Category: Regulatory Referencer

I. DIRECT TAX: SPOTLIGHT

1. Extension of due date for filing return of income for the Assessment Year 2024–25 – Circular No. 13/2024 dated 26th October 2024

CBDT has extended the due date for filing the tax returns for Assessment year 2024-25, which was 31st October, 2024, to 15th November, 2024.

2. Condonation of delay under section 119(2)(b) of the Act for returns of income claiming deduction under section 8OP of the Act for Assessment Year 2023-24 – Circular No. 14/2024 dated 30th October, 2024.

CBDT had received applications from co-operative societies seeking condonation of delay for filing returns of income, citing delays in getting accounts audited under respective State Laws.

CBDT had issued a circular No. 13/2023 dated 26th July, 2023 to provide for a condonation process for tax returns filed of A.Y. 2022–23 to avoid genuine hardship to co-op societies claiming deduction under section 80P of the Act. CBDT has extended the applicability of the said circular for A.Y. 2023–24.

3. Fixing monetary limits for the income-tax authorities for reduction or waiver of interest paid or payable under section 220(2) of the Act – Circular No. 15/2024 dated 4th November, 2024

If a taxpayer fails to pay the amount specified in the notice of demand issued under section 156 of the Act, he is liable to pay interest under section 220(2) of the Act. CBDT has authorised various Income tax authorities to exercise power to waive or reduce interest subject to fulfillment of various conditions.

4. Condonation of delay under section 119(2)(b) of the Act, 1961 in filing of Form No. 9 A/10/ 10B /10BB for Assessment Year 2018–19 and subsequent assessment years – Circular No. 16/2024 dated 18th November, 2024
CBDT has authorised various Income tax authorities to exercise power to condone the delay in filing Form No. 9 A/10/ 10B /10BB subject to fulfillment of various conditions.

5. Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form No. 10-IC or Form No. 10-ID for Assessment Years 2020–21, 2021–22 and 2022–23- Circular No. 17/2024 dated 18th November 2024.

CBDT has authorised various Income tax authorities to exercise power to condone the delay in filing Form No. 10 IC/10ID subject to fulfillment of various conditions.

6. Establishing of tolerance range for transfer pricing of Assessment Year 2024–25 – Notification No. 116/2024 dated 18th October, 2024.

The tolerance range is relevant for international or specified domestic transactions. Pricing within the tolerance range is be deemed to be compliant with arm’s length standards.

The tolerance range is set at 1 per cent for transactions classified as “wholesale trading” and 3 per cent for all other transactions for A.Y. 2024–25. Certain conditions to be fulfilled to qualify a transaction as “wholesale trading,”

7. Forms 42, 43 and 44 to be furnished electronically and to be verified in a manner prescribed in Rule 131. – Notification No. 6/2024 dated 19th November, 2024.

II. COMPANIES ACT, 2013

1. Amendments to Adjudication of Penalties Rules; The MCA has notified the Companies (Adjudication of Penalties) Rules, 2014. An amendment has been made to the Rule relating to the Adjudication Platform. A new proviso has been inserted to Rule 3A(1), which states that the proceedings pending before the Adjudicating Officer or Regional Director on the date of such commencement must continue as per the provisions of these rules existing prior to such commencement. These norms are effective from 9th October, 2024. [Notification No. G.S.R 630(E); Dated 9th October, 2024]

III. SEBI

2. SEBI relaxes Listed Entities from dispatching hard copies of Annual Report for AGMs held till 30th September, 2025: Earlier, MCA vide Circular dated 19th September, 2024, had extended the relaxation from sending of physical copies of financial statements (including Board’s report, Auditor’s report etc.) to shareholders for the AGMs conducted till 30th September, 2025. Therefore, to bring it in line with MCA Circular, SEBI has decided to extend the relaxation to listed entities from sending a hard copy of the annual report for the AGMs conducted till 30th September, 2025. [Circular No. SEBI/HO/CFD/CFD-POD-2/P/CIR/2024/133, dated 3rd October, 2024]

SEBI extends timeline for Social Enterprises to make annual disclosures on Social Stock Exchange (SSE) up to 31st January, 2025: Earlier, SEBI, vide circular dated 27th May, 2024, had prescribed the timeline for submission of annual disclosures and annual impact reports by Social Enterprises on the Social Stock Exchange for FY 2023–24. Social Enterprises that have registered or raised funds via SSE were required to submit a report by 31st October, 2024, as per the relevant rules of the SEBI (LODR) Regulations, 2015. SEBI has now extended this timeline to 31st January, 2025. [Circular No. SEBI/HO/CFD/POD-1/P/CIR/2024/134, dated 7th October, 2024]

