1. Tolerance band for wholesale trading and others: The Central Government has notified the ‘Tolerance Band’ for A.Y. 2021-22 for wholesale trading and others. The Notification provides a tolerance range of one per cent for wholesale trading and three per cent in all other cases.
[Notification No. 124 dated 29th October, 2021.]
2. e-Settlement Scheme, 2021: The CBDT has notified ‘e-Settlement Scheme, 2021′ to settle pending income-tax settlement applications transferred to a settlement commission. [Notification No. 129/2021 dated 1st November, 2021.]
COMPANY LAW
I. COMPANIES ACT, 2013
1. Relaxations in paying additional fees in case of delay in filing Form-8 by LLPs: The MCA has extended the deadline for LLPs to file Form 8 (Statement of Accounts and Solvency) for F.Y. 2020-2021 until 30th December, 2021 in response to representations about the challenges faced because of the Covid-19 pandemic. [General Circular No. 16/2021 dated 26th October, 2021.]
2. Relaxation on levy of additional fees in filing of e-forms: MCA has provided relaxation on levy of additional fees for Annual Financial Statement filings required for the F.Y. ended 31st March, 2021. The normal fees are payable up to 31st December, 2021 for filing the annual financial statements in the e-forms such as AOC-4, AOC-4 (CFS), AOC-4 XBRL, and AOC-4 Non-XBRL, and MGT-7 / MGT-7A. [General Circular No. 17/2021 dated 29th October, 2021.]
3. Extension of last date of filing of Cost Audit Report: MCA has extended the due date for filing of Cost Audit Report for F.Y. 2020-21 with the Central Government. As a result, the companies can file a Cost Audit Report by 30th November, 2021 instead of 31st October, 2021. [General Circular No. 18/2021 dated 29th October, 2021.]
4. IEPFA claim settlement process simplified: The MCA has further simplified the claim settlement process by rationalising various requirements under IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. For claimants, requirement of advance receipt has been waived off and the requirement of Succession Certificate / Probate of Will / Will has been relaxed up to Rs. 5 lakhs both for physical and demat shares. [Press Release dated 12th November, 2021.]
II. SEBI
5. SEBI directs ‘Investment Advisers’ not to deal in unregulated activities: SEBI has directed registered Investment Advisers (IAs) not to deal in unregulated activities, i.e., advisory, distribution and execution / implementation services in digital gold and other unregulated instruments. Any dealing in unregulated activities by IAs may entail action as deemed appropriate under the SEBI Act, 1992 and regulations framed thereunder. [Press Release No. 30/2021, dated 21st October, 2021.]
6. SEBI amends norms for determination of legitimate claims: SEBI has decided to revise the section relevant to the determination of legitimate claims with the goal of aligning them with securities market norms. When a member is designated a defaulter, the claim must be presented to the Member Core Settlement Guarantee Fund Committee (MCSGFC) for penalty and approval. In addition to the foregoing, the MCSGFC’s advice regarding legitimate claims shall be sent to the Investor Protection Fund (IPF) Trust for disbursement of the amount immediately. In case the claim amount is more than the coverage limit under IPF, or the amount sanctioned and ratified by the MCSGFC is less than the claim amount, then the investor will be at liberty to opt for arbitration / any other legal forum outside the exchange mechanism for claim of the balance amount. The provisions of this Circular shall come into effect from 1st January, 2022. [Circular No. SEBI/HO/CDMRD/DoC/P/CIR /2021/651, dated 22nd October, 2021.]
7. SEBI authorises practising Cost Accountants to issue Reconciliation of Share Capital Audit Report: SEBI has amended Regulation 76 of the SEBI (Depositories and Participants) (Second Amendment) Regulations, 2018 authorising practising Cost Accountants to issue Reconciliation of Share Capital Audit Report. [Notification No. SEBI/LAD-NRO/GN /2021/53, dated 26th October, 2021.]
8. Stock brokers should maintain current accounts in multiple banks for holding of client funds: In order to facilitate seamless settlement of funds and for the convenience of investors, the SEBI has clarified that stock brokers should maintain current accounts in appropriate number of banks (subject to the maximum limit prescribed by stock exchanges / SEBI) for holding client funds for settlement purposes and any other accounts mandated by stock exchanges. [Circular No. SEBI/HO/MIRSD/DOP/P/CIR/2021/653, dated 28th october, 2021.]
9. Legal framework governing portfolio managers – can’t provide investing advice on unlisted offshore shares: The SEBI has issued informal guidance whereby it has been clarified that the extant legal framework governing portfolio managers does not envisage investment advice on offshore shares and securities which are neither listed nor intended to be listed in the recognised stock exchanges. [Circular No. SEBI/HO/IMD/DF1/OW/P/2021/31147/1 dated 2nd November, 2021.]
10. SEBI eases norms for processing investor service request by RTAs: As per SEBI’s new framework effective 1st January, 2022, in addition to responding to queries, complaints, and service requests through hard copies, the RTAs shall also process the same received through the registered e-mail address of the holder. Additionally, in the case of service requests, the documents furnished shall have e-sign of the holder(s) / claimant(s). [Circular No. SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/655, dated 3rd November, 2021.]
11. Any person holding more than 10% or more equity shares will be deemed as related party w.e.f. 1st April, 2023: The SEBI has amended the Listing Obligations and Disclosure Requirements Regulations, 2015 whereby the scope and definition of related party has been extended. The amendment states that any person or any entity holding equity shares of 20% or more, or 10% or more in the listed entity at any time during the immediate preceding financial year, shall be deemed to be a related party. [Notification No. SEBI/LAD-NRO/GN/2021/55, dated 9th November, 2021.]
FEMA
1. FPIs allowed to invest in debt instruments issued by REITs and InvITs on repatriation basis: RBI has amended the Foreign Exchange Management (Debt Instruments) Regulations, 2019 to allow FPIs to invest in debt securities issued by REITs and InvITs on repatriation basis by including these securities in Schedule 1 of the said regulations. [Notification No. FEMA. 396(1)/2021-RB, dated 13th October, 2021 notified on 21st October, 2021 and A.P. (DIR Series 2021-22) Circular No. 16, dated 8th November, 2021.]
RBI
1. Clarifications related to Prudential Norms on IRACP Norms: To ensure uniformity in implementing Income Recognition, Asset Classification and Provisioning (IRACP norms) of advances, the RBI has issued clarifications on specific aspects of the extant regulatory guidelines, which applies to all lending institutions. The clarifications relate to: specification of due date / repayment date; classification as SMA and NPA account; definition of ‘out of order’; NPA classification in case of interest payments; upgradation of accounts classified as NPAs; and income recognition policy for loans with moratorium on payment of interest. [Notification No. RBI/2021-22/125. DOR.STR.REC.68/21.04.048/2021-22 dated 12th November, 2021.]
ICAI MATERIAL
Accounts and Audit
1. Report on Audit Quality Review (2020-21): The report highlights key findings observed in Audit Quality Reviews conducted by the Quality Review Board during F.Y. 2020-21. It includes a summary of observations related to Standards on Auditing, AS and Ind AS, other relevant laws and regulations and key takeaways for audit firms.
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Errata
Article: Auditor’s Evaluation of Going Concern Assessment, published in November 2021
We regret to point out a typographical error on Page 28 where ‘SA 260 Using the Work of an Expert’ should be replaced with ‘SA 620 Using the Work of an Auditor’s Expert’ and to be read accordingly.
