DIRECT TAX
1. Insertion of Rule 11UAE – Income-tax (16th Amendment) Rules, 2021 – The Finance Act, 2021 has amended section 50B to provide that in case of slump sale, the Fair Market Value (FMV) of the undertaking or division transferred shall be deemed as the full value of the consideration received or accruing as a result of the transfer of such capital asset. Rule 11UAE is now prescribed providing the formula for computation of the FMV of capital assets for the purposes of section 50B. [Notification No. 68 of 2021 dated 24th May, 2021.]
2. Procedure for exercise of option under 245M(1) and intimation thereof by furnishing and upload of Form No. 34BB under Rule 44DA(1) explained. [Notification No. 5 of 2021 dated 24th May, 2021.]
3. Clarification regarding the limitation time for filing of appeals before the CIT (Appeals) – CBDT has issued Circular No. 8 of 2021 providing various relaxations till 31st May, 2021, including extending the time for filing appeals before CIT (Appeals). At the same time, the Supreme Court, vide order dated 27th April, 2021 in suo motu Writ Petition (Civil) No. 3 of 2020, restored the order dated 23rd March, 2020 and in continuation of the order dated 8th March, 2021, directed that the period(s) of limitation, as prescribed under any General or Special Laws in respect of all judicial or quasi-judicial proceedings, whether condonable or not, shall stand extended till further orders. CBDT clarifies that if different relaxations are available to the taxpayers for a particular compliance, the taxpayer is entitled to the relaxation which is more beneficial to her. Hence, limitation for filing of appeals before the CIT (Appeals) under the Act stands extended till further orders as ordered by the Supreme Court. [Circular No. 10 of 2021 dated 25th May, 2021.]
4. Income-tax Rules – Income-tax (17th Amendment) Rules, 2021 – CBDT amends Rule 31A for furnishing particulars of amounts on which tax is not deducted under sections 194A, 194, 196D and 194Q. It has also prescribed a new Annexure under Form 26Q. [Notification No. 71 of 2021 dated 8th June, 2021.]
5. Cost Inflation Index (CII) notified as 317 for F.Y. 2021-22. [Notification No. 73 of 2021 dated 15th June, 2021.]
COMPANY LAW
I. COMPANIES ACT, 2013
(I) MCA brings in new e-form AGILE-PRO-S for effortless incorporation of companies along with various other registrations – The MCA has notified the Companies (Incorporation) Fourth Amendment Rules, 2021 wherein a new e-form AGILE-PRO-S (Application for Registration of GSTIN, ESIC, EPFO, Profession tax registration, opening of bank account, and Shops and Establishment Registration) is introduced. On filing the AGILE-PRO-S form together with the SPICE incorporation form, companies would be enrolled automatically for GST, EPFO, ESIC, Profession tax registration, opening of bank account, and Shops and Establishment Registration in one go. [MCA Notification No. G.S.R. 392(E) F. No. 1/13/2013 CL-V, Vol. IV Dated 7th June, 2021.]
(II) MCA notifies manner of transfer of shares to IEPF – The MCA has notified the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2021. This amendment has inserted Rule 6A providing the manner of transfer of shares to the IEPF authority in a case where a company does not receive information regarding significant beneficial ownership, or the information received is incomplete. [MCA Notification No. G.S.R. 396 (E) F. No. 05/4/2020-IEPF dated 9th June, 2021.]
(III) MCA removes restrictions on matters not to be dealt with in meetings conducted via video conferencing – The MCA has notified the Companies (Meetings of Board and its Powers) Amendment Rules, 2021 which seeks to amend the Companies (Meetings of Board and its Powers) Rules, 2014 wherein restriction on matters not to be dealt with in a meeting through video conferencing as specified in the Act has been dispensed with. As a result, Companies are free to discuss any matter in meetings conducted through video conferencing. [MCA Notification No. G.S.R. 409 dated 15th June, 2021.]
(IV) Companies (Indian Accounting Standards) Amendment Rules, 2021 – The MCA has notified limited amendments to Ind AS 101, Ind AS 102, Ind AS 103, Ind AS 104, Ind AS 105, Ind AS 106, Ind AS 107, Ind AS 109, Ind AS 111, Ind AS 114, Ind AS 115, Ind AS 116, Ind AS 1, Ind AS 8, Ind AS 12, Ind AS 16, Ind AS 27, Ind AS 28, Ind AS 34, Ind AS 37, Ind AS 38 and Ind AS 40. [MCA Notification dated 18th June, 2021.]
