DIRECT TAX
1. CBDT notifies E-advance Rulings Scheme, 2022: E-advance Rulings Scheme, 2022 shall apply to the applications of advance rulings made to the Board for Advance Ruling under section 245Q(1) or applications transferred to such Board under section 245Q(4). The applicant shall not be required to appear personally or through an authorised representative before the Board. The proceedings before the Board shall not be open to the public. An appeal against an order for advance ruling passed by the Board for Advance Rulings under this Scheme shall lie before the High Court. [Notification No. 7 of 2022 dated 18th January, 2022.]
2. Insertion of Rule 8AD – Income-tax (2nd Amendment) Rules, 2022: Rule 8AD prescribes computation of capital gains for the purposes of section 45(1)(1B), where any person receives at any time during any previous year any amount under a specified unit-linked insurance policy, including the amount allocated by way of bonus on such policy. [Notification No. 8 of 2022 dated 18th January, 2022.]
3. Guidelines under clause (10D) section 10: Sum received including any sum allocated by way of bonus during the previous year under any one or more ULIPs issued on or after 1st February, 2021 shall be exempt under section 10(10D), subject to satisfaction of other provisions of said clause. The related circular issued explains the same by giving various examples. [Circular 2 of 2022 dated 19th January, 2022.]
4. Clarification regarding the Most-Favoured-Nation (MFN) clause in the Protocol to India’s DTAAs with certain countries: CBDT has issued the following clarifications on the applicability of the MFN clause:
a) To claim the benefits under the MFN clause of DTAA, the third state is to be a member of the OECD both at the time of conclusion of the treaty with India and at the time of applicability of the MFN clause.
b) The unilateral decree of a treaty partner does not represent a shared understanding of the applicability of the MFN clause.
c) Benefit of concessional rates under DTAAs, shall only be available after the date of entry in force with the third state, not from when it became a member of OECD.
d) A separate notification has been issued by India, importing the benefits of the second treaty into the treaty with the First State, as required by the provisions of sub-section (1) of Section 90. [Circular No. 3 of 2022 dated 3rd February, 2022.]
COMPANY LAW
I. COMPANIES ACT, 2013
1. Requirement to file Report on CSR in Form CSR-2 by 31st March, 2022: MCA now requires every Company to which provisions of CSR are applicable u/s 135 to file a report in Form CSR-2 (format is prescribed in the notification), as an addendum to Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be. It is to be noted that for the preceding financial year (2020-2021), Form CSR-2 shall be filed separately on or before 31st March, 2022, after filing Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be. [Notification No. G.S.R. 107 (E) dated 11th February, 2022.]
2. MCA directs that certain provisions of the Companies Act, 2013 shall apply to LLPs, with specified modifications to suit LLPs, w.e.f. 12th February, 2022: The few provisions which are important are enlisted below:
|
Section
|
Nature
of Provision
|
|
90
|
Companies to maintain a Register of
significant beneficial owners in a company
|
|
164
|
Disqualifications for appointment of
Director of the Companies Act shall also apply to LLPs
|
|
165
|
No person shall become designated partner
in more than 20 LLPs, similar to the cap of 20 companies for Directors under
the Companies Act
|
|
206(5)
|
Empowering the Central Govt. to direct
inspection of books and papers of LLP
|
|
252
|
Notifying strike off
|
|
439
|
Offences to be non-cognizable
|
[Notification No. G.S.R. 110(E) dated 11th February, 2022.]
3. Delegation of certain powers to Regional Directors and appointment of ROCs as adjudicating officers: In line with the amendments in the LLP Rules, MCA has delegated certain powers w.e.f. 1st April, 2022 to the Regional Directors at Mumbai, Kolkata, Chennai, New Delhi, Ahmedabad, Hyderabad and Guwahati namely the powers and functions vested in it u/s 17 of the LLP Act [Change of name of limited liability partnership]. These delegated powers shall be subject to the condition that the Central Govt. may revoke such delegation of powers or may itself exercise the powers under the said section, if in its opinion such a course of action is necessary in the public interest. [Order No S.O. 622 (E) dated 11th February, 2022.]