SEBI directs AIFs and their managers to exercise specific due diligence w.r.t investors and investments of AIF: SEBI has directed Alternative Investment Funds (AIFs) and their managers to exercise specific due diligence with respect to investors and investments to prevent circumvention of various laws and ensure compliance with regulatory frameworks. Under this, AIFs designated as Qualified Institutional Buyers (QIBs) or Qualified Buyers (QBs) must ensure that investors who are not eligible for QIB or QB status on their own do not avail of the respective benefits through the AIF. [Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/135, dated 8th October, 2024]

3. Unlisted subsidiaries of listed entities must identify ‘related party’ and ‘related party transaction’ as per LODR norms: A listed company sought SEBI’s informal guidance on whether unlisted subsidiaries must identify related parties as per Reg. 2(1) (zb) or other laws. SEBI has clarified that unlisted subsidiaries of listed entities must identify ‘related parties’ and ‘related party transactions’ as per LODR Regulations. Further, under Reg. 2(1)(zc), transactions between a subsidiary and its related party, or the holding listed entity’s related party, are considered ‘related party transactions’ under LODR Regulations. [Advisory dated 11th October, 2024].

4. SEBI extends timeline for compliance with provisions relating to direct pay-out of securities to client’s demat account: Earlier, SEBI, vide circular dated 5th June, 2024, mandated the pay-out of securities directly to the client’s demat account. The circular was to come into effect from 14th October, 2024. In order to ensure the smooth implementation of the pay-out of securities directly to the client’s demat account without any disruption to market players and investors, SEBI has now extended the timeline for implementation of the circular. The circular shall come into effect from 11th November, 2024. [Circular No. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/136; Dated 10th October, 2024]

5. All Market Infrastructure Institutions must disclose their shareholding pattern as per LODR Regulations: In order to ensure ease of compliance and effective monitoring of the provisions related to minimum public shareholding, other shareholding limits and fit and proper criteria, SEBI has decided that all Market Infrastructure Institutions (MIIs) shall disclose their shareholding pattern as per the requirements and formats specified for listed companies under LODR Regulations. Further, every MII shall appoint a ‘Designated Depository (DD)’ for the purpose of monitoring their shareholding limits. [Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/139, dated 14th October, 2024]

6. SEBI introduces Liquidity Window to boost early redemption of debt securities: SEBI has introduced a Liquidity Window facility for debt securities, allowing issuers to offer put options for investor redemption prior to the maturity date. This framework, governed by Regulation 15 of the SEBI (NCS) Regulations, 2021, aims to enhance liquidity in the corporate bond market, especially for retail investors. The Liquidity Window facility can be provided only for prospective issuances of debt securities through public issue process or on a private placement basis. [Circular No. SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2024/141, dated 16th October, 2024]

7. SEBI allows 3-in-1 trading accounts for public issue of debt and other securities in addition to existing modes: SEBI has clarified that investors can continue using 3-in-1 accounts to apply online for public issues of debt securities, non-convertible redeemable preference shares, municipal debt securities and securitised debt instruments. This is in addition to the existing modes of making an application in the public issue of securities. A 3-in-1 trading account combines a savings account, a Demat account, and a trading account into a single integrated solution. [Circular No. SEBI/HO/DDHS/DDHS-POD-1/P/CIR/2024/142, dated 18th October, 2024]

8. Research reports by Research Analysts (RAs) are not advertisements unless promoting RA services: The SEBI, after receiving various queries with respect to applicability of provisions of advertisement code on a Research Report issued by an RA, has clarified that Research Report and research recommendations of an RA will not be considered advertisement unless anything contained in the research report is in the nature of promotion of products or services offered by an RA. [Circular No. SEBI/HO/MIRSD/MIRSD-POD1/P/CIR/2024/146, dated 24th October, 2024]

9. Stock brokers can upload the same mobile no. /email address for more than one client belonging to one family: Earlier, SEBI issued guidelines regarding SMS and email alerts to investors by stock exchanges. It states that stock brokers must ensure that a separate mobile number / email address is uploaded for each client. SEBI has now clarified that the stock broker may, at a client’s request, upload the same mobile number/email address for more than one client, provided the client belongs to one family or such client is an authorised person of an HUF, partnership, or trust. [Circular No. SEBI/HO/MIRSD/MIRSD-POD1/P/CIR/2024/XXX, dated 28th October, 2024]

