MCA Updates
Amendment to Requirements for Strike-Off – Regulatory Updates
The Ministry of Corporate Affairs (MCA) has amended the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 and the same has become effective from the 10th day of May 2023.
The Amendment rules have inserted the following provisions:
- The company cannot file an application for removal of the name of the company under sub-section (2) of section 248 in Form No. STK-2 unless it has filed overdue financial statements and overdue annual returns up to the end of the financial year in which the company ceased to carry out its business operations.
- In case a company intends to file the application after the action under sub-section (1) of section 248 has been initiated by the Registrar, it is required to file all pending financial statements and all pending annual returns before filing the application.
- In case the Registrar strikes off the company’s name from the register of companies and publishes notice thereof in the Official Gazette regarding the same, the company is not permitted to file the application under this rule.
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Filing of Form CSR-2 with the Ministry– Regulatory Updates
The MCA has amended the Companies (Accounts) Rules, 2014 and the same has become effective from 2nd day of June 2023.
The Amendment rule has inserted the proviso in Rule 12:
For the financial year 2022-2023, Form CSR-2 shall be filed separately on or before 31st March, 2024 after filing Form AOC-4 or Form AOC-4-NBFC (Ind AS), or Form AOC-4 XBRL as the case may be.
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Substitution of LLP Form 3 (Filing of LLP Agreement/ Intimation of any change in the Agreement)
The MCA has amended the Limited Liability Partnership Rules, 2009 and the same has become effective from 2nd June 2023 to enhance the transparency and improving the reporting standards with respect to LLP agreement.
The Amendment Rules has substituted the LLP Form 3 (Filing of LLP agreement / Intimation of any change in the agreement).
Additional disclosure requirements have been introduced in Form 3 such as if the nominee is a body corporate, the form must now include additional information such as the name of nominee, type of body corporate and details of the LLPIN/CIN/FLLPIN/Other Identification Number associated with it.
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Amendment to rules of Fast Track Merger to expedite the process – Regulatory Updates
The MCA has amended the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the same has become effective from 15th day of June, 2023.
The Amendment rules have substituted the following sub-rules:
In Fast Track Merger, governed by Section 233 of the Companies Act, 2013 and Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, the transferee company is required to file within seven days after the conclusion of the meeting of members or class of members or creditors or class of creditors, a copy of the scheme as agreed to by the members and creditors, along with a report of the result of each of the meetings in Form No. CAA.11 with the Central Government along with fees prescribed.
The copy of the scheme is also required to be filed with Registrar of Companies in Form No. GNL-1 along with fees prescribed and the Official Liquidator through hand delivery or by registered post or speed post for objections or suggestions if any.
The Amendment rules provided that no objection or suggestion is received within a period of thirty days of receipt of copy of scheme from the Registrar of Companies and Official Liquidator by the Central Government and the Central Government is of the opinion that the scheme is in the public interest or in the interest of creditors, it may, within a period of fifteen days after the expiry of said thirty days, issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA. 12.
If the Central Government does not issue the confirmation order within a period of sixty days of the receipt of the scheme it shall be deemed that it has no objection to the scheme and a confirmation order shall be issued accordingly.
The Amendment rules also provided that where objections or suggestions are received within a period of thirty days of receipt of copy of scheme from the Registrar of Companies or Official Liquidator or both by the Central Government and
- such objections or suggestions of Registrar of Companies or Official Liquidator, are not sustainable and the Central Government is of the opinion that the scheme is in the public interest or in the interest of creditors, it may within a period of thirty days or after expiry of thirty days, issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA. 12.
- the Central Government is of the opinion, whether on the basis of such objections or otherwise, that the scheme is not in the public interest or in the interest of creditors, it may within sixty days of the receipt of the scheme file an application before the Tribunal in Form No. CAA.13 stating the objections or opinion and requesting that Tribunal may consider the scheme under section 232 of the Act:
If the Central Government does not issue a confirmation order under clause (a) or does not file any application under clause (b) within a period of sixty days of the receipt of the scheme under sub-section (2) of section 233 of the Act, it shall be deemed that it has no objection to the scheme and a confirmation order shall be issued accordingly.