4. Appointment of Registrar of Companies as adjudicating officers for the purposes of LLP Act: MCA through notification has appointed Registrar of Companies as adjudicating officers for the purposes of LLP Act, while also enlisting their respective jurisdiction. However, the said notification states that appeals, if any, filed before the concerned RD shall be disposed of according to the specific Notifications issued by MCA in this regard from time to time. This notification will be effective from 1st April, 2022. [Notification No. S. O. 623 (E) dated 11th February, 2022.]
5. Further relaxation in additional fees in filing e-forms for F.Y. ended 31st March, 2021: In continuation of Circular dated 29th December, 2021 MCA has granted further relaxation on levy of additional fees for filing following e-forms:
|
Sr. No.
|
Forms
|
Nature of Filing
|
Nature of Relaxation
|
|
1
|
AOC-4, AOC-4
(CFS), AOC -4 XBRL and AOC-4 Non XBRL
|
Audited Accounts for the F.Y. ended 31st
March, 2021
|
No additional fees if forms mentioned in
the preceding column are filed on or before 15th March, 2022
|
|
2
|
MGT 7 and MGT 7-A
|
Annual Returns
|
No additional fees if forms mentioned in
the preceding column are filed on or before 31st March, 2022
|
[Circular 01/2022 dated 14th February, 2022.]
II. SEBI
6. Operational procedure to be followed by Listed Entities/RTA in case of issuance of securities in Demat mode: SEBI vide its notification dated 24th January, 2022 mandated listed entities to issue securities in Demat mode only while processing the investor service requests related to duplicate certificate issuance, subdivision, consolidation, split, transmission etc. In this connection, SEBI has now issued an operational circular prescribing the procedure to be followed by the Listed Entities/RTA in processing such investor requests and issuance of dematerialized securities. [Circular No. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/8, dated 25th January, 2022.]
7. SEBI prescribes detailed guidelines for preparation of financial statements of Mutual Fund Schemes on Ind AS basis: The SEBI has prescribed that MF Schemes shall prepare opening balance sheet as on transition date and comparative as per Ind AS. SEBI has also specified the format of preparation of financial statement by the AMC as specified in Annexure A of the circular. SEBI clarified that, in order to align with Ind AS, brokerage and transaction cost shall be charged to schemes up to 12 bps and 5 bps for cash market transactions and derivatives transactions. The circular shall be effective from 1st April, 2023. [Circular No SEBI/HO/IMD-II/DOF8/P/CIR/2022/12, dated 4th February, 2022.]
8. SEBI modifies ‘Master Circular for Depositories dated February 05, 2021’ w.r.t. opening of Demat account in case of HUF: SEBI has specified certain modifications to the Master Circular for Depositories issued on 5th February, 2021. SEBI’s earlier circular restricted married daughters from being new Karta of the HUF in case of the death of the Karta. SEBI has now removed that restriction. Further SEBI added one additional guideline to be followed in case of opening of Demat account in case of death of the Karta. All other provisions of the earlier master circular remain the same. [Circular No. SEBI/HO/MRD2/DDAP/CIR/P/2022/20, dated 17th February, 2022.]
FEMA
1. FM proposes the introduction of India’s own digital currency by RBI: In her budget speech, the Finance Minister announced the issuance of a Digital Rupee (using blockchain and other technologies) by the RBI starting 2022-23. Accordingly, a new definition of ‘bank note’ has been proposed in section 2 of the RBI Act, 1934. As per newly inserted Section 2 (aiv), ‘bank note’ means a bank note issued by the Bank, whether in physical or digital form, under section 22. Section 22 of the RBI Act, 1934 gives the RBI sole right to issue bank notes. The amendment is in line with the ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’, which aims to create a framework for the creating the official digital currency to be issued by the RBI. The Bill has, however, not been introduced in Parliament yet. A new section 22A has been proposed to be inserted, which prescribes that certain sections of the RBI Act, 1934, which specifically relate to physical bank notes would not apply to the digital form of the bank notes. [Budget Speech and Finance Bill 2021, dated 1st February, 2022.]