IV. FEMA READY RECKONER

IFSC Authority notifies Code of Conduct for ‘recognised market infrastructure institution’: The International Financial Services Centres Authority has amended the International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations, 2021 to notify the Code of Conduct for a ‘recognised market infrastructure institution’. There are detailed guidelines for governing board, directors, committee members and key management personnel – their compensation, the committees, the segregation of functions along with provisions on several other aspects. [Notification No. IFSCA/GN/2024/011 dated 29th October, 2024]

RBI includes 10-year Sovereign Green Bonds as eligible for non-resident investment under Fully Accessible Route: Certain specified categories of Central Government securities were opened fully for non-resident investors without any restrictions under the Fully Accessible Route introduced vide A.P. (DIR Series) Circular No. 25 dated 30th March, 2020. It has now been decided to also designate Sovereign Green Bonds of 10-year tenor issued by the Government in the second half of the fiscal year 2024–25 as ‘specified securities’ under the Fully Accessible Route. [Circular NO. FMRD.FMD.NO.06/14.01.006/2024-25 dated 7th November, 2024].

RBI amends FEMA Notification 10(R) to align it with the updated definition of ‘startup’: The Reserve Bank of India has notified Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) (Fourth Amendment) Regulations, 2024. The amended norms replace the definition of the startup with the revised definition of startups, which was issued by the Department for Promotion of Industry and Internal Trade in 2019. [FEM (Foreign Currency Accounts by a Person Resident in India) (Fourth Amendment) Regulations, 2024 dated 19th October, 2024]

RBI introduces Operational framework for classification of FPI to FDI: The investment made by a foreign portfolio investor along with its investor group (hereinafter referred to as ‘FPI’) shall be less than 10 per cent of the total paid-up equity capital on a fully diluted basis. FPIs investing in breach of the prescribed limit shall have the option of divesting their holdings or reclassifying such holdings as FDI. In this regard, an operational framework for such reclassification of foreign portfolio investment by FPI to FDI has been introduced by the RBI. [A.P. (DIR Series) Circular No. 19, dated 11th November, 2024]

BCAJ Admin

I.    COMPANIES ACT, 2013

1.    MCA Advisory to the stakeholders: The stakeholders are informed that the processing of application forms for the purpose of name reservation and incorporation at the Central Reservation Centre (CRC) is faceless and randomised. The applications if sent for resubmissions are normally not processed by the same official who has processed the application in the first instance. It is further advised that the stakeholders may inform the Ministry in case of any malpractice or irregularity on the part of any official / officer at CRC or any professional with supporting evidence at CVO-MCA@GOV.IN for taking action in accordance with the CVC guidelines. [Update on MCA website, dated 12th October, 2023]

2.    ICAI issues advisory to its members to ensure due compliance with Significant Beneficial Ownership (SBO) norms:Corporate Laws & Corporate Governance Committee of ICAI has issued an important announcement addressing the sensitization of companies to comply with the provisions related to Significant Beneficial Ownership (SBO) u/s 90 of the Companies Act, 2013 read with relevant Rules. This announcement is in reference to the initiative of the MCA to create awareness among companies regarding their obligations related to SBO. [Announcement dated 18th October, 2023]

3.    MCA mandates Private Companies except Small Companies to issue securities only in Demat form within 18 months from 31st March, 2023: MCA has notified the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023. As per the amended norms, every private company except small companies must issue the securities only in dematerialised form within 18 months from the closure of the Financial Year ended 31st March, 2023. Further, the company must facilitate the dematerialisation of all its securities in accordance with the provisions of the Depositories Act. These provisions shall not apply to Government Companies. [Notification No. G.S.R 802(E), dated 27th October, 2023]

4.    Every company must designate a person for furnishing information to ROC w.r.t beneficial interest in shares of company: MCA has notified the Companies (Management and Administration) Second Amendment Rules, 2023. As per the amended norms, every company must designate a person who shall be responsible for furnishing information and extending cooperation in providing information to the Registrar or any other authorised officer regarding beneficial interest in shares of the company. Further, a company may designate a company secretary (CS), a KMP or every director, if there is no CS or KMP. [Notification No. G.S.R 801(E), dated 27th October, 2023]

5.    MCA amends LLP norms; mandates declaration of beneficial interest and keeping of register for partners: MCA has notified LLP (Third Amendment) Rules, 2023. As per the amended rules, a person whose name is entered in the register of partners of LLP but doesn’t hold any beneficial interest in contribution must file a declaration to that effect in Form 4B within 30 days from the date on which his name is entered in the register. Further, every LLP must maintain a register of its partners in Form 4A from the date of its incorporation. The register must be kept at the registered office of LLP. [Notification No. G.S.R. 803(E), dated 27th October, 2023]

