Filing of Return
As per Assessment Year 2006-07
It is statutorily obligatory for every person to furnish a return of his total income or the total income of any other person in respect of which he is assessable under the income tax act, in all cases where his total income or the total income of any other person in which he is liable to be assessed exceeds, in any relevant accounting year the maximum amount which is not chargeable to income tax. the return of income must be furnished by the assessee in the prescribed manner by the board from time to time.
Filing of Return - compulsory
One-by-Six Scheme
If a person is enjoying any of the following item, he/she has to file his/her return.
• Occupation of a House
• Ownership of a motor car
• Expenditure on foreign travel
• Holder of credit card
• Electricity payments in excess of Rs 50,000/annum
• Member of a club - where the entrance fee is more than Rs 25,000/-.
The assessee is obliged to voluntarily file the return of income without waiting for the notice of the assessing officer calling for the filing of the return. The time limit for filing of the return by an assessee if his total income of any other person in respect of which he is assessable exceeds the maximum amount not chargeable to tax shall be as follows:
a. Where the assessee is a company the 30th day of November of the assessment year
b. Where the assessee is a person, other than a company :-
i. where the account of the assessee are required to be audited under the income tax act or any other law, or in cases where the report of the chartered Accountant is required to be furnished under sections 80HHC or 80HHD i.e.. for deduction in respect of profits retained for export business and also in respect of earnings in convertible foreign exchange, or in case of a cooperative society, the 31st day of October of the assessment year
ii. where the total income includes any income from the business or profession, not being a case falling under sub clause (i), the 31st day of August for the assessment year
iii. in any other case, 30th day of June of the assessment year
The requirements of Income-tax Act making it obligatory for the assessee to file a return of his total income apply equally even in cases where the assessee has incurred a loss under the head 'profit and gains form business and profession' or under the head 'capital gains' or maintenance of race horses. Unless the assessee files a return of loss in the manner and within the same time limits as required for a return of income or by the 31st day of July of the assessment relevant to the previous year during which the loss was sustained, the assessee would not be entitled to carry forward the loss for being set off against income in the subsequent year.
Late Return
Any person who has not filed the return within the time allowed may be file a belated return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, which ever is earlier. However, in case of returns relating to assessment year 1988-89 or any other assessment year, the period allowable is two years.
Revised Return
An assessee who is required to file a return of income is entitled to revise the return of income originally filed by him to make such amendments, additions or changes as may be found necessary by him. Such a revised return may be filed by the assessee at any time before the assessment is made. There is no limit under the income tax Act in respect of the number of time for which the return of income may be revised by the assessee. However, if a person deliberately files a false return he will be liable to be imprisoned under section 277 and the offence will not be condoned by filing a revised return.
Where the return relates to assessment year 1988-89 or any earlier assessment year, the period of limitation is two years from the end of the relevant assessment year.
Defective Return
If the assessing officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within 15 days from the date of such intimation or within such further period as may be allowed by the assessing officer on the request of the assessee. If the assessee fails to rectify the defect within the aforesaid period, the return shall be deemed invalid and further it shall be deemed that the assessee had failed to furnish the return. However, where the assessee is made the assessment officer may condone the delay and treat the return as a valid return.
Signing of Return
The return of income must be signed and verified. In case of an individual
• by the individual himself
• where he is absent from India, by the individual himself or by some person duly authorised by him in this behalf
• where he is mentally incapacitated from attending to his affairs, by his guardian or any person competent to act on his behalf
• where for any other reason, it is not possible for the individual to sign the return, by any person duly authorised by him in this behalf.
Penalty
Under the existing law, penalty for delay in filing of return of income is calculated as a percentage of the shortfall of tax. Where tax has already been deducted at source, or advance tax has been duly paid, no penalty is leviable. It is proposed to amend the law to provide for the penalty of Rs.1000 even in such cases. This provision is targeted towards the salary earners who always had the impression that their liability was over the moment the tax was deducted by the employer.
Section 139 - Return of Income
(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year in the prescribed form 1416 and verified in the prescribed manner and setting forth such other particulars as may be prescribed :
Provided that a person, not furnishing return under this sub-section and residing in such area as may be specified by the Board in this behalf by a notification in the Official Gazette, and who at any time during the previous year fulfils any one of the following conditions, namely :-
(i) Is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or
(ii) Is the owner or the lessee of motor vehicle other than a two- wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or
(iii) Is a subscriber to a telephone; or
(iv) Has incurred expenditure for himself or any other person on travel to any foreign country,
(v) Is the holder of the credit card, not being an "Add-on" card, issued by any bank or institution; or
(vi) Is a member of a club where entrace fee charged is twenty-five thousand rupees or more : shall furnish a return, of his income during the previous year, on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. Provided further that the Central Government may, by notification in the Official Gazette, specify class or classes of persons to whom the provisions of the first proviso shall not apply,
Explanation 1 : In this sub-section, "due date" means -
(a) Where the assessee is a company, the 30th day of November of the assessment year;
(b) Where the assessee is a person, other than a company, -
(i) In a case where the accounts of the assessee are required under this Act or any other law to be audited or where the report of an accountant is required to be furnished under section 80HHC or section 80HHD or where the prescribed certificate is required to be furnished under section 80R or section 80RR or sub-section (1) of section 80RRA, or in the case of a co-operative society or in the case of a working partner of a firm whoseaccounts are required under this Act or any other law to be audited, the 31st day of October of the assessment year;
(ii) In a case where the total income referred to in this sub-section includes any income from business or profession, not being a case falling under sub-clause (i), the 31st day of August of the assessment year;
(iii) In any other case, the 30th day of June of the assessment year.
Explanation 2 : For the purposes of sub-clause (i) of clause (b) of Explanation 1, the expression "working partner" shall have the meaning assigned to it in Explanation 4 of clause (b) of section 40.
Explanation 3 : For the purposes of this sub-section, the expression "motor vehicle" shall have the meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988).
Explanation 4 : For the purposes of this sub-section, the expression "travel to any foreign country" does not include travel to the neighbouring countries or to such places of pilgrimage as the Board may specify in this behalf by notification in the Official Gazette.
(3) If any person, who has sustained a loss in any previous year under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72 or sub-section (2) of section 73, or sub-section (1) or sub-section (3) of section 74 , or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, 1429 and all the provisions of this Act shall apply as if it were a return under sub-section (1).
(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :
Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as reference to two years from the end of the relevant assessment year.
(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed 1432 and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).
(4B) The chief executive officer (whether such chief executive officer is known as secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed 1433a manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).
(5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :
Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.
(6) The prescribed form of the returns referred to in sub-sections (1) and (3) of this section, and in clause (i) of sub-section (1) of section 142 shall, in such cases as may be prescribed, require the assessee to furnish the particulars of income exempt from tax, assets of the prescribed nature value and belonging to him, his bank account and credit card held by him, expenditure exceeding the prescribed limits incurred by him under prescribed heads and such other outgoings as may be prescribed.