The MCA through these amendment rules has specified the time limits to the government authorities for communicating their objections/suggestions in a timely manner in order to expedite the process of fast-track merger. It has also introduced a deemed approval mechanism.
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SEBI Updates
Introduction of Legal Entity Identifier (LEI) for issuers who have listed and/ or propose to list Non-Convertible Securities, Securitised Debt Instruments and Security Receipts
Legal Entity identification (LEI) was introduced by SEBI in its circular dated May 03, 2023. LEI is a unique global identification for legal entities participating in financial transactions defined by a unique 20 – character code to legally separate entities that engage in the financial transactions. SEBI vide this circular requires issuers/ issuer proposing to issue non-convertible securities to report/obtain and report the LEI code in the Centralised Database of corporate bonds in accordance with the timelines as tabulated below:
| Category of security | Applicability | Timeline |
| Non- Convertible Security | Issuer proposing to issue and list non-convertible security | On or after September 1, 2023 |
| Issuer having outstanding listed non-convertible security as on August 31, 2023 | On or before September 1, 2023 | |
| Securitised Debt Instruments and Security Receipts
|
Issuer proposing to issue and list Securitised Debt Instruments or Security Receipts | On or after September 1, 2023 |
| Issuer having outstanding listed Securitised Debt Instruments and Security Receipts as on August 31, 2023 | On or before September 1, 2023 |
In India, the LEI code may be obtained from Legal Entity Identifier India Ltd (LEIIL), a subsidiary of the Clearing Corporation of India Limited (CCIL), which has been recognised by the Reserve Bank of India as issuer of LEI under the Payment and Settlement Systems Act, 2007.
The detailed circular can be accessed at the following link:
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Model “Tripartite Agreement for Issuer Company, existing & new Share Transfer Agents as per Regulation 7(4) of SEBI (Listing Obligation and Disclosure requirements) Regulation, 2015
The listed entity is required to enter into a tripartite agreement between the existing share transfer agent, the new share transfer agent, and the listed entity in the manner specified by the Board from time to time.
In view of the same, SEBI vide its circular dated May 25, 2023, issued a sample Tripartite Agreement in consultation with the Registrar Association of India (RAIN) and some issuer companies.
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RBI Updates
Formalization of informal Micro Enterprises on UDYAM Assist Platform
The Government of India has recently launched the ‘Udyam Assist Platform’ (UAP) to facilitate the formalisation of Informal Micro Enterprises (IMEs) through the online generation of the Udyam Assist Certificate.
Informal Micro Enterprises are those enterprises that are unable to get registered on the Udyam Registration Portal (URP) due to lack of mandatory required documents such as Permanent Account Number (PAN) or Goods and Services Tax Identification Number (GSTIN) due to which such enterprises are unable to avail the benefits of government schemes or programmes.
The Reserve Bank of India (RBI) vide notification dated 09th May 2023 has now specified that IMEs with an Udyam Assist Certificate shall be treated as micro-enterprises under the MSME for the purpose of availing of Priority Sector Lending (PSL) benefits.
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Income Tax Updates
CBDT notifies the Agreement/Protocol between the Government of India and Chile for the elimination of double taxation, prevention of fiscal evasion and avoidance of taxes on income
The Central Government, on 3rd May, 2023 notified the Double Tax Avoidance Agreement (DTAA) and protocol for elimination of Double taxation and prevention of fiscal evasion and avoidance with respect to taxes on income signed between the Government of the Republic of India and the Government of the Republic of Chile on 9 March 2022. The provisions of the Agreement shall have effect in India in respect of income derived in any fiscal year beginning on or after the first day of April next following the date on which the Agreement enters into force, i.e., 19-10-2022.
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Mahila Samman Savings Certificate (MSSC) 2023: A New Savings Scheme for Women
The Government of India has launched a new small savings scheme called Mahila Samman Savings Certificate (MSSC) on 31.03.2023. This scheme is dedicated to women’s empowerment and commemorates Azadi Ka Amrit Mahotsav. The scheme will be available for a period of two years up to March 2025.