II. SEBI

6.    SEBI extends timeline for mandatory verification of market rumours by specified listed entities: SEBI has extended the timeline for mandatory verification of market rumours by listed entities. As per proviso to Regulation 30(11) of SEBI (LODR) Regulations, 2015, the top 100 listed entities by market capitalization must verify, confirm, deny or clarify market rumours from 1st October, 2023. This has now been extended to 1st February, 2024. Similarly, the top 250 listed entities were required to mandatorily verify, confirm, deny or clarify market rumours w.e.f. 1st April, 2024 which now stands extended to 1st August, 2024. [Circular No. SEBI/HO/CFD/CFD-POD-1/P/CIR/2023/162, dated 30th September, 2023]

7.    SEBI introduces a centralized mechanism for reporting the demise of investors through KRAs: SEBI has introduced a centralized mechanism for reporting and verifying the demise of an investor through KYC Registration Agency (KRAs) to smoothen the transmission process in the securities market. Further, upon receipt of intimation about the demise of an investor, the concerned intermediary must obtain a death certificate along with the PAN from the notifier. Also, after verification, the intermediary must submit a KYC modification request to KRA. The circular shall be effective from 1st January, 2024.[Circular No. SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/0000000163, dated 3rd October, 2023]

8.    SEBI relaxes listed entities from dispatching hard copies of annual report till 30th September, 2024 pursuant to MCA extension: Earlier, the MCA vide Circular dated 25th September, 2023, extended the relaxation from dispatching of physical copies of the financial statements (including Board’s report, Auditor’s report or other documents required to be attached therewith) up to 30th September, 2024. Therefore, SEBI in order to bring it in line with MCA, has decided to extend relaxation to listed entities also. Listed entities are now granted relaxation from sending a hard copy of the annual report to Non-Convertible Securities holders up to 30th September, 2024. [Circular No. SEBI/HO/DDHS/P/CIR/2023/0164, dated 6th October, 2023]

9.    SEBI extends the relaxation from sending proxy forms for general meetings held via e-mode till  30th September, 2024: Earlier, SEBI vide circular dated 11th July, 2023, relaxed the listed entities from complying with regulation 36(1)(b) of LODR i.e., sending hard copies of annual reports, and regulation 44(4) i.e., sending of proxy forms to holders of securities, for the general meetings (conducted in electronic mode) till 30th September, 2023. Now, the SEBI has extended these relaxations till 30th September, 2024. [Circular No. SEBI/HO/CFD/CFD-POD-2/P/CIR/2023/167, dated 7th October, 2023]

10. SEBI redefines ‘Large Corporates’ (LCs); relaxes borrowing norms for LCs through issuance of debt securities: SEBI has relaxed borrowing norms for large corporates (LCs) through issuance of debt securities. Now, an entity with outstanding long-term borrowings of Rs.1000 crore or above would be classified as LC. Also, SEBI has introduced incentives for LCs in case of surplus in requisite borrowings and moderated disincentives if they fail to meet at least 25 per cent of their incremental borrowings. Earlier, LCs were defined as those with outstanding long-term borrowings of at least R100 crore or above. [Circular No. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/172, dated 19th October, 2023]

11. MCA takes away RD’s power to levy additional costs to order confirming the shifting of RO from one state to another: The MCA has notified an amendment to Rule 30 of the Companies (Incorporation) Rules, 2014. As per the amended norms, no additional costs can be included in the Central Government’s order confirming the alteration of registered office from one state to another. Further, a new proviso has been inserted into Rule 30(9), which states that shifting of the registered office may be allowed where the resolution plan has been approved and no appeal against the resolution plan is pending. [Notification No. G.S.R. 790(E), dated 20th October, 2023]

12.     Unclaimed amounts transferred to IEPF under LODR shall not bear any interest:SEBI has notified amendments to Regulation 61A of LODR Regulations which prescribe provisions for dealing with unclaimed non-convertible securities and benefits accrued thereon a new proviso has been inserted which states that the amount transferred to the IPEF shall not bear any interest. Further, the unclaimed amount of a person that has been transferred to IPEF can be claimed in the manner specified by the Board. [Notification No. SEBI/LAD-NRO/GN/2023/158, dated 20th October, 2023]

13.     SEBI amends InvIT & REIT Regulations, 2014: SEBI has notified amendment to Regulation 18 of InvIT & REIT Regulations, 2014 which prescribes provisions for Investment conditions, dividend policy and distribution policy. A new proviso has been inserted which states that the amount transferred to the IPEF shall not bear any interest. Further, the unclaimed or unpaid amount of a person that has been transferred to IEPF can be claimed in the manner specified by the Board. [Notification No. SEBI/LAD-NRO/GN/2023/159, dated 20th October, 2023]

III. DIRECT TAX: SPOTLIGHT

1.    Insertion of Rule 21AHA and Form 10IFA – CBDT notifies Form 10-IFA for opting for tax regime u/s 115BAE by co-operative society — Income-tax (Twenty-Third Amendment) Rules, 2023 — Notification No. 83/2023, dated 30th September, 2023:

The Finance Act introduced a new tax regime under section 115BAE for the resident co-operative societies engaged in manufacturing or producing an article or thing. The CBDT has notified Form 10-IFA for exercising the option of section 115BAE. This form is to be furnished electronically on or before the due date for furnishing the return of Income.