(6A) Without prejudice to the provisions of sub-section (6), the prescribed form of the returns referred to in this section, and in clause (i) of sub-section (1) of section 142 shall, in the case of an assessee engaged in any business or profession, also require him to furnish the report of any audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, a copy of such report together with proof of furnishing the report, the particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof, the names and addresses of his partners, if any, in such business or profession and, if he is a member of an association or body of individuals, the names of the other members of the association or the body of individuals and the extent of the share of the assessee and the sharesof all such partners or the members, as the case may be, in the profits of the business or profession and any branches thereof.
(8)(a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then [whether or not the Assessing Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2)], the assessee shall be liable to pay simple interest at fifteen per cent per annum, reckoned 1443 from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source : Provided that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, 1444 reduce or waive the interest payable by any assessee under this sub-section.
Explanation 1 : For the purposes of this sub-section, "specified date", in relation to a return for an assessment year, means, - (a) In the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later;
(b) In the case of every other assessee, the 30th day of June of the assessment year. Explanation 2 : Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this sub-section.
(b) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount of tax on which interest was payable under this sub-section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and -
(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;
(ii) In a case where the interest is reduced, the excess interest paid, if any, shall be refunded.
(c) The provisions of this sub-section shall apply in respect of the assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references therein to the other provisions of this Act shall be construed as references to the said provisions as they were applicable to the relevant assessment year.
(9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return :
Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.
Explanation : For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :- (a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in;
(b) The return is accompanied by a statement showing the computation of the tax payable on the basis of the return;
(bb) The return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;
(c) The return is accompanied by proof of - (i) the tax, if any, claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have been paid;
(ii) The amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974);
(d) Where regular books of account are maintained by the assessee the return is accompanied by copies of - (i) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance sheet;
(ii) In the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members; and in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals;
(e) Where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report and, where an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section;
(f) Where regular books of account are not maintained by the assessee the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.
Thursday, January 6, 2011
CO-OPERATIVE SOCIETY TAXATION
CO-OPERATIVE SOCIETY TAXATION
Meaning
Co-operative society means a society registered under Co-operative Societies Act, 1912 or any other law in force in any state for the registration of Co-operative societies.
Regional rural bank is deemed as co-operative society (Circular 319 dt. 11-1-1982)
Rate of Tax
Income up to Rs. 10,000 10%
Income Rs. 10,001 to Rs. 20,000 20%
Income Rs. 20,001 onwards 30%
The above rates to be increased by 2% education cess on income tax & 1% secondary & higher education cess on income tax.
Filing of return & due date & PAN/ TAN
Since there is no threshold limit for taxability of income in case of a co-operative society, it implies that if a society has any taxable income, it has to file a return of income
Since accounts of all co-operative societies are subject to statutory audit provisions under respective governing laws, therefore due date for filing return of income under the Income-tax Act, 1961 is September 30.
If the society has to deduct income tax it must obtain TAN number. The society is also bound by provisions of TAN and filing of return of TDS. If society earns taxable income it should apply for PAN.
Principle of Mutuality
Income of the co-operative society to which the Doctrine of Mutuality applies is not taxable.
A co-operative society is a mutual association. A mutual association is one in which the members of the group come together for a common objective, make contributions for achieving that objective and participate in the surplus arising out of it. It is not necessary that all the members have to contribute to common fund and all the members have to take benefit of the resultant surplus. It is sufficient even if some members may contribute and some members may only take benefit, concept of mutuality will still apply if all members are covered by the same conditions and have the same entitlements. If a society carries on some activities which are mutual and some activities which are not, then the concept would apply to only those activities which are mutual.
In respect of contributions from members concept of mutuality would be applicable. Surplus arising out of contributions would be covered by concept of mutuality and therefore not an income at all.
Tax Audit
Tax audit is compulsory if turnover of society (engaged in business) is more than 40 lakhs per year. (60 lakhs w.e.f. 1-4-2011 i.e., A.Y. 2011-12). Tax Audit provisions is generally not applicable to societies which do not carry on any business. For. example, Housing societies in years of construction of building premises and redevelopments of their properties, provisions of section 44AB would not apply as there is no business activity.
Deduction available to co-operative society – Sec. 80P
Sr. No.
Society engaged in business of/Nature of Income
Amount deductible
Applicability & Conditions
1)
Providing credit facility to members
Entire profit from such business
W.e.f A.Y. 2007-08 deduction not available to co-operative bank.
Primary Co-operative agricultural & rural development bank & chit funds can claim exemption.
Providing credit facility means providing loans & other credit facilities. Does not include selling goods on credit/hire purchase.
2)
Cottage Industry
Entire profit from such business
For qualifying as cottage industry –
Business is to be carried on in a small scale, with limited capital, workers & turnover.
Business is carried on by members of society (shareholders) & their families.
Business must involve activity of manufacture, production or processing & not merely in trade.
It is not required to be registered under Factories Act.
3)
Marketing of Agricultural Produce
Entire profit from such business
—
4)
Purchase of Agricultural
Implements, seeds, livestock, other articles intended for agriculture
Entire profit from such business
It is for the purpose of supplying them to its members.
5)
Processing Agricultural
Produce of Members
(Without Aid of Power)
Entire profit from such business
—
6)
Collective Disposal of labour of its members
Entire profit from such business
Deduction is available only when earning of society is through the utilization of the actual labour of its members.
Deduction is available provided the rules & bye Laws of the society restrict the voting rights to following class of members –
a) Individuals who contribute their labour
b) Co-op. credit societies which provide financial assistance to the society
c) State Government.
7)
Fishing & Allied Activities
Entire profit from such business
It includes catching, curing, processing, preserving, storing or marketing of fish or purchase of materials & equipment in connection therewith for supplying them to its members.
Deduction is available provided the rules & bye Laws of the society restrict the voting rights to following class of members –
a) Individuals who carry on fishing or allied activities.
b) Co-op. credit societies which provide financial assistance to the society
c) State Government.
8)
Primary society engaged in supplying milk, oil seeds, fruits or vegetables
Entire profit from such business
Milk oil seeds, fruits or vegetables are grown or raised by its members
Milk, oil seeds, fruits or vegetables are supplied to a federal co-op. society (engaged in similar business), Government or local authority, Government company or a statutory corporation (engaged in similar business).
9)
Engaged in any other activity
Rs.1,00,000 for consumer co-operative society. Rs. 50,000 for others
10)
Interest income/ Dividend income
Entire amount of such income
Such income is received from investment in any other co-operative society.
11)
Letting of godowns/ warehouses
Entire amount of income derived from such business
Godowns/warehouses are let for storage, processing or facilitating the marketing of commodities.
12)
Interest on securities & property income
Entire amount of such income
Benefit not available to housing society, urban consumer’s society, society carrying on transport business, society engaged in manufacturing operations with aid of power
Gross total income of such society does not exceed Rs. 20,000.
Meaning
Co-operative society means a society registered under Co-operative Societies Act, 1912 or any other law in force in any state for the registration of Co-operative societies.