Mahila Samman Savings Certificate can only be purchased by a woman or in the name of a minor girl child. The minimum amount of deposit is Rs 1,000, and the maximum amount of deposit under this scheme is Rs 2,00,000. The scheme is a one-time scheme, and accounts can be opened from 01.04.2023 to 31.03.2025 only.
The interest rate under Mahila Samman Savings Certificate, 2023 is fixed at 7.5% per annum compounded quarterly. Hence, the annualized yield comes to 7.71%. It is a fixed interest-rated scheme. The interest will be reinvested and will be paid at the time of maturity. No monthly or quarterly or other periodic interest payment is allowed.
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CBDT Notifies Persons Exempted from Angel Tax Provisions
The CBDT notification on the captioned subject enlists three categories of persons whose investments in closely held companies (CHCs) shall not be covered under the ambit of angel tax provisions:
- Government and Government-related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies/entities controlled by the Government or where direct or indirect ownership of the Government is 75% or more,
- Banks or regulated entities involved in insurance business, and
- Non-resident investors from notified 21 countries. The list of 21 countries includes Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Iceland, Israel, Italy, Japan, Korea, New Zealand, Norway, Russia, Spain, Sweden, United Kingdom and the United States.
The notification on angel tax exemption for specified classes of persons is expected to encourage foreign portfolio investors (FPIs) from the 21 countries to invest in startups in India. This move aims to attract foreign investment from countries with strong regulatory frameworks. However, the notification restricts angel tax exemption for investment from countries such as Singapore, Netherlands and Mauritius.
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DPIIT Recognized Startups Exempted from Angel Tax Provision
The Finance Act 2023 amended the provisions of Section 56(2)(via) to also include shares issued to non-residents. The earlier CBDT circular exempting investment in start-ups did not cover investments made by non-residents as the erstwhile provisions of the law did not apply to investment by non-residents. Accordingly, to exempt the start -ups from investments received from non-resident, the Central Board of Direct Taxes (CBDT) has amended the provisions of the ‘Angel Tax’ under Section 56(2)(viib) of the Income Tax Act, 1961, to exclude or exempt start-ups recognized by the DPIIT, vide Notification 30/2023 dated May 24, 2023, effective April 1, 2023.
Eligibility Criteria for Angel Tax Exemption:
Start-ups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) are eligible for tax benefits and easier compliance. To be eligible for DPIIT recognition, a start-up must meet certain criteria, such as being incorporated as a private limited company, a registered partnership firm or a limited liability partnership, having an annual turnover not exceeding Rs 100 crores and working towards the development or improvement of a product, process or service with a scalable business model.
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Tax exemption on leave encashment for non-government salaried employees increased to INR 25 lakhs
The tax exemption on leave encashment of non-government salaried employees in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise was earlier up to a limit of 3 lakh only under section 10(10AA) (ii) of the Income Tax Act, 1961.
In pursuance to the proposal in the Budget 2023, the Central Government has notified the increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to 25 Lakh w.e.f. 01.04.2023.
The aggregate amount exempt from income-tax under section 10(10AA) (ii) of the Act shall not exceed the limit of 25 Lakh where any such payments are received by a non-government employee from more than one employer in the same previous year.
Further, the amount exempts from income-tax under section 10(10AA) (ii) of the Act shall not exceed the limit of 25 Lakh as reduced by the tax exemption already allowed in the total income of the employee under section 10(10AA) (ii) of any previous year or years.
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IT Rule 11AA Amended: Effective Date of 80G Provisional Registration
The Central Board of Direct Taxes (CBDT) has recently amended Rule 11AA of the Income Tax Rules, 1962, through Notification 34/2023 (Income-tax 7th Amendment Rules, 2023) dated May 30, 2023. This amendment brings about a significant change in the effective date of provisional approval under section 80G of the Income-tax Act, 1961.
According to the amendment, for applications made under clause (iv) of the first proviso to sub-section (5) of section 80G of the Income-tax Act, 1961, the provisional approval shall be effective from the assessment year relevant to the previous year in which the application is made. Previously, Rule 11AA stated that the provisional registration approval would be effective from the date of the provisional order. However, the new sub-rule (7) introduced in Rule 11AA modifies this provision.