2. RBI Cautions against unauthorised forex trading platforms: RBI has issued a Press Release pointing out that it has noticed misleading advertisements of unauthorised Electronic Trading Platforms (ETPs) offering forex trading facilities to Indian residents, including on social media platforms, search engines, OTT platforms, gaming apps and the like. RBI has clarified that resident persons can undertake forex transactions only with authorised persons and for permitted purposes. RBI has cautioned the public not to undertake forex transactions on unauthorised ETPs or remit/deposit money for such unauthorised transactions. RBI has cautioned that Resident persons undertaking forex transactions for purposes other than those permitted under the FEMA or on ETPs not authorised by the RBI shall render themselves liable for penal action under the FEMA.
A list of authorised persons and authorised ETPs is available on the RBI website, along with a set of FAQs. [Press Release: 2021-2022/1660 dated 3rd February, 2022.]
3. Foreign Currency Settled Overnight Indexed Swaps: RBI had issued the Rupee Interest Rate Derivatives Directions on 26th June, 2019. Following that, it has now allowed banks in India having AD Cat-I license under FEMA to offer Foreign Currency Settled Overnight Indexed Swaps (FCS-OIS) based on the Overnight MIBOR benchmark published by FBIL to persons not resident in India as well as to other AD Cat-I banks. Banks can undertake these transactions through their branches in India, through their International Financial Services Centre (IFSC) Banking Units (IBUs) or their foreign branches (in case of foreign banks operating in India, through any branch of the parent bank). Banks may undertake FCS-OIS transactions beyond onshore market hours. [Circular No. FMRD.DIRD.12/14.03.046/2021-22, dated 10th February, 2022.]
4. Voluntary Retention Route (VRR) for FPIs – enhancement of limits: To simplify stable investments in debt instruments issued in the country, Voluntary Retention Route (VRR) for investment in government and corporate debt securities by Foreign Portfolio Investors (FPIs) was announced on 1st March, 2019. An investment limit of R1,50,000 crore was set for investments under the VRR. Given the encouraging response to the VRR, RBI has increased the investment limit under VRR by R1,00,000 crore, i.e., up to R2,50,000 crore w.e.f. 1st April, 2022. [RBI/2021-22/156 A.P. (DIR Series) Circular No. 22 dated 10th February, 2022.]
RBI
1. Clarifications on IRACP prudential norms on advances: The RBI has issued clarifications in respect of Prudential Norms on Income Recognition, Asset Classification, and Provisioning (IRACP) that include: the definition of ‘out of order’ shall apply to all loan products being offered as an overdraft facility, including those not meant for business purposes and/or which entail interest repayments as the only credits; the ‘previous 90 days period’ for determination of ‘out of order’ status of a CC/OD account shall be inclusive of the day for which the day-end process is being run and; in case of borrowers having more than one credit facility from a lending institution, loan accounts shall be upgraded from NPA to standard asset category only upon repayment of entire arrears of interest and principal pertaining to all the credit facilities. [Notification No. RBI/2021-22/158 DOR.STR.REC.85/21.04.048/2021-22 dated 15th February, 2022.]
ICAI ANNOUNCEMENTS
1. FRN compulsory field for generating UDINs: Firm Registration Number (FRN) has been made a compulsory field for generating UDINs w.e.f. 1st February, 2022 to enable firms to consolidate the total UDINs generated by its partners on its behalf for its clients, prospectively. [31st January, 2022.]
2. Guidelines for conducting distance/remote/online peer review: The Peer Review Board has decided to adopt conducting of distance/remote/online Peer Review. Considerations for Peer Reviewers have been specified that requires the Reviewers to ensure that appropriate audit evidence is available with them based on which they are able to express their opinion. [9th February, 2022.]
ICAI MATERIAL
Accounts and Audit
1. Guidance Note on Division I – Non Ind AS Schedule III to the Companies Act, 2013 (Revised January 2022 Edition). [24th January, 2022.]
2. Guidance Note on Division II – Ind AS Schedule III to the Companies Act, 2013 (Revised January 2022 Edition). [24th January, 2022.]
3. Guidance Note on Division III – Schedule III to the Companies Act, 2013 for NBFC that is Required to Comply with Ind AS. (Revised January 2022 Edition). [24th January, 2022.]
4. Guidance Note on Audit of Banks (2022 Edition). [10th February, 2022.]
Valuation
5. Concept Paper on Estimating Discount Rates in Valuation. [10th February, 2022.]
6. Concept Paper on Inventory Valuation. [10th February, 2022