Regional rural bank is deemed as co-operative society (Circular 319 dt. 11-1-1982)
Rate of Tax
Income up to Rs. 10,000 10%
Income Rs. 10,001 to Rs. 20,000 20%
Income Rs. 20,001 onwards 30%
The above rates to be increased by 2% education cess on income tax & 1% secondary & higher education cess on income tax.
Filing of return & due date & PAN/ TAN
Since there is no threshold limit for taxability of income in case of a co-operative society, it implies that if a society has any taxable income, it has to file a return of income
Since accounts of all co-operative societies are subject to statutory audit provisions under respective governing laws, therefore due date for filing return of income under the Income-tax Act, 1961 is September 30.
If the society has to deduct income tax it must obtain TAN number. The society is also bound by provisions of TAN and filing of return of TDS. If society earns taxable income it should apply for PAN.
Principle of Mutuality
Income of the co-operative society to which the Doctrine of Mutuality applies is not taxable.
A co-operative society is a mutual association. A mutual association is one in which the members of the group come together for a common objective, make contributions for achieving that objective and participate in the surplus arising out of it. It is not necessary that all the members have to contribute to common fund and all the members have to take benefit of the resultant surplus. It is sufficient even if some members may contribute and some members may only take benefit, concept of mutuality will still apply if all members are covered by the same conditions and have the same entitlements. If a society carries on some activities which are mutual and some activities which are not, then the concept would apply to only those activities which are mutual.
In respect of contributions from members concept of mutuality would be applicable. Surplus arising out of contributions would be covered by concept of mutuality and therefore not an income at all.
Tax Audit
Tax audit is compulsory if turnover of society (engaged in business) is more than 40 lakhs per year. (60 lakhs w.e.f. 1-4-2011 i.e., A.Y. 2011-12). Tax Audit provisions is generally not applicable to societies which do not carry on any business. For. example, Housing societies in years of construction of building premises and redevelopments of their properties, provisions of section 44AB would not apply as there is no business activity.
Deduction available to co-operative society – Sec. 80P
Sr. No.
Society engaged in business of/Nature of Income
Amount deductible
Applicability & Conditions
1)
Providing credit facility to members
Entire profit from such business
W.e.f A.Y. 2007-08 deduction not available to co-operative bank.
Primary Co-operative agricultural & rural development bank & chit funds can claim exemption.
Providing credit facility means providing loans & other credit facilities. Does not include selling goods on credit/hire purchase.
2)
Cottage Industry
Entire profit from such business
For qualifying as cottage industry –
Business is to be carried on in a small scale, with limited capital, workers & turnover.
Business is carried on by members of society (shareholders) & their families.
Business must involve activity of manufacture, production or processing & not merely in trade.
It is not required to be registered under Factories Act.
3)
Marketing of Agricultural Produce
Entire profit from such business
—
4)
Purchase of Agricultural
Implements, seeds, livestock, other articles intended for agriculture
Entire profit from such business
It is for the purpose of supplying them to its members.
5)
Processing Agricultural
Produce of Members
(Without Aid of Power)
Entire profit from such business
—
6)
Collective Disposal of labour of its members
Entire profit from such business
Deduction is available only when earning of society is through the utilization of the actual labour of its members.
Deduction is available provided the rules & bye Laws of the society restrict the voting rights to following class of members –
a) Individuals who contribute their labour
b) Co-op. credit societies which provide financial assistance to the society
c) State Government.
7)
Fishing & Allied Activities
Entire profit from such business
It includes catching, curing, processing, preserving, storing or marketing of fish or purchase of materials & equipment in connection therewith for supplying them to its members.
Deduction is available provided the rules & bye Laws of the society restrict the voting rights to following class of members –
a) Individuals who carry on fishing or allied activities.
b) Co-op. credit societies which provide financial assistance to the society
c) State Government.
8)
Primary society engaged in supplying milk, oil seeds, fruits or vegetables
Entire profit from such business
Milk oil seeds, fruits or vegetables are grown or raised by its members
Milk, oil seeds, fruits or vegetables are supplied to a federal co-op. society (engaged in similar business), Government or local authority, Government company or a statutory corporation (engaged in similar business).
9)
Engaged in any other activity
Rs.1,00,000 for consumer co-operative society. Rs. 50,000 for others
10)
Interest income/ Dividend income
Entire amount of such income
Such income is received from investment in any other co-operative society.
11)
Letting of godowns/ warehouses
Entire amount of income derived from such business
Godowns/warehouses are let for storage, processing or facilitating the marketing of commodities.
12)
Interest on securities & property income
Entire amount of such income
Benefit not available to housing society, urban consumer’s society, society carrying on transport business, society engaged in manufacturing operations with aid of power
Gross total income of such society does not exceed Rs. 20,000.
Permanent Account Number (PAN)
Permanent Account Number (PAN)
PAN is an all India, unique ten-digit alphanumeric number, issued in the form of a laminated card by the Income Tax Department. It does not change with changes in address or place where you are being assessed. For obtaining PAN related information the Income Tax department has authorized :- (i) UTI Technology Services Ltd (UTITSL) to set up and manage IT PAN Service Centers in all those cities or towns where there is an Income Tax office and (ii) National Securities Depository Limited (NSDL) to dispense PAN services from Tax Information Network (TIN) Facilitation Centers.
Who shall apply for PAN :-
Income Tax Act provides that every person whose total income exceeds the maximum amount not chargeable to tax or every person who carries on any business or profession whose total turnover or gross receipts exceed Rs. 5 lakhs in any previous year or any person required to a file a return of income shall apply for PAN. Besides, any person not fulfilling the above conditions may also apply for allotment of PAN. With effect from 01.06.2000, the Central Government may by notification specify any class/classes of person including importers and exporters, whether or not any tax is payable by them, and such persons shall also then apply to the Assessing Officer for allotment of PAN. With effect from 01.04.2006 a person liable to furnish a return of fringe benefits is also required to apply for allotment of PAN. And if such a person already has been allotted a PAN he shall not be required to obtain another PAN.
Since income of any financial year is taxed in the subsequent year called as the assessment year, application for PAN must be made on or before the 30th of June of the relevant assessment year.
How to apply for PAN :-
Application for allotment of PAN is to be made in Form 49A. Following points must be noted while filling this form:-
Application form must be typewritten or handwritten in black ink in BLOCK LETTERS.
Two black & white photographs are to be annexed.
While selecting the “Address for Communication”, due care should be exercised as all communications thereafter would be sent at the indicated address.
In the space given for “Father's Name”. Only the father's name should be given. Married ladies may note that husband's name is not required and should not be given.
Due care should be exercised to fill the correct date of birth.
The form should be signed in English or any of the Indian Languages in the 2 specified places. In case of thumb impressions attestation by a Gazetted Officer is necessary.
Transactions in which quoting of PAN is mandatory :-
Purchase and sale of immovable property.
Purchase and sale of motor vehicles.