2.    Clarification regarding providing details of persons who have made a ‘substantial contribution to the trust or institution — Circular No. 17/2023, dated 9th October, 2023:

In Form 10B and 10BB, details of persons makingsubstantial contributions may be given with respect tothose persons whose total contribution during theprevious year exceeds fifty thousand rupees and details of relatives of such a person and details of concerns in which such person has a substantial interest may be provided only if available.

3.    Extension of time limit for filing Form 56F for Assessment Year 2023-24 — Circular No. 18/2023, dated 20th October, 2023:

The CBDT has extended the due date for furnishing Form 56F for claiming the benefit of section 10AA for A.Y. 2023-24 to 31st December, 2023.

4.    Condonation of delay in filing of Form No. 10-IC for Assessment Year 2021-22 — Circular No. 19/2023, dated 23rd October, 2023:

The delay in filing of Form No. 10-IC for A.Y. 2021-22 is condoned in cases where the following conditions are satisfied:

i)    The return of income for A.Y. 2021-22 has been filed on or before the due date specified under section 139(1) of the Act;

ii)    The assessee company has opted for taxation u/s 115BAA of the Act in ITR-6; and

iii)    Form 10-IC is filed electronically on or before 31st January, 2024, or three months from the end of the month in which this Circular is issued, whichever is later.

5.    Insertion of Rule 16D and Form 56F for claiming deduction under section 10AA – Income-tax (Twenty-Sixth Amendment) Rules, 2023 — Notification No. 91/ 2023, dated 19th October, 2023.

6.    Agreement between the Government of the Republic of India and the Government of Saint Vincent and the Grenadines for the Exchange of Information and Assistance in collection with respect to taxes, was signed at Kingstown, Saint Vincent and the Grenadines on19thMay, 2022. Agreement entered into force on14th February, 2023. All the provisions of the said Agreement as annexed in the notification shall be given effect to in the Union of India — Notification No. 96/ 2023, dated 1st November, 2023.

IV. FEMA AND IFSCA REGULATIONS

1.    RBI allows PROIs to purchase / sell dated Government Securities/Treasury Bills:

RBI has amended the Foreign Exchange Management (Debt Instruments) Regulations. Persons resident outside India that maintain a rupee account in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016 may purchase or sell dated Government Securities / treasury bills, as perterms and conditions specified by the ReserveBank. Please refer to the Notification for otherconditions.

[Notification No. FEMA.396(2)/2023-RB, dated 16th October, 2023]

2.    Premature withdrawal for NRO and NRE Deposits:

RBI has decided that all domestic term deposits accepted from individuals for amounts of Rupees one crore and below shall have a premature withdrawal facility. This amount has been raised from Rs.15 lakh to Rs. 1 crore. These instructions shall also be applicable for Non-Resident (External) Rupee (NRE) Deposit / Ordinary Non-Resident (NRO) Deposits.

[Circular No. DOR.SPE. REC. NO 51/13.03.000/2023-24, dated 26th October, 2023]

3.    FATF adds Bulgaria to the list of High-Risk Jurisdictions under Increased Monitoring:

The Financial Action Task Force (FATF) releases documents titled “High-Risk Jurisdictions Subject to a Call for Action” and “Jurisdictions under Increased Monitoring” with respect to jurisdictions that have strategic AML / CFT deficiencies as part of the ongoing efforts to identify and work with jurisdictions with strategic Anti-Money Laundering (AML) / Combating of Financing of Terrorism (CFT) deficiencies. As per the 27th October, 2023, FATF public statement, Bulgaria has been added to this list of Jurisdictions under Increased Monitoring while Albania, the Cayman Islands, Jordan and Panama have been removed from this list based on a review by the FATF. This advice does not preclude the regulated entities from legitimate trade and business transactions with these countries and jurisdictions mentioned there.

