More than 50 resolutions with ROC in e-form MGT-14 (As per my earlier article).

 

2. If company pass resolutions mention in Section 179(3) in different Board Meetings then company has to file separate MGT-14, this will incurred cost every time on filling of e-form. Example:

 

• Adoption of Disclosure U/s 184(1).

• Borrow Money.

• Invest Funds.

• Grant Loans.

• Approval of Annual Accounts & Director Report

 

1. DRAFT DETAILED AGENDA:

ON LETTER HEAD OF COMPANY WITH CIN AND TELEPHONE NO.

 

AGENDA FOR THE MEETING OF BOARD OF DIRECTORS OF NAME OF COMPANY PRIVATE LIMITED HELD ON DAY OF MEETING THE DATE OF MEETING AT TIME OF MEETING A.M. AT REGISTERED OFFICE AT ADDRESS OF PLAE OF MEETING.

 

1. To Elect the Chairman of the Meeting.

 

2. To grant leave of absence, if any, to the Directors of the Company.

 

3. To consider and approve minutes of the previous Board Meeting.

 

4. To take on record the declarations from directors u/s 274(1)(g) of the Companies Act, 1956.

(This Declaration given by Directors at the end of March- 2014, so company should take-note same in Board Meeting).

 

5. To authorize an officer of the Company to sign the contracts or any other document or proceedings requiring authentication by a Company as per Section 21 of Companies Act 2013.

 

{As per Section-21 (Documents, proceeding and contracts made by or on behalf of company or requiring authentication by a company), May be signed by KMP or Officer of Company duly authorized by Board in this behalf.}

 

6. To take note of the printing of new stationery and painting of new name plates as per the requirement of Section 12(3) of Companies Act, 2013.

 

(As per Section-12 (3) (a) there is need to print Name, Address of its registered office and the Corporate Identity Number along with Telephone Number, Fax number and e-mail and website address, if any)

 

7. To take note of the duties of Directors u/s 166 read with relevant rules of Companies Act, 2013. (Under Companies Act-2013 there are specifically mentioned duties of directors, all directors must aware from them)

 

8. To take note of general disclosure of interest of Directors under section 184(1) in Form MBP-1.

 

(As per Section-184(1) all the directors are require to disclose their interest (Including Share Holding Interest), even if directors are not interested Nil disclosure are require to give by them).

 

9. To authorize Mr. -------------------------- to keep safe custody of Form MBP -1.

 

(As per Section 184(1) read with rule 9 sub rule 3 of Companies (Meetings of Board and its Powers) Rules, 2014, these MBP- require to maintain in safe custody of Company Secretary or Person Authorized by Board for the purpose. So there is no Company Secretary in mostly private Companies so there is need to authorize any person by board)

 

10. To appoint an Officer in Default.

 

(By passing of this Resolution, In Future if, any default happened than Penalty will be applicable only on Director to whom you will authorize by this resolution section 2(60) of CA-2013, But if we have Company Secretary (KMP) then he will be office who is in default according to Section 2(60).

 

{Take consent from KMP or Director, To whom authorizing as officer who is in default under this resolution- consent attached)

 

11. To authorize Mr. --------------------- to keep in custody the Statutory Registers as per new Companies Act, 2013 at the registered office of the company.

 

(Authorization to update, maintain and convert/ compile the existing statutory registers into new format as per section-88 read with rule 3 sub rule-1 of Companies (Management and Administration) Rules, 2014).

Transition period of 6 month is given for comply registers.

 

12. To authorize Mr._______________ to e-file MGT-14 in respect of resolutions passes u/s 179(3) read with Companies (Management and Administration rules), 2014

 

13. Authorization To File E-Forms With Ministry Of Corporate Affairs.

 

14.  To Borrow Money upto Rs. ----------- lacs.

 

(As per Section 179(3) there is require to file e-form MGT-14 for resolution passed for Borrow Money, so it's better to give power to board with in limit of section 180 to borrow money in future). {Reason: it can be file in same MGT-14- saving of Cost)

 

15. To invest Surplus fund upto --------- Lacs.

 

(As per Section 179(3) there is require to file e-form MGT-14 for resolution passed for Investment Funds, so it's better to give power to board for Invest surplus fund of company in future). {Reason: it can be file in same MGT-14- saving of Cost)

 

16. To Grant Loans. (As per Section 179(3) there is require to file e-form MGT-14 forresolution passed for Grant Loan, so it's better to give power to board for grant Loan in future). {Reason: it can be file in same MGT-14- saving of Cost)

 

17.  Designate as KMP )( if Private Company fall under section 203 rule 8A of Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014 require to have Company Secretary and as per section 2(51) Company Secretary fall under KMP. So company require to Designate Company Secretary as KMP)

 

18. Increase in Remuneration of director, if any.

 

19. To Designate as promoter of Company.

 

20. To discuss any other matter with permission of the Chair.

 

21. To Vote of Thanks

 

__________________

(NAME OF DIRECTOR)

Director

DIN: -----------

Add: ----------------.

 

2. DRAFT MINUTES ACCORDING TO DRAFT AGENDA

 

MINUTES OF THE MEETING OF BOARD OF DIRECTORS OF NAME OF COMPANY PRIVATE LIMITED HELD ON DAY OF MEETING THE DATE OF MEETING AT TIME OF MEETING A.M. AT REGISTERED OFFICE AT ADDRESS OF PLAE OF MEETING.

 

DIRECTORS PRESENT:

MR. NAME OF DIRECTOR DIRECTOR

MRS. NAME OF DIRECTOR DIRECTOR

 

ITEM NO.1: ELECTION OF THE CHAIRMAN.

Mr. Name of Director (DIN: ____________) was elected as the chairman of the meeting and therefore he occupied the chair

 

ITEM NO.2: LEAVE OF ABSENCE

All the directors of the Company are present, No leave of absence was required.

 

ITEM NO. 3: CONFIRMATION OF MINUTES OF THE PREVIOUS BOARD MEETING.

The minutes of the previous Board Meeting the draft of which already circulated to all the Directors are hereby approved and confirmed by the Chairman.

 

ITEM NO.4: TO TAKE ON RECORD THE DECLARATIONS FROM DIRECTORS U/S

274(1) (g) OF THE COMPANIES ACT, 1956.-

 

The Chairman placed before the board the declarations received from the Directors of the Company u/s 274(1) (g) of the Companies Act, 1956 to the effect that they are not disqualified to be appointed as directors of the Company. The Board discussed the matter and unanimously passed the following resolution:-

 

"RESOLVED THAT the Company obtained the declarations from Mr. Name of Director (DIN: _________) and Mrs. Name of Director (DIN: ________) Directors of the Company to the effect that, as on 31st March 2014, they were not disqualified to be appointed as directors pursuant to sub-clause (g) of clause (1) of section 274 of the Companies Act, 1956."

 

"RESOLVED FURTHER THAT, declaration under section 274 Clause (1) to sub-clause (g) of the Companies Act, 1956 be and is hereby noted."

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