Transaction in shares exceeding Rs. 50,000.
Opening of new bank accounts.
Fixed deposits of more than Rs. 50,000.
Application for allotment of telephone connections.
Payment to hotels exceeding Rs. 25,000.
Provided that till such time PAN is allotted to a person, he may quote his General Index register Number or GIR No.
The following changes must be intimated to the assessing officer :-
Death of the assessee.
Discontinuation of business.
Dissolution of a firm.
Partition of a Hindu Undivided Family(HUF).
Liquidation or winding up of a company.
Merger or amalgamation or acquisition of companies.
Application for a fresh PAN under the new series must be made under the following conditions :-
Partition of a Hindu Undivided Family(HUF) into one or more new Hindu Undivided Families(HUF's).
Coming into being of new HUF's.
Change in constitution of a firm(entailing change of partners).
Splitting up or demerger of an existing company into two or more companies.
PAN is an all India, unique ten-digit alphanumeric number, issued in the form of a laminated card by the Income Tax Department. It does not change with changes in address or place where you are being assessed. For obtaining PAN related information the Income Tax department has authorized :- (i) UTI Technology Services Ltd (UTITSL) to set up and manage IT PAN Service Centers in all those cities or towns where there is an Income Tax office and (ii) National Securities Depository Limited (NSDL) to dispense PAN services from Tax Information Network (TIN) Facilitation Centers.
Who shall apply for PAN :-
Income Tax Act provides that every person whose total income exceeds the maximum amount not chargeable to tax or every person who carries on any business or profession whose total turnover or gross receipts exceed Rs. 5 lakhs in any previous year or any person required to a file a return of income shall apply for PAN. Besides, any person not fulfilling the above conditions may also apply for allotment of PAN. With effect from 01.06.2000, the Central Government may by notification specify any class/classes of person including importers and exporters, whether or not any tax is payable by them, and such persons shall also then apply to the Assessing Officer for allotment of PAN. With effect from 01.04.2006 a person liable to furnish a return of fringe benefits is also required to apply for allotment of PAN. And if such a person already has been allotted a PAN he shall not be required to obtain another PAN.
Since income of any financial year is taxed in the subsequent year called as the assessment year, application for PAN must be made on or before the 30th of June of the relevant assessment year.
How to apply for PAN :-
Application for allotment of PAN is to be made in Form 49A. Following points must be noted while filling this form:-
Application form must be typewritten or handwritten in black ink in BLOCK LETTERS.
Two black & white photographs are to be annexed.
While selecting the “Address for Communication”, due care should be exercised as all communications thereafter would be sent at the indicated address.
In the space given for “Father's Name”. Only the father's name should be given. Married ladies may note that husband's name is not required and should not be given.
Due care should be exercised to fill the correct date of birth.
The form should be signed in English or any of the Indian Languages in the 2 specified places. In case of thumb impressions attestation by a Gazetted Officer is necessary.
Transactions in which quoting of PAN is mandatory :-
Purchase and sale of immovable property.
Purchase and sale of motor vehicles.
Transaction in shares exceeding Rs. 50,000.
Opening of new bank accounts.
Fixed deposits of more than Rs. 50,000.
Application for allotment of telephone connections.
Payment to hotels exceeding Rs. 25,000.
Provided that till such time PAN is allotted to a person, he may quote his General Index register Number or GIR No.
The following changes must be intimated to the assessing officer :-
Death of the assessee.
Discontinuation of business.
Dissolution of a firm.
Partition of a Hindu Undivided Family(HUF).
Liquidation or winding up of a company.
Merger or amalgamation or acquisition of companies.
Application for a fresh PAN under the new series must be made under the following conditions :-
Partition of a Hindu Undivided Family(HUF) into one or more new Hindu Undivided Families(HUF's).
Coming into being of new HUF's.
Change in constitution of a firm(entailing change of partners).
Splitting up or demerger of an existing company into two or more companies.
Wednesday, January 5, 2011
Taxation of Representative Offices
Taxation of Representative Offices
Representative office/Liaison Office is one of the three forms in which, foreign companies can set up their operations in India. It is set up primarily to explore and understand the business and investment climate in India. The role of liaison office is limited to collecting information about possible market opportunities and providing information about the overseas parent company and its products to prospective Indian customers.
Any foreign company intending to open a Liaison Office in India is required to obtain prior approval from the RBI, the apex foreign exchange management authority in India. Approval is usually granted for three years and can be renewed on expiry thereof. The companies desirous of opening a liaison office in India may make an application in form FNC-1 along with the documents mentioned therein to Foreign Investment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. In addition to this, the foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC). At the time of closure of the Liaison Office, the RBI grants permission to repatriate the balance in the Indian bank account to the parent company.
Activities of the Liaison office
Representing in India the parent Company / group Companies.
Promoting export/ import from/ to India.
Promoting technical / financial collaborations between the parent / group companies and companies in India.
Acting as a communication channel between the parent company overseas and Indian companies.
Restrictions on the activities of the liaison office
No commercial operation can be done by the liaison office (No invoicing).
The liaison office must maintain a QA22C account with the bank. This is a special account that only allows inflows from abroad.
The liaison office can neither borrow, nor lend money.
It must file regular returns to the RBI. Such returns must include Audited Annual accounts and an activity report for the year.
A Liaison Office is not permitted to undertake any commercial / trading / industrial activity, directly or indirectly, and cannot, therefore, earn any income in India. It is required to maintain itself out of inward remittances received from abroad through normal banking channels. Hence it does not constitute a taxable entity in India. Also, the liaison office is not subjected to taxation in India as there is no mechanism for the income tax department to examine and ascertain as to whether the activities under taken by it result in any taxable income in India. However, the Liaison Office would be required to withhold tax from certain payments and hence to comply with the requisite tax withholding requirements under the domestic tax law
Representative office/Liaison Office is one of the three forms in which, foreign companies can set up their operations in India. It is set up primarily to explore and understand the business and investment climate in India. The role of liaison office is limited to collecting information about possible market opportunities and providing information about the overseas parent company and its products to prospective Indian customers.
Any foreign company intending to open a Liaison Office in India is required to obtain prior approval from the RBI, the apex foreign exchange management authority in India. Approval is usually granted for three years and can be renewed on expiry thereof. The companies desirous of opening a liaison office in India may make an application in form FNC-1 along with the documents mentioned therein to Foreign Investment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. In addition to this, the foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC). At the time of closure of the Liaison Office, the RBI grants permission to repatriate the balance in the Indian bank account to the parent company.
Activities of the Liaison office
Representing in India the parent Company / group Companies.
Promoting export/ import from/ to India.
Promoting technical / financial collaborations between the parent / group companies and companies in India.
Acting as a communication channel between the parent company overseas and Indian companies.
Restrictions on the activities of the liaison office
No commercial operation can be done by the liaison office (No invoicing).
The liaison office must maintain a QA22C account with the bank. This is a special account that only allows inflows from abroad.
The liaison office can neither borrow, nor lend money.