[Press Release No. 2023-24/1223, dated 1st November, 2023]

4.    Sovereign Green Bonds accessible to non-resident investors too:

Under the RBI’s Fully Accessible Route (FAR) certain specified categories of Central Government securities were opened fully for non-resident investors without any restrictions, apart from being available to domestic investors as well. It has now been decided to also designate all Sovereign Green Bonds issued by the Government in the fiscal year 2023-24 as ‘specified securities’ under the FAR.

[Circular No. FMRD.FMID.NO. 04/14.01.006/2023-24, dated 8th November, 2023]

5.    Special current account exclusively for export settlement:

To provide greater operational flexibility to the exporters, RBI has permitted the AD Category-I banks maintaining a ‘Special Rupee Vostro Account’ to open an additional Special Current Account for its exporter constituents. The account is to be maintained exclusively for the settlement of their export transactions.

[FED Circular No. 08, dated 17th November, 2023]

BCAJ Admin

DIRECT TAX

1. Extension of deadline
for filing declaration and payment of tax under Vivaad Se Vishwas
Scheme. [Notification No. 85 of 2020 dated 27^th October,
2020.]

2. Clarifications in
respect of the Direct Tax Vivaad Se Vishwas Act, 2020. [Circular
No. 18/2020 dated 28^th October, 2020.]

3. CBDT notifies Equalisation
Levy (Amendment) Rules, 2020; revises Forms for filing statements and
appeals. [Notification No. 87 of 2020 dated 28^th October, 2020.]

4. Extension of deadline
for filing Income Tax Return, Tax Audit Report and Transfer Pricing Report. [Notification
No. 88 of 2020 dated 29^th October, 2020.]

5. CBDT authorises CIT to condone the delay in
filing audit report in Form No. 10BB. [Circular
No. 19/2020 dated 3^rd November, 2020.]

COMPANY LAW

I.   COMPANIES ACT, 2013

(I) MCA extends minimum residency requirement
relaxation for directors for F.Y. 2020-21 – MCA
relaxes minimum residency requirement of 182 days in a year for resident
directors for F.Y. 2020-21 as well, in view of Covid-19. Clarifies that
‘…non-compliance of minimum residency in India for a period of at least 182
days in a year, by at least one director in every company, under section 149 of
the Companies Act, 2013 shall not be treated as non-compliance for the
financial year 2020-2021 also.’ [MCA General Circular No. 36/2020 dated 20^th
October, 2020.]

(II)        MCA extends LLP Settlement Scheme, 2020
applicability to documents having due dates 30^th November – MCA extends the date of applicability of the LLP Settlement
Scheme, 2020 to defaulting LLPs to 30^th November, 2020 owing to the
large-scale disruption caused by the pandemic. Accordingly, it states that ‘any
“defaulting LLP” is permitted to file belated documents, which were due for
filing till 30^th November, 2020 in accordance with the provisions of
this Scheme.’ It adds that if a statement of account and solvency for the F.Y.
2019-2020 has been signed beyond the period of six months from the end of the
financial year but not later than 30^th November, 2020, the same
shall not be deemed as non-compliance. [MCA General Circular No. 37/2020
dated 9^th November, 2020.]

II. SEBI

(III) SEBI requires
listed debt security issuers to contribute towards ‘Recovery Expense Fund’ – In order to enable the Debenture Trustee(s) to take prompt action
for enforcement of security in case of ‘default’ in listed debt securities,
SEBI has required the creation of a ‘Recovery Expense Fund’ (REF) by issuers of
debt securities. The REF shall be used in the manner as decided in the meeting
of the holders of debt securities. SEBI has also prescribed the norms for the
manner of creation and operation of REF, utilisation and provision for refund
to the issuer. These provisions shall come into force w.e.f. 1^st
January, 2021. [Circular No. SEBI/HO/MIRSD/CRADT/CIR/P/2020/207, dated
22^nd October, 2020.]

(IV) SEBI
streamlines process for approval of draft Schemes of Arrangement by SEs – SEBI streamlines the processing of draft Schemes of Arrangement
filed by listed entities with stock exchanges (SEs) to ensure that the
recognised SEs refer the draft Schemes to SEBI only upon being fully convinced
that the listed entity is in compliance with the requisite SEBI norms. SEBI
further states that the amended provisions will be applicable for all the
Schemes filed with the stock exchanges after 17^th November, 2020. It
highlights that w.e.f. 3^rd November, 2020 steps for listing and
trading in specified securities in relation to the Scheme of Arrangement must
commence within 60 days of receiving the NCLT order approving the Scheme. SEBI
further requires Audit Committees to comment on the viability of the Scheme
from the company’s perspective. SEBI also requires submission of a report from
the Committee of Independent Directors that the draft Scheme is not detrimental
to the shareholders of the listed entity. [SEBI/HO/CFD/DIL1/CIR/P/2020/215
dated 3^rd November, 2020.]

