REGULATORY REFERENCER

DIRECT TAX

1. Deduction of
tax at source from salaries u/s 192 during the financial year 2020-21. [Circular
No. 20/2020 dated 3^rd December, 2020.]

2.
Clarifications on provisions of the Direct Tax Vivad Se
Vishwas Act, 2020. [Circular No. 21/2020 dated 4^th
December, 2020.]

COMPANY LAW

I. COMPANIES
ACT, 2013

(I) Designation
of Special Court for the States of Maharashtra, West Bengal and Tamil Nadu in
connection with trials under Companies Act, 2013 in respect of cases filed by
SEBI. The Central Government has notified the special
courts, as mentioned in the Notification, for the states of Maharashtra,
West Bengal and Tamil Nadu to ensure speedy disposal of trials of offences
punishable under the Companies Act, 2013 in respect of cases filed by SEBI. [MCA
Notification S.O. 4283(E) dated 27^th November, 2020.]

(II) MCA
further extends due date for filing cost audit report. MCA has extended the last date for filing Form CRA-4 (Cost Audit
Report) and relaxed additional fees in view of the large-scale disruption
caused by the Covid-19 pandemic. It has further allowed cost auditors to submit
their report for the F.Y. 2019-20 to the Board of Directors of Companies by 31^st
December, 2020 (earlier, 30^th November). Companies are required to
file Form CRA-4 within 30 days from receipt of a copy of the Cost Audit Report.
[MCA General Circular 38/2020 dated 1^st December, 2020.]

(III) MCA
amends provisions with respect to online assessment exams to be cleared by
Independent Directors under the Companies Act, 2013. Through this Amendment, MCA has notified that Independent Directors
(IDs) shall pass an online proficiency self-assessment test conducted by
the Institute, obtaining a minimum of 50% (as against 60%) in aggregate, within
a period of two years (as against one year) from the date of inclusion of their
name in the data bank. MCA has further clarified that IDs are not required to
take the online proficiency self-assessment test when they have served for a
total period of not less than three years (as against ten years) in the
prescribed list of entities as on the date of inclusion of their name in the
data bank. [Companies (Appointment and Qualification of Directors) Fifth
Amendment Rules, 2020 dated 18^th December, 2020.]

II. SEBI

(IV) SEBI
further extends timeline for conducting internal audit and system audit. In view of the prevailing situation due to the pandemic, SEBI has
decided to extend the timelines for compliances by the trading members / clearing
members related to system audit and internal audit, the due date of which
has been extended to 31^st December, 2020. As regards
half-yearly net worth certificate, Cyber Security and Cyber Resilience Audit,
the due date has been extended to 31^st December, 2020 and 31^st
January, 2021, respectively. [SEBI/HO/MIRSD/DOP/CIR/P/2020/235 dated 1^st
December, 2020.]

(V) SEBI issues
operational guidelines for transfer and dematerialisation of re-lodged physical
shares. In continuation of its Circular dated 7^th
September, 2020 fixing 31^st March, 2021 as the cut-off date for
re-lodgement of transfer requests and stipulating that such transferred shares
shall be issued only in demat mode, SEBI has now issued the operational
guidelines in this regard to be followed by the Registrar and Transfer Agents
(RTAs) and Investors and Depository Participants (DPs). As per this guideline,
RTAs, upon receiving the transfer re-lodgement request, are required to issue a
Letter of Confirmation (LoC) to the investor (the transferee) who has to submit
the same along with the Demat Request to the DP within 90 days of receipt of
the LoC. The format of the LoC is annexed to the Circular.
[SEBI/HO/MIRSD/RTAMB/CIR/P/2020/236 dated 2^nd December, 2020.]

(VI) SEBI
issues Circular to increase participation of non-institutional shareholders in
e-voting facility provided by listed entities. In order to
facilitate seamless authentication and to enhance ease and convenience of
participating in the e-voting process, SEBI has come out with the broad
initiatives to be implemented in two phases; the first phase is to be completed
by 9^th June, 2021 and second phase to be completed
within 12 months of the completion of phase 1. With this, SEBI ultimately
intends to eliminate the key challenge of registration on various E-voting
Service Providers and maintenance of multiple user IDs and passwords by the
shareholders and eventually increase the participation. [SEBI/HO/CFD/CMD/CIR/P/2020/242
dated 9^th December, 2020.]

ACCOUNTS AND AUDIT

(A) CARO 2020 now
made applicable from F.Y. 2021-22 – The MCA has extended the
applicability date of the Companies (Auditor’s Report) Order, 2020 for one
more year, i.e., for the financial years commencing on or after 1^st
April, 2021. [MCA order dated 17^th December, 2020.]