It must file regular returns to the RBI. Such returns must include Audited Annual accounts and an activity report for the year.
A Liaison Office is not permitted to undertake any commercial / trading / industrial activity, directly or indirectly, and cannot, therefore, earn any income in India. It is required to maintain itself out of inward remittances received from abroad through normal banking channels. Hence it does not constitute a taxable entity in India. Also, the liaison office is not subjected to taxation in India as there is no mechanism for the income tax department to examine and ascertain as to whether the activities under taken by it result in any taxable income in India. However, the Liaison Office would be required to withhold tax from certain payments and hence to comply with the requisite tax withholding requirements under the domestic tax law
Taxation of Cooperative Societies
A cooperative society means, a society registered or deemed to be registered under any law relating to cooperative societies for the time being in force in any State or under the Central act.
Cooperative societies may be governed by the respective State cooperative societies Act or by the Multi-State Cooperative Societies Act, 2002. The societies whose main objective is to serve the interests of its members in a particular State, are governed by the Cooperative Societies Act of that particular State. While, a Society whose main objectives is to serve the interests of its members in more than one State, are governed by the Multi-State Cooperative Societies Act, 2002.
According to the Cooperative Societies Act of each State, a cooperative society registered within any State under the law of that State is not allowed to operate in other States without the permission of the Government or Registrar of Cooperative Societies of that State. In case of multi-State cooperative society, it can operate in more than one State as a matter of right, under the Act and no permission of any State is required to do its business.
Provisions for Taxation of a Cooperative Society
A Cooperative Society is a taxable entity under the Income Tax Act, 1961. A Cooperative Society under the Act is to be treated as an association of persons (AOP), which is included in the definition of 'person' under the Income Tax Act, 1961.
Even though, for taxation purposes, the status of a cooperative society is to be taken as an Association of Persons, the section 67A and section 86 of the Act have been excluded from application to the members of society.
A Cooperative Society is taxed at rates, which are different from those applicable to an AOP. Under the annual Finance Act , though individuals, Hindu undivided family, AOP or body of individuals, whether incorporated or not, or every artificial juridical person referred to in the Income Tax Act, are chargeable at rates prescribed in paragraph A, of the Finance act. A Cooperative society is chargeable to tax as per rates prescribed under paragraph B of Part1 of the first schedule to the annual Finance Act.
The amount of income tax computed in accordance with the provisions of paragraph B , shall in the case of every cooperative society, be increased by a surcharge. The rate of surcharge is prescribed in each of the Finance Acts.
The Cooperative Societies are entitled to several concessions, in the computation of their taxable income. Besides, they also enjoy the benefit of concessional rate of tax on their chargeable income under the annual Finance Act.
As per Wealth Tax Act [Section 3(1)], only individuals, Hindu undivided families and companies are liable to wealth tax. Thus, no wealth tax is charged in the case of cooperative society.
For more details visit our Section on Joint Ventures
Compute the taxable income for Cooperative Society
First compute the total income under the different heads i.e. income from house property, profits or gains of business or profession, capital gains, and income from other sources, ignoring the prescribed income exemptions. Thus, "gross total income" is obtained.
Now, from the amount, the permissible deductions under the Income Tax Act are made.
To the 'net income' so arrived at, the 'rates of tax' as per the Finance Act for the respective year is applicable to cooperative societies.
Now to the amount of tax, percent of income tax as surcharge prescribed in the Finance Act is added. As per Finance bill 2006 no surcharge is applicable for the year 2006-2007.
From the tax liability so determined, the amount of 'rebate' in the Act is deducted.
Exemptions and Deductions granted to the Cooperatives under the Income Tax Act
There are various types of exemptions and deductions available to cooperative societies.
Exemptions :- It includes certain classes of income which do not form part of total income and are exempted from income-tax. These are excluded from the computation of gross total income of an assessee. A return of income is also not to be filled for them. Such types of income fall under Chapter III of the Income Tax Act. Some of the permissible exemptions provided are:-
• Exemption of profits and gains from a new industrial undertaking in a free trade zone for ten years[Section 10A].
• Exemption of the profits and gains for ten years from a 100% export oriented undertaking [Section 10B],etc.
Deductions :- It includes certain classes of income which are included in computing the total income of an assessee but are exempted from income-tax as they are basically deductions to be made in computing total income. A return of income is required to be filled for them. Such types of income fall under Chapter VI-A (Sections 80A to 80U) of the Income Tax Act. Some of the permissible deductions provided are:-
• As per Section 80A, in computing the total income of an assessee,the deductions specified in Section 80C to 80U shall be allowed from his gross total income.
• Section 80AB deals with deductions that need to be made with reference to the gross total income.
• Deduction of any amount under Section 80G in respect of donations given to certain funds, charitable institutions, etc.
• Deduction of 50% of profits and gains of projects implemented outside India [Section 80HHB].
• Deduction of the entire profits from income from export business [Section 80HHC], etc.
Relevance of Section 80P
The deductions in respect of income provided under Section 80P of the Income Tax Act are applicable to the cooperative societies alone. The provision has been incorporated in the Act for growth of cooperative societies. There are different heads of deductions enumerated in the section such that each is distinct and independent of other. To decide whether a particular category of income of a cooperative society is to be exempted from tax, it shall have to be seen whether it falls under the said heads or not. The deductions allowable under this section are in respect of net incomes from the activities or businesses, specified in the various clauses of the section.
If a cooperative society carries on such activities, income from which is exempt and also carries on such activities, income from which is not exempt, then profits/gains attributable to former activity shall enjoy exemption and those attributable to latter one shall be taxed. Where a cooperative society earns income, which is partly taxed and partly entitled to special deduction, proportionate share of the expenses attributable to the earning of income, entitled to deduction, should be deducted in computing such income.
Cooperative societies may be governed by the respective State cooperative societies Act or by the Multi-State Cooperative Societies Act, 2002. The societies whose main objective is to serve the interests of its members in a particular State, are governed by the Cooperative Societies Act of that particular State. While, a Society whose main objectives is to serve the interests of its members in more than one State, are governed by the Multi-State Cooperative Societies Act, 2002.
According to the Cooperative Societies Act of each State, a cooperative society registered within any State under the law of that State is not allowed to operate in other States without the permission of the Government or Registrar of Cooperative Societies of that State. In case of multi-State cooperative society, it can operate in more than one State as a matter of right, under the Act and no permission of any State is required to do its business.
Provisions for Taxation of a Cooperative Society
A Cooperative Society is a taxable entity under the Income Tax Act, 1961. A Cooperative Society under the Act is to be treated as an association of persons (AOP), which is included in the definition of 'person' under the Income Tax Act, 1961.
Even though, for taxation purposes, the status of a cooperative society is to be taken as an Association of Persons, the section 67A and section 86 of the Act have been excluded from application to the members of society.