(V) SEBI issues guidelines for Debenture Trustees
(DTs) to perform due diligence for creation of security – SEBI issues guidelines for
strengthening of DTs’ role to safeguard the interest of investors in debt
securities, for new issues proposed to be listed on or after 1^st January,
2021. SEBI further states that to enable the DTs to exercise due diligence
w.r.t. creation of security, the issuer, at the time of entering into the DT
agreement, shall provide information as prescribed. SEBI has cast the duty for
due diligence on DTs. SEBI provides that the DTs shall maintain records and
documents pertaining to due diligence for a minimum period of five years from
redemption of debt securities. SEBI also requires issuers of debt securities to
create charge in favour of the DTs before making application for listing of
debt securities and specifies, ‘The Stock Exchange(s) shall list the debt
securities only upon receipt of a due diligence certificate… from the Debenture
Trustee confirming creation of charge and execution of Debenture Trust Deed.’ [SEBI/HO/MIRSD/CRADT/CIR/P/2020/218
dated 3^rd November, 2020.]

(VI) SEBI issues
Standard Operating Procedure with respect to imposition of fine and initiation
of action in case of non-compliance of continuous disclosures by issuers of listed
debt securities – In order to align the SOP for
imposition of fine and initiation of action in case of non-compliance of
continuous disclosures by issuers of the listed securities, SEBI has laid down
that the fine is to be levied by the Stock Exchange (SE) for violation of
various regulations as listed in the Circular. The SE shall disclose on their
website the action(s) taken against the entities for non-compliance(s),
including the details of the respective requirement, amount of fine levied /
action taken, etc. The Circular shall come into effect for compliance period
ending on or after 31^st December, 2020. [SEBI/HO/DDHS/DDHS/CIR/P/2020/231
dated 13^th November, 2020.]

ACCOUNTS AND AUDIT

(A) Guidance
Note on Accounting for Share-based Payments (Revised 2020) – This is the Revised Guidance Note (GN) applicable for enterprises
that are not required to follow Indian Accounting Standards. The revised GN
deals with share-based payment transactions with employees as well as
non-employees and deals extensively with group-wide share-based payment
transactions. [ICAI Guidance Note issued on 4^th November, 2020.]

(B) Guidance
Note on Applicability of AS 25 and Measurement of Income Tax Expense for
Interim Financial Reporting (Revised) – The revised
GN incorporates updated references used in earlier GNs and relevant examples.
It also enlightens about the impact of opinions issued by ICAI on the
preparation of interim financial reports. Pursuant to this revision, ‘Guidance
Note on Applicability of AS 25 to Interim Financial Results’ and ‘Guidance
Note on Measurement of Income Tax Expense for Interim Financial Reporting in
the Context of AS 25’ stand withdrawn. [ICAI Guidance Note issued on 4^th
November, 2020.]

FEMA

(i) The FDI Policy Framework is put up periodically by the Government through the Department for
Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce
& Industry. The DPIIT makes these pronouncements on FDI through the
Consolidated FDI Policy Circular. These pronouncements are separately notified
by the Ministry of Finance by amending the FEM(NDI) Rules, 2019 under FEMA. DPIIT
has released a Consolidated FDI Policy which is effective from 15^th
October, 2020. This Policy subsumes and supersedes all past Press Releases
/ Press Notes, Circulars on FDI, Clarifications, etc. In case of any conflict
between the Consolidated FDI Policy and the NDI Rules, the Notifications issued
under FEMA will prevail. [DPIIT File Number 5(2)/2020-FDI Policy dated 15^th
October, 2020.]

(ii)        DPIIT had vide ‘Press Note 4’
dated 18^th September, 2019 brought entities engaged in the news
digital media sector under the FDI regime.
Accordingly, entities engaged in uploading or streaming of news and current
affairs through digital media platforms were permitted to receive FDI up to 26%
under the government approval route. This was a new requirement which resulted
in a few concerns among such entities, chief among which were: that no window
was provided to bring the investment as per the FDI regime; and it was not
clear whether or not entities which are digital news aggregators are covered
because ‘digital media’ was not defined.

In response to representations received on these and other concerns,
DPIIT has released a clarification stating that the FDI Policy will apply to
the following Indian entities:

(a)        digital media entities streaming /
uploading news and current affairs on websites, apps or other platforms;

(b)        news agency which gathers, writes and
distributes / transmits news, directly or indirectly, to digital media entities
and / or news aggregators; and

(c)        news aggregator, being an entity which,
using software of web application, aggregates news content from various sources
such as news websites, blogs, podcasts, video blogs, user submitted links,
etc., in one location.