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CBDT Amends IT Rule 11UAC: Excludes Strategic Disinvestment in public sector companies outside the ambit of Section 56(2)(x)
The Central Board of Direct Taxes (CBDT) has made an important amendment to Income Tax Rule 11UAC, resulting in significant changes to the applicability of Section 56(2)(x) of the Income-tax Act, 1961. This amendment, outlined in Notification 35/2023, comes into effect from April 1, 2023, for the Assessment Years 2023-24 and onwards.
The amended IT Rule 11UAC now applies to all circumstances involving the purchase of equity in a company. Previously, this rule was limited to the acquisition of shares in public companies. With the recent amendment, the scope of applicability has been expanded, providing relief to buyers of equity from tax liability under section 56(2)(x). This exemption applies when the shares are purchased at a price lower than their fair market value (FMV) to facilitate strategic disinvestment of public sector enterprises.
This clause pertains to movable property, specifically equity shares of a public sector company or a company received through strategic disinvestment from a public sector company, the Central Government or any State Government.
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Clarification regarding provisions relating to charitable and religious trusts
The Central Board of Direct Taxes (CBDT) has issued Circular 6/2023, which offers clarifications on the registration and approval processes for charitable and religious trusts and other related compliance issues under the Income-tax Act, 1961. The circular outlines the following deadlines, extensions and requirements for registration, renewal and deductions under Section 80G.
- All the existing trusts were required to apply for registration/approval on or before 30.06.2021.
- New trusts are required to apply for provisional registration/approval at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration/approval is sought. Such provisional registration/approval is valid for a maximum period of three years.
- Finance Act, 2023 has, inter-alia, amended section IISTO of the Act, so as to provide that the accreted income of the trusts not applying for registration/ approval, within the specified time, shall be made liable to tax in accordance with the provisions of section IISTO of the Act. This amendment has come into effect from 01.04.2023 and therefore applies to assessment year 2023-24 and subsequent assessment years.
- The application for provisional approval is required to be made at least one month prior to the commencement of the previous year relevant to the assessment year from which approval is sought.
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Increase in monetary limits for condonation under Section 119(2)(b) of the Income-Tax Act, 1961
The revised monetary limits are specified below:
- The Principal Commissioners of Income-tax/Commissioners of Income-tax now have the authority to accept or reject applications/claims if the amount does not exceed 50 lakhs for any given assessment year.
- The Chief Commissioners of Income-tax now have the authority to accept or reject applications/claims if the amount exceeds Rs. 50 lakhs but is not more than Rs. 2 crores for any one assessment year.
- The Principal Chief Commissioners of Income-tax now have the authority to accept or reject applications/claims if the amount exceeds Rs. 2 crores but is not more than Rs. 3 crores for any given assessment year.
- Applications/claims for amounts exceeding Rs. 3 crores will be considered by the Board.
The above revised monetary limits for applications/ claims in respect of the competent authorities specified hereinabove shall be applicable to the applications/ claims filed on and after 01-06-2023.
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GST Updates
e-Invoicing for the taxpayers having aggregate turnover exceeding Rs. 5 Cr from 1st Aug 2023
CBIC has notified that threshold limit for issuance of e-invoices shall stand reduced to Rs. 5 crore (presently Rs. 10 crore) w.e.f. 1st August, 2023. Notification No. 13/2020-CT dated 21.03.2020 has been amended to this effect.
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Advisory on Filing of Declaration In Annexure V by Goods Transport Agency (GTA) opting to pay tax under forward charge mechanism
The GTAs, who commence business or cross registration threshold on or after 1st April, 2023, and wish to opt for payment of tax under forward charge mechanism are required to file their declaration in Annexure V for the FY 2023-24 physically before the concerned jurisdictional authority. The declaration may be filed before the expiry of 45 days from the date of applying for GST registration or one month from the date of obtaining registration or whichever is later. Notification No. 11/2017-CT (Rate) dated 28.06.2017 has been amended to this effect.