A Cooperative Society is taxed at rates, which are different from those applicable to an AOP. Under the annual Finance Act , though individuals, Hindu undivided family, AOP or body of individuals, whether incorporated or not, or every artificial juridical person referred to in the Income Tax Act, are chargeable at rates prescribed in paragraph A, of the Finance act. A Cooperative society is chargeable to tax as per rates prescribed under paragraph B of Part1 of the first schedule to the annual Finance Act.
The amount of income tax computed in accordance with the provisions of paragraph B , shall in the case of every cooperative society, be increased by a surcharge. The rate of surcharge is prescribed in each of the Finance Acts.
The Cooperative Societies are entitled to several concessions, in the computation of their taxable income. Besides, they also enjoy the benefit of concessional rate of tax on their chargeable income under the annual Finance Act.
As per Wealth Tax Act [Section 3(1)], only individuals, Hindu undivided families and companies are liable to wealth tax. Thus, no wealth tax is charged in the case of cooperative society.
For more details visit our Section on Joint Ventures
Compute the taxable income for Cooperative Society
First compute the total income under the different heads i.e. income from house property, profits or gains of business or profession, capital gains, and income from other sources, ignoring the prescribed income exemptions. Thus, "gross total income" is obtained.
Now, from the amount, the permissible deductions under the Income Tax Act are made.
To the 'net income' so arrived at, the 'rates of tax' as per the Finance Act for the respective year is applicable to cooperative societies.
Now to the amount of tax, percent of income tax as surcharge prescribed in the Finance Act is added. As per Finance bill 2006 no surcharge is applicable for the year 2006-2007.
From the tax liability so determined, the amount of 'rebate' in the Act is deducted.
Exemptions and Deductions granted to the Cooperatives under the Income Tax Act
There are various types of exemptions and deductions available to cooperative societies.
Exemptions :- It includes certain classes of income which do not form part of total income and are exempted from income-tax. These are excluded from the computation of gross total income of an assessee. A return of income is also not to be filled for them. Such types of income fall under Chapter III of the Income Tax Act. Some of the permissible exemptions provided are:-
• Exemption of profits and gains from a new industrial undertaking in a free trade zone for ten years[Section 10A].
• Exemption of the profits and gains for ten years from a 100% export oriented undertaking [Section 10B],etc.
Deductions :- It includes certain classes of income which are included in computing the total income of an assessee but are exempted from income-tax as they are basically deductions to be made in computing total income. A return of income is required to be filled for them. Such types of income fall under Chapter VI-A (Sections 80A to 80U) of the Income Tax Act. Some of the permissible deductions provided are:-
• As per Section 80A, in computing the total income of an assessee,the deductions specified in Section 80C to 80U shall be allowed from his gross total income.
• Section 80AB deals with deductions that need to be made with reference to the gross total income.
• Deduction of any amount under Section 80G in respect of donations given to certain funds, charitable institutions, etc.
• Deduction of 50% of profits and gains of projects implemented outside India [Section 80HHB].
• Deduction of the entire profits from income from export business [Section 80HHC], etc.
Relevance of Section 80P
The deductions in respect of income provided under Section 80P of the Income Tax Act are applicable to the cooperative societies alone. The provision has been incorporated in the Act for growth of cooperative societies. There are different heads of deductions enumerated in the section such that each is distinct and independent of other. To decide whether a particular category of income of a cooperative society is to be exempted from tax, it shall have to be seen whether it falls under the said heads or not. The deductions allowable under this section are in respect of net incomes from the activities or businesses, specified in the various clauses of the section.
If a cooperative society carries on such activities, income from which is exempt and also carries on such activities, income from which is not exempt, then profits/gains attributable to former activity shall enjoy exemption and those attributable to latter one shall be taxed. Where a cooperative society earns income, which is partly taxed and partly entitled to special deduction, proportionate share of the expenses attributable to the earning of income, entitled to deduction, should be deducted in computing such income.
Easy Exit Scheme 2011 Key Highlights
Easy Exit Scheme 2011 Key Highlights
t has been observed by the Ministry of Corporate Affairs that certain companies have been registered under the Companies Act, 1956, but due to various reasons some of them are inoperative since incorporation or commenced business but became inoperative later on and are not filing their due documents timely with the Registrar of Companies. These companies may be defunct and are desirous of getting their names struck off from the Register of Companies.
In order to give an opportunity to the defunct companies, for getting their names struck off from the Register of Companies, the Ministry had launched a Scheme namely, ‘Easy Exit Scheme, 2010’ under Section 560 of the Companies Act, 1956 during May-August 2010. A largenumber of companies availed this scheme. However, on huge demands from corporate sector, the Ministry has decided to re-launch the Schemeas, ‘Easy Exit Scheme, 2011’ under Section 560 of the Companies Act, 1956. (i) The Scheme shall come into force on the 1 January 2011 and shall remain in force up to 31 January 2011.
Here we are highlighting the significant aspects of the Easy Exit Scheme, 2011 introduced by the ministry vide General Circular No: 6/2010 dated 3 December 2010.
Key Highlights
•The scheme will be in operation from 1 January 2011 to 31 January 2011.
•Any defunct company desirous of getting its name struck off from the Register under Section 560 of the Companies Act, 1956 shall make an application (accompanied by filing fee of Rs. 3000) in Form EES, 2011, electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in along with affidavit, Indemnity Bond and a Statement of Account duly certified by the statutory auditor or a Chartered Accountant in whole time practice.
•The Scheme does not inter-alia cover the listed companies, companies that have been de-listed, section 25 companies, vanishing companies, companies under inspection / investigation, companies against which prosecution for a non-compoundable offence is pending in court, companies having outstanding public deposits or secured loan or dues towards banks and financial institutions or any other Government Departments etc. or having management dispute or company in respect of which filing of documents have been stayed by court or CLB or Central Government or any other competent authority.
Key Definitions
•“defunct company” means a company registered under the Companies Act, 1956 which is not carrying over any business activity or operation on or after the 1st April, 2008 and includes a company which has not raised its paid up capital as provided in sub sections (3) and (4) of section 3 of the Companies Act, 1956;
•“vanishing company” means a company, registered under the Companies Act, 1956 and listed with Stock Exchange which, has failed to file its returns with Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its Directors are traceable.
Applicability
•Any “defunct company” which has active status on Ministry of Corporate Affairs portal may apply under EES, 2011 in accordance with the provisions of this Scheme for getting its name strike off from the Register of Companies;
•Any defunct company which is a Government Company shall submit ‘No Objection Certificate’ issued by the concerned Administrative Ministry or Department or State Government along with the application under this Scheme;
•The purpose of the Scheme is to allow eligible companies to avail of this opportunity to exit from the Register of Companies after fulfilling the requirements laid down herewith and the decision of the Registrar of Companies in respect of striking off the name of company shall be final.