II. SEBI
(V) SEBI grants relaxation in compliance with requirements pertaining to AIFS and VCFS – Due to the on-going second wave of the Covid-19 pandemic and restrictions imposed by various state governments, SEBI has decided to extend the due dates for regulatory filings by AIFs and VCFs during the period ending March, 2021 to July, 2021. As a result, AIFs and VCFs may submit regulatory filings for the aforesaid periods, as applicable, on or before 30th September, 2021. [Circular No. SEBI/HO/IMD/IMD-I/DOF6/CIR/2021/568, dated 31st May, 2021.]
(VI) Enhancement of overseas investment limits for Mutual Funds – SEBI has enhanced overseas investments for Mutual Funds. As a result, they can now make overseas investments subject to a maximum of US $1 billion per Mutual Fund, within the overall industry limit of US $7 billion. In addition, Mutual Funds can make investments in overseas Exchange Traded Fund/s subject to a maximum of US $300 million per Mutual Fund, within the overall industry limit of US $1 billion. [Circular No. SEBI/HO/IMD/IMD-II/DOF3/P/CIR/2021/571 dated 3rd June, 2021.]
(VII) SEBI allows Mutual Funds to enter into plain vanilla Interest Rate Swaps (IRS) for hedging purpose – Based on the feedback received from the industry, SEBI has decided to modify the norms for investment and disclosure by Mutual Funds in Derivatives wherein it has specified that Mutual Funds may enter into plain vanilla IRS for hedging purposes. The value of the notional principal in such cases must not exceed the value of the respective existing assets being hedged by the scheme. [Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/580 dated 18th June, 2021.]
FEMA
(i) The Government had announced a hike in foreign investment limit for the insurance sector from 49% to 74% during the Budget announced on 1st February, 2021 and the appropriate Amendment Bill was passed into law (covered in the April, 2021 issue of the BCAJ). The Finance Ministry formally notified these amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015 on 19th May, 2021 and clarified on the final rules for increasing the foreign direct investment limit to 74%. The FDI Policy for the same has also now been amended by issuance of Press Note 2 of 2021. Certain conditions in relation to management by Resident Indian Citizens have been added. A corresponding amendment in the Non-Debt Instrument Rules, 2019 (NDI Rules) is pending after which the amendments will take effect. [Notification No. G.S.R. 337(E) dated 19th May, 2021 and Press Note No. 2 (2021 Series) dated 14th June, 2021.]
(ii) All transactions in government securities concluded outside the recognised stock exchanges are settled on a guaranteed basis by the Clearing Corporation of India Ltd. (CCIL) which acts as the central counter party. Based on requests received, RBI has decided to allow banks in India having an Authorised Dealer Category-1 licence to lend to Foreign Portfolio Investors (FPIs) in accordance with their credit risk management frameworks for the purpose of placing margins with CCIL in respect of settlement of transactions involving Government Securities (including Treasury Bills and State Development Loans). Changes have also been made by way of Notification to Regulation 7 of FEM (Borrowing and Lending) Regulations. [Notification No. FEMA. 3(R)2/2021-RB, dated 24th May, 2021 and A.P. (DIR SERIES 2021-22) Circular No. 6 dated 4th June, 2021.]
(iii) Certain banks had cautioned their customers against dealing in virtual currencies by making a reference to an RBI circular which was later set aside by the Supreme Court on 4th March, 2020. RBI has clarified that reference made by banks to this Circular is not in order. However, it has pointed out that banks and other entities may continue to carry out customer due diligence processes in line with regulations governing standards for KYC, Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) and other obligations under PMLA, in addition to ensuring compliance with relevant provisions under FEMA for overseas remittances. [Circular No. DOR. AML.REC 18/14.01.001/2021-22 dated 31st May, 2021.]
(iv) Limits for FPIs to invest in Government Securities have remained unchanged for F.Y. 2021-22. Details are provided in the Circular. [A.P. (DIR SERIES 2021-22) Circular No. 5 dated 31st May, 2021.]
RBI
Accounts and Audit
(A) Risk-Based Internal Audit (RBIA) Framework for HFCs – The RBI had earlier issued a Notification (No. RBI/2020-21/88 Ref. No. DoS.CO.PPG./SEC.05/11.01.005/2020-21 dated 3rd February, 2021) mandating an RBIA Framework for specified NBFCs and UCBs. The aforesaid Circular has now been made applicable to all deposit-taking housing finance companies (HFCs) and non-deposit-taking HFCs with asset size of Rs. 5,000 crores and above. Such HFCs need to put in place an RBIA Framework by 30th June, 2022. [Notification No. RBI/2021-22/53 Ref. No. DoS.CO.PPG.SEC/03/11.01.005/2021-22 dated 11th June, 2021.]
ICAI MATERIAL
Accounts and Audit
- Accounting Standards: Quick Referencer for Micro Non-Company Entities. [25th May, 2021.]