FEMA

1.)
Notification amending Regulation on Export and Import of Currency has
been issued whereby a new Regulation 10 has been introduced giving power
to the Reserve Bank to restrict export or import of currency. The
Reserve Bank may now, in public interest and in consultation with the Central
Government, restrict the amount of Indian currency notes of Government
of India and / or of Reserve Bank, and / or foreign currency, on
case-to-case basis that a person may bring into or take outside India and
prescribe such conditions as it may deem necessary. This is in furtherance of
earlier Notification No. FEMA 6(R)/(2)/2020-RB, dated 11^th August,
2020 whereby the provision regarding RBI’s power to allow, on specific
application, import or export of Indian currency in Regulation 3 was replaced
with a new Regulation 9. [Notification No. FEMA 6(R)/(3)/2020-RB, dated 3^rd
December, 2020.]

2.) The
Government had announced a hike in the limit of FDI in the defence sector from
49% to 74% in May, 2020. The DPIIT had issued Press Note 4 dated 17^th September,
2020 detailing the changes and bringing in some conditions. These changes could
become effective only when necessary amendments are made in the FEMA(NDI)
Rules. A Notification amending the NDI Rules to bring in the changes for FDI
in the Defence Sector has now been issued. The amendments made are in line
with the changes issued vide Press Note 4 earlier. Please refer to BCAJ,
October, 2020 detailing the changes brought in. [Notification No. S.O.
4441 (E) (F. No. 01/05/EM/2019), dated 8^th December, 2020.]

3.) RBI has
issued an important Circular easing several Procedures for Export of Goods and
Services by delegating more powers to AD Banks:

a) Direct
dispatch of shipping documents

AD Banks were
allowed to regularise cases of dispatch of shipping documents by the exporter
directly to the consignee or his agent resident in the country of the final
destination of goods up to USD 1 million or its equivalent per export shipment.
It has now been decided to do away with this limit of USD 1 million subject to
the following conditions:

i) The export
proceeds have been realised in full except for the amount written off, if any,
in line with the provisions for write-off;

ii) The
exporter is a regular customer of AD bank for a period of at least six months;

iii) The
exporter’s account with the AD Bank is fully compliant with RBI’s KYC / AML
guidelines;

iv) The AD bank
is satisfied about the bona fides of the transaction.

b) ‘Write-off’
of unrealised export bills

RBI allowed,
through the AD Banks, exporters to ‘write-off’ unrealised export bills up to
specified limits in enumerated circumstances if all prescribed conditions were
met. To provide greater flexibility to the AD Banks and to reduce the time
taken for according such approvals, the procedure is now revised as under:

The AD bank
may, on request of the exporter, write off unrealised export bills without
any limit in respect of cases falling under categories specified below:

(i) The
overseas buyer has been declared insolvent and a certificate from the official
liquidator, indicating that there is no possibility of recovery of export
proceeds, has been produced;

(ii) The
unrealised amount represents the balance due in a case settled through the
intervention of the Indian Embassy, Foreign Chamber of Commerce or similar
organisation;

(iii) The goods
exported have been auctioned or destroyed by the port / customs / health authorities
in the importing country.

The ‘write-off’ is allowed provided the AD Bank is satisfied with the
documentary evidence produced. Further, in cases falling under the above categories, AD Bank may also permit
write-off of outstanding amount of export bills up to the specified ceilings
where the documents have been directly dispatched by the exporter to the
consignee or his agent resident in the country of final destination of goods.

In all other cases, the erstwhile limits and conditions continue as
currently prevalent. Certain corrections in the terms and forms have also been
made in the provisions.

c) Set-off of export receivables against import payables

There has been a long-standing demand of
importers and exporters to allow set-off of their outstanding export
receivables against outstanding import payables with their overseas group /
associate companies. At present, AD Banks are allowing exporters and importers
to set off only from / to the same overseas buyer / supplier. Accordingly, it
has been decided to delegate powers to AD Banks to also consider such requests
of set-off and a host of revised guidelines / conditions have been issued. The
chief ones among these are those requiring that the arrangement is backed by a
written, legally enforceable agreement / contract in case of set-off among
group / associate companies; not allowing set-off of export receivables for
goods against import payables for services and vice versa; allowing set
off only between the export and import legs taking place during the same
calendar year; and so on.

d) Refund of export proceeds

AD banks, through whom the export proceeds were originally realised,
were allowed to consider requests for refund of export proceeds of goods
exported from India and being re-imported into India on account of poor
quality. However, as per current provisions, the exporter had to provide an
undertaking that such goods will be re-imported within three months from the
date of remittance. The instructions have been reviewed and henceforth AD
Banks, while permitting refund of export proceeds of goods exported from India,
shall not insist on the requirement of re-import of goods, where
exported goods have been auctioned or destroyed by the port or customs or
health authorities or any other accredited agency in the importing country,
subject to submission of satisfactory documentary evidence. In all other cases
AD banks shall ensure that the procedures as applicable to normal imports are
adhered to and that an undertaking from the exporter to re-import the goods
within three months from the date of refund of export proceeds shall be
obtained. [A.P. (DIR Series 2020-21) Circular No. 8, dated 4^th December,
2020.]