Scheme Not Applicable to Certain Companies
The Scheme does not cover the following companies namely:
•listed companies;
•Companies that have been de- listed;
•companies registered under section 25 of the Companies Act, 1956; vanishing companies;
•companies where inspection or investigation is ordered and being carried out or yet to be taken up or where completed prosecutions arising out of such inspection or investigation are pending in the court;
•companies where order under section 234 of the Companies Act, 1956 has been issued by the Registrar and reply thereto is pending or where prosecution if any, is pending in the court;
•companies against which prosecution for a non-compoundable offence is pending in court;
•companies accepted public deposits which are either outstanding or the company is in default in repayment of the same;
•company having secured loan ;
•company having management dispute;
•company in respect of which filing of documents have been stayed by court or Company Law Board (CLB) or Central Government or any other competent authority;
•company having dues towards income tax or sales tax or central excise or banks and financial institutions or any other Central Government or State Government Departments or authorities or any local authorities.
Procedure for Making an Application
•Any defunct company desirous of getting its name strike off from the Register under Section 560 of the Companies Act, 1956 shall make an application in the Form EES, 2011;
•The Form EES, 2011, should be filed electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in accompanied by filing of Rs. 3000;
•In case, the application in Form EES, 2011, is not being digitally signed by any of the director or Manager or Secretary, a physical copy of the Form duly filled in, shall be signed manually by a director authorized by the Board of Directors of the company and shall be attached with the application Form at the time of its filing electronically;
•In all cases, the Form EES, 2011, shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time practice or Cost Accountant in whole time practice;
•The company shall disclose pending litigations if any, involving the company while applying under this Scheme;
•The Form shall be accompanied by an affidavit, which should be sworn by each of the existing director(s) of the company before a First Class Judicial Magistrate or Executive Magistrate or Oath Commissioner or Notary, to the effect that the company has not carried on any business since incorporation or that the company did some business for a period up to a date (which should be specified) and then discontinued its operations and has not carried on any business after the 1April 2008, as the case may be;
•The Form EES, 2011 shall further be accompanied by an Indemnity Bond, duly notarized, to be given by every director individually or collectively, to the effect that any losses, claim and liabili¬ties on the company, will be met in full by every director individually or collec¬tively, even after the name of the com¬pany is struck off from the register of Companies;
•The Company shall also file a Statement of Account, prepared as on date not prior to more than one month preceding the date of filing of application in Form EES, 2011, duly certified by a statutory auditor or Chartered Accountant in whole time practice, as the case may be.
•In the case of 100% Government companies, if no Board is in existence, an officer not below the rank of Deputy Secretary of the concerned administrative Ministry may be author¬ized to enter his name and other details in Form EES, 2011 and in Annexure A, B and C in place of name and other details of the directors and also to sign the said documents before filing.
Simplified Procedure for Registrar of Companies for Removal of Name of Defunct Companies
•The Registrar of Companies, on receipt of the application, shall examine the same and if found in order, shall give a notice to the company under section 560(3) of the Companies Act, 1956 by e-mail on its e-mail address intimated in the Form, giving 30 days time, stating that unless cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved;
•The Registrar of companies shall put the name of applicant(s) and date of making the application(s) under Easy Exit Scheme, 2011, on daily basis, on the MCA portal www.mca.gov.in, giving 30 days time for raising objection, if any, by the stakeholders to the concerned Registrar;
•In case of company(s) like Non-Banking Financial Company(s), Collective Investment Management Company(s) which are regulated by other Regulator(s) namely RBI, SEBI, the Registrar of Companies, at the end of every week, after the Scheme commences, shall send intimation of such companies availing EES, 2011, during that period to the concerned Regulator(s) and also an intimation in respect of all companies availing EES, 2011, during that period to the office of the Income Tax Department giving 30 days time for their objection, if any;
•The Registrar of Companies immediately after passing of time given in sub-paras (a) to (c) above, of this Para and on being satisfied that the case is otherwise in order, shall strike its name off the Register and shall send notice under sub-section (5) of section 560 of the Companies Act, 1956 for publication in the Official Gazette and the applicant company under this Scheme shall stand dissolved from the date of publication of the notice in the Official Gazette.
Source : General Circular No: 6/2010 dated 3 December 2010
t has been observed by the Ministry of Corporate Affairs that certain companies have been registered under the Companies Act, 1956, but due to various reasons some of them are inoperative since incorporation or commenced business but became inoperative later on and are not filing their due documents timely with the Registrar of Companies. These companies may be defunct and are desirous of getting their names struck off from the Register of Companies.
In order to give an opportunity to the defunct companies, for getting their names struck off from the Register of Companies, the Ministry had launched a Scheme namely, ‘Easy Exit Scheme, 2010’ under Section 560 of the Companies Act, 1956 during May-August 2010. A largenumber of companies availed this scheme. However, on huge demands from corporate sector, the Ministry has decided to re-launch the Schemeas, ‘Easy Exit Scheme, 2011’ under Section 560 of the Companies Act, 1956. (i) The Scheme shall come into force on the 1 January 2011 and shall remain in force up to 31 January 2011.
Here we are highlighting the significant aspects of the Easy Exit Scheme, 2011 introduced by the ministry vide General Circular No: 6/2010 dated 3 December 2010.
Key Highlights
•The scheme will be in operation from 1 January 2011 to 31 January 2011.
•Any defunct company desirous of getting its name struck off from the Register under Section 560 of the Companies Act, 1956 shall make an application (accompanied by filing fee of Rs. 3000) in Form EES, 2011, electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in along with affidavit, Indemnity Bond and a Statement of Account duly certified by the statutory auditor or a Chartered Accountant in whole time practice.
•The Scheme does not inter-alia cover the listed companies, companies that have been de-listed, section 25 companies, vanishing companies, companies under inspection / investigation, companies against which prosecution for a non-compoundable offence is pending in court, companies having outstanding public deposits or secured loan or dues towards banks and financial institutions or any other Government Departments etc. or having management dispute or company in respect of which filing of documents have been stayed by court or CLB or Central Government or any other competent authority.
Key Definitions
•“defunct company” means a company registered under the Companies Act, 1956 which is not carrying over any business activity or operation on or after the 1st April, 2008 and includes a company which has not raised its paid up capital as provided in sub sections (3) and (4) of section 3 of the Companies Act, 1956;
•“vanishing company” means a company, registered under the Companies Act, 1956 and listed with Stock Exchange which, has failed to file its returns with Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its Directors are traceable.
Applicability
•Any “defunct company” which has active status on Ministry of Corporate Affairs portal may apply under EES, 2011 in accordance with the provisions of this Scheme for getting its name strike off from the Register of Companies;
•Any defunct company which is a Government Company shall submit ‘No Objection Certificate’ issued by the concerned Administrative Ministry or Department or State Government along with the application under this Scheme;
•The purpose of the Scheme is to allow eligible companies to avail of this opportunity to exit from the Register of Companies after fulfilling the requirements laid down herewith and the decision of the Registrar of Companies in respect of striking off the name of company shall be final.