A window is now
provided for entities covered in (a) above of one year from the date of this
clarification to align their FDI to the 26% level with approval of the Central
Government.

The following
additional conditions have been prescribed:

i)   The majority of the Directors on the Board of
the investee company shall be Indian citizens;

ii)   The CEO shall be an Indian citizen; and

iii) The investee company is
required to obtain security clearance of all foreign personnel likely to be
deployed for more than 60 days in a year by way of appointment, contract or
consultancy or in any other capacity for functioning of the entity prior to
their deployment. In the event of the security clearance of any foreign
personnel being denied or withdrawn for any reasons whatsoever, the investee
entity needs to ensure that the person concerned resigns or his / her services
are terminated forthwith after receiving such directives from the government.

Further, it is also
stated that the investee entities, i.e., the Indian entities receiving FDI,
would be responsible to comply with Press Note 4. [DPIIT File No.
5(4)/2019-FDI Policy dated 16^th October, 2020.]

(iii) RBI has
issued a Notification for regulating posting and collection of margin on specified
derivative contracts. By this regulation:

A. RBI has prohibited any person other than
Authorised Dealers (ADs) to post and collect margin and receive and pay
interest on margin, posted and collected on their own account or on behalf of
their customers for permitted derivative contracts entered into with a person
resident outside India.

B. Permitted derivative contracts have been
defined to mean Foreign Exchange Derivative Contracts, Interest Rate Derivative
Contracts and Credit Derivative Contracts undertaken in line with their
respective Regulations / Directions. The definition can also cover any other
derivative contract as specified by RBI.

C. Other important terms including ‘Margin’,
‘Derivative’, etc., have been defined specifically for this Notification. [Foreign
Exchange Management (Margin for Derivative Contracts) Regulations, 2020, No.
FEMA 399/RB-2020, dated 23^rd October, 2020.]

(iv) There are several reports to be filed with RBI under FEMA. RBI
has decided to discontinue 17 returns / reports with a view to improve the ease
of doing business and reduce the cost of compliance. The discontinued
reports are those that are to be submitted periodically by the AD Banks,
Custodians and FFMCs and are listed in the Annexure to the Circular. [A.P. (DIR
Series) Circular No. 05 dated 13^th November, 2020.]

(v)        The RBI has now
issued a Circular in respect of Compounding of Contraventions under FEMA
whereby the following changes have been made:

(a)        The power to compound certain
contraventions under Notifications dealing with investment in India – FEMA 20
and FEMA 20(R) – was delegated to the Regional Offices / Sub-offices of the
RBI. This delegation of powers was superseded by the introduction of the NDI
Rules in October, 2019. The Circular now updates the reference to various
regulations as per the earlier Notifications to bring it in line with the NDI
Rules.

(b)        Contraventions under FEMA are classified
into ‘technical’ or ‘material’ or ‘sensitive / serious in nature’. Technical
contraventions are dealt with by administrative / cautionary advice without
levying of a compounding fee. The Circular now does away with this practice and
will regularise such contraventions by levying a minimum compounding amount as
per the Compounding Matrix.

(c)        Compounding Orders
issued by RBI have been made available on its website as a measure of public
disclosure. However, by this Circular, for orders issued after 1^st
March, 2020 only a summary will now be put up on the RBI website in the
prescribed format. Complete orders will no longer be available for downloading
from the RBI website.

(d)         Appropriate amendments would also be made in
the Master Direction on Compounding.

[A.P. (DIR
Series) Circular No. 06 dated 17^th November, 2020.]

(vi)
The Hon’ble Supreme Court vide its interim orders dated 4^th
July, 2012 and 14^th September, 2015 passed in the case of the Bar
Council of India vs. A.K. Balaji & Ors. had directed RBI not to
grant any permission to any foreign law firm on or after the date of the said
interim order for opening of Liaison Office (LO) in India. RBI had issued a
Circular to that effect dated 29^th October, 2015. The Supreme Court
has held in the same case that advocates enrolled under the Advocates Act, 1961
alone are entitled to practise law in India and that foreign law firms /
companies or foreign lawyers cannot practise the profession of law in India.
RBI, in line with this decision, has directed AD Banks not to grant any
approval to any branch office, project office, liaison office or other place of
business in India under FEMA for the purpose of practising legal profession in
India. Further, AD Banks have been directed to bring any violation of the
Advocates Act to the notice of the RBI. [A.P. (DIR Series) Circular No. 07
dated 23^rd November, 2020.]

BCAJ Admin

DIRECT TAX

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