Scheme Not Applicable to Certain Companies
The Scheme does not cover the following companies namely:
•listed companies;
•Companies that have been de- listed;
•companies registered under section 25 of the Companies Act, 1956; vanishing companies;
•companies where inspection or investigation is ordered and being carried out or yet to be taken up or where completed prosecutions arising out of such inspection or investigation are pending in the court;
•companies where order under section 234 of the Companies Act, 1956 has been issued by the Registrar and reply thereto is pending or where prosecution if any, is pending in the court;
•companies against which prosecution for a non-compoundable offence is pending in court;
•companies accepted public deposits which are either outstanding or the company is in default in repayment of the same;
•company having secured loan ;
•company having management dispute;
•company in respect of which filing of documents have been stayed by court or Company Law Board (CLB) or Central Government or any other competent authority;
•company having dues towards income tax or sales tax or central excise or banks and financial institutions or any other Central Government or State Government Departments or authorities or any local authorities.
Procedure for Making an Application
•Any defunct company desirous of getting its name strike off from the Register under Section 560 of the Companies Act, 1956 shall make an application in the Form EES, 2011;
•The Form EES, 2011, should be filed electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in accompanied by filing of Rs. 3000;
•In case, the application in Form EES, 2011, is not being digitally signed by any of the director or Manager or Secretary, a physical copy of the Form duly filled in, shall be signed manually by a director authorized by the Board of Directors of the company and shall be attached with the application Form at the time of its filing electronically;
•In all cases, the Form EES, 2011, shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time practice or Cost Accountant in whole time practice;
•The company shall disclose pending litigations if any, involving the company while applying under this Scheme;
•The Form shall be accompanied by an affidavit, which should be sworn by each of the existing director(s) of the company before a First Class Judicial Magistrate or Executive Magistrate or Oath Commissioner or Notary, to the effect that the company has not carried on any business since incorporation or that the company did some business for a period up to a date (which should be specified) and then discontinued its operations and has not carried on any business after the 1April 2008, as the case may be;
•The Form EES, 2011 shall further be accompanied by an Indemnity Bond, duly notarized, to be given by every director individually or collectively, to the effect that any losses, claim and liabili¬ties on the company, will be met in full by every director individually or collec¬tively, even after the name of the com¬pany is struck off from the register of Companies;
•The Company shall also file a Statement of Account, prepared as on date not prior to more than one month preceding the date of filing of application in Form EES, 2011, duly certified by a statutory auditor or Chartered Accountant in whole time practice, as the case may be.
•In the case of 100% Government companies, if no Board is in existence, an officer not below the rank of Deputy Secretary of the concerned administrative Ministry may be author¬ized to enter his name and other details in Form EES, 2011 and in Annexure A, B and C in place of name and other details of the directors and also to sign the said documents before filing.
Simplified Procedure for Registrar of Companies for Removal of Name of Defunct Companies
•The Registrar of Companies, on receipt of the application, shall examine the same and if found in order, shall give a notice to the company under section 560(3) of the Companies Act, 1956 by e-mail on its e-mail address intimated in the Form, giving 30 days time, stating that unless cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved;
•The Registrar of companies shall put the name of applicant(s) and date of making the application(s) under Easy Exit Scheme, 2011, on daily basis, on the MCA portal www.mca.gov.in, giving 30 days time for raising objection, if any, by the stakeholders to the concerned Registrar;
•In case of company(s) like Non-Banking Financial Company(s), Collective Investment Management Company(s) which are regulated by other Regulator(s) namely RBI, SEBI, the Registrar of Companies, at the end of every week, after the Scheme commences, shall send intimation of such companies availing EES, 2011, during that period to the concerned Regulator(s) and also an intimation in respect of all companies availing EES, 2011, during that period to the office of the Income Tax Department giving 30 days time for their objection, if any;
•The Registrar of Companies immediately after passing of time given in sub-paras (a) to (c) above, of this Para and on being satisfied that the case is otherwise in order, shall strike its name off the Register and shall send notice under sub-section (5) of section 560 of the Companies Act, 1956 for publication in the Official Gazette and the applicant company under this Scheme shall stand dissolved from the date of publication of the notice in the Official Gazette.
Source : General Circular No: 6/2010 dated 3 December 2010
Auditors Selection Process Irks ICAI - No Tendors Please
Auditors Selection Process Irks ICAI
Economic Times, New Delhi, 03-01-2011.
ACCOUNTING regulator ICAI is opposed to the tendering process of selecting accountants for auditing state-run schemes and has taken up the issue with the Planning Commission and the CAG.
The ICAI wants the appointment to be done through fixing the fees district wise and not through tender saying it may lead to compromise of audit work
The appointment of auditors for scanning government schemes and projects is proposed to be done through tendering process, wherein the applicant quoting the lowest fees would get the project.
However, according to the ICAI the appointment should rather be done through fixing the fees district-wise and not through tender as it may lead to compromise of audit work.
We had taken up the issue with the Comptroller and Auditor General (CAG) and the Planning Commission. We have requested that the L1 (lowest bidding) factor in audit can kill the entire concept of the audit.
It is no good. We have requested them to fix the fees scheme wise to ensure that if at all bids are there, they should be technical rather than financial, said Amarjit Chopra, President of the Institute of Chartered Accountants of India.
ICAI has suggested that the CAG could fix the fees scheme wise and choose auditors for these schemes district wise and has also provided the Planning Commission and the official auditor with a list of chartered accountant firms across the country.
The institute has also suggested that audit work be made subject to peer review by a designated reviewer, with a view to controlling the quality of audit of social schemes and government projects. The National Rural Employment Guarantee Act (NREGA) and Jawaharlal Nehru National Urban Renewal Mission (JNNURM) are some of the social sector schemes run by the government.
Economic Times, New Delhi, 03-01-2011.
ACCOUNTING regulator ICAI is opposed to the tendering process of selecting accountants for auditing state-run schemes and has taken up the issue with the Planning Commission and the CAG.
The ICAI wants the appointment to be done through fixing the fees district wise and not through tender saying it may lead to compromise of audit work
The appointment of auditors for scanning government schemes and projects is proposed to be done through tendering process, wherein the applicant quoting the lowest fees would get the project.
However, according to the ICAI the appointment should rather be done through fixing the fees district-wise and not through tender as it may lead to compromise of audit work.
We had taken up the issue with the Comptroller and Auditor General (CAG) and the Planning Commission. We have requested that the L1 (lowest bidding) factor in audit can kill the entire concept of the audit.
It is no good. We have requested them to fix the fees scheme wise to ensure that if at all bids are there, they should be technical rather than financial, said Amarjit Chopra, President of the Institute of Chartered Accountants of India.
ICAI has suggested that the CAG could fix the fees scheme wise and choose auditors for these schemes district wise and has also provided the Planning Commission and the official auditor with a list of chartered accountant firms across the country.
The institute has also suggested that audit work be made subject to peer review by a designated reviewer, with a view to controlling the quality of audit of social schemes and government projects. The National Rural Employment Guarantee Act (NREGA) and Jawaharlal Nehru National Urban Renewal Mission (JNNURM) are some of the social sector schemes run by the government.
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